MACRO APPLICATION Flashcards
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UK inflation
2.8%
Forecast growth for 2025
0.75%
UK unemployment
4.4%
UK current account deficit
2.6% of GDP
UK budget / fiscal deficit
4.5% of GDP = £128 billion
UK annual wage growth
5.9%
UK interest rate
4.5%
UK GDP / capita
£36000
Argentina inflation rate
67%
USA national debt
123% of GDP
UK government national debt
97% of GDP
Economic growth UK 2024
1.1%
UK consumer confidence
Very weak
UK output gap
-0.6%
-Uk potential growth is only 1%
UK Total GDP 2024
£2.851
-Services 79%
-Manufacturing 14%
-Construction 6%
-Agriculture 1%
Biden’s tariffs on China
-100% tariffs on Chinese climate related products
-10-50% tariffs on global imports
-125% tariffs on China
Consequences for China of trade war with USA
-Rises in unemployment
-Harmed economic growth
Consequences for USA of trade war with China
-Higher prices and costs
-Producers had to pay more raw material prices
-Cost the average USA consumer $750
-USA trade deficit went from $375 billion $420 billion
Retaliatory protectionism from China
25% tariffs on $110 billion of imports on certain industries
Pakistan’s literacy rate
58%
Average child in PK spends only 9 years in school
Pakistan’s GDP per capita
$14000
Germany’s literacy rate
99%
Germany’s GDP per capita
$50000
Germany’s Gini coefficient
0.30
Pakistan’s Gini coefficient
0.45
UK National debt
£2.7 trillion = 97% of GDP
Iran’s comparative advantage in Gas production
-Iran holds 1,183 trillion cubic feet (Tcf) of proven gas reserves as of 2017
-Ranking #29 in the world
-Accounting for about 17.09% of the world’s total gas reserves of 6,923 Tcf.
-Iran has proven reserves equivalent to 161.9 times its annual consumption levels.
Poverty statistics for UK
-In 2021/22, 13% of people in the U.K. were in absolute poverty before housing costs are considered (rising to 17% after housing costs).
-The UK’s Gini coefficient for income inequality is 0.36 for 2021/22.
-The UK’s Gini coefficient rose during the 1980s from 0.24 to 0.34.
How much money did global banks lose in the 2008 financial crisis?
$2.8 trillion
Market rigging examples
-The LIBOR (London Interbank Offered Rate) fixing scandal was a financial scandal that was uncovered in 2012
-Evidence emerged that some of the banks were artificially lowering or raising the LIBOR to benefit their own financial positions, such as by making their own borrowing costs appear lower than they actually were
-Barclays, Royal Bank of Scotland and three other banks are being sued by investors for at least £1bn over rigging of the foreign exchange market in a test case for US-style class actions in the UK.
How much money did the US gov use to bail out banks during the financial crisis
$700 billion of tax payers money
Corruption in Pakistan
Nawaz Sharif jailed for 7 years for embezzling $160 million which was meant for a highway project
Trading blocs
RCEP
-Example of a Free trade area
-RCEP became the world’s largest trading bloc in monetary terms
Trade liberalisation
China
China joined WTO in 2001 which led to the removal of protectionist measures, boosting China’s export of goods like electronics, textiles etc
Technological advancements
Alibaba
Rise in ecommerce giants such as Ali baba has allowed companies to sell products internationally and help facilitate global trade
Application for HDI
Average life expectancies in UK, India and Burundi
Uk —> 81
India —> 68
Burundi —> 57
Application for HDI
How long do people spend in school in UK, India and Burundi
UK —> 15 years
India —> 9 years
Burundi —> 7 years
Botswana facts
-Trade and development
-HDI= 0.71
-Diamond exporter
-Rapid growth
-Inequality, Gini coefficient = 0.53
-Depletion of resources
Botswana detail (3)
-Since the 1970s, Botswana has exported large quantities of rough diamonds (mainly through its partnership with De Beers). Earnings from diamond exports allowed Botswana to invest in healthcare, education, and infrastructure, boosting human development.
-Botswana is a member of SACU (Southern African Customs Union) and SADC (Southern African Development Community). These regional agreements reduced trade barriers, allowing Botswana to access larger markets for both diamonds and other goods like beef.
-Unlike many resource-rich countries, Botswana saved and reinvested much of its export revenue. Examples include creating the Pula Fund (sovereign wealth fund) to smooth out trade shocks and invest in future generations.
Advantages of Botswana using trade for development
-Diamond exports brought huge revenues 💎
-Regional trade agreements (SACU, SADC) 🌍
-Revenue invested into education, health 🏥📚
-Strong institutions attracted FDI 🌟
Disadvantages of Botswana using trade for development
-Overreliance on diamonds (commodity risk) ⚡
-Vulnerable to global market fluctuations 📉
-Slow diversification beyond mining 🏭
-High income inequality remains ⚖️
EVAL paragraph
BOTSWANA
While trade has driven Botswana’s impressive growth, it has also created vulnerabilities. The economy is heavily dependent on diamonds, making it exposed to global price fluctuations — if diamond demand falls, national income can sharply decline.
Efforts to diversify the economy have been slow, and sectors like manufacturing and tourism still contribute relatively little compared to mining.
Furthermore, inequality remains high (as seen in the Gini coefficient), suggesting that the benefits of trade have not been evenly shared.
Finally, Botswana faces risks linked to overreliance on a few trading partners, which could threaten stability if trade relationships weaken.
Nigeria facts
-Trade for development
-Oil exporter
-HDI = 0.53
-Corrupt gov
-Need to diversify
-Low oil prices = Nigerian recession
Nigeria detail
-Nigeria is Africa’s largest oil producer and exports crude oil mainly to countries like the USA, India, and China. Oil contributes about 90% of Nigeria’s export earnings.
-Nigeria is a major member of ECOWAS (Economic Community of West African States).
-Nigeria has started to diversify its economy into agriculture, manufacturing, and services. Programs like the Economic Recovery and Growth Plan (ERGP) (2017–2020) encouraged non-oil exports such as cocoa, textiles, and rubber to new markets.
Disadvantages of Nigeria relying on trade for development
-Over-reliance on oil still creates volatility.
-Poor infrastructure (roads, ports) and corruption have sometimes limited the full benefits of trade.
-Income inequality remains high despite growth.
Ethiopia facts
-Aid for development
-Interventionist government
-HDI = 0.47
-Corrupt government and low incomes
-50% of population in absolute poverty
AN
Ethiopia using aid for development
Ethiopia has used foreign aid to fund critical infrastructure projects, such as the development of major roads and energy production (e.g., the Grand Ethiopian Renaissance Dam).
Improved infrastructure lowers transport costs, increases productivity, and attracts private investment, helping to stimulate long-term economic growth.
Additionally, aid directed towards healthcare and education improves human capital by raising literacy rates and reducing disease burdens.
A more educated and healthier workforce increases labour productivity, enabling Ethiopia to diversify its economy beyond agriculture into manufacturing and services.
Eval
Ethiopia using aid for development
However, over-reliance on aid can create dependency, reduce incentives for domestic resource mobilisation, and lead to governance issues if aid funds are mismanaged.
Therefore, while aid has been a vital driver of development in Ethiopia, its long-run effectiveness depends on parallel improvements in governance, conflict resolution, and economic diversification.
Ethiopia detail
-Ethiopia uses foreign aid to fund major infrastructure like roads, railways, and dams. The Grand Ethiopian Renaissance Dam (GERD) received partial funding support, aiming to boost energy production and support industrialisation.
-Aid has supported improvements in healthcare and education access. Programmes funded by donors (e.g., the World Bank, USAID) have helped reduce child mortality and improve primary school enrolment rates.
-Ethiopia, prone to droughts and famines, receives aid for food programmes.
Schemes like the Productive Safety Net Programme (PSNP) provide food or cash to millions during agricultural crises, preventing mass hunger and supporting rural livelihoods.
KAA1
Ethiopia
Aid for development
KAA1: Aid for Infrastructure
Example: Roads, Grand Ethiopian Renaissance Dam
Explain: Reduces transport costs, increases productivity, attracts FDI
Link to development: Boosts economic growth, job creation
KAA2
Ethiopia
Aid for development
KAA2: Aid for Human Capital (Health and Education)
Example: USAID health programmes, World Bank education projects
Explain: Improves literacy, reduces mortality → better workforce productivity
Link to development: Supports industrialisation and higher income levels
EVAL
Ethiopia
Aid for development
-Risk of aid dependency — too much reliance on foreign help can discourage self-sufficiency.
-Some projects suffer from corrupt government
-Political instability and regional conflict (e.g., in Tigray) have disrupted aid effectiveness.
South Korea facts
-HDI = 0.92
-Growth for development
-Market based
-Diversification
-Strong gov
-Diversification
South Korea detail
Growth for development
- Rapid Industrialisation (1960s onwards)
South Korea shifted from a poor, agricultural economy to a highly industrialised nation. It focused on manufacturing exports — especially electronics and cars. High GDP growth rates (often 7–10% annually during the 1960s–80s) created massive job opportunities, reducing poverty dramatically. - Export-Led Growth Strategy
South Korea pursued export-oriented industrialisation (EOI):
Targeted industries for state support (like Samsung, Hyundai). Opened to global markets to sell goods competitively. Trade surpluses funded investment in education, health, and infrastructure. - Investment in Human Capital
Heavy investment in education and skills development (high literacy, STEM skills).
Created a highly productive workforce, driving further growth and innovation. - Government Policies and Intervention
The government (under Park Chung-hee) directed credit to key sectors and protected infant industries initially. Strategic planning helped firms grow before opening them up to global competition. - Reduction of Poverty and Improvement in Living Standards
Massive economic growth led to a rise in GDP per capita. Poverty fell sharply, and South Korea became classified as a high-income country by the World Bank by the 1990s.
EVAL
South Korea
Growth for development
-Early phases involved inequality and labour exploitation (e.g., long hours, weak unions).
-Environmental costs from rapid industrialisation.
-Reliance on exports means vulnerability to global shocks.
KAA1 + EVAL
South Korea
Growth for development
KAA1: Export-Led Growth Strategy
-South Korea focused on exporting manufactured goods (cars, electronics).
-Explain: Exports brought in foreign currency → boosted GDP → funded public services (health, education).
-Develop: Helped South Korea avoid the “middle income trap” many countries fall into.
-Link to development: Higher employment, better incomes, government revenue → improved living standards.
-Evaluation 1: Risks of Export-Led Growth
Vulnerable to global demand shocks (e.g., Asian Financial Crisis 1997).
Overdependence on external markets can cause instability.
KAA2 + EVAL
South Korea
Growth for development
KAA2: Investment in Human Capital
-Point: Massive investment in education (especially STEM subjects) and healthcare.
-Explain: Created a high-skilled workforce, leading to innovation and higher productivity.
-Develop: Higher wages, greater technological advancement → diversified economy into electronics, biotech, IT.
-Link to development: Not just richer, but healthier, better educated, with broader human development.
Evaluation 2: Short-Term Costs
High pressure on students (mental health issues).
Initial income inequality as growth benefited urban areas first (e.g., Seoul vs rural areas).
Ireland facts
-FDI for development
-Corporation tax rate is only 12.5%
-HDI = 0.95
Ireland detail
Attracting Multinationals with Low Corporate Taxes
Ireland set corporation tax at just 12.5% — one of the lowest in the developed world. This attracted huge multinationals like Google, Facebook, Apple, Pfizer to set up European headquarters there. Result: Massive inflows of capital, jobs, and tax revenues (even though tax rates were low, the volume of investment was huge).
Technology and Pharmaceutical Sectors
FDI flowed heavily into tech and pharmaceuticals. Ireland became known as the “Silicon Valley of Europe” and a major hub for medical manufacturing. These high-value industries pushed up GDP per capita to one of the highest levels in Europe.
Employment and Skills Development
FDI created high-paying jobs in areas like tech support, R&D, finance, and pharmaceuticals. Helped reduce Ireland’s unemployment rate sharply (especially after the 1980s recession). Encouraged investment in education (especially IT and engineering skills) to meet multinational demand.
Export Growth
Ireland’s economy became highly export-driven, especially in services (IT, finance) and pharmaceuticals. FDI strengthened Ireland’s balance of payments and made it a key part of global supply chains.
EVAL
Ireland
FDI for development
-Dependency on MNCs
-Inequality, rural areas benefit less from FDI than large cities such as Dublin
-Tax Haven Criticism and International Pressure
Ireland faces criticism from the EU and OECD for offering ultra-low corporation taxes. Global moves toward minimum corporate tax rates (e.g., 15% G7 agreement) could reduce Ireland’s competitive advantage in attracting FDI.
