T4 EMERGING AND DEVELOPING ECONOMIES Flashcards
What is meant by Low Human Capital
When workers don’t have the necessary knowledge, skills or assets to be productive.
If the standard of education is poor, students will leave school with:
Low human capital
What are the 4 constraints to economic growth and development
Poor education
Poor infrastructure
Poor health
Population growth
What is the HDI
What is the I-HDI
What is the advantage of the HDI
The first advantage of the HDI is that it is holistic- it focuses on a range of indicators rather than just one.
What is the disadvantage of the HDI
The first disadvantage of the HDI is that it can still be unreliable as there are many indicators that it does not use.
What does an HDI value of 0.95 mean?
Very High development
What are the 5 indicators of development
Access to clean water, number of mobile phones, energy consumption, Access to the internet. Proportion of population in agricultural work.
the definition of: Economic Development
An increase in living standards in an economy.
What three indicators does HDI measure?
Education, years of school.
Health, life expectancy at birth.
Living standards, real GNI per capita
What is Gross National Income?
Gross National Income is Gross Domestic Product plus the net income from abroad.
How is gross national income per capita calculated
gross national income divided by the country’s population .
What are the three measures used by the Human Development Index to determine the level of development based on the indicators
Life expectancy, real GNI per capita and average years spent in school
If a country’s HDI value is between 0 and 0.49 it has
low development
If a country’s HDI value is between 0.50 and 0.69 it has
medium development
If a country’s HDI value is between 0.70 and 0.79, we say that country has
high development
What does a high Gini coefficient mean for an economy?
more unequal economy
Whats does IHDI account for
IHDI accounts for the distribution of development within a country.
What are the 3 measures of development
HDI
IHDI
Multi dimensional. Poverty Index (MPI)
What else does the multidimensional poverty index measure.
The average intensity of poverty
Unlike with HDI and IHDI, a high multidimensional poverty index means that a country has ???? levels of development.
low
What does the Multidimensional Poverty Index measure?
Measures education, health and living standard using 10 different indicators
What are the two main reasons for low savings ratio
Low income many people in developing countries don’t earn enough to have money left to save
small amount of banks to save, which are often far away and not always seen as secure
What is meant by a savings gap
when there is a gap between the amount of money held at banks, in the form of savings, and the amount of money that firms want to borrow from banks.
Explain the harrod-domar model
Low incomes
Low savings
No money in the bank to lend
Low investment
Low AD and low LRAS
Low economic growth
Low incomes
What is Microfinance
Small loans provided to small businesses who otherwise would have no access to financial services
How should microfinance loans affect small businesses?
(chain of reasons)
Increase productivity → Decreases unit costs → More competitive prices → Increase incomes
What is the impact of higher incomes on the savings gap?
it will decrease
Why might microfinance not lead to economic development?
Microfinance lenders may charge very high interest rates
What are property rights?
The legal right to your property
Possessions without property rights are called
dead capital
Dead capital can not be used as:
Collateral when taking out a loan
What does it mean if assets are given property rights?
They can be used as collateral when taking out loans with a bank
What is collateral
An asset given as security for the repayment of a loan
Is allocating property rights a market based or interventionist policy for development?
market based
Why might a strategy of assigning property rights not lead to economic development?
If they don’t increase the number of people taking out loans
What is the definition of corruption
Corruption is when people working for the government use government funds for their own private expenses.
What is the Fair Trade premium?
Money from the sale of products which can be used by farmers to pay for development themselves
What is the fair trade scheme
is a communal fund for Fair Trade farmers.
How can Fair Trade schemes lead to economic development?
Increase farmers’ incomes → Increase aggregate demand → Increase real GDP → Increase economic growth
