macro economic growth and development

Question 1

What are the three benefits of economic growth?

Answer 1

1. HIGHER INCOMES: +creates jobs, improves quality of life, reduces poverty
   - income inequality

2.HIGHER PROFITS: + Technology investment and jobs created

3. FISCAL DIVIDEND(tax): Healthcare, education and infrastructure

Question 2

What are three limitations of growth ?

Answer 2

1. distribution of income (may not be equal)
2. Negative externalities and sustainability (pollution from factories mainly poorer factories)
3. Growth in dominant sector

Question 3

What are characteristics of developing countries ?

Answer 3

• low living standards
• low levels of productivity
• low savings
• high population growth
• incomplete market
• high unemployment
• low economic power

Question 4

What are the measurements of development?

Answer 4

SINGLE INDICATORS: GDP PER CAPITA ( the average income per person in the economy)
- doesn’t include income inequality PPP,
(GNI) income generated by countries factors of production used in more developing countries.

HEALTH MEASURES: life expectancy, infant mortality

EDUCATION MEASURES: adult literacy, enrolment in primary education.

Question 5

What is HDI?

Answer 5

Human development index
0-0.49 lowest development 0.5-0.69 medium development 0.7-0.79 high development and <0.8 very high development

Question 6

Why is HDI good?

Answer 6

+ Broad , still includes GDP per capita
+ focuses on development outcomes
+ allows progress to be measured over time
+ focuses attention on lowly developed countries

Question 7

Why is HDI BAD?

Answer 7

not include distribution of income
all is weighted equally so inefficient allocation of resources
no freedom of choice
other factors: crime, corruption, poverty

Question 8

What is SEN’s definition of development?

Answer 8

“process of improving people’s wellbeing and quality of life, improvement of standards of living reduction of poverty improved health freedom and economic choice

Question 9

What is Todaros definition of development?

Answer 9

“Availability and distribution of life sustaining goods, food, shelter , health increase in living standards, expansion and economic social changes”

Question 10

What are the institutional factors within a country that lead to development?

Answer 10

EDUCATION:
+ Higher productivity levels, higher job potentials, better living standards, freedom of choice, gender equality, health benefits
- Funding is very expensive

HEALTHCARE:
+ Increased job productivity, more jobs, better living standards,more jobs
- Funding is hard to get
- Prices is it right to exclude people from health care due to price? no

INFRASTRUCTURE:
+ Access to markets, countries increased competitiveness, access to schools and hospitals.
- Funding is expensive

Question 11

Define primary product dependency?

Answer 11

When a countries main export of primary product are agricultural goods, raw materials grown naturally

Question 12

Define Volatility of commodity prices?

Answer 12

Prices of a commodity are continually fluctuating due to changing stock levels

Question 13

What is the savings gap?

Answer 13

the savings gap is when high levels of of extreme poverty make it difficult to generate sufficient savings to provide needed funding for investment projects.

Question 14

what are the benefits of financial aid?

Answer 14

benefit: helps people meet basic needs e.g shelter,food and medical care, and economic opportunities

Question 15

disadvantages of financial aid?

Answer 15

kills local industries and countries receiving the foreign aid are stuck in aid dependency

Question 16

what are the benefits of development ?
problems with development?

Answer 16

a benefit : recovery for the govt widening tax bracket, standards of of living
disadvantage: low HDI, savings gap , dutch disease, PPD.

Question 17

what is the dutch disease ?

Answer 17

the dutch disease is when you discover or have increased exploitation of a natural resource.

Question 18

why is the dutch disease bad explain…

Answer 18

the dutch disease is when you discover or have increased exploitation of a natural resource this is bad because it leads to appreciation of currency, as more people demand your good they pay you in your currency your currency value increases this means that country has higher purchasing power makes exports more expensive which is bad ! has a bad knock on effect on local industries that aren’t involved with the natural resource

Question 19

Piebstch and singer?

Answer 19

piebstch and singer say that if relying countries rely on Prinary Product Development they will face a very bleak future. Demand for primary products is inelastic (doesn’t change) demand for manufactured goods is elastic( changes)

Question 20

how does infrastructure lead to development?

Answer 20

• infrastructure can help hospitals build hospitals
• better equipped hospitals
• more doctors more healthy population
• increased working population increased productivity
• better sewage system
• provides sanitation
• sewage causes diseases e.g hepatitis
• use dams for clean water
• flood barriers e.g better roads
• drones for delivery of aid

Question 21

how does tourism help growth and development?

Answer 21

-export earnings improve the balance of trade this helps improve the current account
- domestic job creation
- promotes gender equality
- the tourism multiplier, money spent by tourists

Question 22

what are the negative externalities of tourism ?

Answer 22

• pollution
• inflation
• rent
• damage to the environment
• house prices increase , bad living standards for locals bc tourists want to buy holiday homes this increases their prices worsening living standards for locals
• strong health concerns

Question 23

what is the downside of infrastructure?

Answer 23

• opportunity cost
• pollution
• long term it takes time
• extraction of finite resources

Question 24

what are buffer stocks ?

Answer 24

buffer stocks try to reduce volatility of commodities. tries to protect producers and consumers from price volatility aims to stabilise prices.

Question 25

advantage and disadvantage of buffer stocks

Answer 25

advantage:
-creates price stability
- enables economy to develop
- price stability
- investment increases AD

disadvantages:
-expensive
- big opportunity cost
- high chance of market failure
- hard to determine the price
- lack of infrastructure
- perishable goods