4.3 Emerging and Developing Economies

Question 1

What are the three dimensions of the Human Development Index (HDI)?

Answer 1

Education, life expectancy, standard of living

Measured by real GNI at purchasing power parity (PPP) per capita.

Question 2

What does the education component of HDI combine?

Answer 2

Mean number of years of schooling, expected years of schooling

Question 3

What life expectancy range is used in the HDI?

Answer 3

25 to 85 years

Question 4

Why is GNI used instead of GDP in the HDI calculation?

Answer 4

GNI accounts for remittances and foreign aid, reflecting average income per person

Question 5

What was the average world HDI in 1970 and in 2010?

Answer 5

0.48 in 1970, 0.68 in 2010

Question 6

What does a value close to 1 in HDI indicate?

Answer 6

High level of economic development

Question 7

What are some limitations of the HDI?

Answer 7

Does not consider political freedom, human rights, gender equality, cultural identity, environmental factors, or income distribution

Question 8

What is the Human Poverty Index (HPI)?

Answer 8

Measures life expectancy, education, and basic needs ability

Includes HPI-1 for developing countries and HPI-2 for developed countries.

Question 9

What does HPI-1 measure?

Answer 9

Longevity (age 40), adult literacy rate, percentage of underweight children, and access to improved water sources

Question 10

What does HPI-2 measure?

Answer 10

Probability of not surviving to age 60, literacy skills, and poverty level (below 50% of median income)

Question 11

What does the Gender-related Development Index (GDI) measure?

Answer 11

Relative inequality between men and women in terms of HDI components

Question 12

What is primary product dependency?

Answer 12

Reliance on raw materials for economic stability

Question 13

What is the Harrod-Domar model?

Answer 13

Investment, saving, and technological change are required for economic growth

Question 14

What does the savings gap refer to?

Answer 14

Limited wealth leading to inadequate capital accumulation in developing countries

Question 15

What is the average savings rate in Africa compared to middle-income countries?

Answer 15

Africa: ~17%, Middle-income: ~31%

Question 16

What is a foreign currency gap?

Answer 16

When a country does not attract sufficient capital flows to cover a current account deficit

Question 17

What triggers capital flight?

Answer 17

Economic threats such as hyperinflation or rising tax rates

Question 18

How can demographic factors impact growth and development?

Answer 18

Population growth can complicate efforts to reduce poverty and eliminate hunger

Question 19

What is the impact of debt on developing countries?

Answer 19

Threatens the fight against poverty and inequality

Question 20

What role does infrastructure play in economic development?

Answer 20

Poor infrastructure discourages foreign investment and increases production costs

Question 21

What is the importance of education and skills in development?

Answer 21

Developing human capital is essential for productivity and economic quality

Question 22

What are some consequences of weak property rights?

Answer 22

Lack of incentive to innovate for entrepreneurs

Question 23

How does corruption affect education funding?

Answer 23

Lost funds could provide education for millions of children

Question 24

What are market-oriented strategies?

Answer 24

Measures that make the economy more free with minimal government intervention

Question 25

What is trade liberalization?

Answer 25

Free trade between nations without protectionist barriers

Question 26

What are the potential downsides of foreign direct investment (FDI)?

Answer 26

Repatriation of profits, exploitation of workers, and negative externalities

Question 27

What are microfinance schemes?

Answer 27

Small loans for unbankable individuals to support enterprises

Question 28

What is the goal of privatization?

Answer 28

Transferring assets from the public sector to the private sector

Question 29

What is the purpose of developing human capital?

Answer 29

Improving skills and productivity in the economy

Question 30

What are the effects of protectionism?

Answer 30

Can reduce trade deficits but may distort markets and lead to inefficiencies

Question 31

What is a managed exchange rate system?

Answer 31

Combines fixed and floating exchange rates with central bank intervention

Question 32

What are buffer stock schemes?

Answer 32

Government interventions to stabilize agricultural prices by buying surpluses

Question 33

What is the primary purpose of government intervention in agricultural markets?

Answer 33

To reduce price volatility and stabilize farmers' incomes ## Footnote Governments buy up harvests during surpluses and sell them when supplies are low, although this has historically been unsuccessful.

Question 34

What is the Lewis model?

Answer 34

An explanation of how a developing country can transition from agriculture to manufacturing ## Footnote It assumes a surplus of unproductive labor in agriculture and fixed wages in manufacturing.

Question 35

What are the potential issues with the Lewis model?

Answer 35

* Profits may not be reinvested into the firm * Capital investment might replace labor * Urban poverty may arise if jobs in cities are insufficient

Question 36

How does tourism contribute to the economy of developing countries?

Answer 36

Creates jobs, diversifies the economy, attracts FDI, and earns foreign currency ## Footnote However, it may lead to revenue repatriation, overcrowding, and environmental damage.

Question 37

What are the benefits of Fairtrade schemes?

Answer 37

* Ensures fair prices for farmers * Provides guaranteed income * Supports community development and social projects * Promotes sustainable production

Question 38

What are the criticisms of Fairtrade schemes?

Answer 38

* Impact may be insignificant * Could worsen conditions for non-Fairtrade producers * Might distort price signals, leading to inefficiency

Question 39

What is the role of aid in developing economies?

Answer 39

Provides temporary assistance, reduces human capital inadequacies, and improves infrastructure ## Footnote However, the effectiveness of aid can be limited by corruption and dependency.

Question 40

What is debt relief?

Answer 40

Partial or total forgiveness of debt ## Footnote It is crucial for alleviating poverty and allowing for improved public services.

Question 41

What is the primary focus of the World Bank?

Answer 41

To promote economic and social progress by raising productivity and reducing poverty

Question 42

What are the main objectives of the International Monetary Fund (IMF)?

Answer 42

* Promote monetary cooperation between nations * Support free trade * Maintain exchange rate stability