Login
Copyright

What Is Economic Growth and Development? - Definition, Theories & Indicators

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: What Is Tort Law? - Definition and Examples

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:02 Economic Growth
  • 0:52 Example of Economic Growth
  • 2:17 Economic Development
  • 3:18 Example of Economic…
  • 4:23 U.S. Foreign Aid
  • 5:50 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Login or Sign up

Timeline
Autoplay
Autoplay
Create an account to start this course today
Try it free for 5 days!
Create An Account

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Ashley Dugger

Ashley is an attorney. She has taught and written various introductory law courses.

A country's economic health can usually be measured by looking at that country's economic growth and development. This lesson defines and explains economic growth and economic development, including the role of U.S. foreign aid.

Economic Growth

A country's general economic health can be measured by looking at that country's economic growth and development. Let's take a separate look at what indicators comprise economic growth versus economic development.

Let's first examine economic growth. A country's 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.

Example of Economic Growth

For example, let's say that a special berry grows naturally only in the country of Utopia. Natives to Utopia have used this berry for many years, but recently, a wealthy German traveler discovered the berry and brought samples back to Germany. His German friends also loved the berry, so the traveler funded a large berry exporting business in Utopia. The new berry exporting business hired hundreds of Utopians to farm, harvest, wash, box and ship the berries to grocers in Germany.

In one calendar year, the berry exporting business added over one million dollars to Utopia's GDP because that's the total value of the goods and services produced by the new berry exporting business. Since Utopia's GDP increased, this means that Utopia experienced economic growth.

In the United States, our periods of large economic growth are mostly associated with new technology. The Industrial Revolution and the development of the Internet are two examples. When new developments bring an increase in output capacity, economic growth usually follows.

Economic Development

Now let's take a look at economic development. A country's 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.

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.

Example of Economic Development

For example, before the berry exporting business, most Utopians lived in small villages many miles from one another. Few Utopians had access to schools, fresh water or healthcare. Utopian men worked long hours attempting to farm land that was naturally unsuitable for most crops, just to feed their immediate families.

After the berry exporting business, many Utopians found work through the new industry. Newly employed villagers relocated closer to the business, giving them better access to schools, healthcare and fresh water produced for the plant and surrounding areas. Most Utopian men were able to trade labor-intensive hours in the fields for easier eight-hour shifts. Besides earning a salary, the new work enabled them more leisure time and contributed to longer life spans. Thus, Utopia experienced economic development through economic growth.

U.S. Foreign Aid

The U.S. is committed to the economic growth and development of many other countries through foreign aid programs. Foreign aid programs include humanitarian and disaster relief, economic or military support and healthcare programs, such as those involving family planning, reducing infant mortality or prevention of a particular disease. In a broader sense, all U.S. foreign aid seeks to promote economic growth and development in the recipient country.

To unlock this lesson you must be a Study.com Member.
Create your account

Register for a free trial

Are you a student or a teacher?
I am a teacher
What is your educational goal?
 Back

Unlock Your Education

See for yourself why 10 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back

Earning College Credit

Did you know… We have over 95 college courses that prepare you to earn credit by exam that is accepted by over 2,000 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it free for 5 days!
Create An Account
Support