macro economic growth and development Flashcards
(25 cards)
What are the three benefits of economic growth?
- HIGHER INCOMES: +creates jobs, improves quality of life, reduces poverty
- income inequality
2.HIGHER PROFITS: + Technology investment and jobs created
- FISCAL DIVIDEND(tax): Healthcare, education and infrastructure
What are three limitations of growth ?
- distribution of income (may not be equal)
- Negative externalities and sustainability (pollution from factories mainly poorer factories)
- Growth in dominant sector
What are characteristics of developing countries ?
- low living standards
- low levels of productivity
- low savings
- high population growth
- incomplete market
- high unemployment
- low economic power
What are the measurements of development?
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.
What is HDI?
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
Why is HDI good?
+ Broad , still includes GDP per capita
+ focuses on development outcomes
+ allows progress to be measured over time
+ focuses attention on lowly developed countries
Why is HDI BAD?
not include distribution of income
all is weighted equally so inefficient allocation of resources
no freedom of choice
other factors: crime, corruption, poverty
What is SEN’s definition of development?
“process of improving people’s wellbeing and quality of life, improvement of standards of living reduction of poverty improved health freedom and economic choice
What is Todaros definition of development?
“Availability and distribution of life sustaining goods, food, shelter , health increase in living standards, expansion and economic social changes”
What are the institutional factors within a country that lead to development?
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
Define primary product dependency?
When a countries main export of primary product are agricultural goods, raw materials grown naturally
Define Volatility of commodity prices?
Prices of a commodity are continually fluctuating due to changing stock levels
What is the savings gap?
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.
what are the benefits of financial aid?
benefit: helps people meet basic needs e.g shelter,food and medical care, and economic opportunities
disadvantages of financial aid?
kills local industries and countries receiving the foreign aid are stuck in aid dependency
what are the benefits of development ?
problems with development?
a benefit : recovery for the govt widening tax bracket, standards of of living
disadvantage: low HDI, savings gap , dutch disease, PPD.
what is the dutch disease ?
the dutch disease is when you discover or have increased exploitation of a natural resource.
why is the dutch disease bad explain…
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
Piebstch and singer?
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)
how does infrastructure lead to development?
- 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
how does tourism help growth and development?
-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
what are the negative externalities of tourism ?
- 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
what is the downside of infrastructure?
- opportunity cost
- pollution
- long term it takes time
- extraction of finite resources
what are buffer stocks ?
buffer stocks try to reduce volatility of commodities. tries to protect producers and consumers from price volatility aims to stabilise prices.
