Development Economics

Question 1

Absolute Poverty

Answer 1

The condition experienced by individuals who cannot afford to acquire the basic necessities for a healthy and safe existence.

Question 2

Relative Poverty

Answer 2

The condition experienced by people in a country whose incomes are considerably lower than the higher income groups in the same country.

Question 3

Gross National Income

Answer 3

Gross national income is the sum of a nation’s gross domestic product and the net income it receivesfrom overseas.

Question 4

Informal Sector

Answer 4

The informal sector refers to those workers who are self employed, or who work for those who are self employed. Essentially a black market.

Question 5

Formal Sector

Answer 5

A formal sector of the economy is a well defined sector or an organized sector that contributes to the gross national product (GNP) and gross domestic product (GDP) of the country. It is taxed and monitored by the government as well.

Question 6

Closed Economy

Answer 6

A closed economy is one that has no trade activity with outside economies. A closed economy is self-sufficient, which means no imports come into the country and no exports leave the country. A closed economy’s intent is to provide domestic consumers with everything they need from within the country’s borders.

Question 7

Credit / Micro-credit

Answer 7

Microcredit is the extension of very small loans to impoverished borrowers who typically lack collateral, steady employment, or a verifiable credit history. It is designed to support entrepreneurship and alleviate poverty.

Question 8

Comparative Advantage

Answer 8

When a country produces a good at a lower domestic opportunity cost than another country.

Theory: nations should specialize in the production of whatever has the lowest opportunity cost.

Question 9

Foreign Direct Investment

Answer 9

Long term investment by foreign firms (MNC) into the domestic markets of other countries.

Question 10

Least Developed Countries / Least Economically Developed Country

Answer 10

Developing countries that, according to the United Nations, exhibit the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world.

Question 11

Civil Society

Answer 11

Civil society includes the family and the private sphere, referred to as the “third sector” of society, distinct from government and business.

Question 12

Primary Goods/ Commodities

Answer 12

A reasonably interchangeable good or material, bought and sold freely as an article of commerce. Commodities include agricultural products, fuels, and metals and are traded in bulk on a commodity exchange or spot market.

Question 13

Capital-intensive

Answer 13

Capital intensive refers to business processes or industries that require large amounts of investment to produce a good or service, and therefore have a high percentage of fixed assets, which are also known as property, plant, and equipment.

Question 14

Multinational Corporation

Answer 14

A multinational corporation or worldwide enterprise is a corporate organization which owns or controls production of goods or services in at least one country other than its home country.

Question 15

Official Development Assistance

Answer 15

It is widely used as an indicator of international aid flow. It includes some loans.

Question 16

Import Substitution

Answer 16

Import substitution industrialization (ISI) is a trade and economic policy which advocates replacing foreign imports with domestic production.

Question 17

Sustainable Economic Development

Answer 17

Sustainable economic growth is economic development that attempts to satisfy the needs of humans but in a manner that sustains natural resources and the environment for future generations.

Question 18

Poverty Cycle

Answer 18

The cycle of poverty is the “set of factors or events by which poverty, once started, is likely to continue unless there is outside intervention”. Families trapped in the cycle of poverty, have either limited or no resources.

Question 19

Economic Development

Answer 19

Economic development is the process by which a nation improves the economic, political, and social well-being of its people.

Question 20

Trade Liberalization

Answer 20

Trade liberalization is the removal or reduction of restrictions or barriers on the free exchange of goods between nations. These barriers include tariffs, such as duties and surcharges, and non-tariffs, such as licensing rules and quotas.

Question 21

Purchasing Power Parity

Answer 21

Purchasing power parity is a way of measuring economic variables in different countries so that irrelevant exchange rate variations do not distort comparisons.

Question 22

Human Development Index

Answer 22

The Human Development Index is a statistic composite index of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of human development. A country scores a higher HDI when the lifespan is higher, the education level is higher, and the GNI per capita is higher.