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Moi cards > Macroeconomics Theme 4 > Flashcards

Macroeconomics Theme 4 Flashcards

1
Q

What is Horizontal equity (4.2.2)

A

This is the same treatment for everyone regardless of any differences, e.g indirect taxes

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2
Q

What is Vertical equity (4.2.2)

A

This is different treatment for similar groups of people, e.g income tax

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3
Q

Absolute poverty (4.2.1)

A

The minimum amount of resources a person needs to survive (food, shelter, clothing, clean water, sanitation, education and information). A positive statement

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4
Q

Relative poverty (4.2.1)

A

This is measured in comparison with other people in a country and varies between countries. Usually living under a certain income threshold in a particular country. A normative statement

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5
Q

Measures of Absolute poverty (4.2.1)

A

The World Bank measured the international poverty line to $1.90 a day

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6
Q

Measures of Relative poverty (4.2.1)

A

A poverty line is set, which is a percentage of average income for the given country.

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7
Q

Causes of poverty (4.2.1)

A

◦Lack of unemployment
◦Lack of human capital
◦Lack of financial capital
◦Health problems
◦Level of education
◦Inheritance

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8
Q

What is equality (4.2.2)

A

If people have the same incomes or wealth and concerns what is fair

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9
Q

What is inequality (4.2.2)

A

It occurs when there is a difference between the highest earners and lowest earners in an economy

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10
Q

What are Income levels (4.2.2)

A

The higher the level of income the more likely it is that you will be able to save and create wealth

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11
Q

What are Wealth levels (4.2.2)

A

mr james sheet…….

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12
Q

What is Income inequality (4.2.2)

A

Its a capitalist system, where people … teams

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13
Q

What is Wealth inequality (4.2.2)

A

It is the difference in total assets between people. Generally, wealth inequality is greater than income inequality

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14
Q

Measures of Income inequality (4.2.2)

A

The Lorenz Curve - The curve plots the proportion of total income or wealth that is held by each percentile of the population, from poorest to richest

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15
Q

How do you calculate the Gini Coefficient (4.2.2)

A

Area A / Area of A + B

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16
Q

Causes to lower inequality (4.2.2)

A

◦ Higher marginal tax rates on income and wealth
◦ Increases in the legal minimum wage
◦ Rise in the relative level of cash welfare benefits
◦ Measures to increase increase employment rates
◦ Subsidies on energy bills, tuition, childcare
◦ Rent controls to tackle unaffordable housing
◦ Laws to tackle discrimination in labour market
◦ Universal Basic Income (UBI)

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17
Q

Causes of income inequality and wealth within countries (4.2.2)

A

◦ Differences in education, training and skills
◦ Differences in wage rates in different occupations
◦ Strength of trade unions
◦ Degree of employment protection
◦ The level of welfare benefits
◦ The progressive rate of the tax system

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18
Q

Causes of income inequality and wealth between countries (4.2.2)

A

◦ Natural resources
◦ Geography
◦ History
◦ Degree of political stability
◦ Macroeconomic policies
◦ The amount of FDI attracted by different countries
◦ The degree of technological change

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19
Q

The Kuznets Inequality curve (4.2.2)

A

He proposed that as a country gets richer, income inequality will rise at first, but then it falls as income levels continue to rise

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20
Q

What is the Low-income stage (4.2.2)

A

teams

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21
Q

What is the High-income stage (4.2.2)

A

teams

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22
Q

What is the Higher-income stage (4.2.2)

A

teams

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23
Q

Significance of capitalism for inequality - Access to opportunities (4.2.2)

A

Not everyone has equal access to opportunities, education, or resources to start a business or invest in capital

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24
Q

Significance of capitalism for inequality - Economic Mobility (4.2.2)

A

It allows individuals to improve their economic status through hard work and entrepreneurship. However some may face challenges such as discrimination

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25
Q

What is the Human development index (HW) (4.3.1)

A

It is a composite measure that is used in the UN development report and consists of three elements; Income, Health and Education

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26
Q

Factors influencing growth and development (HW)

A

Saving gaps x
Foreign currency gap x
Demographic factors x
Debt x
Access to credit banking x
Infrastructure x
Education/skills x
Absence of property rights x
Non-economic factors, e.g poor governance, civil wars, corruption

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27
Q

Characteristics of developing countries (4.3.1)

A

◦ Lower per capita incomes
◦ Structure of the economy
◦ Physical capital
◦ Human capital
◦ Unemployment & underemployment
◦ Population growth
◦ Institutional structures
◦ The environment
◦ Health and morality

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28
Q

What are the 3 indicators of development with HDI (4.3.1)

A

◦ Health - life expectancy at birth
◦ Education - which is measured in terms of mean years of schooling at age 25 and expected years of schooling at age 4
◦ Income - GDP per head, which is measured at PPP

29
Q

Benefits of HDI (4.3.1)

A

◦ It’s a broader measure than GDP per capita
◦ It’s used to make comparisons of developing between countries
◦ Places a greater emphasis on the quality of life of a countries people
◦ HDI figures can be used to rank countries

30
Q

Limitations of HDI (4.3.1)

A

◦ Gender inequality
◦ Scale & depth of income & wealth inequality
◦ Extent of democratic freedoms
◦ Sustainable development
◦ Quality of education
◦ Years of healthy life expectancy rather than longevity
◦ Perceptions of human insecurity
◦ Well-being/stress

31
Q

Measures of economic development (4.3.1)

A

◦ HDI
◦ Energy consumption per person
◦ The proportion of population with internet access
◦ Mobile phones per thousand of population
◦ The proportion of male population employed in agriculture
◦ The proportion of the population with access to clean water
◦ The degree of inequality
◦ The degree of democracy
◦ The proportion of people entitled to civil rights

32
Q

What is Inequality- adjusted Human development Index (IHDI) (4.3.1)

A

This is HDI with inequality, with inequality being considered to have a negative impact on economic development

33
Q

What is Multidimensional Poverty Index (MPI) (4.3.1)

A

It measures the percentage of the population that is multidimensionally poor. It uses a broader range of indicators

34
Q

What is Genuine Progress Indicator (4.3.1)

A

This is calculated from 26 different indicators grouped into 3 categories - economic, environmental and social

35
Q

what is HDI for someone who doesn’t know what it is…

A

HDI is a way of measuring developing countries by the UN in 3 elements: Income, health and education so that you can make comparisons between developing countries and rank them. However, it has limitations such as: gender inequality & extent of democratic freedoms

36
Q

Economic factors in different countries (4.3.2)

A

◦Primary product dependency
◦Volatility of commodity prices
◦Savings gap
◦Foreign currency gap
◦Demographic factors
◦Debt
◦Access to credit and banking
◦Absence of property rights
◦Infrastructure
◦Education/skills

37
Q

Impact of non-economic factors (4.3.2)

A

◦Poor governance, political stability and civil wars
◦Corruption

38
Q

The Harrod-Domar model (4.3.2) (image)

A

Low incomes and output –>
Low savings –>
Low investment –>
Low capital accumulation –> back to start

39
Q

What does the Harrod-Domar do (4.3.2)

A

It illustrates the problem of how countries with a low GDP per capita will experience low savings ratios

40
Q

Causes of foreign currency gap (4.3.2)

A

Dependency on exports of primary products
Dependency on imports of oil and manufactured goods
Capital flight
Interest payments on loans from foreign countries

41
Q

Conclusion of Foreign currency gap (4.3.2)

A

Due to the causes, the country may have insufficient foreign currency to purchase imported capital goods, which are needed to increase its productive capacity

42
Q

Causes of debt (4.3.2)

A

◦Primary product dependency
◦Interest payments on debt - especially if loans were taken out when interest rates were low
◦Loans for major investment projects or military equipment
◦Depreciation of currency

43
Q

What is the Absence of poverty rights (4.3.2)

A

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44
Q

What are Market-orientated strategies (4.3.3)

A

◦Trade liberalisation
◦Promotion of FDI
◦Removal of government subsidies
◦Floating exchange rate systems
◦Microfinance schemes
◦Privatisation

45
Q

What is Trade liberalisation (4.3.3)

A

It is the removal or reduction of barriers to free trade, such as tariffs, between countries

46
Q

What is the Promotion of FDI (4.3.3)

A

It is when a company in one country establishes operations in another country or when it acquires assets or a stake in an overseas company

47
Q

What is the Removal of government subsidies (4.3.3)

A

It is the removing of a grant given by the government that has the effect of reducing the costs of production

48
Q

What is the Floating exchange rate systems (4.3.3)

A

It is the exchange rates that are solely determined by free market forces of supply and demand, with no government intervention

49
Q

What are Microfinance schemes (4.3.3)

A

They are small loans and finical services to low-income individuals and businesses

50
Q

What is Privatisation (4.3.3)

A

It is the sale of government organisations or assets to the private sector

51
Q

What are the Interventionist strategies (4.3.3)

A

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

52
Q

What is the Development of human capital (4.3.3)

A

It refers to the skills, knowledge and talents of the workforce. If there is an investment in people this will result in an increase in productivity

53
Q

What is Protectionism (4.3.3)

A

The policies restrict trade, for example tariffs and quotas on imports and subsidies on domestic products

54
Q

What is the Managed exchange rates (4.3.3)

A

It involves policies to fix a number of exchange rates

55
Q

What is the Infrastructure development (4.3.3)

A

It refers to capital assets that are designed to help and economy to function efficiently, e.g motorways, internet connection

56
Q

What is Promoting joint ventures (4.3.3)

A

It refers to enterprises that are undertaken jointly by two or more firms which retain their distinct identities

57
Q

What are Buffer stock systems (4.3.3)

A

They are systems designed to reduce price fluctuations and involves the buying and selling of stocks to maintain price within agreed limits

58
Q

What are the Other strategies (4.3.3)

A

◦Industrialisation - The Lewis model
◦Development of tourism
◦Development of primary industries
◦Fairtrade schemes
◦Aid
◦Debt relief

59
Q

What is Industrialisation (4.3.3)

A

It is the process of transforming the economy of a nation or region from a focus on agriculture to a reliance on manufacturing

60
Q

What is the Development of tourism (4.3.3)

A

It has strong attractions for developing countries but also some potential drawbacks

61
Q

What is the Development of primary industries (4.3.3)

A

Primary industries are those firms that operate in extracting raw materials from the ground

62
Q

What is the Fairtrade schemes (4.3.3)

A

Fairtrade is defined as being ‘a trading partnership based on dialogue transparency and respect, which seeks greater equity in international trade’ (WTFO)

63
Q

What is Aid (4.3.3)

A

It is when a country voluntarily transfers resources to another or gives loans on concessionary terms

64
Q

What is Debt relief (4.3.3)

A

Debts are usually owed to all, or some, of the following - the IMF, the World Bank, governments and banks in developed countries

65
Q

What are the Awareness of the role of international institutions and NGOs (4.3.3)

A

World Bank
International Monetary Fund (IMF)
NGOs

66
Q

What is the World bank (4.3.3)

A

The World Bank was founded at the Bretton Woods Conference after WWII. It aims to bring about long-term development and a reduction in poverty

67
Q

What is the International monetary fund (4.3.3)

A

The IMF was also set up in the Bretton Woods Conference. It was set up to ensure that exchange rate systems work well

68
Q

What are NGOs (4.3.3)

A

Non-government organisations are organisations that work independently of governments

69
Q
A

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