Emerging and Developing Economies

Question 1

The Human Development Index

Answer 1

The HDI measures three factors:
-Education
-Health
-Real GNI per capita

The IHDI is an inequality adjusted version of this, with less equal countries gaining lower scores.

Question 2

The Multi-Dimensional Poverty Index

Answer 2

Composed of the same indicators as the HDI, but also includes measure of poor people’s experience of deprivation.
-Incidence (percentage of people who are poor)
-Intensity of poverty

Question 3

Market-Based Strategy Influencing Growth and Development

Answer 3

Privatisation:
-Profit incentive will increase productive and allocative efficiency, increasing output whilst only producing what is profitable.

-In 2005, the Rwandan Govt sold 99% of its shares in broadcaster Rwandatel to the private sector. Lower running costs led to lower prices for consumers.

-However, nationalised industries can often become monopolies, leading to reduced efficiency gains and higher prices.

Question 4

Interventionist Strategy Influencing Growth and Development

Answer 4

Development of Human Capital:
-Increased investment in education and online courses will help create a skilled workforce , increasing productivity and therefore economic output. Rising wages will raise workers out of poverty, further improving their efficiency.

-The U.K and Rwanda have announced a plan to launch the digital access library in Rwanda to help provide Rwandan students with 80,000 extra educational resources and material to further their education.

-However, student take a long time to make it to the workforce, by which time the world has developed further, limiting the effect of these changes. It can also be very expensive to implement if the infrastructure isn’t already there.

Question 5

Other Strategies Influencing Growth and Development

Answer 5

Foreign Aid:
-It can help a nation to recover from conflict by providing investment into industry, particularly if they are initially running at a loss. In the long term this can also benefit the loaner provider by increasing trade with the other nation.

-The Marshall Plan 1948 provided $13Billion to European nations recovering from the war resulting in recipient’s GDP rising by 0.5% every year.

-However, corruption can prevent aid from going to the correct places, or alternatively, nations may become reliant on aid to function as efficiency is discouraged.

Question 6

3 Factors Influencing Growth and Development

Answer 6

Levels of savings and investment:
Harrod-Domar model states that ‘low incomes=low savings=low investment=low capital levels=low income’ loops on, deteriorating the situation.

Access to finance:
The inability to borrow money prevents new business from starting and existing ones from investing.
Microfinance schemes help poor families in developing countries to engage in productive activities.

Infrastructure:
Strong infrastructure encourages FDI, improving growth and output. However, resource-rich nations may receive FDI to build new infrastructure such as China building railways in Kenya.

Question 7

The World Bank

Answer 7

The World Bank provides loans to developing countries to fund projects which will help increase growth in the country.

Question 8

The International Monetary Fund

Answer 8

The IMF aims to increase international liquidity and provide stability in markets. Governments with a BoP deficit could borrow funds to repay others.
It also provides ‘stabilisation programs’ to help balance developing countries by encouraging free market reform.