Answer to Question #259608 in Macroeconomics for BOB

Question

Distinguish between economic growth and economic development. Why economic growth is necessary but not a sufficient condition for economic development

Answer 1

Economic growth is a narrower concept that deals with an increase in a country's real level of output that can be attributed to an increase in the quality of resources such as education, an increase in the number of and technological improvements or, in other words, an increase in the value of goods and services of all sectors of the economy. On the other hand, economic development is a broader concept, that is, it is applied in the context of human morality. It is about raising the standard of living, improving the need for self-esteem and liberation from oppression and having more choices. The most accurate way to measure development is the human development index, which takes into account how literacy rates and life expectancy affect productivity and can lead to economic growth.

Economic growth is essential for a country, but it alone cannot be used for economic development. This requires political / human and administrative will to implement structural, institutional and technical changes to achieve sustainable growth that delivers economic development. Complementary economic growth can be easily measured by a country's GDP, but GDP does not determine economic development because it does not provide detailed information about individuals' living conditions or purchasing power.