4.3.3 - Strategies Influencing Growth & Development

Question 1

What Are The Market-Orientated Strategies Influencing Growth & Development?
(6 Points)

Answer 1

~ Trade liberalisation.

~ Promotion of FDI.

~ Removal of government subsidies.

~ Floating exchange rate systems.

~ Microfinance schemes.

~ Privatisation.

Question 2

Describe ‘Trade Liberalisation’ As A Market-Orientated Strategy Influencing Growth & Development
(3 Points)

Answer 2

~ Increased global trade.

~ Increases employment and incomes.

~ E.g. Singapore, South Korea & Hong Kong.

Question 3

Describe ‘Promotion Of FDI’ As A Market-Orientated Strategy Influencing Growth & Development
(4 Points)

Answer 3

~ Attracted by lower corporation tax and wage costs.

~ Firms use this to increase investment, increasing output.

~ Meaning more tax revenues, to benefits growth and development.

~ E.g. India.

Question 4

What Are The Drawbacks, Of Using Promotion Of FDI As A Strategy?
(2 Points)

Answer 4

~ Countries can try and forcefully promote FDI, leading to neglect in other areas.

~ The attraction of FDI, can lead to lower wages, having negative effects.

Question 5

Describe ‘Removal Of Government Subsidies’ As A Market-Orientated Strategy Influencing Growth & Development
(2 Points)

Answer 5

~ Can increase efficiency, as firms cant rely on it, forcing them to become more efficient.

~ Increasing competition.

Question 6

Describe ‘Floating Exchange Rate Systems’ As A Market-Orientated Strategy Influencing Growth & Development
(2 Points)

Answer 6

~ Influenced by supply and demand for domestic currency.

~ No government intervention.

Question 7

Describe ‘Microfinance Schemes’ As A Market-Orientated Strategy Influencing Growth & Development
(3 Points)

Answer 7

~ Small loans, to small firms.

~ Increasing investment, eventually decreasing a savings gap, having the relevant further impacts.

~ E.g. Bangladesh.

Question 8

What Are The Drawbacks, Of Using Microfinance Schemes As A Strategy?
(2 Points)

Answer 8

~ Hard to pay off, due to high interest rates.

~ Opportunity cost.

Question 9

Describe ‘Privatisation’ As A Market-Orientated Strategy Influencing Growth & Development
(3 Points)

Answer 9

~ Increases competition.

~ Can improve government finances, if the firms was a loss making firm.

~ E.g. Water industry, in Ghana.

Question 10

What Are The Interventionist Strategies Influencing Growth & Development?
(6 Points)

Answer 10

~ Development of human capital.

~ Protectionism.

~ Managed exchange rates.

~ Infrastructure development.

~ Promoting joint ventures with global companies.

~ Buffer stock schemes.

Question 11

Describe ‘Development Of Human Capital’ As A Interventionist Strategy Influencing Growth & Development
(2 Points)

Answer 11

~ Improving education and skills.

~ E.g. Madagascar and China.

Question 12

Describe ‘Protectionism’ As A Interventionist Strategy Influencing Growth & Development
(2 Points)

Answer 12

~ Allows domestic industries to grow.

~ Allows increased employment and wages.

Question 13

Describe ‘Managed Exchange Rates’ As A Interventionist Strategy Influencing Growth & Development
(2 Points)

Answer 13

~ Reduces volatility.

~ Increases confidence.

Question 14

Describe ‘Infrastructure Development’ As A Interventionist Strategy Influencing Growth & Development
(2 Points)

Answer 14

~ Attracts FDI.

~ Cheaper for businesses.

Question 15

Describe ‘Promoting Joint Ventures With Global Companies’ As A Interventionist Strategy Influencing Growth & Development
(2 Points)

Answer 15

~ Reduces exploitation, from FDI.

~ Helps keep profit from foreign firms in the country.

Question 16

Describe ‘Buffer Stock Schemes’ As A Interventionist Strategy Influencing Growth & Development
(6 Points)

Answer 16

~ Reduce price instability, for agricultural products.

~ Good harvest, government buys the goods and stores them in a buffer stock, decreasing the supply of grapes.

~ Bad harvest, government sells the goods from the buffer stock, increasing the supply of grapes.

~ Government sets a minimum and maximum price, and keeps the price within this range.

~ This allows prices to be brought back to the average, reducing price instability.

~ Fostering improved investor confidence, and therefore investment.

Question 17

What Are The Drawbacks, Of Using Buffer Stock Schemes As A Strategy?
(2 Points)

Answer 17

~ Farmers have an incentive to over produce, due to guaranteed government intervention of excess stock.

~ Making this scheme costly, generating an opportunity cost.

Question 18

What Are Other Strategies Influencing Growth & Development?
(6 Points)

Answer 18

~ Industrialisation: The Lewis model.

~ Development of tourism.

~ Development of primary industries.

~ Fairtrade schemes.

~ Aid.

~ Debt relief.

Question 19

Describe ‘Industrialisation: The Lewis Model’ As A Strategy Influencing Growth & Development
(5 Points)

Answer 19

~ Shows how agricultural workers, can move into industrialised jobs.

~ Firms attract these workers, and pay low wages, due to monopsony power.

~ As they make supernormal profits, they require more workers.

~ Pushing wage rates up, therefore attracting more agricultural workers.

~ Leading to countries, not being so dependant on primary products.

Question 20

What Are The Drawbacks, Of Using Industrialisation As A Strategy?
(2 Points)

Answer 20

~ Transfer pricing may arise, meaning less tax revenue.

~ Less spending on development and growth as a result.

Question 21

Describe ‘Development Of Tourism’ As A Strategy Influencing Growth & Development
(3 Points)

Answer 21

~ Provides a source of foreign currency.

~ Attracts investment, therefore increasing jobs and incomes.

~ E.g. Caribbean.

Question 22

Describe ‘Development Of Primary Industries’ As A Strategy Influencing Growth & Development
(3 Points)

Answer 22

~ Due to an abundance of natural resources.

~ This provides funds for diversification and other development and growth schemes.

~ E.g. Saudi Arabia.

Question 23

Describe ‘Fair Trade Schemes’ As A Strategy Influencing Growth & Development
(3 Points)

Answer 23

~ A price paid on fair-trade products, goes towards farmers.

~ Increasing their income, thus consumption and tax revenues.

~ These farmers are then able to fund their own schemes, free from corruption.

Question 24

Describe ‘Aid’ As A Strategy Influencing Growth & Development
(2 Points)

Answer 24

~ Aid is given to another countries in need.

~ Increases spending in infrastructure, which leads to further benefits.

Question 25

Describe 'Debt Relief' As A Strategy Influencing Growth & Development (2 Points)

Answer 25

~ Given to countries with high interest repayments, from past loans. ~ Present these funds towards development and growth.

Question 26

Describe The World Bank (2 Points)

Answer 26

~ Provided reconstruction loans, after the WWII. ~ Provide development loans and debt relief, for developing countries.

Question 27

Describe The International Monetary Fund (IMF) (2 Points)

Answer 27

~ Ensure stability in the world economy, by monitoring exchange rates, balance of payments e.t.c. ~ Provides bailouts, for economies which are sinking.

Question 28

Describe Non-Government Organisation (NGOs) (2 Points)

Answer 28

~ Provide direct assistance, to countries. ~ Mainly in the form of project work, as well as education and healthcare projects.