Integrated Guidance Programme of
General Studies for IAS (Pre)
Subject - Economic and Social
Chapter - Economics: An Introduction (Part -2)
Define Business cycles:
Alternating periods of expansion and decline in economic
activity is called business cycle. That is, the ups and downs of the
economy. There are four stages in the business cycle: expansion, growth,
slowdown and recession.
What are the Benefits and Side Effects of Economic Growth:
- The first benefit of economic growth is wealth creation. It helps create
jobs and increase incomes.
- It ensures an increase in the standard of living, even if it is not
- Government has more tax revenues: fiscal dividend. Economic growth
boosts tax revenues and provides the government with extra money to finance
spending projects. -For example, the flagship programmes of the government
like the MGNREGA are a direct result of the tax buoyancy of growth It sets
up the positive spiral.
- rising demand encourages investment in new capital machinery which helps
accelerate economic growth and t create more employment.
Economic growth can also have a self-defeating effect:
- violate the principles of fairness and equity thus setting off social
- Environmental costs are another disadvantage.
- The UN Human Development Index (HDI) is a standard means of measuring
wellbeing. The index was developed in 1990 by the Pakistani economist Mahbub
ul Haq, and has been used since 1993 by the United Nations Development
Programme in its annual report.
- The HDI measures the average achievements in a country in three basic
dimensions of human development:
- A long and healthy life, as measured by life expectancy at birth.
- Knowledge, as measured by the adult literacy rate (with two-thirds
weight) and the combined primary, secondary, and tertiary gross
enrolment ratio (with one-third weight).
- A decent standard of living, as measured by gross, domestic product
(GDP) per capita at purchasing power parity (PPP) in US Dollars.
- An alternative measure, focusing on the amount of poverty in a country,
is the Human Poverty Index. The Human Poverty Index is an indication of the
standard of living in a country, developed by the United Nations.
Indicators used are:
- functional literacy skills
- Long-term unemployment
- Relative poverty (poverty with reference to the average per capita
For Detail Description,
Analysis and More MCQs of the Chapter Buy this Study Notes:
- The Genuine Progress Indicator (GPI) is a concept in green economics and
welfare economics that has been suggested as a replacement metric for gross
domestic product (GDP) as a metric of economic growth. Unlike GDP it is
claimed by its advocates to more reliably distinguish uneconomic growth -
almost all advocates of a GDP would accept that some economic growth is very
- Green Gross Domestic Product (Green GDP) is an index of economic growth
with the environmental consequences of that growth factored in. From the
final value of goods and services produced, the cost of ecological
degradation is deducted to arrive at Green GDP.
- Gross National Happiness (GNH) is an attempt to define quality of life
in more holistic and psychological terms than Gross National Product.
Structural Composition of the Economy:
- The three-sector hypothesis is an economic theory which divides
economies into three sectors of activity: extraction of raw materials
(primary), manufacturing (secondary), and services (tertiary).
- According to the theory the main focus of an economy’s activity shifts
from the primary, through the secondary and finally to the tertiary sector.
- A developing country is a country that has not reached the Western-style
standards of democratic governments, free market economies,
industrialization, social programs, and human rights guarantees for their
- Development entails a modem infrastructure (both physical and
institutional), and a move away from low value added sectors such as
agriculture and natural resource extraction. Developed countries, in
comparison, usually have economic systems based on economic growth in the
secondary, tertiary and quaternary sectors and high standards of living.
Least Development Countries:
- Least Developed Countries (LDCs or Fourth World countries) are countries
which according to the United Nations exhibit the lowest indicators of
socioeconomic development, with the lowest Human Development Index ratings
of all countries in the world.
India GDP Base Year is Changed:
- The Government changed the base year for calculating national income to
2004-05 as against 1999-2000 earlier. The Central Statistical Organisation (CSO)
made the changes in early 2010.
Detail Description, Analysis and More MCQs of the Chapter Buy this Study
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