4.3- Emerging Economies

Question 1

What is the Human Development Index(HDI)

Answer 1

The HDI is used to measure the quality of life in a country

The HDI combines; health(measured as life expectancy), education(measured as average time spent in school) and standard of living(measured by GNI per capita, using PPP)

Question 2

How is the HDI used?

Answer 2

• Can be used to measure changes in development levels over time in a country
• It can be used to compare levels of development between countries
• Countires can be ranked in levels of development
• > 0.8 = High development
• < 0.8 > 0.5 = Medium level of development
• < 0.5 = Low level of development

Question 3

What are three advantages of using the HDI

Answer 3

1. More than one indicator is used to determine the HDI therefore, it is reliable
2. Progress can be measured over time and can be compared to other countries
3. Countries with low development can be given aid. The HDI helps determine which countries have low development

Question 4

What are three disadvantages of using the HDI

Answer 4

1. A long life expectancy does not mean a high quality of life
2. Measuring the average number of years someone spends in education does not measure the quality of teaching e.g Mr Seddon Dyer
3. Using the GNI can lead to innacurate comparisons as the the GNI does not take into account the hidden economy
4. The HDI does not measure the extent of inequality in a country

Question 5

Other ways of measuring development(1)

Answer 5

1. )Measuring the percentage of labour in agriculture
   - workers are paid very little in agriculture
   - as countries become more developed, they tend to use more machinery
   - countries that are highly developed have low levels of labour in agriculture

Question 6

Other ways of measuring development(2)

Answer 6

Number of mobile phones in the population

• mobile phones imorove communication and trading which can lead to more economic development
• As mobile phones are relatively expensive, a high number of them indicates that wages are high enough to pay for them

Question 7

Other ways to measure development(3)

Answer 7

• Access to clean water
• Levels of political and social freedom
• Levels of disease
• Levels of malnutrition

Question 8

What are the limits to growth and development

Answer 8

1. Poor infrastructure
2. Human capital inadequacies
3. Low levels of investment
4. Primary product dependency
5. Corruption and wars

Question 9

How does poor infrastructure limit development?

Answer 9

1. If energy supplies are low, firms won’t be able to operate efficiently
2. Poor transport links means goods can’t be moved around
3. Telephone and internet services being scarce means businesses aren’t able to communicate with customers
4. Poor infrastructure makes it hard to attract FDI

Question 10

How do human capital inadequacies limit development?

Answer 10

1. If a countriy’s population grows faster than its economy, there is a fall in GNI per capita
2. A fast growing population means there will be pressure on a country’s education system

⇒If children do not go to school, it leads to less human capital as there are lower skilled workers

3. Disease also leads to low productivity as workers can’t work

Question 11

How does investment limit development?

Answer 11

1. If savings are low, people do not invest(savings gap)
2. Capital flight - When people start holding their savings abroad so it can’t be taxed. This leads to a lack of domestic investment therefore lower economic growth
3. A foreing exchange gap- A country has more capital outflows than inflows(imports are greater than exports)

Question 12

How does primary product dependency limit development?

Answer 12

• Demand for these products is price inelastic
• Commodity prices are volatile whic means that the incomes of those who produce primary products can change drastically
• Developed countries can use protectionist policies
• Prebisch-Singer hypothesis

Question 13

What is the Prebisch-Singer hypothesis?

Answer 13

1. Demand for primary products is price inelastic
2. Demand for manaufactured goods is income elastic
3. As income rises, demand for manufactured goods increases which leads to an increase in price
4. Countries exporting mainly primaryb products will find they are able to import less manufactured goods for a given level exports

Question 14

How do corruption and wars limit development?

Answer 14

• Corruption leads to a country’s resources not being allocated efficiently which means that the country becomes less productive

Question 15

What are the two types of strategies to promote development?

Answer 15

1. Market-oriented strategies
2. interventionist strategies

Question 16

What are three market oriented strategies to increase development?

Answer 16

• Trade liberalisation
• Promotion of FDI
• Removal of government subsidies
• Floating exchange rate systems
• Microfinance schemes
• Privatisation

Question 17

What is trade liberalisation?

Answer 17

This is the removal of legislation that reduces free trade. This includes removal of protectionist measures such as tarriffs and quotas. This allows countries to specialise therefire, world GDP is increased

Question 18

What is Foreign Direct Investment(FDI)

Answer 18

FDI is the flow of of capital from one country to another in order to gain a lasting interest in an enterprise in the foreign country. FDI can help create employment and provides LEDCs with funds to invest

Question 19

How does removing subsidies promote development?

Answer 19

Government subsidies could distort price signals by interfering with the free market system. This could lead to inefficient allocation of resources.

Question 20

What are floating exchange rate systems?

Answer 20

When the value of a currency is determined by the forces of supply and demand

Question 21

How does privatisation increase development?

Answer 21

Firms in the private sector are more efficient at allocating resources. This is because they have the incentive of profit which nationalised firms do not

Question 22

What are three advantages of market-oriented strategies

Answer 22

1. More efficient resource allocation
2. HIgher incentives from competition and profit maximisation
3. Encourages FDI

Question 23

What are three disadvantages of using market oriented strategies

Answer 23

1. Certain goods and services are underprovided for under a freemarket e.g healthcare and education
2. Market failure such as pollution can occur
3. Protectionism in MEDCs can reduce development for LEDCs
4. Free market economics can lead to income inequality

Question 24

What are three interventionist strategies to increase development

Answer 24

1. Development of human capital
2. Protectionism
3. Managed exchange rates
4. Infrastructure development
5. Promoting joint ventures with global companies
6. Buffer stock schems

Question 25

How does developing human capital increase development?

Answer 25

By developing capital through training and/or education, productivity is improved as workers have more skills

Question 26

How does protectionism influence development

Answer 26

Protectionism can help reduce a trade deficit. This is because the country will be importing less due to tarriffs and quotas on imports. This protects infant industries and helps them develop

Question 27

How does infrastructure development influence development

Answer 27

Development of transport links can lead to lower immobility of labour therefore, employment increases.

Question 28

How do buffer stock schemes help to promote development?

Answer 28

Buffer stocks reduce price volatility. If supply increases as a result of a good harvest and price gets too low, The government buys the surplus whuch decreases supply leading to price increasing to an acceptable amount.If there is a bad harvest and there is not enough supply, price increases. The government then releases its stores to increase supply which decreases price

Question 29

Other strategies to influence development

Answer 29

1. Lewis Model(Industrialisation) 2. Development of tourism 3. Development of primary industries 4. Aid

Question 30

What is the lewis model?

Answer 30

1. There is surplus labour in the agricultural sector 2. Workers are attracted to higher wages in the manufacturing sector 3. Manufacturing sector makes a lot of profit 4. This profit leads to higher demand for labour 5. This increases employment 6. This leads to economic growth

Question 31

How does development of primary industries promote development

Answer 31

Some developing countries have an abundance of raw materials, so governments might choose to exploit this advantage and develop the industry so that the country can have a comparative advantage

Question 32

How do NGOs and international institutions promote development

Answer 32

World bank- The world bank can loan funds to member countries which the country can then use in interventionist strategies International Monetary Fund(IMF)- Aims to promote monetary cooperation between countries. Monetary problems can be consulted in the IMF