Factors influencing growth and development 4.3.2 Flashcards
How does high costs affect growth
Left shift SRAS, Real GDP decreases, growth limited
High costs leads to uncompetitive high prices, lower income and profits reducing gov tax rev reducing development
How does low productivity affect growth
Left shift LRAS, Real GDP decreases, growth limited
Results in decreased profit and income reducing gov tax rev reducing development
How does low investment affect growth
Left shift LRAS, Left Shift AD, Real GDP decreases, growth limited
Leads to lower income and profit reducing gov tax rev reducing development
3 Constraints on growth and development
Low productivity
High costs
Low investment
How does education influence growth and development
Poor education leads to low productivity
How does infrastructure influence growth and development
Poor infrastructure leads to low productivity
How does health influence growth and development
Poor health leads to low productivity
How does Population growth influence growth and development
If population growth is too high the quality of education/healthcare decreases causing lower productivity
How do savings gaps influence growth and development
A lack of loans, Low investment, Low AD and low LRAS, Low economic growth, Low incomes
Define savings gaps
A gap between the amount of money in savings, and the amount of money that firms want to borrow from banks
What is the Harrod-Domar model
Low savings, Low investments, Low profits, Low tax Rev, Limits development
How do Property rights influence growth and development
No property rights, no collateral, decreased investment
How does corruption influence growth and development
Corruption can mean theres a lack of finance for education healthcare and infrastructure, lowering productivity
How do landlocked countries influence growth and development
Shipping costs are 2x leading to higher costs
How do infant industries influence growth and development
Infant industries dont benefit from EOS, leading to higher costs
Define primary Product Dependency
Developing countries depend on exporting primary products
How does price instability influence growth and development
Unstable prices make it much harder for investors to predict future prices so Investment decreases
Define a foreign currency gap
A country’s expenditures in foreign currency exceed its foreign currency earnings from exports
How does a foreign currency gap influence growth and development
Leads to depreciation, an increase in the price of imports leads to cost push inflation
