E+D Economies - Corruption

Question 1

Constrains because…

Answer 1

• Corrupt politicians often use tax revenue and foreign aid for their own benefits
• Even if country receives great amounts of income tax rev, corp tax rev and foreign aid, may not be spent on education, infrastructure of healthcare
• ^^ limited development and growth

Question 2

Fix

Answer 2

• Fair trade schemes - give money to those directly who need most
• ^^ part of price goes directly to workers - increases incomes - increase consumption - right shift AD - income tax rev increase - increase gov spending - increase economic growth
• ^^ although income tax may be affected by corruption
• ^^ solution: Promote development in corrupt countries - fair trade premium - communal fund that fair trade farmers can spend on development themselves &laquo_space;gives workers money to spend on development themselves instead of relying on their government

Question 3

Eval

Answer 3

• May not lead to growth and development
• Fair trade foundation (in charge of all products) doesnt actually monitor how much fair trade products are being sold for in the UK and US
• ^^ no idea how much money from each fair trade product goes to the farmers
• ^^ less than 1% of the extra price goes to farmers
• Thus incomes won’t rise - no consumption - no increase in AD - limited economic growth
• ^^ Fair trade premium also remain tiny - no money to spend on development
• Also fair trade has resulted in excess production of goods, lowering their world price and deteriorating the terms of trade for many exporters

Question 4

Example

Answer 4

• $300bn gone missing from Venezuelan funds in last decade, due to corrupt politicians