Economic Growth and

Development
Dolor, Kristine Angelica
Gentolea, Dawn
Monsala, Erika Jane
Tuboran, Kristie Lou

What is economic growth and development?

Economic growth:
Economic development implies
changes in income, savings and
investment along with
progressive changes in socioeconomic structure of country
(institutional and technological
changes).
Development relates to growth of
human capital indexes, a
decrease in inequality figures,
and structural changes that

 Economic development:
Economic growth refers to an
increase in the real output of
goods and services in the
country.

Growth relates to a gradual

increase in one of the
components of Gross
Domestic Product:
consumption, government
spending, investment, net
exports.

Stages of economic growth and

development
Rostows stages of development:
It is a model of economic growth suggesting that all
countries pass through a series of stages of development
as their economies grow.

The
tradition
al society

The
precondi
tions for
take-off

Takeoff

The
drive
to
maturi
ty

The age of
high massconsumpti
on

Traditional stage
Existence of barter
Agricultural base
economy
Extensive labour
Subsistence economy

Precondition

Development of
mining industries
Society begins to
develop
manufacturing
country advances to
a more complex
economy, beginning
of economy
development
levels of technology
develop
development of a
transport systemTRADE.

Take-off
Increased in industrialization
Further growth in savings and investment
Decrease in agricultural workers

Drive to maturity
Industry more diversified
Increase in levels of
technology utilized
standards of living rise
Use of technology increases
National economy grows and
diversifies
Increased percentage of
Nations wealth- invested
into developing its economy

High Mass Consumption

Individual incomes are greater than
necessary for buying essentials
growing demand for additional
consumer goods and services
Improved health care systems and
education
Economy flourishes
High output levels
Mass consumption of consumer
durables
High proportion of employment in
service sector

Formula for calculating

Economic Growth

where: = previous year GDP

= present year GDP


Example:
The Philippines GDP in 2012 is 250.2 billion USD
and in 2013 is billion USD (source: World Bank). Thus, the
Philippines Economic Growth rate from 2012-2013
is:
E.G. =
=
= 0.0875 or 8.7%

Formula use to compute

Gross National Product (GNP)

GNP is a measure of a country's economic

performance, or what its citizens produced (i.e.
goods and services) and whether they produced
these items within its borders.
The general formula for calculating GNP is:
GNP= Consumption + Government
Expenditures + Investments + Exports +
(Foreign Production by U.S Companies
Domestic Production by Foreign Companies)

How it works/Example:
GNP includes income earned by citizens and companies
abroad, but does not include income earned by
foreigners within the country.
The figures used to assess GNP include the
manufacturing of tangible goods (cars, furniture and
agricultural products) and the provision of services
(education, healthcare, and business services). GNP
does not include the services used to produce
manufactured goods because their value is included in
the price of the finished product. However, GNP does
include depreciation and indirect
business taxes like sales tax.

METHODS USED TO ASSESS

ECONOMiC GROWTH

There are 2 ways in assessing Economic

Growth:
1. GDP
a. Using the Expenditures Approach
b. Using the Income Approach
2. GNP
a. Nominal GNP
b. Real GNP

GROSS DOMESTiC PRODUCT

- Is one the primary indicators used to gauge the
health of a country's economy.
- It represents the total value of all goods and
services produced over a specific time period.
- GDP is expressed as a comparison to the
previous quarter or year.

Table 1: Expenditures
Transfer Payments

$54

Interest Income

$150

Depreciation

$36

Wages

$67

Gross Private Investment

(I)

$124

Business Profits

$200

Indirect Business Taxes

$74

Rental Income

$75

Net Exports (X-M)

$18

Net Foreign Factor Income

$12

Government Purchases (G)

$156

Household Consumption
(C)

$304

GDP = C + G + I + (X - M)
C = all private consumption, or consumer
spending in a countrys economy
G = the sum of government spending
I = sum of all the business spending on the
capital in the country
X-M = the total net exports of the country,
estimated as total exports less total
imports
(X-M = Exports Imports)

Table 1: Expenditures
Transfer Payments

$54

Interest Income

$150

Depreciation

$36

Wages

$67

Gross Private Investment

(I)

$124

Business Profits

$200

Indirect Business Taxes

$74

Rental Income

$75

Net Exports (X-M)

$18

Net Foreign Factor Income

$12

Government Purchases (G)

$156

Household Consumption
(C)

$304

GDP = C + G + I + (X - M)
GDP = $304 + $156 + $124
+ $18

GDP = $602

Table 1: Income
Transfer Payments
Interest Income (i)

$54
$150

Depreciation

$36

Wages (W)

$67

Gross Private
Investment

$124

Business Profits (PR)

$200

Indirect Business Taxes

$74

Rental Income (R)

$75

Net Exports

$18

Net Foreign Factor

Income

$12

Government Purchases

$156

Household
Consumption

$304

NI = W + R + i + PR
W = wages
R = Rental income
i= Interest income
PR = are business profits

GDP = NI + Indirect
Business Taxes +
Depreciation

Table 1: Income
Transfer Payments
Interest Income (i)

NI = W + R + i + PR
$54
$150

Depreciation

$36

Wages (W)

$67

Gross Private
Investment

$124

Business Profits (PR)

$200

Indirect Business Taxes

$74

Rental Income (R)

$75

Net Exports

$18

Net Foreign Factor

Income

$12

Government Purchases

$156

Household
Consumption

$304

NI = $67 + $75 + $150 + $200

NI = $492

GDP = NI + Indirect
Business Taxes +
Depreciation
GDP = $492 + $74 + $36

GDP = $602

GROSS NATiONAL PRODUCT

- GDP + any income earned by residents from
investments made overseas.
- Also, the income earned within the domestic
economy by overseas residents.
-It measures whatever goods and services are
generated by the citizens and whether these
are produced within the borders of the country
or not.

A. Nominal Price

It is the cost of the good at the current

price level.

Changes in nominal prices result

directly from changes in the price
level due to inflation.

B. Real Price
It is the cost of the good at a base year
price level.

TOP 10 POOREST COUNTRIES OF

THE WORLD
GDP (PPP*) per Capita

TOP TEN POOREST COUNTRIES OF THE WORLD (as of July 18,

2014)
COUNTRY

GDP (PPP*) per Capita ($)

1. DR Congo

394.25

2. Zimbabwe

589.46

3.Burundi

648.58

4. Liberia

716.04

5. Eritrea

792.13

6. Central African Rep.

827.93

7. Niger

853.40

8. Malawi

893.84

9. Madagascar

972.07

4. Afghanistan

1,072.19

http://www.mapsofworld.com/world-top-ten/world-top-ten-poorest-coun
tries-map.html

TOP 10 RICHEST COUNTRIES IN

THE WORLD
GDP [Per Capita ($)]

TOP TEN RICHEST COUNTRIES OF THE WORLD (as of Feb 14,

2015)
COUNTRY

GDP [Per Capita ($)]

1. Qatar

154,894.18

2. Luxembourg

90,332.89

3. Singapore

78,761.92

4. Brunei Darussalam

73,823.13

5. Kuwait

70,785.46

6. Norway

64,363.14

7. United Arab Emirates

63,180.83

8. Switzerland

53,976.60

9. United States

53,000.97

10. Hongkong SAR

52,984.06

http://www.mapsofworld.com/world-top-ten/world-top-ten-richestcountries-map.html