Strategies Influencing Growth and Development

Question 1

Trade Liberation

Answer 1

Removal of trade barriers to allow free movement of goods and services

Question 2

TradLib Benefits

Answer 2

Job Creation
Tech progress which opens economies up
Promotes entrepreneurship
Higher growth rates and lower poverty (eg Asia)

Question 3

TradLib Costs

Answer 3

If industry is weak, job will be lost
Industries/firms may not be able to compete globally
Higher inequality etc

Question 4

FDI Benefits

Answer 4

Growth (investment is an injection)
Increase in trade
Technological and managerial transfers (techniques passed through countries)
Increased CapEx
Greater competition

Question 5

FDI Costs

Answer 5

Could be seen as exploitative
Domestic market isn’t mature enough to compete against international firms
Worker’s rights laws may be underdeveloped.

Question 6

Removal of Govt Subsidies Benefits

Answer 6

Improves efficiency and productivity
Greater technological advancement
Increased international competitiveness

Question 7

Removal of Govt Subsidies Costs

Answer 7

In the SR, firms may shut down as they cannot afford the removal of subsidies.

Question 8

Floating Exchange Rate System

Answer 8

When value of a currency is determined by market forces

Question 9

Floating Exchange Rate System Benefits

Answer 9

Automatic Adjustment of exchange rate (allows you to have slightly better export prices)
Independence of monetary policy to respond to shocks

Question 10

Floating Exchange Rate System Costs

Answer 10

Economic volatility could lead to lack of consumer confidence
Central banks may not be able to support falls of value

Question 11

Microfinance Schemes

Answer 11

Bottom up schemes to provide credit to low income households

Question 12

Microfinance Benefits

Answer 12

Loans can set up businesses
High repayment rates
Safety net of savings are provided
Encourages female participants, develops human capital

Question 13

Microfinance Costs

Answer 13

Loans can be used for consumption and not repayment
High interest rates could prove expensive
The poorest of the poor still don’t have access to microfinance
Markets become saturated as repeat businesses crop up

Question 14

Privatisation Benefits

Answer 14

Monopolies break down, less barriers to market means more supply so more competition
Efficiency is maximised
Government generates revenue
More innovation + investment

Question 15

Privatisation Costs

Answer 15

Only works with high competition and robust ownership

Question 16

Human Capital

Answer 16

Higher quality human capital means higher skilled jobs, higher productivity and more output

Question 17

Interventionist Strategies

Answer 17

Protectionism
Human Capital Development
Managed Exchange Rates
Infrastructure Development
Joint ventures with private firms
Buffer Stock Schemes

Question 18

Market Led Strategies

Answer 18

Privatisation
Microfinance
FLoating Exchange Rate
Removal of subsidies
TradLib
FDI promotion

Question 19

Protectionism Costs

Answer 19

Net welfare loss
Not a sustainable long run solution

Question 20

Protectionism Benefits

Answer 20

Revenue source for government
Industries can grow till international competitiveness
Protects jobs

Question 21

Managed Exchange Rates Benefits

Answer 21

Exchange rate stability provides confidence for firms and promotes FDI
Countries can control Ex.Rate to suit needs - eg make currency weaker to maximise exports
Financial Repression can take place, can pay off debts quicker

Question 22

Managed Exchange Rates Costs

Answer 22

Contradiction of any domestic economic policies
Regular intervention will be limited by currency reserves of foreign country

Question 23

Infrastructure Development

Answer 23

Greater mobility of labour
Low utility costs promotes business growth
BUT financing could build huge debt and poor people may not have access to the use
ROI may not be high enough to be profitable

Question 24

Joint Ventures with Global Companies

Answer 24

All Economies of Scale utilised
BUT de merger could happen due to culture differences

Question 25

Buffer Stock Schemes

Answer 25

Min and Max Price shows conditions for government intervention. Gov buys excess stock at max price, and releases at min price.

Question 26

Industrialisation (Lewis Model)

Answer 26

The transition from primary to secondary sectors

Question 27

Lewis Model

Answer 27

Excess labour in agriculture sector moves to manufacturing, HD model dismisses agriculture workers, HD model keeps stealing workers. EG China

Question 28

Lewis Model Eval

Answer 28

Lewis Model Turning Point: As labour is absorbed, wages increase, manufacturing sector loses competitiveness

Question 29

Tourism Development Benefits

Answer 29

Creates employment and consumption Multiplier Effect Improves Current Account

Question 30

Tourism Development Costs

Answer 30

Seasonal unemployment Foreign companies will reinvest profits into other economies Negative Externalites

Question 31

Primary Industry Development

Answer 31

Greater Research and investment leads to lower prices due to greater productvity More employment Maximises competitive advantage

Question 32

Fairtrade Benefits

Answer 32

Increased Farmer income FDI and investment is more confidence, as guaranteed revenue and sales Multiplier Effect in local community

Question 33

Fairtrade Costs

Answer 33

Increased revenue may not be passed down workers High membership fees make it inaccessible Encourages lower skilled workers and low profits

Question 34

Aid Benefits

Answer 34

Fills the savings gap (allows HD to take place) Basic provisions are met Multiplier Effect on local community

Question 35

Aid Costs

Answer 35

Corruption may be fueled, no effect on economy Aid may come with conditions of neoliberalism, contradicting country's beliefs Dependence on aid may reduce incentives to develop economy and discourage FDI Only effective when bottom-up schemes used

Question 36

Debt Relief Definition

Answer 36

The restructuring of debt to make it more sustainable

Question 37

Debt Relief Eval

Answer 37

Could encourage reckless spending Only IMF and World Bank participate, private creditors don't Claiming debt relief may hinder future borrowing

Question 38

Role of World Bank

Answer 38

12,000 projects funded via loans, grants and interest-free credit Focused on developing countries to fight poverty

Question 39

Role of IMF

Answer 39

Controls international monetary system Bails out financial crisis loasn eg greece