Interventionist Strategies

Question 1

What are the interventionist strategies (6)

Answer 1

Development of human capital
Protectionism
Managed exchange rates
Infrastructure development
Promoting joint ventures with global companies
Buffer stock schemes

Question 2

What developing in human capital

Answer 2

Investing in education and capital

Question 3

Problems with high birth rate (3)

Answer 3

Increased dependency ratio
More babies to feed, clothe, educate etc
Increased pressure on social infrastructure (schools, hospitals, housing etc)

Question 4

What is increased dependency ratio

Answer 4

More non-productive members of the population dependent on the earnings of the productive members of the population

Question 5

Developed vs developing = Uganda vs UK (3++)

Answer 5

Birth rate = 47 births/1000 VS 10 births/1000
HIV/AIDS prevelance = 5.4% VS 0.2%
LIfe expectancy = 53 VS 79

Question 6

Possible policies to increase human capital (4)

Answer 6

Education programmes
Family planning clinics
Use women within workforce
Disincentive to have kids

Question 7

Why better to have women in workforce (2)

Answer 7

GDP negatively effected if underused
Better educated mother = better educated children

Question 8

What is protectionism (2)

Answer 8

Trying to protect an economy from the full impact of free trade
Governments try to replace imported goods with domestically produced ones

Question 9

What protectionism (6)

Answer 9

Tariff
VER
Technical standards
PPP
Quota
Export subsidy

Question 10

Asian tiger economies (2++)

Answer 10

Believed that by integrating with the global trading system = their domestic industries would be forced to become dynamically efficient and develop specialisation
They argue protected domestic producers have no incentive to reduce costs or improve products

Question 11

Asian tiger where + what

Answer 11

China
17% of growth

Question 12

Why restrict trade = protectionism (5)

Answer 12

BoP equilibrium
Fear of structural unemployment
Comparative advantage
Potential loss of gov revenue
Dumping = predatory pricing

Question 13

What is outward looking strategies (2)

Answer 13

Not all countries go through the import substitution stage
Many countries seek export-led growth from the outset but are willing to accept imports

Question 14

What outward looking governments (3++)

Answer 14

Favour an open economy which involves:
Dismantling of protective tariff barriers
Removal of obstacles to mobility of labour
Openness to MNC inward investment

Question 15

Benefits of outward looking (3)

Answer 15

New sources of investment
Access to global markets
Economies of scale

Question 16

Problems with outward looking

Answer 16

Domestic economy = reduced demand

Question 17

Managed exchange rates what (2++)

Answer 17

Know their currency will only fluctuate within a narrow band against the currencies of their major trading partners = firms can order ahead with confidence = removes uncertainty
Governments will devalue their currencies to help their exporters to compete = China pegged

Question 18

Advantages of fixed echnage rates (3)

Answer 18

Gov fixes high exchange rate for imports of essential imports = cheaper for consumers
Gov fixes a low rate for imports of luxury items = makes it more expensive for consumers
Gov fixes an even lower rate for exports = helps domestic firms compete in global export mark

Question 19

Disadvantages of ER (2)

Answer 19

Difficult to set the right ER
Invitation for corruption

Question 20

What infrastructure development

Answer 20

Gov to be the principal builder of facilities like ports, roads, schools and hospitals

Question 21

Who builds the infrastructure depends on what (3)

Answer 21

Profits
Private sector won’t invest in schools or roads = free rider issue
If there’s positive externalities = social benefit = governments will finance

Question 22

Problems with infrastructure development

Answer 22

With no profit motive = costs will be kept to a minimum and building might be of poor quality

Question 23

Example of infrastructure development (4+)

Answer 23

After the collapse of global trade due to the Global Financial Crisis of 2007- 08
China’s infrastructure investment reached nearly 50% of GDP
One project = US$16bn Jiaozhou Bay Bridge = world’s longest cross-sea bridge, stretching nearly 26 miles
Gre GDP 17.5%

Question 24

Uk examples of infrastructure development (2)

Answer 24

HS2
RACC = schools are crumbling

Question 25

What - joint ventures with MNC

Answer 25

One way that governments can reduce the risk of being exploited by Multi-National Corporations = force them to form joint ventures with domestic companies

Question 26

How does JV work (3++)

Answer 26

Local partner will provide some finance + land for the JV in a development zone set up by the government
Foreign partner provides the expertise and will import the specialist equipment from overseas
Overtime local employees will gain skills to run the plant themselves without the need for expensive staff

Question 27

Benefit of JV (2)

Answer 27

Only a portion of the profits will be repatriated out of the host country
Reduce the flow of currency out of the country = helping BoP

Question 28

Example of JV with MNC (3+)

Answer 28

Liquid gas plan in angola
Owned by Chevron (36.4%)
The Angolan state-owned oil company owns 22.8% (ONLY)

Question 29

Buffer stock

Answer 29

Ask Mrs Tod
We didn’t go through in lesson properly so notes in book are shit and slides are confusing ?