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2023/24 Academic Year Economics Lesson Note for Grade 11

UNIT-6
ECONOMIC – DEVELOPMENT
6.1 Economic Growth and Economic Development
GDP is a measure of the market value of goods and services which are provided by a country over a period
of time, often one year or one quarter. Growth is not indicated by the GDP itself, but rather growth is
determined by the % in increase of the GDP from one-time period to another. Per capital income can be
measured in terms of home currency and for international comparisons in terms of foreign currency
(usually US dollars).
Economic growth rate: refers to the increase in the inflation-adjusted market value of the G/S that are
produced by an economy over a specific period. It is conventionally measured in % terms since it is the
easiest way to make a comparison over time and space. Usually, the real inflation-adjusted GDP is also
used for the calculation since it removes the effect of the rising price level. Economists often focus on the
% change in the real GDP per capita because it improves the comparison between countries and also
isolates the effect of changing the population.

Example
The real GDP in 2017 is 17,304,984 dollars and in 2016 it was 16,920,328 dollars. Applying the GDP
growth rate formula:
Solution
• GDP growth = (17,304,984 - 16,920,328) / 16,920,328 * 100 = 2.27%.
• Therefore, the real GDP growth in 2017 compared to the previous year was 2.27%.
Economic development: is a process where there is improvement in the lives of all people in the country.
This involves
• living standards

e 1 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
 • Greater availability of G/S and the ability to purchase them
• Promotion of attributes such as
– self-esteem
– dignity
– respect
• Enlarging of people‟s freedom to choose and to take control of their own lives.
• While a country may grow richer through the growth of its real output, it does not necessarily mean
that it will develop.

6.2 Measures of Productivity

Productivity is commonly defined as a ratio between the output volume and the volume of inputs. It
measures how efficiently production inputs, such as labor and capital, are being used in an economy to
produce a given level of output. There are different measures of productivity and the choice between them
depends either on the purpose of the productivity measurement and/or data availability. One of the most
widely used measures of productivity is gross domestic product (GDP) per hour worked. This measure
captures the use of labor inputs better than just output per employee.
Higher productivity means producing more from a given amount of inputs or producing a given amount
with fewer inputs. Productivity, in economics, measures output per unit of input, such as labor, capital, or
any other resource. Productivity is often calculated for the economy as a ratio of gross domestic product
(GDP) to hours worked. Productivity can thus be measured as:

• Productivity=

Ways to increase productivity

• Productivity can be increased by the following ways:
– Increasing the output using the same input.
– Reducing the input by maintaining the output as constant.
– Increasing the output to a maximum extent with a smaller increase in input.
• Output is measured by the GNP & GDP.

6.3 Human Development Index (HDI)

The understanding and measurement of development has shifted from one dimension (income)to multiple
dimensions (capabilities and freedoms).
One expanded indicator, which attempts to measure the multidimensional aspect of development, is the
Human Development Index (HDI), conceived by the United Nations Development Program (UNDP), not
only of rich, but also of poor nations.
Indexes of HD indicators
• UNDP publishes a number of different human development indicators, many of which are
composites of other weighted indexes. The main indexes are:
 Human Development Index (HDI)

e 2 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
  Inequality adjusted Human Development Index (IHDI)
 Gender Inequality Index (GII)
 Multidimensional Poverty Index (MPI)
 Gender Empowerment Measure (GEM)

HDI Vs (GDP, GNP)/ Per capita

• HDI is important b/c it does not only gives a better indication of well-being but also it is better than
measuring income alone.
• HDI is a composite criterion consisting of three indicators of development to measure the level of
welfare of the people of a country:
Criteria of HDI
• Life expectancy indicators (LEI)
• Educational attainments indicators (EAI)
– Adult literacy rate= percentage people aged 15 and over who can understand, read and
writes a short and simple statement
– Gross enrollment ratio = percentage of population enrolled at primary, secondary and
university level
• Standard of living indicators (SLI) - divide the GDP at constant price by the total population of the
country, we get real GDP per capita (real per capita income).
Inequality-adjusted Human Development Index (IHDI)
• In 2010, a revised HDI was developed to account for inequality in a country.
• Referred as Inequality-adjusted Human Development Index
• Far more accurate than the initial HDI, though some still find the old formula useful in some
applications.

e 3 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
 Achievement Level each indicator

• Achievement level=

• HDI= (income index )+ ( Life expectancy index) + (Education index)

• HDI= (Standard of living )+ ( Life expectancy index) + (Education index)

• HDI= (SLI )+ ( LEI) + (EAI)

6.3.1 Ethiopia’s HDI Value and Rank

• Ethiopia‟s HDI value for 2019 was 0.485 which put the country in the low human development
category, positioning it at 173 out of 189 countries.
• Between 2000 and 2019,
– Ethiopia‟s HDI value increased from 0.292 to 0.485, an increase of 66.1 percent.
• Between 1990 and 2019,
– Ethiopia‟s life expectancy at birth increased by 19.5 years,
– mean years of schooling increased by 1.4 years
– Expected years of schooling increased by 5.7 years.
6.3.2 Evaluation of HDI and its Relevance to Developing Countries
Critics argue that the HDI assigns weights to certain factors that have equal trade-offs, when these
measurements may not always be equally valuable. For example, countries could achieve the same HDI
through different combinations of life expectancy and GNI per capita. It also correlates factors that are
more common in developed economies. (higher level of education) The HDI also fails to take into account
factors such as inequality, poverty, and gender disparity. The values of the factors that make up the HDI are
bounded between 0 and 1. This means that certain countries that already have high GNIs, have little room
to improve in terms of GNI score even if their GNI continues to grow and improve. This same parameter
affects the logic of the life expectancy score.
Advocate of Capability Approach
• The capability approach was first articulated by the Indian economist and philosopher Amartya Sen
in the 1980s, and remains most closely associated with him.

6.4 Capability Approach

• Capability to function is what really matters for status as a poor or non-poor person.
• Economic growth cannot be sensibly treated as an end in itself.
• Development has to be more concerned with enhancing the lives we lead and the freedoms we
enjoy. We should look at
– people‟s capabilities

e 4 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
 – their abilities and possibilities to live a good life
– make choices about their education, economic activities, and their freedom to participate in
decision making.
• Economic development occurs when individual agents have the opportunity to develop the
capacities that allow them to actively engage and contribute to the economy.
Functioning Versus Capability
In the aggregate, this should lower transaction costs and increase social mobility. The capability approach
goes directly to the quality of life that people can actually achieve. This quality of life is analyzed in terms
of the central concepts of functioning and capability. Freedom is integral to Sen‟s approach which
distinguishes between people‟s capabilities (what they can potentially be and do) and what they choose to
do with them (their actual functioning).
Capability (Do they have Capacity?)
• “Capabilities” are what people can achieve if they so choose, such as being
– Well Nourished (fasting)
– Getting Married (too much criteria)
– Being Educated (hates schooling)
– Travelling (wants to save money)
• Capabilities have also been referred to as “real” or “substantive freedoms” as they denote the
freedoms that have been cleared of any potential obstacles, in contrast to mere formal rights and
freedoms.
Functioning - (Are they actually doing it?)
• Functioning refers to the use that a person makes of the commodities at his/her command.
• Whether someone can convert a set of means to resources and public goods into a functioning (i.e.
whether he/ she has a particular capability) crucially depends on certain
– personal
– sociopolitical
– environmental conditions
• In capability literature, it is called „conversion factors.

6.5 Sustainable Development

Sustainable development can be defined as development that meets the needs of the present generation
without compromising the ability of future generations to meet their own needs. Sustainability goals, such
as the current UN Sustainable Development Goals, address the global challenges, including poverty,
inequality, climate change, environmental degradation, peace, and justice. Thus, sustainable development
recognizes that growth must be both inclusive and environmentally sound to reduce poverty and build
shared prosperity for today‟s population and to continue to meet the needs of future generations. It entails

e 5 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
 efficient and carefully planned use of resources to deliver both immediate and long-term benefits for
people, the planet and prosperity.
Three Pillars of Sustainable Development
• The three pillars of sustainable development
– Economic growth
– Environmental stewardship (Guard)
– Social inclusion across all sectors of development,
• From cities facing rapid urbanization to agriculture, infrastructure, energy
development and use, water availability, and transportation

6.6 Millennium Development Goals (MDGs)- (2000-2015)

• The international development agenda has been actively led by the United Nations (UN) and its
technical agencies and funds from their inception in the late 1940s. Until the 1990s, the approach
was fragmented and disjointed, initiated by its specialized agencies or funds at various World
Summits and Conferences to address three dimensions of development
– Economic
– Social
– Environmental.
Convergence of The Development Agenda
• The Millennium Declaration and Millennium Development Goals (MDGs) saw the convergence of
the development agenda of the
• United Nations Development Program (UNDP)
• United Nations Environment Program (UNEP)
• World Health Organization (WHO)
• United Nations Children‟s Fund (UNICEF)
• United Nations Educational, Scientific and Cultural Organization (UNESCO), and other
development agencies.
Eight Millennium Development Goals
1. To eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/AIDS, malaria, and other diseases

e 6 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
 7. Ensure environmental sustainability
8. Foster a global partnership for development.
The goals were then assigned specific targets deemed achievable by 2015 based on the pace of past
international development achievements.
Benefits of setting MDGs
• Providing a common language to reach global agreement.
• The MDGs generated
– new and innovative partnerships,
– galvanized public opinion, and
– immense value of setting ambitious goals.
• It helped
– to lift more than one billion people out of extreme poverty
– to make inroads against hunger
– to enable more girls than ever before to attend school
– to protect our planet
The need for further Endeavor
• Yet inequalities persist and the progress has been uneven.
• The world‟s poor remain overwhelmingly concentrated in some parts of the world.
• Progress tends to bypass (jump) women
• Continue to die during pregnancy
– From childbirth-related complications
– who are lowest on the economic ladder?
• Disadvantaged because of their :
– age
– disability
– ethnicity
6.7 The Sustainable Development Goals (2015-2030)
• The MDGs expired in 2015 and the focus is now on building a sustainable world where
environmental sustainability, social inclusion, and economic development are equally valued.
• The 2030 Agenda for Sustainable Development, adopted by all United Nations member states in
2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into
the future.
• At its heart are the 17 (SDGs), which are an urgent call for action by all countries, developed and
developing, in a global partnership.
Agenda 2063
Agenda 2063 is Africa‟s blueprint and master plan for transforming Africa into the global powerhouse of
the future. It is the continent‟s strategic framework that aims to deliver on its goal for inclusive and
sustainable development. It is a concrete manifestation of the pan African drive for
– Unity
– Self-determination
– Freedom

e 7 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
 – Progress
– Collective Prosperity
• pursued under Pan-Africanism and African Renaissance.
• The genesis (origin) of Agenda 2063 was the realization by African leaders that there was a need to
refocus and reprioritize Africa‟s agenda from
– the struggle against apartheid (aggression against black people)
– the attainment of political independence for the continent
– to priorities inclusive social and economic development,
– continental and regional integration,
– democratic governance and peace and security
50th Anniversary (Golden Jubilee) of the formation of the OAU /AU in May 2013
African heads of state and government signed the declaration marked the re-dedication of Africa towards
the attainment of the Pan African Vision of an
– integrated
– prosperous
– peaceful Africa, driven by its own citizens, representing a dynamic force in the international
arena
• Agenda 2063 is the concrete manifestation of how the continent intends to achieve this vision
within a 50-year period from 2013 to 2063.

Performance of Ethiopian Economy against MDGs and SDGs

• Ethiopia‟s principal endowments are the country‟s
– vast land
– human resources
• The development policy of the country focuses on
– the need for accelerated and comprehensive economic growth
– Economic infrastructure development
– Social development
– Expediting the building of a democratic system
• The implementation of the policies is envisaged (predicted) to
– Ensure food security in the whole country and at every household
– Eradicate poverty in all its forms
– Ensure gender equality
– Withstand climate change
– Bring about prosperity of the nation
Ethiopia has been pursuing pro-poor policies
• within which global development frameworks such as
– MDGs
– Brussels Program of Action and its successor
– Istanbul Program of Action for Least Developed Countries
• The above programs have been mainstreamed with remarkable achievements in
– Economic growth
– Social development

e 8 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
 – Environmental management
Due to past lesson from MDGs to SMDGs
• Ethiopia has prepared a medium-term plan
– Second Growth and Transformation Plan (GTP II), covering the period from 2015 to 2020
– A ten years Prosperity Plan (2020-2030) which also forms an integral part of the country‟s
post-2015 development agenda.
• The SDGs are highly relevant for Ethiopia: in addition to covering the entire unfinished agenda of
the MDGs, they also address a range of economic and environmental issues critical to the
realization of human‟s rights.
Achievements of Ethiopia
• Ethiopia integrated the MDG agenda into successive national development
– Sustainable Development Poverty Reduction Program (SDPRP) (2002/03 to 2004/05)
– First Growth and Transformation Plan (GTP I) (2010/11 to 2014/15).
• Ethiopia has successfully
– Achieved six of the eight MDGs, and
– made significant progress with respect MDG 3 and MDG 5
– Formulated a Climate Resilient Green Economy (CRGE) strategy
• Established vision of becoming a middle-income, carbon-neutral economy by 2025.
Challenges faced by Ethiopia
• low implementation capacity
• scarce financial resources
• These weaknesses had a negative impact
– on project and service delivery
– Contributed to a high trade deficit
– low agricultural production
– savings-investment gap, and
– Inflation pressure that threaten the macroeconomic stability of the country.
Ethiopia plan
• Ethiopia has proactively mainstreamed, aligned the SDGs with the Second Growth and
Transformation Plan (GTP II) which spans from 2015/16 to 2019/20
• GTP II is Ethiopia‟s blueprint for national development over the five-year period from 2015 to
2020.
• It also incorporates a range of development priorities, including
– national and sectorial policies and strategies
– the 2030 Agenda for Sustainable Development
– Africa‟s Agenda of 2063
• learned from MDGs and GTP I and the international and regional economic conditions such as the
– market price fluctuation of products, inputs and outputs of the country and the regional trade
and economic integration prospects
National Development Priorities of Ethiopia (GTP II 2019/20-2029/30)
1. Ensuring that the agriculture development sector remains the mainstay of the nation‟s accelerated
economic development

e 9 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11
 2. Expediting change in the economic structure of the nation by transforming the manufacturing
industry development
3. Enhancing the economy to its full economic capacity through increased focus on competitiveness,
efficiency, productivity and quality
4. Correcting the imbalance between overall demand and supply
5. Fostering the development of the construction industry and projects‟ management capacity
6. Institutionalizing urban administration and management compatible with the accelerated
urbanization, industrialization and structural changes in the economy
7. Creating enabling environment for the transformation of domestic investors
8. Providing support to human resources development through building technologic capacity
9. Building climate resilient green economy and
10. Eliminating rent-seeking behaviors and ensuring the predominance of developmental frame of
mind.
Ethiopia Regarding 2030 Agenda
• Ethiopia has accepted with strong government commitments and endorsed the 2030 Agenda for
• Sustainable Development by the House of People Representatives with full sense of national
ownership to implement it and its Sustainable Development Goals (SDGs) as an integral part of its
– national development framework
– Second Five Year Growth and Transformation Plan (GTP II)
• Ethiopia formulated a 10-year Prosperity Plan for the period 2019/20 to 2029/30 which is fully
aligned with the
• 2030 agenda of SDGs.
Challenges implement the SDGs
• There exist,
– huge gaps in the developmental capacity in all sectors and at all levels
– Misperceptions among the executive bodies and the implementing bodies
– deficiency in their level of motivations and
– in their sense of ownership and
– in delivering efficient services
• In general, it can be stated that the ten years Prosperity plan has been harmonized and integrated
with the three dimensions of the SDGs and would reach successful ends.

e 10 “ፈጣሪ የተወደዱ ልጆቻችንን ፣ ሀገራችንንና ህዝባችንን ይጠብቅልን!”

Economics Lesson Note for Grade 11