Chapter 26 The Economics of Developing Countries

Question 1

How does the world bank classify countries?

Answer 1

high-income, medium-income and low-income countries on the basis of national income per capita

Question 2

What are the high-income nations known as?

Answer 2

industrially advanced countries (IACs)

Question 3

Examples of high-income nations/Countries?

Answer 3

USA, Canada, Japan and the nations of western Europe that have highly developed market economies based on large stocks of technologically advanced capital goods and skilled labor forces,

Question 4

what are the remaining nations called?

Answer 4

Developing countries (DVCs)
Many countries of Africa, Asia and Latin America that are characterized by the lack of capital goods use of non-advanced technologies, ; low literacy rates, high unemployment, rapid population growth and labor forces heavily committed to agriculture.

Question 5

In what two groups can DVCs be subdivided into?

Answer 5

The middle-income nations and The low-income nations.

Question 6

Examples of the middle-income nations

Answer 6

Brazil, Iran, Poland, Russia, South Africa and Thailand

Question 7

Examples of the low-income nations

Answer 7

India, Indonesia and the sub-Saharan nations of Africa. Low levels of industrialization. Literacy rates are low, unemployment is high, population growth is rapid and exports consist largely of agricultural produce (such as cocoa, bananas, sugar and raw cotton) and raw materials (such as copper, iron ore and natural rubber). Capital equipment is minimal, production technologies are simple and labor productivity is very low.

Question 8

What % of the worlds population lives in low-income DVCs?

Answer 8

37%

Question 9

If per capita income is $400 a year in a DVC, a 2 per cent growth rate means an $8 increase in income.

Answer 9

Where per capita income is $20,000 per year in an IAC, the same 2 per cent growth rate translates into a $400 increase in income. Thus the absolute income gap will have increased from $19,600 (= $20,000 − $400) to $19,992 (= $20,400 − $408). The DVCs must grow faster than the IACs for the gap to be narrowed.

Question 10

Is the path to economic development the same for DVCs and IACs?

Answer 10

Yes

Question 11

Path to economic development?

Answer 11

1) DVCs use existing supplies of resources more efficiently, eliminate unemployment and underemployment and also combine labor and capital resources that will achieve lowest-cost production. Also direct their scarce resources so that they will achieve allocative efficiency.
2) Expand their available supplies of resources, By achieving greater supplies of raw materials, capital equipment and productive labor, and by advancing its technological knowledge, a DVC can push its production possibilities curve outward.

Question 12

On what income does South Africa rely on?

Answer 12

Gold. SA second-largest gold exporter in the world, rely on income to contribute to economic prosperity

Question 13

To what is world markets for many of the farm products and raw materials that the DVCs export subject to?

Answer 13

to large price fluctuations, which contribute to instability in their economies.

Question 14

How can tropical climate affect a country?

Answer 14

The heat and humidity hinder productive labour; human, crop and livestock diseases are widespread; and weed and insect infestations plague agriculture.

Question 15

What can be an obstacle for growth?

Answer 15

A weak resource base

Question 16

Why is it important not to generalize?

Answer 16

might be unrealistic for many DVCs to envision an economic destiny comparable with that of, say, the USA or Canada. But we must be careful in generalizing: Japan, for example, has achieved a high level of living despite a limited natural resource base.

Question 17

What does Japan do regarding limited resources?

Answer 17

imports the large quantities of natural resources that it needs to produce goods for consumption at home and export abroad.

Question 18

statements describing the poorest DVCs with respect to human resources:

Answer 18

1.They are overpopulated.
2.Unemployment and underemployment are wide-spread.
3,Labour productivity is low.

Question 19

What is important in the long-run?

Answer 19

Contrast in population growth rates.

Question 20

What does population statistics help explain?

Answer 20

why the per capita income gap between the DVCs and the IACs has widened.

Question 21

How does rapid population growth affect DVCs?

Answer 21

strains the food supply so severely that per capita food consumption falls to or below the biological subsistence level.

Question 22

What keeps income near subsistence?

Answer 22

malnutrition and disease and the high death rate

Question 23

Formula for standard living?

Answer 23

Consumer goods (food) production/Population

Question 24

Why might population growth in DVCs accompany increases in food production?

Answer 24

1. the nations death rate will decline, decline is the result of (1) a higher level of per capita food consumption and (2) the basic medical and sanitation programmes that accompany the initial phases of economic development.
2. the birth rate will remain high or may rise, particularly as medical and sanitation programmes cut infant mortality

Question 25

In addition to the fact that rapid population growth may convert an expanding GDP per capita into a stagnant or slow-growing GDP per capita, what are the four other reasons why population expansion is often an obstacle to development:

Answer 25

1. Saving and investment
2. Productivity
3. Resource overuse
4. Urban problems