Economic development and growth have distinct benefits, with GDP measuring growth and improvements in living standards indicating development. Government support can encourage both, with investment in infrastructure leading to increased trade and small business growth.
Generally, both economic development and economic growth provide certain distinct benefits to a region. There are some differences between these events, however. For example, advances in industry, including technology and manufacturing, could certainly position a region more competitively with other countries. However, higher productivity can occur even when other sectors suffer from high unemployment or inflation, preventing adequate consumer spending. As a result, developments in an economy, while often advantageous, do not always result in expansion for an economy.
To recognize the difference between economic development and economic growth, it can be helpful to identify the two occurrences. Economic growth is often measured using an indicator known as gross domestic product (GDP). Data are typically reported quarterly within a country. This value reflects the degree of production of goods and services in that region.
Economists use GDP information to assess the health of a region’s financial status. An increase in the indicator reveals that some degree of economic expansion has taken place, while a decline suggests that some slowdown is underway. When there is no change in GDP, the production of goods and services remains stagnant over a period of time.
As economic development takes place, residents of a region should be able to recognize improvements in living standards. This progress may become evident in the construction of additional roads or improvements to existing infrastructure. Much of the investment that drives economic development comes from the federal government. As a result, changes in public policy can occur to encourage activity that leads to greater employment, higher incomes and more favorable conditions in areas ranging from health care to transportation.
Government support can be provided at the state or local level. Programs can include extending funding opportunities so new businesses have a chance to thrive. Sometimes certain government programs and policies can provide the framework for further economic development, which in turn can lead to greater economic growth.
While there are distinctions between economic development and economic growth, the two occurrences can support each other. Investment in local infrastructure, for example, can improve trade conditions in communities. More accessible roads and an increase in property values that can occur from new development can increase the number of small businesses in an area. This can spur economic growth because favorable conditions can attract greater commerce to a region and increase profits for local stores. A larger presence of small businesses can benefit a city’s development because store owners often reinvest in a community by supporting local events.
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