3-emerging & developing economies

Question 1

measures of development

Answer 1

-Human development index
-the genuine progress indicator
-multidimensional index
-inequality-adjusted HDI

Question 2

What does the HDI measure

Answer 2

-health
-education
-income

Question 3

pros of the HDI

Answer 3

-takes into account three important factors
-relatively easy to calculate

Question 4

cons of the HDI

Answer 4

-issues with figures (health doesn’t take into account quality of life)
-no consideration. for equality of income
-all factors weighted equally (some people may see health>income)

Question 5

9 economic factors influencing growth & development

Answer 5

-primary product dependency
-volatility of commodity prices
-savings gap
-foreign currency gap
-capital flight
-debt
-access to credit and banking
-infrastructure
-education/skills

Question 6

non-economic factors influencing growth & development

Answer 6

-corruption
-disease
-poor climates or geographical terrain
-civil wars

Question 7

primary product dependency

Answer 7

they are large in NEEs, natural disasters can wipe out production, often non-renewable so country can struggle if they run out, prone to dutch disease

Question 8

what is dutch disease

Answer 8

high demand for the primary product leads to a high demand for the currency, which makes the currency stronger and the country less competitive

Question 9

volatility of commodity prices

Answer 9

primary producers have inelastic demand and supply, therefore a small change in demand leads to a large change in price and therefore producer income and country earning fluctuate which makes long term investment difficult

Question 10

savings gap

Answer 10

developing countries have lower income and therefore lower savings. according to the harrod domar model, savings is the key to development as it allows for borrowing and reinvestment. the savings gap is the difference between the actual savings and the required savings for development

Question 11

foreign currency gap

Answer 11

exports from a developing country are too low to compared to imports to finance the purchase of investment

Question 12

capital flight

Answer 12

large amounts of money are taken out if the countries banks due to a lack of confidence

Question 13

debt

Answer 13

high levels of interest repayment means a loss of money that could be spent on development

Question 14

access to credit and banking

Answer 14

developing countries have less access

Question 15

market orientated Strategies to influence growth and development

Answer 15

-trade liberalisation
-promotion of FDI
-removal of subsidies
-floating exchange rate
-microfinance schemes
-privatisation

Question 16

what does promoting FDI do

Answer 16

creates jobs
transfers knowledge
fills the savings gap
loss of some sovereignty
environmental damage

Question 17

interventionist strategies to influence growth and development

Answer 17

-development of human capital
-protectionism
-managed exchange rates
-infrastructure development

Question 18

other strategies to influence growth and development

Answer 18

-industrialisation
-development of tourism
-development of primary industries
-fair trade schemes
-aid
-debt relief
-International Monetary Fund
-NGOs

Question 19

solutions to high debt

Answer 19

-debt relief (ease off on money being paid bak aslong as it is spent well)
-reschedule debts (allow economies to repay their debts over a longer period of time)
-debt swaps (given to NGOs)

Question 20

Aim of foreign aid

Answer 20

fill the savings gap in developing countries and promote economic development

Question 21

types of aid

Answer 21

-humanitarian (alleviate short term suffering- food, medical and emergency aid)
-development (longterm loans, tied aid, project aid, technical assistance aid and commodity aid)

Question 22

concerns with aid

Answer 22

-corruption
-dependency on aid (less incentive to innovate)
-aid ‘weariness’ in developing countries
-loan repayments can lead to debt
-aid focused on industrialisation can lead to income gaps between primary and industry sectors
-donor countries may have politics in mind and so poorer countries miss out