Economic Development Flashcards
What is the meaning of Economic Development
refers to an increase in the living standards in a country
Define GDP
Gross Domestic Product, The total income generated within the domestic economy, regardless of the nationality of the owners of factors of production.
Define GNP
the total value of all the final goods and services made by a nation’s economy citizens (doesn’t matter where it was made)
Define PPP
used to compare economic productivity and standards of living between countries.
Define GNI
is the total amount of money earned by a nation’s people and businesses (includes abroad)
How do you calculate GNP
GDP + Net income earned from abroad.
How do you calculate GNI Per capita
GNI per capita is GNI divided by its population
What does HDI focus on
HDI focuses on longevity, basic education and minimal income
What are the 3 components of HDI
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
What is Infant Mortality Rate
The infant mortality rate is the number of infant deaths for every 1,000 live births
Define LEDC
LEDC – Less economically developed country, an economy which is less economically developed, India
Define MEDC
MEDC – More economically developed country, an economy which has higher economic development, UK
What are some obstacles of development for LEDC
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
What is meant by international aid
Assistance required by one country from another, A transfer of resources from one country to another, often with no need to ‘pay it back’
What is meant by income distribution
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%
What are the positives of measuring development in GDP per capita
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
What are the negatives of measuring development in GDP per capita
Ignores income distribution
Ignores voluntary work
What are the positives of measuring development in HDI
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.
What are the negatives of measuring development in HDI
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
What are the ways of measuring economic development
Happiness, HDI, GDP, GDP per capita, Poverty Rates, Internet users, Literacy rates and employment rates
Define Government Current spending
Current spending is expenditure on day to day running costs, for example, government spending on wages of public sector workers or buying raw materials
Define Government capital spending
Capital spending is investment spending on important long-term projects, for example, building a hospital, buying equipment or building a new road.
What are the solutions to help LEDCs Develop
trade liberalisation
international aid
debt relief
import substiution
encouraging FDI
Define and evaluate Liberalisation
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
Define and evaluate international aid
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
Define and evaluate debt relief
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
Define and evaluate Import substitutions
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
Define and evaluate Encouraged FDI
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)
