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Economics A-Level Theme 4: A Global Perspective (Edexcel) > 4.3.3: Strategies Influencing Growth & Development > Flashcards

4.3.3: Strategies Influencing Growth & Development Flashcards

1
Q

What are the categories of strategies influencing growth & development?

A

-Market-Orientated Strategies.
-Interventionist Strategies.
-Other Strategies.

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2
Q

What is the difference between market-orientated strategies and interventionist strategies?

A

Market-orientated strategies minimalize the role of the government and maximize the demand & supply mechanisms.
Interventionist strategies involve an active role by the government and manipulation of the economy.

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3
Q

What are the market orientated strategies?

A

-Trade liberalisation.
-Promotion of FDI.
-Removal of government subsidies.
-Floating exchange rate systems.
-Microfinance schemes.
-Privatisation.

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4
Q
  1. How does trade liberalisation influence growth & development?
  2. What is a drawback of trade liberalisation?
A
  1. Removing trade barriers will mean that domestic industries either close, or are forced to become as efficient as other world producers (e.g. South Korea).
  2. Can cost jobs, as cheaper goods flood the nation’s domestic market.
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5
Q

What is FDI?

A

Foreign Direct Investment is the purchase of interest of a company by an investor located in another country.

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6
Q
  1. How does promotion of FDI influence growth & development?
  2. What is a drawback of promotion of FDI?
A
  1. FDI promotes long term sustainable growth by encouraging technological innovation and creating employment.
  2. Profits are often repatriated, and workers are given low wages & poor working conditions.
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7
Q
  1. How does removal of government subsidies influence growth & development?
  2. What is a drawback of removal of government subsidies?
A
  1. Removing subsidies counteracts the negative effect on the government budget & debt.
  2. Removing a subsidy can be very politically unpopular, and some governments have been thrown out attempting to do so.
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8
Q
  1. How does floating exchange rate systems influence growth & development?
  2. What is a drawback of floating exchange rate systems?
A
  1. The country doesn’t have to worry about their gold & foreign currency reserves.
  2. The currency can be volatile, making it difficult for exporters/importers to make decisions about the future.
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9
Q

What is microfinance?

A

A type of banking that provides financial services to low income individuals who would otherwise have no access to finance.

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10
Q
  1. How does microfinance schemes influence growth & development?
  2. What is a drawback of microfinance schemes?
A
  1. Gives borrowers the ability to set up businesses while avoiding high interest rates.
  2. Opportunity cost for funding sustainable methods of development.
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11
Q
  1. How does privatisation influence growth & development?
  2. What is a drawback of privatisation?
A
  1. Firms operating in the private sector have a profit incentive, while nationalised firms don’t, encouraging efficiency.
  2. If the firm is privatised as a monopoly, there will be no competition in the market.
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12
Q

What are the interventionist strategies?

A

-Development of human capital.
-Protectionism.
-Managed exchange rates.
-Infrastructure development.
-Promoting joint ventures with global companies.
-Buffer stock schemes.

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13
Q
  1. How does development of human capital influence growth & development?
  2. What is a drawback of development of human capital?
A
  1. Improves productivity & allows more advanced technology to be used, since workers will have the necessary skills. Also allows the country to develop into a manufacturing sector, overcoming primary product dependency (e.g. China).
  2. Time-consuming & expensive.
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14
Q
  1. How does protectionism influence growth & development?
  2. What is a drawback of protectionism?
A
  1. Reduces trade deficit due to trade barriers, allowing infant industries to grow.
  2. Consumers face less choice, retaliation from other countries, less competition.
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15
Q
  1. How does managed exchange rates influence growth & development?
  2. What is a drawback of managed exchange rates?
A
  1. The exchange rate floats on the market, but the central bank buys & sells currencies to try and influence their exchange rate, providing stability.
  2. Requires large-scale foreign exchange reserves.
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16
Q
  1. How does infrastructure development influence growth & development?
  2. What is a drawback of infrastructure development?
A
  1. Social benefits, such as easy transport.
  2. The government may not have the funds, construction causes environmental damage.
17
Q

How does promoting joint ventures with global companies influence growth & development?

A

-Joint ventures opens up new markets for small firms, so they can distribute their products to consumers, saving time & funds (e.g. Starbucks in India).
-They have all the benefits of FDI, without the negatives of exploitation and some of the profits remain in the country.

18
Q

How does a buffer stock scheme work?

A

Governments buy up harvests during surpluses, and sell the goods onto the market when supplies are low.

19
Q
  1. How does buffer stock schemes influence growth & development?
  2. What is a drawback of buffer stock schemes?
A
  1. It helps incomes of farmers to remain stable, as fluctuations in the market are reduced, while increasing consumer welfare by ensuring prices aren’t in excess (e.g. Ghana and cocoa, 2017).
  2. Storage is difficult and expensive, since agricultural goods don’t last long, and there are administrative costs.
20
Q

What are other strategies?

A

-Industrialisation (the Lewis model).
-Development of tourism.
-Development of primary industries.
-Fairtrade schemes.
-Aid.
-Debt relief.

21
Q

What is the Lewis model?

A

A model that describes a two-sector economy:
-A surplus of labour in the traditional, low-productivity sector (e.g. agricultural).
-A shortage of labour in the modern, high-productivity sector (e.g. industrial).

In this model, the movement of labour (traditional -> modern) drives economic growth & development.

As the economy grows, wages will rise in the modern sector, leading to an increase in consumption and investment, causing higher living standards for everyone.

22
Q
  1. How does industrialisation influence growth & development?
  2. What is an example of a country not going through industrialisation?
A
  1. The process has improved productivity and has allowed for mass production.
  2. India went from agriculture to services.
23
Q
  1. How does development of tourism influence growth & development?
  2. What is a drawback of development of tourism?
A
  1. Makes the country more attractive to FDI, as well as developing their infrastructure. Tourism can also be a way of earning foreign currency for developing countries.
  2. Travel agents are likely to repatriate their profits, environmental damage, such as pollution.
24
Q
  1. How does development of primary industries influence growth & development?
  2. What is a drawback of development of private industries?
A
  1. Some countries choose to exploit their comparative advantage of natural resources to diversify the economy (e.g. Saudi Arabia).
  2. Primary product dependency.
25
Q
  1. How does Fairtrade schemes influence growth & development?
  2. What is a drawback of Fairtrade schemes?
A
  1. Ensures that farmers receive a fair price for their goods, giving them a guaranteed income and certainty about their sales, so they can plan for the future.
  2. It could make producers that are not part of Fairtrade worse off, dividing the market into Fairtrade and non-Fairtrade markets.
26
Q
  1. How does aid influence growth & development?
  2. What is a drawback of aid?
A
  1. Provides temporary assistance to a country after conflicts or natural disasters, reduces human capital inadequacies, improves infrastructure.
  2. The benefits of aid are limited by corrupt leaders.
27
Q
  1. How does debt relief influence growth & development?
  2. What is a drawback of debt relief?
A
  1. Improves government finances, so public services could be funded instead.
  2. Creates a moral hazard with developing countries.
28
Q

What international institutions are looked at for growth & development?

A

-World Bank.
-International Monetary Fund (IMF).
-Non-Government Organisations (NGOs).

29
Q

What is the role of the World Bank?

A

-Aims to promote economic & social progress by raising productivity and reducing poverty.
-Supports education and rebuilds countries after natural disasters with interest free loans.

30
Q

What is the role of the International Monetary Fund (IMF)?

A

-Aims to promote monetary co-operation between countries.
-Supports exchange rate stability, avoiding competitive depreciations between currencies.

31
Q

What is the role of Non-Government Organisations (NGOs)?

A

-Voluntary groups that aims to raise the voices of ordinary citizens.
-Lobbies governments to make changes (e.g. raising funds to establish schools in developing countries).

Economics A-Level Theme 4: A Global Perspective (Edexcel) (21 decks)

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