Emerging And Devoloping Economies

Question 1

HDI

Answer 1

A composite measure which is sued in the United Nations development report and which consists of three elements:
GDP per head, health (life expectancy) and education (years in school average)

Question 2

Advantages of using HDI

Answer 2

Broader measure than GDP per capita
According to the UN programme, the three so essential contributors to development for people to lead a long health life, have access needed for decent living

Question 3

Limitations of HDI

Answer 3

Too narrow, only takes into account three things
Only concerned with long term development outcomes
An average, so disguised disparities a inequalities within countries

Question 4

Other indicators of development

Answer 4

Proportion of population with access to clean water,energy consumption per person, degree of inequality,mobile phones per thousand people etc.

Question 5

Factors influencing growth and development (examples)

Answer 5

Education, infrastructure, debt, demographics, foreign currency gap, primary product dependency, absence of property rights etc.

Question 6

Factors influencing growth and development: primary product dependency

Answer 6

Occurs in countries where the value of production in primary products accounts for a large proportion of GDP. Hard commodities (minerals) and soft commodities (agriculture)

Question 7

Factors influencing growth and development: primary product dependency issues

Answer 7

Extreme price fluctuation, protectionism,finite supply (of hard commodities),fluctuation in producers revenue

Question 8

Factors influencing growth and development: savings gap (Harrod Domar model)

Answer 8

Low income and output-> low savings -> low investment -> low capital accumulation -> low income and output
Suggest development limited

Question 9

Factors influencing growth and development: savings gap (Harrod Domar model) limitations

Answer 9

Focus only physical capital and ignore human capital, assumes constant relationship between capital and income, savings gap can be filled (eg by FDI)

Question 10

Factors influencing growth and development: foreign currency gap

Answer 10

Countries may have a shortage of foreign currency, which could be caused by- dependency on the export of primary products, dependency on imports of oil and manufactured goods, interest payments on debt to foreign countries

Question 11

Factors influencing growth and development: demographic factors

Answer 11

In countries with greater population growth, GDP per head would decline, ageing population means smaller working population

Question 12

Factors influencing growth and development: debt

Answer 12

Causes- dependency on primary product and falling terms of trade, borrowing money at times of low interest rates, loans taken to finance expenditure on military equipment, investment project etc.

Question 13

Factors influencing growth and development: access to credit and banking

Answer 13

Important both for new entrepreneurs who need to borrow money to finance their start up expenses and for existing businesses which may need money to finance expansion and for cash flow reasons

Question 14

Factors influencing growth and development: infrastructure

Answer 14

PhysicL and organisational structures and facilities which are required for the efficient operation of a society and its enterprises. If bad, it may deter domestic investment and FDI

Question 15

Factors influencing growth and development: education and skills

Answer 15

If school enrolment ratio is low then the levels of literacy and numeracy are likely to be low, so productivity may be low and will act as a deterrent to FDI

Question 16

Factors influencing growth and development: absence of property rights

Answer 16

The authority to determine how a resource is used, whether it’s owned by the gov, or individuals. Ownership rights

Question 17

Impact of non-economic factors in different countries: poor governance, instability and civil wars

Answer 17

If weak gov., unlikely resources will be allocated efficiently, gov. Failure may occur. If gov. Intervention, there may be welfare loss, civil war devastating effects on infrastructure etc,

Question 18

Impact of non-economic factors in different countries: corruption

Answer 18

Undesirable if it causes: inefficient allocation of resources,decrease FDI, capital flight, increase in cost of running a business there

Question 19

Market oriented strategies: trade liberalisation

Answer 19

Removal of trade barriers. Results in a increase in trade, maybe lower prices and consumer surplus, encourage FDI

Question 20

Market oriented strategies: promotion of FDI

Answer 20

Encourages by: trade liberalisation, deregulation of capital markets, tax incentives,measures to make cheaper to operate there

Question 21

Market oriented strategies: removal of government subsidies

Answer 21

Reduced so less incentive for firms to minimise costs

Question 22

Market oriented strategies: floating exchange rate system

Answer 22

Result in depreciation of exchange rate, goods and services more competitive abroad.

Question 23

Market oriented strategies: privatisation

Answer 23

More efficient than gov. Run

Question 24

Market oriented strategies: micro finance schemes

Answer 24

Provide poor with small loans to help them engage in productivity. However have high interest rates

Question 25

interventionist strategies: development of human capital

Answer 25

skills knowledge and talents of the workforce includes the idea there are investments of people

Question 26

interventionist strategies: protectionism

Answer 26

include tariffs, quotas and subsidies to domestic producers

Question 27

interventionist strategies: managed exchange rates

Answer 27

bank could engineer a depreciation of the country’s currency, so increasing competitiveness of its goods and services

Question 28

interventionist strategies: infrastructure development

Answer 28

tends to be expensive but is vital to a country’s economic development and prosperity. may be funded publicly, privately

Question 29

interventionist strategies: promoting joint ventures

Answer 29

enterprise undertaken by two or more firms which retain their distinct identity.
advantages include: reduction in costs and risks, less vulnerability to hostile actions id there is political instability
disadvantages: possible loss of control of tech and enterprise to the local partner, possibility of the partners having different strategic interests

Question 30

interventionist strategies: buffer stock schemes

Answer 30

designed to reduce price fluctuations.
key features of these schemes: a ceiling price (max price), floor price (min price), a buffer stock (storage and release of stock)

Question 31

interventionist strategies: industrialisation (Lewis model)

Answer 31

transfer of surplus labour from low productivity to higher productivity sectors,

Question 32

interventionist strategies: development of tourism

Answer 32

source of foreign exchange, investment by global companies, increased tax revenue. but, external costs, employment my be low paid and seasonal

Question 33

interventionist strategies: development of primary industry

Answer 33

some countries have achieved rapid rates of growth and development as a result development of their primary sectors.
this approach is appropriate if: demand for primary products is income elastic, country has comparative advantage in primary products, FDI is attracted

Question 34

interventionist strategies: fair trade schemes

Answer 34

the primary aim of fair trade schemes is to guarantee that producers receive a fair price for their products

advantages: producers receive a higher price, increased revenue allows quality to improve, producers protected from fluctuating prices
disadvantages: extra money may only be very mall, poorer or remote farmer unable to join, main proportion of the higher prices goes to retailers rather than producers

Question 35

interventionist strategies: aid

Answer 35

transfers of resources from one country to another to reduce absolute poverty and provide emergency relief.
types of aid: tied aid (one with conditions attached), bilateral aid (given directly by one country to another), multilateral aid (provided by countries through organisations).
but, can distort figures, corruption, interest may be needed to be paid, dependency culture may occur

Question 36

interventionist strategies: debt relief

Answer 36

IMF, world bank etc.
increases confidence, environmental gains.
but, corruption, moral hazard (country taking the risk wont be the one who bears the consequences),impact on financial institutions and their shareholders in developed countries

Question 37

international institutions: the World Bank

Answer 37

role changed in 1970 its role change to setting up agricultural reforms in developing countries, giving loans and providing expertise.
imposes structural agricultural programmes (SAP), which set conditions on which loans are given. aim to ensure that debtor countries don’t default on the repayments of debts.
SAPs are based on free market reforms. however, criticised as did little for worlds poor
following this, world bank now focus on poverty reduction strategies

Question 38

international institutions: IMF

Answer 38

189 members. when countries join its required to pay a quota which is broadly based on the relative size of the country in the world economy. in 2008, the IMF increased lending, and gave advice to countries.

Question 39

international institutions: NGOs

Answer 39

bought community based development to the forefront to promote growth and development