Chapter 20.1

Question 1

Import substitution

Answer 1

A growth and trade strategy where a country begins to manufacture simple consumer goods for the domestic product to promote its domestic industry

Question 2

Consequences of import substitution policies

Answer 2

High levels of protection of domestic firms, inefficiency and resource misallocation
Overvalued exchange rates
Too much government intervention
Neglect of agriculture
Deterioration of balance of payments
Encouragement of capital intensive production methods
Negative impacts on employment and income distribution
Limited possibilities for growth over the long term

Question 3

Export promotion

Answer 3

A growth and trade strategy where a country attempts to achieve economic growth by expanding exports

Question 4

Export promotion policies

Answer 4

Financial assistance to targeted key industries
Strong government intervention
Requirements imposed on multinational corporation
Exchange rate management

Question 5

Factors behind the success of export promotion

Answer 5

Expansion into foreign markets
Emphasis on diversification
Major investments in human capital
Appropriate technologies
Increased employment
No balance of payment problems