ECODEV REVIEWER
Economics
--A social science seeking to analyze and describe the production, distribution, and consumption
of goods and services.
--The study of the choices people makes to cope with scarcity.
Economic Principles
1. People face trade-off
2. The cost of something is what you give up to get it
3. Rational people think at a margin
4. People respond to incentives
5. Trade can male everyone better off
6. Market are usually a good way to organize economic activity
7. Governments can sometimes improve markets outcomes
8. A country’s standard of living depends on its ability to produce goods and services
9. Prices rise when the government prints too much money.
10. Society faces a short-run trade-off between inflation and unemployment.
Microeconomic- examines the economic behavior of individual units such as businesses and
households in the face of the scarcity and government interactions, as well as the economic
consequences of these decisions on other actors.
Macroeconomics- examines an economy as a whole with a view to understanding the interaction
between economic aggregates such as national income, employment and inflation.
Normative Economics (Policy)/Prescriptive: What should do…
-deals primarily with statements that contain value judgement
-cannot be confirmed or refuted solely by reference to facts
Positive Economics (Analytical)/ Scientific: What is…
-concerned with descriptive and conditional statements
- descriptive: portray things as they are or have been in the past
- conditional: forecast based on careful analysis of economic bahavior
What Do We Mean by Development?
Traditional Economic Measures
Gross National Income (GNI)
Income per capita
Utility of that income
The New Economic View of Development
Leads to improvement in wellbeing, more broadly understood
Amartya Sen’s “Capability” Approach
-Functionings as an achievement
-Capabilities as freedoms enjoyed in terms of functionings
-Development and happiness
-Well-being in terms of being well and having freedoms of choice
“Beings and Doings”:
Some Key “Capabilities”
Some Important “Beings” and “Doings” in Capability to
Function:
-Being able to live long
-Being well-nourished
-Being healthy
-Being literate
-Being well-clothed
-Being mobile
-Being able to take part in the life of the community
-Being happy – as a state of being - may be valued as a functioning
Three Core Values of Development
-Sustenance: The Ability to Meet Basic Needs
-Self-Esteem: To Be a Person
-Freedom from Servitude: To Be Able to Choose
The Central Role of Women
-To make the biggest impact on development, societies must empower and invest in women
The Three Objectives of Development
-Increase availability of life-sustaining goods
-Raise levels of living
-Expand range of economic and social choices
The importance of Development Economics
Inclusion of non-economic variables in designing development strategies
Achieving the Millennium Development Goals “…One future-or none at all”
Concepts for Review
Absolute Poverty
Attitudes
Capabilities
Developing countries
Development
Development economics
Freedom
Functionings
Globalization
Gross domestic product
Gross national income (GNI)
Income per capita
Institutions
Less developed countries (LDCs)
Millennium Development Goals (MDGs)
More developed countries (MDCs)
Political economy
4 KEY PRINCIPLES
1. UNIVERSAL
2. SUSTAINABILTY
3. LEAVE NO ONE BEHIND
4. PARTICIPATION
1. Adverse Geography such as resource endowments – Developing countries
2. Greater Social Fractionalization – Developing countries
3. Higher Levels of Inequality and Absolute Poverty (absolute and world poverty) – Developing
countries
4. Higher Population Growth Rates such as crude birth rates – Developing countries
5. Historic role of international migration – Developed countries
6. Lower levels of human capital (health, education, skills) – Developing countries
7. Lower levels of living and productivity – Developing countries
8. Physical and human resource endowments – Developed countries
9. Stable Leadership and Political Systems – Developed countries
10. Underdeveloped Financial and Other Markets (imperfect markets and incomplete
information) – Developing countries
1. Gross Domestic Product (GDP) is measured by dividing the GDP of the country to its
population/capita.
False- GDP per capita is obtained by dividing GDP by population, not the definition of
GDP itself.
2. In 2017, World bank has established the world's average GDP of $13,460 per capita.
True- The World Bank estimated a global average around that level in 2017.
3. 72% of world population in 2017 is below the world's average GDP of $13,460 per capita.
True- A large majority of the global population lives below the average due to inequality.
4. Real GDP is measured by its GDP per capita to total population of a country.
False- Real GDP is adjusted for inflation, not based on population.
5. If per capita gross domestic product is high but a country has poor infrastructure and income
inequality, it would not be considered a developed economy.
True- High GDP per capita alone does not guarantee development if inequality and poor
infrastructure exist.
6. PPP method instead of exchange rates as conversion factors as one of the indicators of
economic development of the country.
True- Purchasing Power Parity (PPP) is used instead of exchange rates for more accurate
comparisons.
7. Nominal GDP comparisons can be inaccurate because currencies may be
adjusted/manipulated.
True- Exchange rates can fluctuate or be manipulated, making nominal GDP less reliable.
8. One way to measure Human Development Index is through Life Expectancy Index, Health
Index, and Education Index.
False- HDI includes Life Expectancy, Education, and Income (GNI)—not a separate “Health
Index.”
9. Recently, HDI considers Life Expectancy Index, Education, and GNI Index*
True- Modern HDI uses Life Expectancy, Education, and GNI Index.
10. Happiness index among countries varies and based on their core values such as hardwork,
discipline, vitality, health, etc.
True- Happiness varies across countries and is influenced by cultural and social values.
1. Poverty is more than lack of income – it is inherently multidimensional.
True- Poverty includes lack of education, health, and opportunities—not just income.
2. Income among all countries in the world is the same.
False- Income distribution varies widely across countries.
3. Social Systems are Interdependent relationships between economic (firms and households)
and non-economic factors (governance and environment).
True- Economic and non-economic systems are interconnected.
4. Traditional Economic include Gross National Income, Income per Capital and Utility of
Income
True- Traditional measures focus on income-related indicators like GNI and per capita income.
5. Some of capability approaches according to A. Sen is well being in terms of being well and
having freedoms of choice.
True- Amartya Sen emphasized well-being and freedom of choice in development.
6. Three Core values of development are sustenance, self-esteem and freedom from servitude
True- Core values: sustenance, self-esteem, and freedom.
7. Sustainable Development Goals are improvement of Millineum Development Goals drafted
in 2000.
True
8. The countries target Sustainable Development Goals attainment by 2030.
True
9. There were 195 countries who agreed on Sustainable Development Goals
False- Not exactly 195 countries—193 UN member states adopted the SDGs.
10. " One future [for humanity] or none at all", is the gist of Millenium Development Goals.
True
How does quality services of the institutions have an importance in improving the Human
Development Index?
Quality services provided by institutions are important in improving the Human Development
Index because they are key aspects of human development. Educational institutions help develop
people’s knowledge and skills. Quality education can help individuals find better opportunities
and empower them to improve their lives. In addition, quality government services, including
health services, improve people’s health and increase life expectancy.
How does urbanization affect your life?
Urbanization affects my economic life as a student because it increases the cost of living. Cities
usually have higher prices for food, transportation, and other basic necessities. Since I am now
staying in the city and away from my family, I need to be more independent and manage my own
finances and expenses. However, urbanization also brings opportunities and better access to
services and resources. For example, I can find a job to support my personal needs while
studying because there are many work opportunities in the city. In addition, living in the city
often means having access to better quality education.
The World Bank classifies economies for analytical purposes into four income groups:
low, lower-middle, upper-middle, and high income.
For this purpose it uses gross national income (GNI) per capita data in U.S. dollars,
converted from local currency using the World Bank Atlas method, which is applied to
smooth exchange rate fluctuations.
Estimates of GNI are obtained from economists in World Bank country units who rely
primarily on official data published by the countries; the size of the population is
estimated by World Bank demographers from a variety of sources, including the UN’s
biennial World Population Prospects.
Countries are classified each year on July 1, based on the estimate of their GNI per capita
for the previous calendar year. Income groupings remain fixed for the entire World Bank
fiscal year (i.e., until July 1 of the following year), even if GNI per capita estimates are
revised in the meantime.
Prior to FY19, the income category of a country was not one of the factors which
influenced lending decisions. Starting in FY19, there will be surcharges in IBRD loan
pricing for High income countries as described in the Development Committee
Paper "Sustainable Finance for Sustainable Development” (DC2018-002/P, April 21,
2018).
LARGEST ECONOMIES BY NOMINAL GDP
1. UNITED STATES
2. CHINA
3. BILLIONAIRES
4. JAPAN
5. GERMANY