Econmoic Development

Question 1

Common characteristics of developing nations (5)

Answer 1

• Small GDP per capita
• Focus on primary and secondary sector
• Low life expectancy
• High birth rates
• Weakness in institutions

Question 2

How EG can spur economic development (4)

Answer 2

• Increase GDP per capita
• Creates new jobs
• Profits meaning investment
• More tax revenue = improved public services (Healthcare and education)

Question 3

Issues with GDP being an indicator of development

Answer 3

• Figures high due to wealth concentrated in the top earners
• Info gathered may be unreliable
• Some economies (Bangladesh) don’t use money often
• Purchasing power parity

Question 4

HDI involves

Answer 4

• Life expectancy at birth
• Mean years of schooling
• GDP per capita

Question 5

Limitations of HDI (2)

Answer 5

• Doesn’t include qualitative factors (human rights)
• No account of distribution of income

Question 6

Good measure of development involves (5)

Answer 6

• GDP
• Environment degradation
• Happiness/ mental health
• Misery index (UE and inflation)
• Levels of poverty

Question 7

Domestic sources of financing ED (2)

Answer 7

• Savings from private sector
• Tax revenues

Question 8

External sources of financing ED (4)

Answer 8

• Foreign aid
• Loans from international banks ( IMF and world bank)
• FDI
• Remittance

Question 9

What is a remittance?

Answer 9

Money sent ‘home’ from people working abroad, often from a developed country to a developing country (UK to Senegal)

Question 10

Advantages of remittances (4)

Answer 10

• Increases living standards
• Reduced poverty
• Lowers Gini coefficient
• Can use money to invest and become self sufficient

Question 11

Disadvantages of remittances (3)

Answer 11

• Reduces size if the workforce in that area
• X🔺R to appreciate, damaging X
• Moral Hazard (disincentives to work)

Question 12

Harris Domar growth formula

Answer 12

Savings ratio
———————
Capital output ratio

Question 13

Development strategies (5)

Answer 13

Aid
Liberalisation
FDI
Isi
Esi

Question 14

How to increase FDI (4)

Answer 14

• Financial incentives
• Special economic zones
• Improve infrastructure quality
• Open capital markets

Question 15

Advantages of FDI (5)

Answer 15

Job creation
Tax revenue
Diversification of economy
More competition
Improves labour productivity

Question 16

Disadvantages of FDI (5)

Answer 16

Inequality
Land grabs
Poor ethical standards
Volatile FDI flows
Limited job creation effects

Question 17

Debt relief advantages (4)

Answer 17

• Increased social spending
• Increase growth and job
• Reduced poverty
• Benefits global trading system

Question 18

Debit relief disadvantages (3)

Answer 18

• Moral Hazard
• Increased IR
• Resources are diverted (OC)

Question 19

Forms of aid (5)

Answer 19

Debt relief
Bilateral aid
Multilateral aid
Humanitarian aid
Development aid

Question 20

Advantages of official development assistance (4)

Answer 20

• Overcome savings gap
• Building capital stock
• Human capital and post conflict help
• Increase growth and trade spillovers

Question 21

Internal liberalisation

Answer 21

Lessening government regulations and restrictions in an economy (privatisation)

Question 22

Liberalisation advantages (3)

Answer 22

Jobs
Efficiency
Tax revenue

Profit motive
Politics removed
Competition

Question 23

Liberalisation disadvantages (7)

Answer 23

Dividends lost
Regulatory capture
Exploration of consumers
Externalities
Efficiencies: job losses
Natural monopoly
Inequality

Question 24

Import substitution industrialisation

Answer 24

Targets the protection and incubation of domestic industries so that the goods produced are competitive with imports

Question 25

Export substitution industrialisation

Answer 25

Export led growth is a trade and economic policy aiming to speed up the industrialisation process of a country by exporting goods when a country has a CA

Question 26

How is ISI achieved?

Answer 26

Via protectionist policies: tariffs and quotas

Question 27

How is ESI achieved? (3)

Answer 27

Depreciate the exchange rate
Subsidies exports
Reduce barriers to trade