PSC final

Question 1

Money

Answer 1

a medium of exchange, a way to store value, and a commodity that can be traded.

Question 2

Monetary Policy

Answer 2

interest rates (i) and money supply (M)- low i > push up M, high i > reduce M- affects inflation and employment.

Question 3

Exchange Rate

Answer 3

a price, converting money into other’s currencies.

Question 4

Fixed Exchange Rate System

Answer 4

A system in which governments establish an official rate for their currency, usually expressed in terms of some standard, such as gold or another currency.

Question 5

Floating Exchange Rate System

Answer 5

A system in which governments do not establish an official rate for their currency and are under no obligation to engage in foreign exchange market intervention to influence the value of their currency.

Question 6

Foreign Exchange Reserves

Answer 6

Government holdings of other countries’ currencies.

Question 7

Unholy Trinity

Answer 7

Highlights the trade-offs that governments face when making decisions about fixed exchange rates, monetary policy, and international capital flows. Governments have three policy goals, each of which is desirable: (1) maintaining a fixed exchange rate (2) having the ability to use monetary policy to manage the domestic economy, which we refer to as monetary policy autonomy (3) allowing financial capital to flow freely into and out of the domestic financial system (capital mobility). The unholy trinity states that any government can achieve only two of the three goals simultaneously.

Question 8

Bretton Woods System

Answer 8

The international monetary system that was created in 1944 at Bretton Woods, NH. based on fixed-but-adjustable exchange rates in an attempt to provide a stable international monetary system and at the same time allow government to use monetary policy to manage the domestic economy. The system collapsed in 1973 and represented the last time that governments attempted to create and maintain an international monetary system based on some form of fixed exchange rates.

Question 9

Dollar overhang

Answer 9

Foreign holdings of dollars and dollar-denominated assets in excess of U.S. holdings of monetary gold necessary to redeem foreign dollar holdings. Outstanding claims on U.S. monetary gold were greater than the stock of monetary gold the U.S. held. Many argue that dollar overhang lay at base of the instability of the Bretton Woods system.

Question 10

Plaza Accord

Answer 10

A pact reached in September 1985 under which the Group of five agreed to reduce the value of the dollar against the Japanese yen and the German mark by 10 to 12 percent

Question 11

Keynesianism

Answer 11

An approach to macroeconomic policy that places primary emphasis on using fiscal and monetary policies to manage domestic demand in order to maintain full employment. Named after John Maynard Keynes, who was the first to demonstrate that governments could use macroeconomic policies for this purpose. The approach was widely adopted by governments in the advanced industrialized countries following WWII, but lost favor during the 1980s.

Question 12

International migration

Answer 12

The movement of a person or group of persons, either across an international border or within a State.

Question 13

S-N international migration

Answer 13

81.9 million migrants, 35% of migrant distribution

Question 14

Youth bulge

Answer 14

distribution of youth migrants (powerpoint chart)

Question 15

Pushing factor

Answer 15

bad social, political, and economic conditions in home countries.

Question 16

Gentlemen’s Agreement 1908

Answer 16

limit Japanese laborers

Question 17

Bracero Program 1942-1964

Answer 17

wartime labor shortage in agriculture sector, allow millions of Mexican men to come to the USA to work on,
short-term, primarily in the agricultural sector.

Question 18

Immigration and Nationality Act 1952

Answer 18

End Asian exclusion from immigration and introduce a system of preference based on skills and family reunification.

Question 19

Out Groups

Answer 19

out group mentality, xenophobia: irrational fear or intense dislike of people from other countries.

Question 20

Competition for jobs

Answer 20

factors of production: capitol vs labor (skilled vs unskilled labor), who competes against who?: domestic unskilled labor vs. foreign unskilled labor, domestic skilled labor vs. foreign skilled labor.

Question 21

Competitions for resources

Answer 21

welfare/fiscal costs, contributors to welfare system: taxpayers, beneficiaries of the welfare system: lower income citizens, against having money spent on immigrants. Economic climate and the “size of the pie”
High skilled vs. low skilled labor

Question 22

ILO Convention No. 97

Answer 22

ILO Convention No. 97 of Convention Concerning Migration for Employment (international treaty)
o Applies to the whole labor migration process
o Principle of equal treatment

Question 23

IOM (International Organization of Migration)

Answer 23

Established in 1951 in Geneva, Switzerland
o Initially founded to resettle refugees from Europe
o Manage migration
• Ensure the orderly and humane management of migration
• Promote cooperation on migration issues
• Assist in searching solutions to migration problems
• Offer humanitarian assistance to migrants including
refugees and internally displaced people
- Joined the UN system as a related
agency in 2016

Question 24

Poverty Trap

Answer 24

no money to invest, low K development leads to poverty

Question 25

Economic Development ladder

Answer 25

see power point

Question 26

Mono economy

Answer 26

producing 1-2 primary products

Question 27

Pecuniary externality

Answer 27

A market failure structuralists believed would limit automatic industrialization arises from the interdependence of economic activities. Investment in industry A that supplies inputs to industry B expands output. Industry B will not expand output unless industry A expands its output. investments in each are dependent upon decision in the other.

Question 28

Singer-Prebisch Theory

Answer 28

Developed during the 1950s by Raul Prebisch and Hans Singer, it claimed that, because developing countries faced a secular decline in their terms of trade, participation in the GATT based multilateral trade system would hamper their industrialization. The theory provided am intellectual justification for import substitution industrialization.

Question 29

Terms of Trade

Answer 29

the ratio of the price of a country’s exports to the price of its imports. An improvement in a country’s terms of trade means the price of the good it exports is rising relative to the price of the goods it imports. vice versa. An improvement in its terms of trade makes a country richer, whereas a decline in its terms of trade makes it poorer.

Question 30

ISI (Import Substitution Industrialization)

Answer 30

An economic development strategy adopted in many developing countries after WWII in which states attempted to industrialize by substituting domestically produced goods for manufactured items that had previously been imported. The strategy proceeded in two stages. Under easy ISI, the focus was on creating simple consumer goods. Second stage, focus shifted to consumer durable goods, intermediate inputs, and the capital goods needed to produce consumer durables. Most governments abandoned this approach since the mid-1980s in favor of an export oriented strategy.

Question 31

UNCTAD (United Nations Conference on Trade and Development)

Answer 31

First established in March 1964, in response to developing countries’ dissatisfaction with the GATT, this is a permanent UN body dedicated to promoting the developing countries’ interests in the world trade system.

Question 32

Group of 77

Answer 32

a coalition of developing countries established at the conclusion of the first UNCTAD conference in the early 1960s. 77 developing countries’ governments signed a joint declaration that called for reform of the international trade system. The Group of 77 subsequently led the campaign for reform of the multilateral trade system during the next 20 years.

Question 33

NIEO (New International Economic Order)

Answer 33

A reform effort driven by the Group of 77 and adopted by the UN General Assembly in December 1974. It embodied a set of reform objectives that would have radically altered the nature and operation of the international economy by creating “development-friendly” trade rules and giving developing countries a larger roles in the decision making processes of the World Bank and IMF. The NIEO was abandoned on the early 1980s.

Question 34

GSP (Generalizes System of Preferences)

Answer 34

part of the GATT concluded in the late 1960s under which advanced industrialized countries can allow manufactured exports from developing countries to enter their markets at preferential tariff rates. The GSO is therefore a legal exception to the GATT principle of nondiscrimination.

Question 35

EOI (Efficiency-Oriented Investment)

Answer 35

One of the three types of foreign direct investment by a foreign firm in the local economy made in order to use the locally abundant factor in production oriented toward the global market.

Question 36

EOS (Export-Oriented Strategy)

Answer 36

A development strategy in which emphasis is placed on producing manufactured goods that can be sold in international markets. Adopted by the East Asian newly industrialized countries in the late 1950s to early 1960s after the gains from easy import substitution industrialization had been exhausted. During the late 1980s, this strategy and the apparent Asian success based on it provided the foundation for the “Washington Consensus.”

Question 37

Washington Consensus

Answer 37

The collection of policy reforms advocated by the U.S. officials and by the IMF and World Bank staffs as the solution to the economic problems faced by developing countries. The emphasis is on stabilization, structural adjustment, privatization, and market liberalization.

Question 38

Nairobi Package

Answer 38

Benefits for LDCs. agreement on agriculture, eliminate subsides for farm exports, preferential treatment to LDCs.

Question 39

Foreign Aid

Answer 39

Financial assistance provided to developing countries’ governments by the advanced industrialized countries and by multilateral financial institutions such as the World Bank and the regional development banks in order to finance development projects. Foreign aid can be supplied as a grant (requiring no repayment) or a loan (requiring repayment). Loans can offered on concessional terms (below market rates of interest) or non-concessional terms (at market rates of interest).

Question 40

IRBD (International Bank for Reconstruction and Development)

Answer 40

Established in 1944 at the Bretton Woods conference, the IRBD extends long-term loans to developing countries to finance physical and social infrastructure needed to reduce poverty and promote development. These loans are financed by bonds that the IRBD sells in private bond markets.

Question 41

IDA (International Development Association)

Answer 41

Part of the World Bank group, the IDA was established in the early 1960s as a separate developments lending agency. The IDA concessional loan agency; its loans have a longer time to maturity than standard IRBD loans have, they carry 0% interest rates. These loans are financed by member government contributions. To be eligible for IDA lending, a country must have a per capita income of less than $885 per year.

Question 42

MIGA (Multilateral Investment Guarantee Agency)

Answer 42

1988, political risk insurance for foreign investors.

Question 43

Regional Development Banks

Answer 43

Created in the 1960s to provide concessional lending on the model of the IDA. They include the Inter-American Development Bank, the Asian Development Bank, and the African Development Bank.

Question 44

Weighted Voting

Answer 44

See powerpoint.

Question 45

Petrodollars

Answer 45

The revenues earned by Organization of Petroleum Exporting Countries (OPEC) governments in the wake of the 1973 oil price rise. These funds were channeled by commercial banks to some developing country governments to finance their current account deficits in a process that came to be called petrodollar recycling.

Question 46

Macroeconomic stabilization

Answer 46

The correction, through various policy programs, of macroeconomic imbalances that are producing high and rising inflation. Most programs involve the reduction of government budget deficit and a tight monetary policy. Most conditionality agreements with the IMF contain such a program.

Question 47

Structural Adjustment

Answer 47

Policy reforms designed and promoted by the World Bank and IMF that seek to increase the role of the market and reduce the role of the state in developing countries’ economies. First emerged in connection with the Baker Plan, but have subsequently become the standard component of IMF conditionality agreements.

Question 48

HIPC (Heavily Indebted Poor Countries) Initiative

Answer 48

A plan initiated in September 1996 to reduce the debt owed by the world’s poorest countries to multilateral lenders; linked debt reduction to a two-stage conditionality process. The goal was to bring a country’s total foreign debt down to sustainable levels, defined as less than 150% of export earnings. HIPC was succeeded by the Multilateral Debt Relief Initiative in 2006.

Question 49

Habib Gulzar

Answer 49

Since 1940, FDI– diaspora investment.

Question 50

Countercyclical

Answer 50

Contrary to or tending to counteract the fluctuations in an economic cycle.

Question 51

Multiplier effect of remittances

Answer 51

Refers to the increase in final income arising from any new injection of spending. Is the expansion of a country’s money supply that results from banks being able to lend.