ECS3709
Assignment 5 Semester 2 2024
Unique Number:
Due Date: 24 October 2024
SECTION A
QUESTION A1
(a) How the Measurement of Living Standards Between Countries Influences
Understanding of Economic Growth
The measurement of living standards, typically through indicators such as Gross Domestic
Product (GDP) per capita, Human Development Index (HDI), and purchasing power parity
(PPP), can significantly affect our understanding of economic growth. GDP per capita is
widely used to compare economic output per person, but it overlooks inequality, quality of
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SECTION A
QUESTION A1
(a) How the Measurement of Living Standards Between Countries Influences
Understanding of Economic Growth
The measurement of living standards, typically through indicators such as Gross
Domestic Product (GDP) per capita, Human Development Index (HDI), and
purchasing power parity (PPP), can significantly affect our understanding of
economic growth. GDP per capita is widely used to compare economic output per
person, but it overlooks inequality, quality of life, and environmental sustainability.
For instance, while the United States has a high GDP per capita, inequality and
healthcare access issues temper the overall living standards for certain populations.
On the other hand, countries like Norway, which ranks high on the HDI due to better
health and education outcomes, offer a more holistic view of growth that
encompasses well-being beyond mere income.
In countries with similar GDPs, differences in living standards due to factors like
healthcare, education, and life expectancy can alter perceptions of economic growth.
For example, China’s rapid economic growth has led to higher GDP per capita, but
living standards in rural areas still lag behind those in developed regions, highlighting
regional disparities. Thus, by considering living standards alongside traditional
growth metrics, we gain a more comprehensive understanding of a country’s real
economic progress.
(b) The Role of Savings in Promoting Economic Growth
Savings play a crucial role in promoting economic growth as they provide the funds
for investment in infrastructure, technology, and human capital. Countries with high
savings rates, such as China, are able to channel these resources into large-scale
investments in manufacturing, infrastructure, and innovation, driving long-term
economic growth. China’s high savings rate, combined with state-led investment,
has contributed to its rapid economic expansion over the past few decades.
