Economic Growth and Development

We often notice the terms ‘economic development and ‘economic growth’ being used simultaneously. Most people who come across these two terminologies do not hold a clear idea about their significance. As chartered accountancy practitioners we must assimilate the fact that both of them are different concepts altogether. The basic difference is that ‘economic growth is expressed in figures while ‘economic development is more of a qualitative description’.

Through economic growth, we get a clear vision of the monetary gains procured through the selling of all services or goods for a particular window of time. It reflects the resultant growth in business by comparing the present frequency of transactions with that of the colder months. Therefore, we can assume that economic growth is a quantitative measure. This can be evaluated by determining the increase in the overall valuation of a firm’s assets which becomes possible through investment in new assets. Economic growth is also assessed against the services furnished by the organizations that use financial protocols like GNP and GDP. After this, we are going to understand the fundamental concepts of economic development which is a much more elaborate concept in the field of economics.

Economic development is the outcome of all the constituent procedures that are responsible for improving the overall health status, lifestyle, and educational degree of the country’s citizens as a whole. Economic development also takes into account the enhanced production volume which becomes possible due to the innovations in technology introduced in a country’s industrial sectors.

In a nutshell, economic development is the qualitative evaluation of the general public. A crucial indicator that closely relates to economic development is the HDI or Human Development Index. An impressive HDI score reflects many factors that govern a civilization’s overall growth. Some of these key factors are cited as issuance of job positions, technological upgrades, living standards, surrounding or vicinity of the general population, income per capita, the health status of citizens of all age groups, improved expectations in the establishment of self-esteem, infrastructural enhancement and lastly the GDP. Through this discussion now we are aware of the fact that economic development is a much broader idea which however covers all the aspects that are discussed in economic growth too. Economic development not only focuses on the employment status and income level of the citizens. Unlike economic growth which follows a uni-directional ideology, economic development also stresses explaining the quality of life enjoyed by the general people. Evaluation of economic growth is a short-term process that can be easily executed within a year while the term ‘economic development’ indicates a long-term venture. The developed countries all over the world like the US, Japan, South Korea, etc. focus on analyzing their economic growth which helps them to access their position on a global stage in exact numerical terms. Developing economies like India, China, Bangladesh, etc. focus more on economic development. Economic development is consequences of the policies drafted by the government which are later on approved by the law enforcement committees therefore the developmental schemes always need governmental involvement. This is not true for economic growth as it is an automatic process that is systematic and needs negligible contribution from the government. Through some questions, we will try to explain the in-depth knowledge about economic growth and development.

MCQs on Economic Growth and Development

1. What is the term used by economists to signify the combined valuation of services and products manufactured by citizens of a particular nation and their cumulative property price? 

1. 1. GDP or gross domestic product
   2. GNP or gross national income
   3. NDP or net domestic product
   4. NNI or net national income

Ans. Option (A)

 2. In which industrial sector there is ample probability of coming across a disguised unemployment scenario?

1. 1. Agricultural sector
   2. Manufacturing industries
   3. National Defence
   4. Small scale plants

Ans. Option (A)

 3. Hereby we have put a few instances which are commonly referred to as scenarios that explain the economic growth and development of a community by the general population. Please choose the option that specifically explains economic growth.

1. 1. Improvement in production frequency.
   2. Advancement of the distribution or chain networks.
   3. Technological upgrades.
   4. Each of the above options is true.

Ans. Option (D)

 4. The instances of severe unemployment rates, lack of net capital, and increased percentage of technological imports are repeatedly noticed in which type of the following economies?

1. 1. Partially developed or marginalized economies
   2. Backward economies
   3. Developed economies 
   4. Not applicable

Ans. Option (B)

 5. What is the theory of nominal national income?

1. 1. It is the improvement of national monetary gains that are calculated at base fiscal price periods.
   2. National income of any country is directly proportional to the appreciation of prices of commodities and services.
   3. Increase in each citizen’s average income.
   4. National income increment noticed at constant costs.

Ans. Option (B)

 6. Point out the indicator which is absent as a determining factor for an economically strong nation.

1. 1. Commendable literacy rate.
   2. Significant lower risks of death from chronic diseases.
   3. Significant proportion of workers or laborers directly involved in the primary industrial sectors to earn their livelihood.
   4. Improved figures of income per capita.

Ans. Option (C)

 7. What is the underlying concept of economic development?

1. 1. It is just another synonymous term with economic growth.
   2. It is obtained by tracking modifications in output allocation and financial structure.
   3. Economic development is sustainable improvement in GNP.
   4. Improving the livelihood of urban people.

Ans. Option (C)

 8. We often come across the abbreviation PQLI when we read reports of economic development. Please choose the option that lists the correct set of indicators that are eligible for assessing the quality of life of a particular community.

1. 1. Crime frequency, housing conditions, and water pollution
   2. Water pollution, air pollution index, and sanitation status
   3. Infant mortality rate, literacy strength among adults, and average life expectancy
   4. None of the above.

Ans. Option (B)

 9. The Lewis model of economic growth discusses the theory of dual economy. A dual economy develops when any one of the below-mentioned criteria is met. Choose the right option.

1. 1. The manufacturing sector of the modernized nations must be labor-intensive.
   2. The output share of modern sectors must increase compared to the output ratio contributed by traditional units.
   3. Economic considerations are strictly adhered to while employing laborers in the agricultural fields.
   4. Agricultural firms resolve using modern pieces of machinery to boost their production.

Ans. Option (B)

 10. What do we learn about economic growth from the Harrod-Domar theory?

1. 1. Economic growth shares a direct relation to aggregate savings. It is inversely proportional to the output ratio of sectors.
   2. Economic growth is directly related to both capital/output proportion and savings.
   3. Growth is inversely proportional to both savings and output of firms.
   4. None of them are correct.

Ans. Option (B)

 11. Among the following four options can you choose the correct indicator that is considered an index of growth?

1. 1. Overall improvement in the country’s income would directly affect the individual income of the citizens.
   2. Improvement in country’s income in accordance to present prices over time.
   3. An enhancement in national gains at constant rates throughout an annual financial cycle.
   4. A stable increase that is perceived through real parameters per capita income.

Ans. Option (D)

 12. Which of the following is a non-economic factor of growth?

1. 1. Ideal legislative structure
   2. Collection of natural resources
   3. Growth of overall population in course of time
   4. Capital accumulation

Ans. Option (A)

 13. With a considerable advancement of policies that leads to the economic development of a community, we prepare a graph that expresses income inequality. Can you identify the characteristics of that graph?

1. 1. Convex shaped
   2. I- shaped curve
   3. Inverted u-shaped curve
   4. S- form curve

Ans. Option (C)

 14. What information can be derived specifically through the Lorenz curve?

1. 1. Poverty gap between developed, developing, and marginalized economies.
   2. The transformation of gross domestic product per capita over time.
   3. Income concentration against a 45-degree curve
   4. None of the above.

Ans. Option (C)

So, these were a few questions on economic growth and developament which have been hand-picked from the collection of most important questions that are repeatedly asked by the examinees. It covers most of the major sectors of economic development in general.