Economics studies how individuals, governments, businesses, organizations, and countries use their limited resources effectively and efficiently to benefit from them to the maximum extent. It deals with manufacturization, distribution, and consumption of goods and services.
Economics addresses what to produce, how, and who will produce it. It is an essential factor as it denotes the distribution of resources, social efficiency, consumer behaviour, market failure, economic forecasts, opportunity costs, and decisions.
- Definition: Economic growth represents an increase in a country’s output or Gross Domestic Product (GDP), while economic development involves qualitative improvements in living standards and well-being.
- Indicators: Economic growth is measured by GDP, while economic development considers various indicators like health, education, and income distribution.
- Sustainability: Economic growth can be short-term and resource-intensive, while economic development aims for long-term improvements and sustainable progress.
Economic Growth vs Economic Development
Economic growth refers to an increase in the production and consumption of goods and services in an economy over time, measured by GDP. Economic development, however, involves a more comprehensive change including structural changes, improved living standards, and technological progress.
Economic growth is the increase in the goods and services produced per person over some time. In contrast, economic development is the increase in output and improvement in a nation’s social and political welfare.
|Parameter of Comparison||Economic Growth||Economic Development|
|Meaning||Economic growth refers to the rise in the value of everything produced within the economy.||Economic Development refers to the process of improvement in the quality of life and living standards.|
|Indicators||Economic growth is indicated by the gross domestic product (GDP) or gross national product (GNP) increase.||Economic development is indicated by the quality of living standards, increase in life expectancy, human development, etc.|
|Scope||The scope of economic growth is narrow as compared to the area of economic development.||Economic development has a broader scope as compared to Economic growth.|
|Reflects||Economic growth covers quantitative aspects and reflects the national income.||Economic development considers the qualitative aspects and reflects not only national income but also the nation’s overall development.|
|Measurement||Economic growth measures the actual gross domestic product or gross national product.||Economic development measures the development, human development index, human poverty index, and physical quality of life index.|
What is Economic Growth?
Economic growth measures the real national income, i.e. GDP. GDP (gross domestic product) measures the national income, output, or expenditure.
It denotes the total volume of the goods and services produced in the country or a nation.
Economic growth creates more profits for businesses. As a result, stock prices rise, increasing the capital to invest, purchasing more resources, and hiring more human resources/ employees.
Consumers having more money to buy additional goods and services increases economic growth. All countries wish to achieve positive economic growth as it leads to more money, which is the ultimate goal of businesses. In contrast, the government benefits from increased tax revenue by spending more, cutting taxes, or both.
There are two measures of Economic growth:
- GDP, i.e. Gross domestic product
- GNP, i.e. Gross national product
Different methods, such as gross domestic and national products, can be employed to assess economic growth.
While the gross domestic product indicates the value of goods and services manufactured by the country, the gross national product measures the value of goods and services and investments from foreign countries.
Although the gross domestic product is commonly used to measure the country’s growth, it fails to keep the nation’s well-being.
What is Economic Development?
Economic Development refers to the improvement in the quality of goods, and services, organization of production, improvement in quality of life, and structured changes. It denotes the creation and distribution of wealth.
It is qualitative and reflects the composition and distribution of national income. Moreover, economic development is a continuous and planned process; it refers to gradual and steady change.
Economic development is the solution to the problems of underdeveloped countries. It is a prerequisite for development.
The measures of Economic Development are the following:
- Gross Domestic Product
- Literacy level
- Health Level
- Life expectancy rate
- Environmental rate
- Quality of housing
Main Differences Between Economic Growth and Economic Development
- Economic growth refers to the monetary gain of an economy, whereas on the other hand, economic development refers to the overall development of the quality of life, living standards, etc.
- Economic growth is a uni-dimensional approach that only deals with economic growth. In contrast, economic development is a multi-dimensional approach that takes both growth and the quality of life of the economy.
- Economic growth is an automatic process that may or may not require the government’s intervention. On the other hand, economic development requires the government’s intervention as the government lays down all the development policies.
- Economic growth denotes more output, while, on the other hand, economic development denotes better living conditions.
- Economic growth does not consider income distribution; on the contrary, economic development considers income distribution.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.