QUESTION 1 (6 marks)

Economic growth is a necessary, but not a sufficient condition for economic...

Question

QUESTION 1 (6 marks)

Economic growth is a necessary, but not a sufficient condition for economic development in a country. True or False? Justify your answer by comparing through an example of an Asia-Pacific economy (compare between indonesia and china) over XXXXXXXXXXperiod.

As a guideline, use GDP Growth (Annual %) from WDI as an indicator for economic growth and the Human Development Index (HDI) from UNDP as data indicators. Remember to interpret each of these data indicators in your country context. You may use either tables or charts to explain your answer (but not both)

QUESTION 2(5 marks)

Refer to the table below that provides data on Gross Domestic Product (GDP) per capita in 2009 and answer the following question:

What are the possible reasons that could explain the significant difference between GDP per capita measured at official exchange rates and that measured at purchasing power parity (PPP) for developing countries (for example, China, Vietnam, India) compared to developed countries (for example, US, UK, Japan) in the above table?

QUESTION 3(7 marks)

If GDP in an economy grows at 4% annually, and capital stock and labour force at 3.5% and 1.5% respectively, with share of capital in national income being 25% and in labour 75%, calculate the Total factor Productivity (TFP) growth rate and interpret it, using a standard growth accounting framework.

QUESTION 4(12 marks)

Go tohttp://info.worldbank.org/governance/wgi/sc_chart_print.asp on the web and select your chosen Asia-Pacific economy (INDONESIA) from the top left menu. Then create a table of Governance indicators for your country for the years 2002 and 2011.

Based on this table, answer the following questions:

i) Which of the governance indicators have improved over XXXXXXXXXX?

ii) What are the possible reasons behind this improvement?

iii) Which of the governance indicators have deteriorated over XXXXXXXXXX?

iv) What are the possible reasons behind this deterioration?

(Note: A higher percentile rank indicates improvement in the indicators, and better governance and institutional development).

The World Bank (2010), Governance and Anti-Corruption Indicators available athttp://info.worldbank.org/governance/wgi/sc_chart.asp# (Accessed March 1 2010)

(TOTAL FOR ASSIGNMENT – 30 MARKS)

David · Accepted Answer

QUESTION 1 (6 marks) 
Economic growth is a necessary, but not a sufficient condition for economic development in a co
untry. True or False? Justify your answer by comparing through an example of an Asia-Pacific e
conomy (compare between indonesia and china) over 2000-2010 period.  
Answer: 
The statement that “Economic growth is a necessary, but not a sufficient condition for economic 
development in a country” is a true statement. To establish this statement, we can compare the an
nual growth rates and human development indexes of two Asia-pacific countries say; Japan and 
China. The data and graph has been shown below; 
 
China Japan 
Year 
GDP Annual 
growth rate (%) 
GDP Annual 
growth rate 
(%) 
2003 10 2 
2004 10 2 
2005 11 1 
2006 13 2 
2007 14 2 
2008 10 -1 
2009 9 -6 
2010 10 4 
 
Sources: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
Sources: http://hdr.undp.org/en/data/trends/
It can be noted that despite having a very high annual growth rate relative to Japan (for the perio
d 2003-2008), China‟s economic development (as measured in terms of human development ind
ex) is far below Japanese economic development. It proves the initial statement that “Economic 
growth is a necessary, but not a sufficient condition for economic development in a country.
QUESTION 2 (5 marks) 
Refer to the table below that provides data on Gross Domestic Product (GDP) per capita in 2009 
and answer the following question: 
What are the possible reasons that could explain the significant difference between GDP per capi
ta measured at official exchange rates and that measured at purchasing power parity (PPP) for de
veloping countries (for example, China, Vietnam, India) compared to developed countries (for ex
ample, US, UK, Japan) in the above table? 
Answer: 
Possible reasons that could explain the significant difference between GDP per capita measured 
at official exchange rates and that measured at purchasing power parity (PPP) for developing cou
ntries; 
1. Lower cost of living in developing country as compare to developed country; cost of livin
g in developing country is much lower than developed country and this fact is not reflecte
d in official exchange rate.

QUESTION 1 (6 marks) Economic growth is a necessary, but not a sufficient condition for economic development in a country. True or False? Justify your answer by comparing through an example of an...