1. Economic growth and development.

A country's general economic health can be measured by looking at that country's economic
growth and development.

The term economic growth refers to the quantitative aspect of economic progress of a country.
According to Paul Baron, “Economic growth may be defined as an increase over time in per capita
output of material goods.” In other words, growth of gross national output or per capita output is an
indicator of economic growth. We know human wants are unlimited and they are increasing over time.
Man is never satisfied with what he has. However, our resources are very limited. Therefore, we should
try to satisfy our wants. Hence, we should try to increase the production of goods and services. Thus,
economic growth signifies the growth in the volume of goods and services.

Economic growth can be attained from the following methods:-

(a) To raise total output
(b) To check increase in population
(c) To ensure capital formulation
(d) To raise entrepreneurship.

Economic growth is usually indicated by an increase in that country's gross domestic product, or
GDP. Generally speaking, gross domestic product is an economic model that reflects the value of a
country's output. In other words, a country's GDP is the total monetary value of the goods and services
produced by that country over a specific period of time.

On the other hand according to Promit Chowdhury, “Economic development is an increase in

real output goods and services that is sustained over a long period of time, measured in terms of value
added.” According to Meier and Bladwin, “Economic Development is a process whereby an economy’s
real national income increases over a long period of time.” According to Prof. Todaro, “Economic
development is a multi-dimensional process involving major changes in social structures, popular
attitudes and national institutions as well as the acceleration of economic growth, the reduction of
inequality and the eradication of absolute poverty”.

Economic development is usually indicated by an increase in citizens' quality of life. 'Quality of

life' is often measured using the Human Development Index, which is an economic model that considers
intrinsic personal factors not considered in economic growth, such as literacy rates, life expectancy and
poverty rates.

Hence, standard of living includes various things like safe drinking water, improve sanitation
systems, medical facilities, spread of primary education to improve literacy rate, eradication of poverty,
balanced transport networks, increase in employment opportunities etc. Thus, the quality of life is the
major indicator of economic development. Therefore, increase in economic development is more
necessary for an economy to achieve the status of Developed Nation.

While economic growth often leads to economic development, it's important to note that a
country's GDP doesn't include intrinsic development factors, such as leisure time, environmental quality
or freedom from oppression. Using the Human Development Index, factors like literacy rates and life
expectancy generally imply a higher per capita income and therefore indicate economic development.
 2. What are some of the indicators of economic growth displayed by present day advanced
economies? How would you justify their significance as economic indicators?

Economic growth is a quantitative term and measures the rate of growth in economy via
following indicators –

National income - Higher the growth in national income, higher will be the economic growth
since population will have a bigger chunk of income for distribution among themselves.

Per capita Income - We incorporate population so as to take care of increasing population. If

population increase at a higher rate than national income then of course economy will be no better off.
Hence we look at per person income which is national income divided by population.

Per capita consumption - We look at it to basically distinguish between what part of income is
going for savings and what part for consumption. Very high saving rate especially in developed countries
can bring about recessionary conditions. And in general too stressing too much on savings at the cost of
producing essential goods can adversely impact welfare. Hence an increase in per capita consumption is
seen as another measure to indicate economic growth.

3. Explain the growth of output assuming that:

a. Capital and labor are the only inputs, with one factor fixed:
b. There are three inputs, in which technological progress is now included.
c. How can the simple theory of production explain productivity growth?