ECON4 International Development

Question 1

Name 4 non-economic factors that influence growth and development

Answer 1

war, poor governance, disease, Geographical location

Question 2

3 types of strategies to improve development

Answer 2

Market-based, interventionist, Other

Question 3

Market-based strategies to improve development (6)

Answer 3

Privatisation, trade liberisation, promotion of FDI, Removal of subsidies, Floating exchange rate, Microfinance

Question 4

How does Trade liberalisation improve development?

Answer 4

Allows countries to specialise meaning output increases. This increase in output could lead to improvement in living standards

Question 5

How does Promotion of FDI improve development?

Answer 5

Can create employment opportunities as foreign capital seeks interest. This would be especially long term and sustainable growth

Question 6

Pros of FDI (3)

Answer 6

Risk of investment taken by MNC not government, transfer of knowledge and skills, Multiplier

Question 7

Cons of FDI (3)

Answer 7

Loses sovereignty, Repatriation of profits, Can be exploitative

Question 8

How does Removal of Government subsidies improve development?

Answer 8

If subsidies were an example of government failure then removing them could stop price signals being distorted

Question 9

How might removal of government subsidies harm development? (2)

Answer 9

Might not lead to green growth, and also might lead to primary product dependency as the economy may not diversify naturally

Question 10

How does Floating exchange rate systems improve development?

Answer 10

Stops pricing inefficiencies and could cause a depreciation of the currency making it more internationally competitive

Question 11

How does Microfinance schemes improve development(3)?

Answer 11

Involves small loans to individuals which boosts their income and boosts AD. Also it’s injection so their could be multiplier. Also helps them break away from aid and loan sharks with high interest

Question 12

Why might microfinance be less succesful than it appears

Answer 12

Honesty on how the money was spent, people may lie to cover their back

Question 13

What % of microfinance schemes were still running in Tamil Nadu, India?

Answer 13

less than 2%

Question 14

How does privitisation improve development?

Answer 14

Free market bros argue that it gives incentive to produce efficiently which increases output. It also gives allocative efficiency because firms have to meet demands of market

Question 15

Interventionist strategies to improve development (6)

Answer 15

Development of human capital, Protectionism, Managed exchange rates, developing infrastructure, joint venturing, buffer stocks

Question 16

How does Development of human capital improve development (3C)?

Answer 16

Skills base of the economy improves - Increases productivity and technical ability - economy can move up from primary products to manufacturing

Question 17

How does Protectionism improve development (2)?

Answer 17

Helps reduce a trade deficit, protect infant industries that are growing to become internationally competitive

Question 18

How might protectionism actually hinder development (5)?

Answer 18

Could distort market - less allocative efficiency, consumer welfare loss along with less variety, lower incentive to reduce costs and become efficient for firms, tariffs are regressive and hurt those on low incomes, could lead to retaliation from other countries

Question 19

How does Managed exchange rates improve development? (export side)

Answer 19

Stops exporters from being disadvantaged by fluctuations in the exchange rate as the government keeps it fluctuating around a fixed point

Question 20

How does Infrastructure improve development?

Answer 20

Gives businesses lower unit costs and external economies of scale, improves quality of life because of reliable power and water, can boost employment if better transport

Question 21

What % of gdp did China invest in infrastructure from 19??-20??

Answer 21

9% GDP in infrastructure from 1990-2010

Question 22

How did investing in infrastructure help China

Answer 22

meant they climbed ahead of other emerging economies

Question 23

How many chinese people benefited from the improvements in infrastructure from late 1990 to 2005

Answer 23

100 million chinese people

Question 24

How does joint ventures improve development?

Answer 24

(multiple international companies working together on a scheme) allow international trade and transfer of technology. They also help small firms grow into new markets while spreading risks between multiple firms

Question 25

What do buffer stocks tackle

Answer 25

Volatile prices

Question 26

disadvantages of buffer stocks (4)

Answer 26

Prices may go one way (don’t work) - unsustainable, Large cost to taxpayer to set up, Difficult to do with perishables, Free riders (other countries)

Question 27

What is import substitution

Answer 27

when protectionism is used to move consumption from imports to domestic products

Question 28

Other strategies to improve development (6)

Answer 28

fairtrade, developing primary industries, debt relief, aid, tourism, industrialisation

Question 29

Advantages of buffer stocks (2)

Answer 29

Prevents fall in revs that cause poverty, Consumers see more stability

Question 30

What is the Lewis Model

Answer 30

Industrial workers provide more value and therefore get higher wages, therefore a key to development is to encourage industrialisation and the transfer of workers to the industrial economy.

Question 31

Negatives of lewis model (4)

Answer 31

Profits may not be passed onto workers, Urban poverty, Government can waste resources on investment, Slums caused by influx

Question 32

Advantages of Aid

Answer 32

fills savings, trade gaps can be targeted

Question 33

positives of debt relief (4)

Answer 33

Reduces burden on small countries, Allows growth, Interest was larger than original loan, Previous government may have been corrupt

Question 34

Negatives of debt relief (2)

Answer 34

moral hazard, eases pressure on govt to adopt good policies

Question 35

Name 3 key development NGOS

Answer 35

IMF, World Bank, WTO

Question 36

What does the imf do

Answer 36

Provides temporary relief in crisis, tied aid (aid based on promises for production)

Question 37

What does world bank do

Answer 37

Promotes devlopment through different sub branches