CIE A LEVEL SAMPLE ESSAYS

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9708/41/O/N/22

Explain what economists mean by an increase in real GDP per capita and discuss the extent to which an increase in real GDP per capita will have a positive impact on economic development. [25] 

Real GDP per capita as a measure of the average economic output per person in a country, adjusted for inflation. It provides a more accurate measure of economic well-being than nominal GDP because it accounts for changes in price levels, thus giving a clearer picture of how the economy’s productivity is evolving over time.

When real GDP per capita increases, it implies that the economy is growing at a faster rate than the population, allowing for a potential increase in the average standard of living. For instance, families may have more disposable income to invest in better housing, nutrition, and access to technology, all of which contribute to a better quality of life. As people enjoy higher purchasing power, they can afford better healthcare, which may contribute to a longer life expectancy.

With increased economic output, governments can collect more tax revenue, which can be allocated towards public goods such as education and healthcare. Improved access to education can enhance the skill levels of the workforce, leading to higher productivity and further economic growth. Similarly, better healthcare systems can reduce morbidity and mortality rates, enabling a healthier and more productive workforce. This virtuous cycle can contribute significantly to the development process, improving both the human capital and the economic prospects of a country.

Economic growth, as indicated by a rise in real GDP per capita, can contribute to poverty reduction if the gains from growth are distributed equitably. Higher average incomes can enable the government to implement social safety nets and welfare programs, reducing the number of people living below the poverty line. This can foster social stability and contribute to long-term economic development, as more people have the means to participate productively in the economy.

While real GDP per capita may indicate overall growth, it does not account for how income is distributed among the population. If economic gains are concentrated among the wealthy, the majority of the population may not experience significant improvements in their living conditions. This can exacerbate income inequality, leading to social tensions and undermining social cohesion. In such cases, economic development might stagnate despite rising average incomes, as the benefits of growth are not shared equitably.

An increase in real GDP per capita may also be accompanied by unsustainable growth patterns, such as overreliance on finite resources or external borrowing. If growth is driven by exploiting non-renewable resources, it may not be sustainable in the long term, potentially leading to economic instability. For example, economies that depend heavily on oil exports might face challenges when global demand for fossil fuels declines, impacting future growth prospects and economic stability.

Economic growth can sometimes come at the cost of longer working hours and reduced leisure time for workers. In pursuit of higher productivity and output, individuals may have to sacrifice time spent on leisure activities, family, and personal development. This can have negative effects on mental health and well-being, which are critical components of economic development. While real GDP per capita might increase, the subjective quality of life may not improve if people feel overworked and stressed.

While an increase in real GDP per capita is a valuable indicator of economic progress, policymakers must ensure that growth is inclusive, sustainable, and oriented towards improving the broader well-being of the population. Economic development should prioritize both quantitative measures like real GDP per capita and qualitative aspects such as health, education, and environmental sustainability to achieve a truly developed society.