Senior Inter Economics Study Material and Important Questions

Following is the study material and important questions for Senior Inter Economics for Andhra Pradesh Board students. The material and questions are from Unit – I of the lesson – Economic Growth and Economic Development.

1 Q: What are the differences between Economic Growth and Economic Development?

The problems of developed and under developed countries are not same in nature. To discuss and elevate such problems we use the terms Economic Growth and Economic Developed. Though they synonyms each other, they are quite different in meaning in economic literature.

Economic Growth: The increase in real output of goods and services of the economy is called as “Economic Growth”. It indicates only quantitative changes of the economy. This concept is related to developed countries.

Economic Development: The overall progress of the economy along with institutional and technological changes is called as “Economic Development. It indicates both quantitative and qualitative changes of the economy. This concept is related to under developed countries.

Difference between growth and development:

Economic Growth – Economic Development:
1. It indicates only qualitative 1. It indicates both qualitative changes. and quantitative changes.
2. It is a uni-dimensional concept. 2. It is multidimensional concept.
3. It is a narrow concept. 3. It is a broad concept.
4. Govt. play nominal role in 4. Govt. play dominant role in this concept. this concept.
5. It is related to developed countries. 5. It is related to under developed countries.
6. It is a short run process. 6. It is a long run process.

2 Q. Explain the factors that determine economic development?

Factors Determining Economic Development:

1. Natural resources: According to Jacob Viner, Bawmol and W.A. Lewis, a country’s developed is determined by natural resources like fertility of soil, irrigation, mineral like coal, petroleum etc.

2. Capital Formation: Increase in the net stock of the capital is called as capital formation. It helps to create sound infrastructure and enlarges the productive capacity.

3. Marketable Surplus: The excess amount of output available in agricultural sector after meeting the basic needs of rural people is called as marketable surplus. More marketable surplus leads to economic development.

4. Foreign Trade: Foreign trade provide sufficient investment, technology, managerial abilities and enlarge the market. so it is described as an engine of growth.

5. Human resources: Population of the country is called as human resources. The quality population of any country provide skilled and efficient labour and managerials.

6. Technical progress: The availability of latest and sophisticated technology minimise cost of production, maximise output and change the social atmosphere.

7. Political freedom: If any country is under the rule of other country, they may be exploited and forced to remain backward. So political freedom is essential for economic development.

8. Desire to develop: Richard T. Gill says that, the economic development is not a mechanical process but it depends on the skills, quality and attitudes of the people.

Classification of the Countries:

World Bank classified the countries of the world on the basis of per capita Gross National Income. (As per WDR-2008)

Sl. No. Category Range of GNI

1. Low Income Countries – Below 906 dollars
2. Middle Income Countries – $ 907 – $11115
3. High Income Countries – $ 11116 and above

3 Q. What are the features of developed Countries?

DEVELOPED COUNTRIES: The countries with high Per Capita Income are called as developed countries. They are also called as industrial and emerging economies. According to World Development Report (2008), they have 16 percent of world population with 77 percent world GNI. Eg: USA, UK, Switzerland.

CHARACTERS:

1. High Per Capita Income: Developed Countries Possess higher per capita as well as gross National Income.
Eg: The PCI of switzerland is $65330, USA is 47,580.

2. Importance of Non-agricultural Sector: In developed countries non-agricultural sector (industry & Services) provide
more share to GDP and employment for majority of population. Eg: In U.S.A. industrial sector provide 22 percent Service Sector provide 76 percent share in GDP and employment for 96 percent population.

3. High level Capital and Technology: Due to high level saving rates, investment and PCI, the developed countries are maintaining high level capital formation and technical progress.

4. Low level unemployment: There is very low level of unemployment in these countries due to the domination
of non-agricultural sector. We find cyclical and frictional unemployment is some extent.

5. Better Quality of Life: In these countries all citizens are ensured with minimum standard of life with
Social Security. There are low level death and birth rates, high level literacy rate etc. due to higher human capital.

4 Q: Explain the features of under developed countries with reference to India?

Under Developed Countries: According to Indian Planning Commission, An under developed country is characterised by the greater or lesser degree of un utilised or under utilised man power on one hand and unexploited natural resources on the other hand. These are also called as third world countries, agrarian economies and developing countries. They have 84 percent World population with only 23 percent of World GNI. Eg: India, Srilanka etc.

Features with Reference to India:

1. Low Per Capita Income: Under developed countries have lower PCI due to low level savings and investment.
India’s PCI is $1070 which is 45 times less than that of USA.

2. Scarcity of Capital: In most of countries, the saving rates range between 15 to 20 percent. So, it leads
to low level capital formation. As per Ragnar Nurkse, many of these are in vicious circles of poverty due to scarcity of capital. Now India’s capital formation rate is 39 percent of GDP.

3. Demographic Characters: Many countries are suffering with population explosion, high level death rates,
birth rates, etc. 84 percent of world population is in developing countries only. As per 2011 Census, India’s population is 121 Crores, which is 17 percent of world population.

4. Unemployment: These countries are suffering with disguised and cyclical unemployment due poverty and market failure. In India disguised unemployment ranges between 15 to 20 percent.

5. Predominance of agriculture: In developing countries agriculture provide 20 to 30 percent of share in GDP and
employment opportunities for nearly 70 to 80 percent. In India agriculture provide 58 percent employment opportunities and 18 percent share to GDP.

6. High Incidence of Poverty: Most of under developed countries are suffering from high poverty levels along
with malnutrition, poor quality of life, ill-health and literacy. In India 19.3 percent people are living below poverty line.

7. Income inequalities: There are large inequalities in income and wealth distribution in these countries due to private ownership, tax evasion etc. It widens the gap between haves and have not’s.

8. Poor Quality of Life: In these countries there is low level literacy, income, health facilities, sanitation,
safe drinking water, life expectancy, etc… In India life expectancy is 63.4 years with 74 percent literacy rate.

9. Technological backwardness: Capital deficiency is the main reason for technical backwardness. There is a technological dualism in almost all sectors of the economy.

10. Density of Population: The average number of persons living per square kilometre area is called as density
of population. High density of population in these countries increase the burden on land and other resources. At present India’s density of population is 382 persons per square km. area.

Andhra Pradesh Economy:

Andhra Pradesh is the fourth largest state in area with 8.37 percent of land area of India and fifth largest state in terms of population with 8.46 crores. It posses 7 percent of India’s population with 1.06 percent growth rate. At present the sex ratio is 992 per 1000 males.

At present 59.7 percent of population in agriculture, 15.5 percent in industrial sector and 24.8 percent in Service Sector is engaged in Andhra Pradesh. AP is one of the largest states in India among high Per Capita Income States.

Important Questions:

Long Answer Questions: (10 M)

1. What are the factors that influence economic development?
2. Explain the features of developing countries with reference to India.

Short Answer Questions: (5 M)

1. Distinguish between Economic Growth and Economic Development.
2. What are the features of developed countries?

Very Short Answer Questions: (2 M)

1. Per Capita Income.
2. Economic Development.
3. World Bank’s Classification of Countries.
4. Dual Economy.
5. Marketable Surplus.