Economics theorists macro Flashcards
Lewis model of industrialisation
Instead of supplying agriculture goods, a country should supply manufactured goods. This may lead to an increase in investment into the manufacturing sector and therefore leading to mass consumption
Dambisa Moyo
Poor countries become over-dependent on AID and cannot efficiently distribute the aid across the country. It also encourages corruption of hierarchy.
Douglas North
Less developing economies have financial institutions which means that there is less availability to borrow or save. It also restricts borrowing because poor countries cannot provide collateral to secure loans
Harrod Domers savings equation
Savings/Capital output ratio
When a firm saves, they have more money to invest. This increase in investment allows more firms to invest in growth and development
The malthus theory of population
The theory of exponential population may eventually exceed food supply
The prebisch-singer hypothesis
PPD goods are price inelastic. This means that when world income rises, PPD products won’t rise because they are not rising in demand but, manufactured goods will increase which means that they will import more manufactured goods, worsening terms of trade
SOLOWs growth model
This is an economic measure of output. It assumes that labour and capital is fixed. The factors are population rate, savings and technological advances
ROSTOWs model of development
This shows the development of an economy from the exploitation of PPD and then industrialising and exploiting the manufacturing sector in the long-run
Dutch disease
When you over-specialise in an industry which means that the industry you specialise in does well however, this can push up the exchange rate, because there is an increase in imports, increasing the demand for the pound and worsen other industries
The resource curse
When a country specialises in the overproduction of the resource it has a factor abundance in which could cause other industries to suffer
De soto’s property rights
This states that poorer, undeveloped economies cannot benefit from property rights and therefore their assets are not legally protected. This means that their assets are dead capital
The environmental kuznets curve
Economics development initially leads to a deterioration of the environment however, once a country industrialises, they can invest in improving the environmental stance
Mundell flemings optimal currency area
This is the maximisation of economic efficiency between countries.
This is based of:
- Integrated labour market
- Flexibility of wages
- Redistribution of wealth
- Similar business cycles
Ohlin Heckshlers factor abundance model
Specialising in the trade of what they have a high resource of.
They can have a comparative advantage in this and benefit from economies of scale
What is the Marshell-lerner condition
A devaluation of the currency improves the balance of payments only if the sum is greater than one
Equation: PEDx + PEDy > 1
Ha joon chang
Countries should use protectionism to develop
Krugmans new trade theory
The ability of a country to produce a particular product at a lower opportunity cost than its trading partners, due to different natural resources and other factors.
Fishers quantity theory of money
change in price can be related to a change in the money supply
M×V=P×T
where:
M=money supply
V=velocity of money
P=average price level
T=volume of transactions in the economy
Marshell lerner condition
This is when for the current account to improve, the PED of imports have to be above 1. If businesses are in forward contracts, it is unlikely in the short run the current account will improve.
Gary Becker’s human capital theory
This stated that the government should invest in education to improve the skills of labour and increase productivity. This will help to develop an economy.
The government should fund research and development and fund childhood education.
- Technological advancements means that the knowledge that people acquire in school is becoming obsolete more quickly than before
Paul Krugmans gravity model
This states that countries near each other should trade with one another
Wagners law
What is an EV?
This is that public sector goods are income elastic and so when national income increases, so does public expenditure on healthcare and education etc
- some goods are inferior goods like public transport
What is Pareto efficiency?
Due to perfect competition, being in a competitive market means that a firm is fully maximising efficiency and nothing can be changed without making someone worse off
Tragedy of the commons
This is that when a common good is found, it will become over-utilised. This means that there will eventually be a depletion of resources
The Diderot Effect
Dictates that once you acquire something new, it will trigger a chain reaction that pushes you to start making more purchases.
What is Ricardian equivalence?
An attempt to stimulate the economy with government spent that is debt-financed will not benefit an economy because firms and consumers understand that this will lead to higher taxes in the future
Fisher’s quantity theory of money
This states that an increase in injections into the economy could increase money supply as more money is flowing around the circular flow of income. This increases price level as more money is chasing the same number of goods and services leading to inflation
