Factors affecting Growth and development

Question 1

What are the factors that affect Growth and development

Answer 1

Primary Product Dependency
Foreign Currency Gap
Savings Gap
Access to credit and banking
Debt
Demographic Factors
Capital Flight
Property Rights

Question 2

What is primary product dependency
And give examples of primary products

Answer 2

When countries specialise in products that are used in the earlier stages of the production process

Examples:
Agriculture
Oil
Fishing
Forestry
Coal mining

Question 3

Advantages and disadvantages of primary product dependency

Answer 3

Advantages:
-exploitation of comparative advantage
-can attract FDI
-developing economies have a large and elastic supply of labour
-doesn’t require costly investment

Disadvantages:
-Supply is volatile
-Inelastic YED
-Risk of over-specialisation
-Limited resources
-price & demand is volatile

Question 4

What is the chain of reasoning for the Harrod-Domar Model

Answer 4

Low savings-Low investment due to low mobilized savings-capital deficiency-underdevelopment-low productivity-low income

Question 5

Ways to fill the savings gap

Answer 5

-increase inward flows of FDI
-prevent excess capital flight
-encouraging foreign aid
-obtaining loans from the world bank

Question 6

What causes a foreign currency gap

Answer 6

This is when exports from a developing country are too low compared to imports
to finance the purchase of investment or other goods from overseas required for
faster economic growth.

Question 7

What is capital flight
And different causes of it

Answer 7

The money that flows out of a country due to people losing confidence in the economy

Causes:
-political instability
-economic sanctions
-war
-high tax/interest rates
-changes to govt policies

Question 8

What are some demographic factors and example in its affect on growth and development

Answer 8

-High population growth leads to much unemployment amongst young workers
Increasing the dependency ratio-ratio of people outside working age to those inside the working age (15-65)

Question 9

What are some reasons why developing countries may be in debt

Answer 9

-Rise in the value of the dollar
-High interest payments
-Corruption and mismanagement

Question 10

How do a lack of access to credit and banking hinder development

Answer 10

Lacks of access to funds for investment so investment stays low

Question 11

How does the absence of property rights hinder development

Answer 11

Businesses and individuals cannot use the law to protect their assets
Assets are vulnerable
Reduced investment into assets