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Explain the key issues in relation to the developing nations concerning the characteristics of economic growth.

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Sec. 5 - Development economics - Essay #2 Explain the key issues in relation to the developing nations concerning the characteristics of economic growth Economic growth occurs if there is an increase in the real level of national output produced over time within the domestic boundaries, including the output of foreign owned firms1. The measurement for economic growth - annual percentage change in GDP (Gross Domestic Product) or GNP (Gross National Product) - is therefore a quantitative one. It is very desirable to have growth since it creates extra resources which can be used to reduce poverty and lead to more goods and services for consumption as shown in diagram 1 by the shift of the first curve outwards in the Production Possibility Curve: Diagram 1: PPF - growth2 Typical for economic growth are variations in long run growth rates. ...read more.


In addition there are four more main changes associated with economic growth: The structure of a country's production is definitely linked to the its level of output of goods and services. Changes in economic growth connected with changes from the primary sector into the secondary sector and from the secondary sector to the tertiary sector which are driven by YED, the income elasticity of demand - responsiveness of demand to a given change in income. In developing countries (represented by chart A) agriculture plays a bigger role than manufacturing and services: Diagram 2: Economic structures - Primary, manufacturing & tertiary sectors5 After YED increased the manufacturing sector becomes more important (M > P > T in chart B) and after a certain period of time the economy structure may have changed so that the service sector is bigger than the manufacturing sector and the agricultural sector is the smallest one (like in chart C representing a developed country). ...read more.


and its level of productivity is equal to productivity level of these small scale firms. In Zambia they still use traditional farming methods so there is very little machinery and much of the heavy work is done by hand or by the single oxen that the farmer owns, the farmer's family has to walk considerable distances to the small plots of land that are being worked, etc. Necessary for an improvement of this would be technological changes including in human skills. Moreover the problem that the international exchanges are limited and international trade is insignificant is relevant to developing countries because international trade grows with the changes of economic structures (from chart A to chart C in diagram 2). All these characteristics are inter-dependant and self-reinforcing8. Economic growth is very essential to developing countries hence it is the basis for economic development and therefore raises both the standard of living and the economic efficiency of resource allocation in developing countries. ...read more.

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