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Economics paper 2 > 4.3 Developing / emerging economies > Flashcards

4.3 Developing / emerging economies Flashcards

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1
Q

What does the Genuine Progress Indicator aim to assess?

A

Economic sustainability

It ensures development does not limit future production and consumption.

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2
Q

How many different indicators are used to calculate the Genuine Progress Indicator?

A

26 different indicators

These indicators are grouped into economic, environmental, and social categories.

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3
Q

What does the economic category of the Genuine Progress Indicator include?

A

Personal consumption, inequality, and the cost of unemployment

These factors are essential for understanding economic health.

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4
Q

What environmental factors are considered in the Genuine Progress Indicator?

A

Cost of pollution, loss of natural areas, CO2 emissions, ozone depletion, depletion of non-renewable resources

These factors highlight the impact of economic activities on the environment.

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5
Q

What social indicators are included in the Genuine Progress Indicator?

A

Value of housework, parenting, cost of crime, commuting, value of volunteer work

These indicators reflect the social dimensions of progress.

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6
Q

What is the Prebisch-Singer Hypothesis?

A

It suggests the long-run price of primary goods declines in proportion to manufactured goods

This implies that countries dependent on primary exports will see a fall in their terms of trade.

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7
Q

What is Dutch disease?

A

A situation where a country becomes a significant commodity producer, leading to increased currency demand and reduced competitiveness in other sectors

This phenomenon has affected non-oil sectors in Venezuela and Nigeria.

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8
Q

What is the savings gap?

A

The difference between actual savings and the level of savings needed to achieve a higher growth rate

Developing countries typically have lower savings rates, affecting investment potential.

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9
Q

What does the Harrod-Domar model suggest about economic growth?

A

Economic growth depends on the amount of labor and capital available

It highlights the importance of savings for investment purposes.

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10
Q

What is a foreign currency gap?

A

When exports from a developing country are too low compared to imports needed to finance investment or other goods

This can hinder faster economic growth.

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11
Q

What is capital flight?

A

The large amount of money taken out of a country instead of being left for local investment

This can result from a lack of confidence in the country’s stability.

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12
Q

What demographic factor limits development in developing countries?

A

Higher population growth rates

This requires economic growth to maintain living standards.

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13
Q

What impact does debt have on developing countries?

A

High levels of interest repayments can limit spending on services and growth

This can lead to a vicious cycle of borrowing and repayment.

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14
Q

How does limited access to credit affect developing countries?

A

It restricts investment and savings

Families may resort to loan sharks, leading to perpetual debt.

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15
Q

What infrastructure issues do developing countries face?

A

Low levels of infrastructure make it hard for businesses to trade and operate effectively

This can lead to unreliable services and production.

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16
Q

What is the impact of poor education in developing countries?

A

Low-skilled workers with limited productivity

This hampers economic growth and development.

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17
Q

What are property rights?

A

Rights allowing individuals to own and control resources

Lack of property rights can deter investment and economic activity.

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18
Q

What is a factor that influences growth and development non-economically?

A

Corruption

It can lead to decisions that maximize personal gain rather than economic growth.

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19
Q

What is trade liberalization?

A

The removal of trade barriers to promote export-led growth

Countries like Singapore and South Korea have benefitted from this strategy.

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20
Q

What is Foreign Direct Investment (FDI)?

A

Investment by one private sector company in another country

It includes direct acquisition, construction of facilities, and joint ventures.

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21
Q

What are potential downsides of FDI for developing countries?

A

Repatriation of profits, potential exploitation, loss of sovereignty

Local competition may struggle to compete with foreign firms.

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22
Q

What is the impact of government subsidies?

A

They can minimize absolute poverty but may distort market efficiency

Removing subsidies can lead to increased output and investment.

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23
Q

What percentage increase in FDI was noted in various sectors?

A

48% increase in FDI in pharmaceuticals, manufacturing, and railways.

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24
Q

What role has Samsung’s investment in Vietnam played?

A

Crucial for local firms becoming part of their supply chain and other businesses setting up around factories.

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25
What are government subsidies typically placed on?
Essential items like food or fuel, and target agriculture and industry.
26
What is one goal of government subsidies?
To increase output and investment.
27
What is a potential benefit of subsidies?
Minimizing absolute poverty and ensuring a minimum standard of living.
28
What is a major problem with government subsidies?
They are often poorly targeted.
29
What does economic theory suggest as a better solution than subsidies on basic goods?
Cash payments to poor households.
30
What can happen if subsidies to farmers and producers are provided over a long period?
They can lead to inefficiency and become ineffective in increasing development.
31
What can be a positive aspect of subsidies for industries?
Allowing an infant industry to grow.
32
What do subsidies represent in terms of government spending?
A large amount, incurring an opportunity cost.
33
What financial consequence can high levels of subsidies lead to?
High levels of debt.
34
What are the unintended consequences of fuel subsidies in Venezuela?
High emissions and smuggling of subsidized fuel for profit ## Footnote These subsidies can lead to corruption and criminality.
35
Why can removing a subsidy be politically unpopular?
It can lead to government instability and even cause governments to be overthrown ## Footnote The best time to remove a subsidy is when the free market price is falling.
36
What is the impact of high inflation and low wages on Venezuelan goods?
Venezuela has placed subsidies on almost all goods, but demand still exceeds supply
37
How do floating exchange rate systems work?
Market forces determine the currency without government intervention
38
What are the problems associated with floating exchange rate systems?
Currency volatility complicates decision-making for exporters/importers and can impact economic growth
39
What do microfinance schemes aim to provide?
Permanent access to financial services like loans, savings, insurance, and fund transfers
40
What is a key feature of microfinance loans?
They require little or no collateral and often use group lending
41
Who do microfinance schemes typically target?
Groups less likely to receive loans, such as women
42
What issues have arisen in South Africa concerning microfinance?
Financing consumption spending, leading to asset sales and reliance on new loans for repayment
43
What is one potential benefit of privatization?
Reduction of corruption and increased efficiency through competition
44
What is a potential downside of privatization?
Creation of monopolies and potential corruption in the sale process
45
What were the outcomes of the privatization of the water industry in Ghana?
Improved revenue and efficiency, but reliability issues persisted
46
What is the goal of developing human capital?
To provide workers with skills and training to improve efficiency and productivity
47
How can human capital be developed?
Through schools, vocational training, and apprenticeships
48
What is protectionism?
A policy to protect domestic industries by restricting foreign goods
49
What are the short-term benefits of protectionism?
Job creation and industry development
50
What is a downside of protectionism?
Loss of benefits from specialization and comparative advantage
51
What are managed exchange rates?
Currency rates fixed against various exchange rates to control imports and exports
52
What is a potential issue with managed exchange rates?
Development of black markets and speculation can destabilize the system
53
Why is infrastructure development crucial for a country's growth?
It provides essential services like roads, schools, and hospitals necessary for development
54
What is the free-rider problem in infrastructure development?
Private sectors may underinvest due to the benefits being available to all
55
What are joint ventures?
Partnerships between local and foreign firms to share profits and resources
56
What do buffer stock schemes aim to achieve?
Stabilization of prices for goods by controlling supply
57
What is a significant risk of buffer stock schemes?
They require substantial start-up and administrative costs
58
What is the Lewis model of development?
It assumes dual economies with a traditional agricultural sector and a modern industrial sector
59
What is the relationship between migration and industrialization in the Lewis model?
Migration from rural areas to urban centers is expected to increase savings and investment
60
What is a challenge associated with rapid urban migration?
Urban poverty can replace rural poverty if the industrial sector cannot provide enough jobs
61
What is the role of tourism in economic development?
It generates income and can lead to improvements in infrastructure and living standards
62
What are some drawbacks of relying on tourism for development?
Seasonality, low-skilled jobs, and potential negative externalities such as pollution
63
What is the significance of fair trade schemes?
They promote equitable trading partnerships based on dialogue and respect
64
What is the Dutch Disease?
An economic condition where a country's increase in revenues from natural resources leads to a decline in other sectors, particularly manufacturing.
65
How does Norway address the Dutch Disease?
By using some of its oil revenues to invest overseas, increasing currency supply, depreciating it, and helping other industries to compete.
66
Define Fairtrade.
A trading partnership based on dialogue, transparency, and respect, seeking greater equity in international trade.
67
What are the key principles monitored under Fairtrade?
* Fair price * Community development * Fair working conditions * Environmental protection
68
What does a fair price in Fairtrade mean?
Agreements to buy a guaranteed amount of produce at a price above the market price at the time of the agreement.
69
What impact does Fairtrade have on child labor?
It prohibits the use of child labor and promotes sustainable production.
70
What were the findings of the study conducted in Sri Lanka regarding Fairtrade?
* Higher income and satisfaction * Greater market understanding * More optimistic future outlook * Ability to save for the future
71
True or False: Fairtrade producers always feel their income is sufficient.
False
72
What is a potential negative impact of Fairtrade on non-Fairtrade producers?
It can lead to a fall in demand for non-Fairtrade goods.
73
What are the types of aid?
* Tied aid * Bilateral aid * Multilateral aid * Concessional loans
74
What is tied aid?
Aid with conditions attached, such as economic or political reforms or a commitment to buy goods from the donor country.
75
Which countries are the greatest recipients of aid?
* Egypt * Afghanistan * Vietnam
76
Who are the largest donors of aid?
* European Union * United States
77
What is one benefit of aid?
It can reduce absolute poverty, especially emergency relief after disasters.
78
What is the Harrod-Domar model related to in the context of aid?
It outlines the savings gap and provides funds for investment in infrastructure or human capital.
79
What is a concern regarding dependency culture in relation to aid?
Countries may become unconcerned about their finances due to reliance on aid.
80
What is debt relief?
The process of writing off debt for developing countries to ease financial burdens.
81
What are potential negative effects of debt relief?
* Creates a precedent for all poor countries to expect debt relief * Eases pressure on governments to adopt reforms
82
What is the World Bank's primary aim?
To bring about long-term development and a reduction in poverty.
83
Name the components of the World Bank.
* International Bank for Reconstruction and Development (IBRD) * International Development Association (IDA) * International Finance Corporation (IFC) * Multilateral Investment Guarantee Agency (MIGA) * International Centre for Settlement of Investment Disputes (ICSID)
84
What is the main purpose of the International Monetary Fund (IMF)?
To ensure that exchange rate systems work well and provide loans during international crises.
85
What conditions does the IMF impose when providing loans?
Countries must make macroeconomic reforms to resolve their issues.
86
What type of organizations are NGOs?
Non-profit organizations run independently from the government.
87
What are some roles of NGOs?
* Provide direct assistance through project work * Act as pressure groups to lobby for pro-development strategies
88
What is a criticism of NGOs?
They cannot solve problems alone; government action is also necessary.
89
What is a concern regarding the agenda of some NGOs?
They may have an anti-capitalist agenda that blames problems on entities like the World Bank, IMF, and WTO.

Economics paper 2 (10 decks)

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