GDP

The GDP - Gross domestic product of a country is a measure of the size of its economy. The most conventional economic analysis of a country relies heavily on economic indicators like the GDP and GDP per capita. While often useful, it should be noted that GDP only includes economic activity for which money is exchanged.

Economic measures
There are a number of ways to measure economic activity of a nation. These methods of measuring economic activity include:

Consumer spending Exchange Rate Gross domestic product GDP per capita GNP Stock Market Interest Rate National Debt Rate of Inflation Unemployment Balance of Trade

ECONOMY

An economy consists of the economic systems of a country or other area; the labor, capital and land resources; and the manufacturing, production, trade, distribution, and consumption of goods and services of that area. A given economy is the result of a process that involves its technological evolution, history and social organization, as well as its geography, natural resource endowment, and ecology, as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions. A market based economy may be described as a spatially limited social network where goods and services are freely produced and exchanged according to demand and supply between participants (economic agents) by barter or a medium of exchange with a credit or debit value accepted within the network. Capital and labor can move freely across places, industries and firms in search of higher profits, dividens, interests, and compensations and benefits. Rent on land allocates this generally fixed resource among competing users. Contemporary Capitalism is a market economy in which most of the production capacity is owned and directed by the private sector. Government role is limited to provide for defense and internal security; administer justice and prisons; make laws and regulations; enforce contracts, laws and regulations; correct market imperfections and failures; ensure full employment without inflation; promote balance economic growth and development;

provide for the poor, children, and elderly; protect and assist in emergencies and natural disasters; provide basic opportunities to all members of society; prevent future calamities and disasters; and, pursue national goals established by society at large such as protection of the environment and natural resources. On the other hand, tradicional socialism is a command-based economy in which markets and the free exchange of goods and services, as well as manufacturing, production, trade and distribution are replaced or done by government central planning and state owned enterprises. In this economy all private owners of capital (called capitalist) and of land (called landowners) are not allowed or banned; and the only permitted private ownership is of consumption goods. Capital and land are assigned by the state and movement of labor is severely restricted. There are no profits, dividends, interest or rent. Labor compensation and benefits are decided by central planners. Finally, a mixed economy contains elements of both capitalism and socialism which means a market based economy with a varied degree of government central planning and state owned enterprises.

ECONOMICS DEVELOPMENT Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area. Economic development can also be referred to as the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development of human capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health, safety, literacy, and other initiatives. Economic development differs from economic growth. Whereas economic development is a policy intervention endeavor with aims of economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as economist Amartya Sen points out: economic growth is one aspect of the process of economic development. [ The scope of economic development includes the process and policies by which a nation improves the economic, political, and social well-being of its people

The University of Iowa's Center for International Finance and Development states that: 'Economic development' is a term that economists, politicians, and others have used frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernization, and especially Industrialization are other terms people have used when discussing economic development. Although no one is sure when the concept originated, most people agree that development is closely bound up with the evolution of capitalism and the demise of feudalism.[3]

Growth and Development

Dependency theorists argue that poor countries have sometimes experienced economic growth with little or no economic development initiatives; for instance, in cases where they have functioned mainly as resource-providers to wealthy industrialized countries. There is an

opposing argument, however, that growth causes development because some of the increase in income gets spent on human development such as education and health. According to Ranis et al. (2000), economic growth and human development is a two-way relationship. Moreover, the first chain consists of economic growth benefiting human development with GNP. Specifically, GNP increases human development by expenditure from families, government and organizations such as NGOs. With the rise in economic growth, families and individuals will likely increase expenditures with heightened incomes, which in turn leads to growth in human development. Further, with the increased consumption, health and education grow, also contributing to economic growth.[13] In addition to increasing private incomes, economic growth also generate additional resources that can be used to improve social services (such as healthcare, safe drinking water, etc.). By generating additional resources for social services, unequal income distribution will be mitigated as such social services are distributed equally across each community, thereby benefiting each individual. Thus, increasing living standards for the public.[14] Concisely, the relationship between human development and economic development can be explained in three ways. First, increase in average income leads to improvement in health and nutrition (known as Capability Expansion through Economic Growth). Second, it is believed that social outcomes can only be improved by reducing income poverty (known as Capability Expansion through Poverty Reduction). Lastly, social outcomes can also be improved with essential services such as education, healthcare, and clean drinking water (known as Capability Expansion through Social Services).[15] John Joseph Puthenkalam's research aims at the process of economic growth theories that lead to economic development. After analyzing the existing capitalistic growth-development theoretical apparatus, he introduces the new model which integrates the variables of freedom, democracy and human rights into the existing models and argue that any future economic growth-development of any nation depends on this emerging model as we witness the third wave of unfolding demand for democracy in the Middle East. He develops the knowledge sector in growth theories with two new concepts of 'mirco knowledge' and 'macro knowledge'. Micro knowledge is what an individual learns from school or from various existing knowledge and macro knowledge is the core philosophical thinking of a nation that all individuals inherently receive. How to combine both these knowledge would determine further growth that leads to economic development of developing nations. For further reading, please refer to "Integrating Frem, Democracy and Human Rights into Theories of Economic Growth" & other publications(1998,2000&2010). DEVELOPMENT ECONOMICS Development economics is a branch of economics which deals with economic aspects of the development process in low-income countries. Its focus is not only on methods of promoting economic growth and structural change but also on improving the potential for the mass of the population, for example, through health and education and workplace conditions, whether through public or private channels.[1] Development economics involves the creation of theories and methods that aid in the determination of policies and practices and can be implemented at either the domestic or international level.[2] This may involve restructuring market incentives or using mathematical

methods like inter-temporal optimization for project analysis, or it may involve a mixture of quantitative and qualitative methods.[3] Unlike in many other fields of economics, approaches in development economics may incorporate social and political factors to devise particular plans.[4] Also unlike many other fields of economics, there is "no consensus" on what students should know.[5] Different approaches may consider the factors that contribute to economic convergence or non-convergence across households, regions, and countries.[6]
ECONOMICS GROWTH

Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment," which is caused by growth in aggregate demand or observed output. As an area of study, economic growth is generally distinguished from development economics. The former is primarily the study of how countries can advance their economies. The latter is the study of the economic aspects of the development process in low-income countries. As economic growth is measured as the annual percent change of gross domestic product (GDP), it has all the advantages and drawbacks of that measure.

Economic growth versus the business cycle

Economists distinguish between short-run economic changes in production and long-run economic growth. Short-run variation in economic growth is termed the business cycle. Briefly, the business cycle is made up of booms and busts in production that occur over a period of months or years. The most recent example of a business cycle was the global boom starting in approximately 2002 that ended with the bust of 20089. As discussed in the article on the business cycle, economists attribute the ups and downs in the business cycle to a number of causes including: overproduction of goods followed by large inventories that can't be readily sold, overexpansion of credit resulting in piling up of debt that inhibits purchasing; speculative bubbles, and shockslike wars, political upheavals, and so on. In contrast, the topic of economic growth is concerned with the long-run trend in production due to basic causes such as industrialization. The business cycle moves up and down, creating fluctuations in the long-run trend in economic growth.

Historical sources of economic growth

Main article: Productivity improving technologies (historical)

Increases in productivity are the main factor responsible for economic growth, especially since the mid 19th century. Most of the economic growth since that time been due to reduced inputs of labor, materials, energy, capital and land per unit of economic output (less input per widget). The balance of growth has come from using more inputs overall because of the growth in output (more widgets), including new kinds of goods and services (innovations).[1] Opening up new territories was considered a growth factor in the past, being important since the late 19th century and in limited cases in the 20th century, such as the Amazon. During colonial times, what ultimately mattered for economic growth were the institutions and systems of government imported through colonization. There is a clear reversal of fortune between the poor and wealthy countries, which is evident when comparing the method of colonialism in a region. Geography and endowments of natural resources are not the sole determinants of GDP. In fact, those that were blessed with good factor endowments experienced colonial extraction which only provided limited rapid growth; whereas, countries that were less fortunate in their original endowments experienced European settlement, relative equality, and demand for rule of law. These initially poor colonies end up developing an open franchise, equality, and broad public education, which helps them experience greater economic growth than the colonies that had exploited their economies of scale. During the Industrial Revolution, mechanization began to replace hand methods in manufacturing and new processes were developed to make chemicals, iron, steel and other products. Since the Industrial Revolution, a major factor of productivity was the substitution of energy from, human and animal labor, water and wind power to electric power and internal combustion. Since that replacement, the great expansion of total power was driven by continuous improvements in energy conversion efficiency.[2] Other major historical sources of productivity were automation, transportation infrastructures (canals, railroads, and highways),[3] new materials (steel) and power, which includes steam and internal combustion engines and electricity. Other productivity improvements included mechanized agriculture and scientific agriculture including chemical fertilizers and livestock and poultry management, and the Green Revolution. Interchangeable parts made with machine tools powered by electric motors evolved into mass production, which is universally used today.

Productivity lowered the cost of most items in terms of work time required to purchase. Real food prices fell due to improvements in transportation and trade, mechanized agriculture, fertilizers, scientific farming and the Green Revolution. Great sources of productivity improvement in the late 19th century were the railroads, steam ships, horse-pulled reapers and combine harvesters, and steam-powered factories. The invention of processes for making cheap steel were important for many forms of mechanization and transportation. By the late 19th century, power and machinery were creating overproduction, which eventually caused a reduction of the hourly work week. Prices fell because less labor, materials, and energy were required to produce and transport goods; however, workers real pay rose, allowing workers to improve their diet and buy consumer goods and better housing.[4] Mass production of the 1920s created overproduction, which was arguably one of several causes of the Great Depression of the 1930s.[5] Following the Great Depression, economic growth resumed, aided in part by demand for entirely new goods and services, such as household electricity, telephones, radio, television, automobiles, and household appliances, air conditioning, and commercial aviation (after 1950), creating enough new demand to stabilize the work week.[6] Building of highway infrastructures also contributed to post World War II growth, as did capital investments in manufacturing and chemical industries. The post World War II economy also benefited from the discovery of vast amounts of oil around the world, particularly in the Middle East. Economic growth in Western nations slowed after 1973, but growth in Asia has been strong since then, starting with Japan and spreading to Korea, China, the Indian subcontinent and other parts of Asia. The Japanese economic growth has slowed down considerably since late 1980s.

Economic growth per capita

Often, the concern about economic growth focuses on the desire to improve a country's standard of livingthe level of goods and services that, on average, individuals purchase or otherwise gain access to. It should be noted that if population has grown along with economic production, increases in GDP do not necessarily result in an improvement in the standard of living. When the focus is on standard of living, economic growth is expressed on a per capita basis.

Economic growth per capita is primarily driven by improvements in productivity, also called economic efficiency. Increased productivity means producing more goods and services with the same inputs of labour, capital, energy, and/or materials. For example, labour and land productivity in agriculture were increased during the Green Revolution. The Green Revolution of the 1940s to 1970s introduced new grain hybrids, which increased yields around the world. However, there is not necessarily a long term one-to-one relationship between improvements in productivity and improvements in average standard of living.[7] Among other factors that might prevent a long-term improvement in standard of living despite economic growth is the potential for population growth matching or outstripping productivity improvements. When increased food supplies spur population growth rather than an improvement in the standard of living, people are said to be caught in the "Malthusian trap," named for Thomas Robert Malthus, the first observer to detail out this dilemma. There is considerable controversy, for example, as to whether the Green Revolution resulted in long-term improvements in the standard of living as it was accompanied by rapid population growth creating population sizes that may be unsustainable.[8] Economic growth can also be of interest without reference to per capita changes in standard of living. An example of this is the economic growth in England during the Industrial Revolution. Certainly, per capita increases in productivity occurred due to the replacement of hand labour by machines. However, economic growth during this period was in large part so dramatic because England's population simultaneously increased very rapidly (1700 A.D. 1860 A.D.). The two factors together, more production per worker combined with many more workers, resulted in a sixfold increase in production between 1700 and 1860. Population growth alone accounted for most of this increase.[9]

Measuring economic growth

Economic growth is measured as a percentage change in the Gross Domestic Product (GDP) or Gross National Product (GNP). These two measures, which are calculated slightly differently, total the amounts paid for the goods and services that a country produced. As an example of measuring economic growth, a country which creates $9,000,000,000 in goods and services in 2010 and then creates $9,090,000,000 in 2011, has a nominal economic growth rate of 1% for 2011. In order to compare per capita economic growth among countries, the total sales of the countries to be compared may be quoted in a single currency. This requires converting the value of currencies of various countries into a selected currency, for example U.S. dollars. One way to do this conversion is to rely on exchange rates among the currencies, for example how many Mexican pesos buy a single U.S. dollar? Another approach is to use the purchasing power parity method. This method is based on how much consumers must pay for the same "basket of goods" in each country. Inflation or deflation can make it difficult to measure economic growth. If GDP, for example, goes up in a country by 1% in a year, was this due solely to rising prices (inflation) or because more goods and services were produced and saved? To express real growth rather than changes

in prices for the same goods, statistics on economic growth are often adjusted for inflation or deflation. For example, a table may show changes in GDP in the period 1990 to 2000, as expressed in 1990 U.S. dollars. This means that the single currency being used is the U.S. dollar with the purchasing power it had in the U.S. in 1990. The table might mention that the figures are "inflation-adjusted" or real. If no adjustment were made for inflation, the table might make no mention of inflation-adjustment or might mention that the prices are nominal.
Following are the factors that affect economic development of a country: - Literacy rate - Life expectancy - Poverty rate - GDP - Per capita income - Real National Income. - Price stability - Tax base - Sustainable growth

Economic development is impacted by various factors. The positive economic development has many reasons but these are focused around GDP, which is an abbreviation of Gross Domestic Product. This is what the economy of a country is based around. The Gross Domestic Product of a country is determined by how much produce, in monetary value, a country makes. Economic development is usually boosted by an increase in demand in those products or in some cases a world event taking place in the country, such as the Olympics. This brings more money into the country and rises the Gross Domestic Product. Other factors for economic development are social. As the economy grows with the help of the citizens (workers), these workers also need to see the benefit to help the country to continue developing. This includes the increase in private income and better services for the community. A country should have decent relationships to have a growing economy as they will need to trade with others. Therefore strained relationships will impair this growth. There are also negative effects on economic development. These include natural disasters, war, corruption within government and also problems with produce. These problems in produce can range from crop failure to the production of poor quality products and unfair conditions for workers. Natural disasters impeded economic growth as the production may take a while to get back to normal and there may be damage in the natural product or the process of making particular products. War and government corruption can also halt economic development. This will make trading harder between the country and other countries. It will also break relationships and, in the case of war, can cause problems in exporting produce. There are many more factors but these are the main factors that have both positive and negative effects