Development

Question 1

Define development

Answer 1

Increasing per capita incomes leading to improved living standards and welfare of the general population

Question 2

Factors infusion the level of development

Answer 2

Factor endowment 
Strength of financial system 
Level of savings 
Quality of infrastructure 
Level of human capital

Question 3

How the level of human capital influences development

Answer 3

Malnutrition- more cognitive development
Lack of education- lack of skills
Low skilled low wage jobs, low labour productivity, slow wage growth
Low incomes - low demand- slow growth

Question 4

Brain drain

Answer 4

Citizens may be inclined to migrate out of the country and gain skills and a higher paid job
Highly skilled individuals leave country attracted by higher wages in more developed nations
Entrepreneurs leave country due to poor infrastructure/ lack of skilled labour/ loanable funds
Reduces quality/ quantity of labour and enterprise- damage LR growth potential

Question 5

Market based policies to promote development

Answer 5

Promote FDI- tax cuts/ incentives, reduce trade union power, deregulation
Privatisation- firms become more efficent, gain competitive advantage
Trade liberalisation- encourage trade reduce cost of imports/ exports, allow specialisation and comparative advantages to be exploited

Question 6

Government lead policies to promote development

Answer 6

Spending on infrastructure
Cultivating a stable economy with strong confidence levels to encourage consumption and investment
Improving provision of education and healthcare

Question 7

How can economic growth NOT lead to development

Answer 7

Inequality, gains not distributed equally so the welfare of the general population does NOT rise
Environmental degradation, pollution damage health
Corruption, inefficient government that does not use tax revenues in the right way.

Question 8

Example of how growth does not necessarily lead to development

Answer 8

Equatorial Guinea
Corrupt president
Discovery of large oil reserves in 1990s
Now 3rd largest GDP per capita in Africa
But HDI remains very low, 75% in absolute poverty
Tax revenues used in wrong way- lack sufficient health care/ education
Only benefited families involved in oil industry- often foreign investors

Question 9

Types of aid

Answer 9

bi-lateral
multilateral
project
debt relief 
humanitarian

Question 10

Pro Aid

Answer 10

helps fill savings gap
increasing investment, development of industries and boost to efficiency
increase eduction, healthcare
help increase quality of human capital= increased MRP

Question 11

Critics of Aid

Answer 11

create a dependency culture Malawi 30% GDP
moral hazard created, know that will receive aid- no need to domestically invest

corruption

humanitarian aid can distort market forces and reduce domestic production

Question 12

Barriers to growth/ development

Answer 12

lack of property rights

poor infrastructure (telecommunications, healthcare, education, transport)

poor Financial institutions

factor endowment

savings gap

Question 13

Factors that affect growth/ development

Answer 13

level of investment

corruption

education

healthcare

Question 14

Development indicators

Answer 14

GDP per capita

HDI RNI, healthcare, education

happy planet index

Question 15

Characteristics of a developing country

Answer 15

savings gap

poor healthcare (life expectancy)

poor education (literacy rate)

high levels of inequality and absolute poverty

underdeveloped financial institutions

poor infrastructure