Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Macro > Y2 - Emerging and developing economies > Flashcards

Y2 - Emerging and developing economies Flashcards

1
Q

What are the measures of development?

A

HDI

  • % access to clean water
  • Energy consumption per person
  • Degree of inequality
  • Mobile phones per 1000 people
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the advantages of HDI?

A
  • Broader than GDP per capita
  • According to UN = 3 most essential measurements
  • Used for international comparison
  • Shows development as a whole (not just social/economic)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define HDI

A

A composite measure that consists of GDP per head (ppp), health (LE) and education (mean years of schooling at 25 and expected at 4)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the limitations of HDI?

A
  • Too narrow = only 3 measures
  • Only concerned with LT development outcomes
  • Average measure = does not show development inequalities within a country
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are factors influencing growth and development?

A
  • Savings gap
  • Foreign currency gap
  • Demographic factors/education/access to credit
  • Debt
  • Volatility of commodity prices/dependence on primary products
  • Non-economic factors = poor governance/corruption etc
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the issues with primary product dependency/volatile commodity prices?

A
  • Price fluctuations (inelastic PED/PES) and revenue fluctuation
  • Protectionism
  • Shortage of domestic supply (all is exported)
  • Falling terms of trade
  • Finite supply of hard commodities
  • Currency appreciation = demand for commodity = more demand for currency
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the Prebisch-Singer hypothesis?

A
  • Primary products have inelastic demand (more price fluctuation)
  • Manufactured products have elastic demand (price rises with income faster than primary products)
    = terms of trade for developing countries falls relative to developed countries
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the evaluation of Prebisch-Singer hypothesis?

A
  • Developing countries may have comparative advantage
  • Real price of primary products might increase over time (more population/incomes)
  • More FDI in primary product countries
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the savings gap?

A

HARROD - FOMAR MODEL = shows how countries with low GDP has low savings ratio = difficult to finance investment = capital accumulation is limited = low output and low GDP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the evaluation of the savings gap?

A
  • Only focusses on physical capital (not human)
  • Assumes constant relationship between capital and output
  • Savings gap could be filled by something else (such as FDI)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the foreign currency gap?

A

Shortage of foreign currency caused by:
- Dependency on primary products (low rev)
- Expensive to import oil/manufactured goods
- Interest payments on debt to foreign countries
- Capital flight (assets or money taken out of a country)
= insufficient foreign currency to buy imported capital goods needed to increase productive capacity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the evaluation on the foreign currency gap?

A
  • LDCs could seek foreign aid/loans

- Other factors may be more important

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How do demographic decrease development and growth?

A
  • Thomas Malthus = famine inevitable because population grows geometrically but food grows arithmetically
  • population grows > GDP
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How does debt decrease development and growth?

A

CAUSES

  • Dependant on primary products and falling terms of trade
  • Developing countries borrow when low interest rates (cannot afford when interest rises)
  • Currency depreciation (more burden)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How does credit/banking decrease development and growth?

A

Entrepreneurs need to borrow to start business = if not possible then growth is restricted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How does infrastructure decrease development and growth?

A

Physical and organisational structures required for society and enterprises
- Can deter FDI

17
Q

How does education decrease development and growth?

A
  • Low literacy = less education = low worker productivity and FDI deterred
18
Q

What is the impact of non-economic factors for development?

A

Poor governance/instability
- Resources allocated inefficiently
- Likely to be gov failure (net welfare loss)
- Civil wars = expensive, destroy infrastructure, FDI deterred
Corruption:
- Higher business costs, less FDI, capital flight (= foreign currency gap)

19
Q

What are the strategies influencing growth and development?

A

Market
Interventionist
Other

20
Q

What are market orientated methods influencing growth and development? (6)

A
  • Trade liberalisation (remove barriers)
  • FDI promotion
  • Remove gov subsidies (more competition)
  • Floating exchange rate systems (more international competitiveness)
  • Microfinance
  • Privatisation
21
Q

What are interventionist methods influencing growth and development? (5)

A
  • Developing human capital (education)
  • Protectionism
  • Managed exchange rates (can engineer devaluation)
  • Buffer stock schemes
  • Joint ventures
22
Q

Define buffer stock schemes

A

Aims to decrease price fluctuations and involves gov buying/selling stocks to maintain price
- Price floor and ceiling

23
Q

What is the evaluation of buffer stock schemes?

A
  • Floor price too high = surpluses
  • Ceiling price too low = insufficient stock
  • Costs of storage
  • Not for all goods (perishable)
24
Q

Define joint venture

A

Enterprise undertaken jointly by two or more firms which retain their distinct identities
- Foreign investor and local business join

25
Q

What are the advantages/disadvantages of joint ventures?

A 
Advantages:
- Lower costs/risks
- Less vulnerable to political instability
Disadvantages:
- Different interests (conflict)
- Loss of expertise/technology control
26
Q

List the ‘other strategies’ influencing growth and development

A
  • Industrialisation (Lewis model)
  • Tourism development
  • Primary industries development (YED inelastic = comparative advantage = FDI)
  • Fair trade
  • Aid
  • Debt relief
27
Q

How does industrialisation increase development and growth?

A
  • Shows transfer of labour from low-productivity agriculture to high-productivity industry
  • MR = 0 = LDMR (0 opportunity cost)
  • Higher savings ration = more investment
    HOWEVER
  • TNCs profit repatriated to foreign owners
  • Needs lots of FDI
  • Depends on state of economy/level of education
  • Negative externality to environment
28
Q

How does tourism development increase development and growth?

A
  • More foreign exchange and investment (more employment)
  • More infrastructure (more tax rev)
    HOWEVER
  • Worsens trade balance on BoP (more imports)
  • Demand fluctuates with trade cycle
  • Only seasonal employment
29
Q

What are advantages and disadvantages of fair trade?

A
  • Higher income (guaranteed
  • More investment into education
  • Only small investment
  • Can lead to more supply = price falls
30
Q

How does aid increase development and growth?

A

Transfer resources from one country to another

- Tied, bilateral or multilateral (from country through organisation)

31
Q

What are advantages and disadvantages of aid?

A
  • Less absolute poverty/global inequality
  • Fill savings gap/foreign exchange gap
  • More human capital
  • Dependence/corruption
  • Interest on loans (tied)
32
Q

What are advantages and disadvantages of debt relief?

A
  • More business confidence
  • Less poverty/inequality
  • More investment (positive multiplier)
  • Long time to agree
  • Moral hazard problem
  • Adverse impact on financial institutions and shareholders in developed countries
33
Q

What are the different international institutions promoting development and growth?

A
  • World bank = poverty reduction (directed towards stable/trying countries)
  • IMF = more liquidity and stability in capital markets (also temporary loans = 2008)
  • NGOs = community-based development = sustainable growth/development
    ALL DIFFERENT SCALES

Macro (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions