Level: SL and HL
Economic development is broader than economic growth, so no single number captures it. This topic examines single and composite indicators of development, their strengths and limitations, and the relationship between growth and development.
Economic growth is an increase in real GDP (or real GDP per capita) over time.
| Category | Indicators | What they show |
|---|---|---|
| Income | GDP per capita; GNI per capita, preferably at purchasing power parity (PPP) | Average income and output per person, adjusted for differences in the cost of living |
| Health | Life expectancy at birth; infant mortality rate; under-5 mortality rate; maternal mortality ratio | How long and how healthily people live |
| Education | Literacy rate; mean years of schooling; expected years of schooling; enrolment rates | The level of human capital and access to education |
| Economic and social | Access to clean water, sanitation and electricity; energy use per person; share of workforce in agriculture; poverty rate; Gini coefficient | Basic needs, structure of the economy and inequality |
Purchasing power parity (PPP) is an exchange rate that equalises the purchasing power of currencies, so that the same basket of goods costs the same in each country.
Task (SL and HL): Country Z has GDP of US$500 billion, net income paid abroad of US$20 billion and a population of 40 million. Calculate GNI and GNI per capita.
GNI = GDP + net income from abroad = 500 − 20 = US$480 billion
GNI per capita = 480 000 million ÷ 40 million = US$12,000
Interpretation: GNI is below GDP because foreign owners of firms in Country Z send profits home, which is common in countries with large inflows of FDI or foreign-owned mines.