market based strategies

Question 1

what is trade liberalisation?

Answer 1

refers to the removal of trade barriers ( such as tariffs ) to free up trade between countries

Question 2

what is the aim of trade liberalisation?

Answer 2

it allows export led growth
allows an economy to be more open to trade and investment

Question 3

Advantages of trade liberalisation?

Answer 3

Allows cam open market access: increased productivity, higher standards of living
Gives low income countries much better trade
Encourages inward fdi

Question 4

Disadvantages of trade liberalisation

Answer 4

Can lead to the deterioration of domestic industry
Bad for the environment

Question 5

What is fdi?

Answer 5

When foreign firms open up in another country

Question 6

Policies that the government could use to encourage fdi?

Answer 6

Lower interest rates
Low corporation tax
Trade liberalisation
Deregulations

Question 7

What drives FDI?

Answer 7

Higher profits
Market access
Production costs are lower

Question 8

What are the advantages of promoting inwards fdi?

Answer 8

Creates newer jobs
Infrastructure increasing
Diversification of the economy
Grows a countries export capacity

Question 9

Disadvantages of promoting inward fdi?

Answer 9

Inequality
Land grabs
Cause environmental damage

Question 10

Why a government in a developing country may subsidies industries producing necessity goods?

Answer 10

Allows for an increase in output and increased investment
Can minimise poverty levels
And ensure minimal standards of living

Question 11

What are micro-finance schemes?

Answer 11

Provides extremely poor households with small loans to help them engage in productive activities or to grow tiny businesses

• help increase their income, build businesses and perhaps reduce vulnerability

Question 12

Advantages of micro finance schemes?

Answer 12

• increased access to credit
• helps break debt poverty cycle
• help smooth consumption when income is volatile
• platform for saving and investment ( link to harrod - domar model )

Question 13

Disadvantages of micro finance schemes?

Answer 13

• micro finance interest rates are high
• could lead to an increase in debt
• might mean some don’t have the money to pay it back

Question 14

What is privatisation?

Answer 14

Sale of publicly owned assets to the private sector

Question 15

What are the advantages of privatisation?

Answer 15

• raises revenue for the government - can be used to promote development policies
• reduces budget deficit
• increase flexibility of labour markets
• can raise allocative / productive and dynamic efficiency

Question 16

Disadvantages of privatisation?

Answer 16

• private firms may not take negative production externalities to account
• associated wit corruption - due to being profit driven?
• government may lose out on dividends