4.3.3 stragies influencing growth Flashcards
What is a market-oriented strategy?
Private sector organisations that use market forces to supply goods. (no/ little gov intervention)
What is trade liberalisation
Removing/ reducing barriers to trade among countries like getting rid of tariffs or quotas (market-oriented strategy)
What is foreign direct investment (FDI)
Investment located in a foreign country
What is microfinance
Supply of finance services to poor people. E.g. credit, savings
What is privatization
Public firms turns into private gain profit
5 market-orientated strategies
- Trade liberalisation
- Promotion of FDI into the country
- Remove gov subsidies
4.Microfinance schemes - Privatisation
What is an interventionist strategy
Government intervene in domestic market
Benefits of Market orientated strategies
Developing countries benefit as wages will be lower which leads to lower costs and an increase in exports
Drawbacks of Market orientated strategies
Reduction in barriers increase competition from other countries so less money is spent on domestic firms
Advantages of interventionist strategies
Creates employment in domestic markets
Disadvantages of interventionist strategies
- Increases gov spending
- Productively inefficient firms ( rely on gov money)
- Corruption?
What is protectionism
Increasing barriers of entry to promote domestic firms like increasing tariffs and quotas or subsiding domestic firms
What is a managed exchange rate
Allowing exchange rates to fluctuate between 2 figures in response to foreign exchange mechanisms. They do this but altering interest rate
What is a joint venture
2 or more firms agree to set up a new business together using all they’re current resources
What is buffer stock scheme
Where government have saved stock to put into a market if supply slows down in order to keep demand for the product steady. For example if floods happen the supply of farm food will stop as crops are damaged so gov put in stock of farm foods to keep demand.
6 interventionist strategies
- Development of human capital
- Protectionism
- Managed exchange rates
- infrastructure development
5.Buffer stock scheme - promotion of joint ventures
What is Simon Kuznets model
- Lower developed countries have a high number of people in rural sectors like agriculture so it has a marginal productivity of labour of around 0
- So they should get people working in urban sectors like industrial
- This will generate more profit whichc an be reinvested to grow
What is a fair trade scheme?
They sell ethical products at a fairer price so producers in low income countries like farmers get a fair proportion on the sale. The only issues is that the price is very high for consumers
What is AID
Money from higher income countries given to low income countries to help them grow maybe after a naturual disastor.
What is debt relief
Where a country writes of debt so they can spend theyre money elsewhere. This will make them untrustworthy with money and reduce trade
What is the world bank
Funding for low developing countries to help them invest at a low intrest rate
What is the International Monetary Fund(IMF)
189 members that control international trading like exchange rates and international payments in order to keep the economy stable.
