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Economics Theme 4 - MACRO > 4.3 - Emerging and developing countries > Flashcards

4.3 - Emerging and developing countries Flashcards

1
Q

Why is growth important?

A

Rising living standards
Leads to more growth through the multiplier and accelerator
Gov. can receive more tax revenue

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2
Q

What is economic development?

A

Sustained improvement in economic and social opportunities

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3
Q

What are some negatives of economic growth?

A

Generate negative externalities
May not be evenly distributed creating inequalities
Urbanisation can reduce living standards

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4
Q

What is HDI? What does it consist of

A

Human development index:
Life expectancy
Number of years expected in education
GNI per capita

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5
Q

Limitations of using HDI

A

Does not measure inequality that exists in GNI
Does not compare the levels of absolute poverty

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6
Q

What are other measures of development?

A

Gender-related development index
Genuine progress indicator
Happy planet index
Multidimensional Poverty Index

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7
Q

What is Primary Product Dependency?

A

When an economy is based on the production of primary products - they can soft or hard commodities

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8
Q

What are strategies to reduce primary product dependency?

A

Better government - more transparency
Higher taxes
Diversification - Tourism etc.

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9
Q

Why do volatile commodity prices impact on development?

A

Creates volatile income for primary sector workers
Uncertainty about future income
Falling commodity prices - lowers revenue
Creates volatility in the governments fiscal balance - hard to spend

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10
Q

What is a commodity?

A

An economic good, usually a resource, that specifically has full or substantial fungibility

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11
Q

Why are savings low in developing economies?

A

Low income so very little money left over to save
Lack of banking infrastructure
Low levels of literacy making banking difficult

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12
Q

How can savings improve growth and development?

A

Investment can raise productivity and increase job opportunities
Savings can be spent on basic education and healthcare in economies

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13
Q

What does the Harrod-Domar model emphasise?

A

The role of savings to help fund capital investment

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14
Q

What does the theory state? (Harrod-Domar)

A

That investment, saving and technological changes are key variables in determining economic growth

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15
Q

Constraints to the Harrod Domar Model

A

Persistent savings gap in some countries
Small scale financial institutions
Deep weaknesses in human capital

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16
Q

What is a savings gap?

A

A situation where the current level of savings is insufficient to achieve an economic objective

17
Q

Ways to overcome the savings gap

A

Attract inflows of foreign direct investment
External financing from inflows of overseas aid
Behavioural interventions to encourage households to save

18
Q

What is the foreign currency gap?

A

When currency outflows exceeds inflows meaning there is a reduction in the availability of foreign currency

19
Q

What are the causes of a foreign currency gap?

A

Persistent current account deficit
Lack of inward remittances
Capital flight

20
Q

What is capital flight?

A

The uncertain and rapid movement of large sums of money out of the country

21
Q

What are the problems with capital flight?

A

Loss of tax revenue
Currency depreciation as supply of the domestic currency increases
Undermines the stability of the financial sector

22
Q

How can infrastructure gaps limit economic growth and human development?

A

Increase supply costs for businesses
Reduce geographical mobility of labour
Damage export competitiveness
Make a country less attractive to inward FDI

23
Q

How does high debt impact development?

A

Large opportunity cost
Reduce an economy’s credit rating, making it more challenging to borrow in the future

24
Q

How does corruption affect growth and development?

A

Deters foreign investment
Leads to allocative investment
Causes a loss of trust
Poorer human development outcomes

25
Q

How does human capital lead to development?

A

Higher income - better housing/sanitation
Better health - more education about health and nutrition

26
Q

Trade liberalisation

A

Removing barriers between different countries and encouraging free trade
Increases competition and improve economies of scale

27
Q

Advantages and disadvantages of FDI

A

Adv:
Better training for workers
More competition in markets
Infrastructure accelerator effect
Increase in the level of labour productivity
DisAdv:
Inequality
Ethical standards of TNC’s may be poor

27
Q

What is microfinance?

A

The provision of financial services, such as loans, savings, and insurance, to individuals and small businesses

28
Q

Why is microfinance designed?

A

To provide access to credit and other financial services to people who are considered to be low-income

28
Q

Aims of microfinance:

A

Poverty reduction
Raising domestic savings

29
Q
A

Economics Theme 4 - MACRO (1 decks)

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