Economic Development

Question 1

What is the meaning of Economic Development

Answer 1

refers to an increase in the living standards in a country

Question 2

Define GDP

Answer 2

Gross Domestic Product, The total income generated within the domestic economy, regardless of the nationality of the owners of factors of production.

Question 3

Define GNP

Answer 3

the total value of all the final goods and services made by a nation’s economy citizens (doesn’t matter where it was made)

Question 4

Define PPP

Answer 4

used to compare economic productivity and standards of living between countries.

Question 5

Define GNI

Answer 5

is the total amount of money earned by a nation’s people and businesses (includes abroad)

Question 6

How do you calculate GNP

Answer 6

GDP + Net income earned from abroad.

Question 7

How do you calculate GNI Per capita

Answer 7

GNI per capita is GNI divided by its population

Question 8

What does HDI focus on

Answer 8

HDI focuses on longevity, basic education and minimal income

Question 9

What are the 3 components of HDI

Answer 9

Knowledge – mean years of schooling and expected years of schooling.

Long and Healthy Life – minimum value for life expectancy of 25 years and maximum value of 85 years

A decent standard of living: gross national income (GNI) per capita adjusted to purchasing power parity

Question 10

What is Infant Mortality Rate

Answer 10

The infant mortality rate is the number of infant deaths for every 1,000 live births

Question 11

Define LEDC

Answer 11

LEDC – Less economically developed country, an economy which is less economically developed, India

Question 12

Define MEDC

Answer 12

MEDC – More economically developed country, an economy which has higher economic development, UK

Question 13

What are some obstacles of development for LEDC

Answer 13

Resource curse – not efficiently using these resources

Low levels of education & health – won’t have demanded skills

Low life expectancy – People work less time, strain in health services

MEDC trade policies – Exports and tariffs - affect the LEDC (increased costs)

Poor levels of infrastructure – Harder to transport goods (less FDI)

Lack of capital and technology – Other countries have more efficient tech
High levels of public debt – cannot focus on projects instead debt

Question 14

What is meant by international aid

Answer 14

Assistance required by one country from another, A transfer of resources from one country to another, often with no need to ‘pay it back’

Question 15

What is meant by income distribution

Answer 15

Income distribution covers how a country’s total GDP is distributed amongst its population, such as how much income is distributed in the top 1% compared to the bottom 5%

Question 16

What are the positives of measuring development in GDP per capita

Answer 16

GDP per person is a good enough measure because higher income allows people to be able to purchase goods and services including healthcare and education

Data collected by most countries therefore good tool for comparison

Question 17

What are the negatives of measuring development in GDP per capita

Answer 17

Ignores income distribution

Ignores voluntary work

Question 18

What are the positives of measuring development in HDI

Answer 18

HDI measures three factors, rather than just income, giving a more rounded view of living standards than GDP.

Health, education and income are pivotal to good living standards.

The data used is easy-‐to-‐obtain and reliable.

The use of PPP qualifies income in terms of the cost of living.

Question 19

What are the negatives of measuring development in HDI

Answer 19

The three components are relatively weighted which are assumed equally important

does not take into account important aspects of human development such as political freedom or environmental sustainability

Question 20

What are the ways of measuring economic development

Answer 20

Happiness, HDI, GDP, GDP per capita, Poverty Rates, Internet users, Literacy rates and employment rates

Question 21

Define Government Current spending

Answer 21

Current spending is expenditure on day to day running costs, for example, government spending on wages of public sector workers or buying raw materials

Question 22

Define Government capital spending

Answer 22

Capital spending is investment spending on important long-term projects, for example, building a hospital, buying equipment or building a new road.

Question 23

What are the solutions to help LEDCs Develop

Answer 23

trade liberalisation

international aid

debt relief

import substiution

encouraging FDI

Question 24

Define and evaluate Liberalisation

Answer 24

Trade liberalisation involves removing barriers to trade between different countries and encouraging free trade. Trade liberalisation involves:

Reducing tariffs
Reducing/eliminating quotas
Reducing non-tariff barriers.

+ Enables Comparative advantage
+Attracts Inward FDI

• Can cause income inequality
• Domestic firms struggle (job losses)
• Potential environmental cost

Question 25

Define and evaluate international aid

Answer 25

Any type of assistance that one country voluntarily transfers to another, which can take the form of a gift, grant, or loan.

+ Helps in crisis situations
+Encourages economic growth (resources used in supply side goods)

• May not solve the long term solution
• Corruption
• Dependency on debt

Question 26

Define and evaluate debt relief

Answer 26

The partial or total forgiveness of debts.

+ Allows governments to focus on more important things such as infrastructure etc.

• May encourage the country to go into more debt

Question 27

Define and evaluate Import substitutions

Answer 27

Import substitution- An economic policy that replaces foreign imports with domestic production.

+ Creates domestic jobs
+It can help create a balance between imports and exports

• May not be as efficient at making the products
• More costly

Question 28

Define and evaluate Encouraged FDI

Answer 28

Encouraged FDI - When a developing country makes changes to the economy to encourage FDI

+ Higher wages
+ Improved working conditions

• Relaxation of regulations to attract FDI
• Potential lower taxes to attract FDI (less government rev)