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economic growth

  • Economic growth is a measure for a country’s performance:
    • In absolute terms (i.e., how fast/much are we growing?).
    • In relative terms (i.e., are we growing faster than our neighbors?)
  • relationship betw. growth & env.
  • refers to an increase in the level of goods and services produced by an economy, as estimated by measures such as Gross Domestic Product (GDP) within a specified time period
  • subset of economic development, but they are not the same
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benefits and costs of economic growth

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measurement of eco growth

  • Gross National Product (GNP): total value of all income (= value of final output) accruing to residents of a country, regardless of the sources of that income.

  • Gross Domestic Product (GDP): total value of all income (= value of final output) created within the borders of a country, regardless of whether the ultimate recipient of that income resides within or outside the country

  • Absolute Real Economic Growth is an increase in Real GDP from one period to the next (there is adjustment for inflation).

  • Per Capita Real Economic Growth is an increase from one period to the next in per capita Real GDP, which is Real GDP divided by population

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Why do economies grow? 

  • increasing resources: capital, labour, land, energy, material
  • productivity grows: increase in education, training contributes to productivity of resources in eco activities 
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GDP & criticism

  • effects of the economy on the environment are not well measured by GDP
  • Changes in natural resource stocks and externalities are not well captured.
  • GDP does not accommodate the distribution of incomes (e.g. inequalities)
  • GDP does not reflect changes in factors such as health, literacy etc., which have important impacts on people’s sense of well- being.
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Economic development

  • is a measure of the welfare in a society
  • reduction/elimination of poverty, inequality and unemployment within the context of a growing economy
  • characteristics of eco dev
    • High levels of consumption
    • Broad-based educational achievement
    • Adequate housing
    • Access to high-quality health care, etc.
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measurement of eco dev

  • Human Development Index (HDI), invented 1990. refined 1994. 
  • indicators: 
    • life expectancy
    • adult literacy
    • average years of schooling
    • GDP/capita (adjusted by PPP)

==> measure of societal wellbeing, weighted average: life expectancy, educational attainment, GDP/capita

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criticism HDI, advantages, disadvantages

  • freedom, human rights, umemployment, access to water, tensions in societies --> not measured


  • broader measure than simple growth measure
  • more informative than simple reliance on eco growth
  • slowly, HDI becoming a standard


  • no general agreement on what should be in the HDI (not one measure)
  • still a lot missing