ASSIGNMENT

Global Economics



Introduction1

Economic Growth vs. Economic Development1

Different but Interrelated Concept3

Preconditions for Economic Growth4

Economic Freedom4

Property rights6

Markets9

Sources of Economic Growth10

Conclusion13

References14

Global Economics

Introduction

Wealth of nations has been in spot light since long time. However, the relatively new concept is the economy and moreover the economic growth. A broader term used is the economic development. These two terms are interrelated; however, have distinct concepts and measures. It is necessary to understand the differences among the two concepts. Also, the preconditions of economic growth are to be seen. This paper distinguishes the economic development from economic growth and identifies the preconditions of economic growth. The paper also brings into discussion the sources of growth in economy and how they lead to improving quality of life. The role of sources in history, present and future is also discusses in brief and concise manner. This paper does not present an exhausting list of sources of economic growth; however, it does include the major sources and discussion of broader terms that play their role in growth of any economy. It is also an objective of this paper to focus on long term and continuous growth in economy, rather than factors that only lead to bubble growth that last few instances (Colombatto, 2006, pp. 243-260).

Economic Growth vs. Economic Development

Economic growth and economic development are interrelated terms which should never be confused, since both portray different meaning, however, in related fashion. Economic growth is a narrow concept of economic development. Economic growth is actually the increase in country's real level of national output. This increase can be caused due to several reasons including technology improvements, quantity of resources, or any other way that increases the relative value of an output. The measure that is used to gauge the growth in economy is Gross Domestic Product or GDP in most cases. The gross domestic product can also be increased due to fluctuation in currencies, or inflation. To counter this inflation adjusted GDP or Real GDP is taken a measure to monitor the growth in production in real sense without the inflation balloon effect (Osborne, 2006, pp. 536: Jurgilas, 2007, pp1 -7).

The normative concept of economic development is broad term that encompasses the economic health and standard of living. It not only takes into account the quantitative measures but also the qualitative measures. Michael Todaro views the economic development as improvement is self-esteem needs, increase in standard of living, and freedom of oppression. There are several measures and opinions regarding the measurement of economic development. However, the most widely used measure is perhaps the Human Development Index (Hirschman, 1981, pp. 1-24). Human Development Index takes into account the life expectancy, and literacy rates which have effects on the productivity ultimately leading to economic growth. Other measures of economic development include, Gender Related index (GDI), infant mortality rates, and Human poverty Index. The increase in literacy also brings better opportunities in the domain of health, education, employment and conservation of environment domains (Hanushek, and Ludger 2008: ...