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4.3 Emerging and Developing Economies Flashcards

1
Q

What does economic development focus on?

A

Improvements in living standards.

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2
Q

What is the Human Development Index (HDI)?

A

A composite index based on health, education, and income.

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3
Q

What are the three factors used to calculate HDI?

A
  • Health (life expectancy at birth)
  • Education (mean years of schooling, expected years of schooling)
  • Income (real GNI per capita at purchasing power parity)
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4
Q

What is the range of HDI values?

A

Between 0 and 1.

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5
Q

True or False: HDI is a perfect measure of development.

A

False.

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6
Q

What is the Inequality-adjusted Human Development Index (IHDI)?

A

An adjustment of HDI that includes a fourth indicator of inequality.

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7
Q

What does the Multidimensional Poverty Index (MPI) measure?

A

The percentage of the population that is multidimensional poor.

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8
Q

What categories does the Genuine Progress Indicator consider?

A
  • Economic
  • Environmental
  • Social
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9
Q

What is a primary product dependency?

A

Economic activity based on primary products like agriculture and mining.

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10
Q

What is the Prebisch Singer Hypothesis?

A

The long-run price of primary goods declines in proportion to manufactured goods.

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11
Q

What does Dutch disease refer to?

A

Increased demand for a country’s currency due to commodity production, leading to reduced competitiveness.

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12
Q

What is a savings gap?

A

The difference between actual savings and the level of savings needed for higher growth.

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13
Q

What does the Harrod-Domar model suggest?

A

Economic growth depends on the level of saving and the productivity of investment.

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14
Q

What is a foreign currency gap?

A

When exports are too low compared to imports to finance necessary purchases.

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15
Q

What is capital flight?

A

Large amounts of money leaving a country instead of being invested locally.

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16
Q

What demographic factor limits development in developing countries?

A

Higher population growth.

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17
Q

How did high debt levels affect developing countries in the 1970s and 1980s?

A

They suffered from high levels of interest repayment, limiting growth.

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18
Q

What is the impact of poor access to credit and banking in developing countries?

A

Limited access to funds for investment and savings.

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19
Q

What is the significance of infrastructure in economic development?

A

Low infrastructure levels hinder business operations and trade.

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20
Q

What is the effect of poor education on workforce productivity?

A

Workers tend to be low-skilled, leading to low productivity.

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21
Q

What are property rights?

A

Rights allowing individuals to own resources and protect their assets.

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22
Q

What is a market-oriented strategy in economic development?

A

Strategies such as trade liberalization and promotion of FDI.

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23
Q

What is trade liberalization?

A

Removing trade barriers to promote export-led growth.

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24
Q

What does FDI stand for?

A

Foreign Direct Investment.

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25
What are the benefits of FDI for developing countries?
* Job creation * Knowledge transfer * Increased productivity
26
What can be a downside of FDI?
Repatriation of profits and exploitation of local resources.
27
What is one example of a country benefiting from FDI?
India.
28
What is the impact of government subsidies on economic growth?
They can increase output and investment.
29
What percentage increase in FDI was observed in various sectors due to investment?
48% increase in FDI in sectors such as pharmaceuticals, manufacturing, and railways.
30
How has Samsung's investment in Vietnam impacted local businesses?
Local firms are part of Samsung's supply chain, leading to the establishment of businesses like hotels and restaurants around their factories.
31
What are government subsidies typically aimed at?
Essential items like food or fuel, as well as agriculture and industry to increase output and investment.
32
What is a major problem with subsidies on basic goods?
They are often poorly targeted, benefiting everyone rather than just the poor.
33
What alternative to subsidies is suggested to better target assistance to the poor?
Providing cash payments directly to poor households.
34
What is a potential negative outcome of long-term subsidies to farmers and producers?
They can lead to inefficiency and become ineffective in increasing development.
35
What unintended consequence can result from fuel subsidies?
High emissions and smuggling of subsidized fuel across borders.
36
Why can removing a subsidy be politically unpopular?
It can lead to public dissatisfaction and even government instability.
37
What characterizes floating exchange rate systems?
Market forces determine the currency without government intervention.
38
What is a downside of floating exchange rate systems?
Currency volatility complicates decision-making for exporters and importers.
39
What are microfinance schemes designed to provide?
Access to financial services such as loans, savings, insurance, and fund transfers for poor households.
40
What unique features do microfinance loans often include?
Little or no collateral, group lending, and pre-loan saving requirements.
41
What issue has arisen in South Africa regarding microfinance schemes?
They have become a method of financing consumption rather than investment.
42
What is one benefit of privatization?
It can reduce corruption and encourage efficiency through increased competition.
43
What potential problem arises from privatizing a monopoly?
There will be no competition within the market.
44
What is a common issue associated with government-managed infrastructure development?
It may suffer from inefficiency, corruption, and high capital costs.
45
What is the purpose of buffer stock schemes?
To stabilize prices by buying excess stock and selling it when there is excess demand.
46
What are the potential drawbacks of buffer stock schemes?
They require significant start-up and administration costs, and may lead to inefficiency if minimum prices are set too high.
47
What does the Lewis model suggest about industrialization in developing countries?
It assumes a dual economy with a traditional agricultural sector and a modern industrial sector attracting workers with higher wages.
48
What is one argument against the effectiveness of the Lewis model?
Urban migration can lead to urban poverty if the industrial sector cannot provide enough jobs.
49
What is the role of tourism in economic development for some countries?
It provides funds for development and improves living standards.
50
What are some challenges associated with the tourism industry?
Seasonality, low-skilled jobs, and environmental externalities.
51
What is Fairtrade defined as?
A trading partnership based on dialogue, transparency, and respect to seek greater equity in international trade.
52
What are the key principles monitored under the Fairtrade label?
* Fair price * Community development * Fair working conditions * Environmental protection
53
What was a finding of a study conducted in Sri Lanka regarding Fairtrade?
Producers under Fairtrade had higher income and satisfaction compared to those not under Fairtrade.
54
What criticism is made regarding the impact of Fairtrade on the developing world?
It may benefit Fairtrade producers while leaving non-Fairtrade producers worse off.
55
What is the impact of Fairtrade on producers?
Fairtrade producers experience greater satisfaction, understanding of the market, and an optimistic view of the future. ## Footnote They can save for the future and provide financial support for their children, although they may still feel their income is insufficient.
56
What is a criticism of the Fairtrade system?
It can negatively affect non-Fairtrade producers by reducing their demand. ## Footnote The long-term price increase for Fairtrade goods may lead to a decrease in prices based on supply elasticity.
57
How can Fairtrade impact children's education?
Fairtrade allows parents to send their children to school by providing necessary funds. ## Footnote This reduces the expectation for children to work on the land and helps them gain skills for future opportunities.
58
What is tied aid?
Aid with conditions attached, such as economic reforms or commitments to purchase goods from the donor country. ## Footnote It can influence the recipient country's policies.
59
What are the types of aid?
The types of aid include: * Tied aid * Bilateral aid * Multilateral aid * Concessional loans
60
Which countries are the greatest recipients of aid?
Egypt, Afghanistan, and Vietnam. ## Footnote The EU and US are the largest donors.
61
What is a benefit of aid?
Aid can reduce absolute poverty, especially through emergency relief after disasters. ## Footnote Examples include support following the Haiti earthquake in 2010.
62
What is the Harrod-Domar model related to aid?
Aid can fill the savings gap, providing funds for investment in infrastructure and human capital. ## Footnote These investments often need to be made by the government due to public goods issues.
63
What is a criticism of aid?
Aid can create a dependency culture, reducing the incentive for countries to manage their finances. ## Footnote This may lead to complacency regarding economic reforms.
64
What does debt relief aim to achieve?
It aims to ease government finances and allow more investment in services and infrastructure. ## Footnote This is especially important for countries with high-interest loan repayments.
65
What is a moral hazard associated with debt relief?
It creates a precedent where every poor country may expect debt relief, potentially weakening incentives for reforms. ## Footnote This can lead to a cycle of dependency.
66
What is the primary goal of the World Bank?
To bring about long-term development and a reduction in poverty. ## Footnote It was founded at the Bretton Woods Conference after WWII.
67
What are the components of the World Bank?
The World Bank consists of: * International Bank for Reconstruction and Development (IBRD) * International Development Association (IDA) * International Finance Corporation (IFC) * Multilateral Investment Guarantee Agency (MIGA) * International Centre for Settlement of Investment Disputes (ICSID)
68
What is the role of the IMF?
To ensure that exchange rate systems work well and to provide loans during international exchange rate crises. ## Footnote Unlike the World Bank, it does not focus on promoting economic development.
69
What conditions does the IMF impose when providing loans?
Countries must make macroeconomic reforms to resolve their financial issues. ## Footnote This often includes reducing imports and increasing exports.
70
What are NGOs?
Non-profit organizations run independently from the government. ## Footnote They can provide direct assistance or act as pressure groups for pro-development strategies.
71
What is a limitation of NGOs?
They cannot solve development issues alone; government involvement is necessary. ## Footnote Some view them as having an anti-capitalist agenda.

Macro (11 decks)

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