primary product dependence

Question 1

1. Primary Product

Answer 1

A product made from raw materials.

Question 2

2. Price Instability

Answer 2

Small changes in the supply and demand for primary products can lead to big changes in price.

Question 3

1. Buffer Stock Scheme

Answer 3

A scheme where the government buys and sells primary products from a market in order to reduce price fluctuations.

Question 4

1. Prebisch-Singer Hypothesis

Answer 4

As world incomes rise, countries who depend on exporting primary products will see a deterioration in their terms of trade.

Question 5

2. Lewis Model

Answer 5

As countries industrialise, manufacturing firms will make more profit and increase investment. This will increase their demand for labour which will increase wages and attract even more workers into the manufacturing sector.

Question 6

3. Industrialisation

Answer 6

Where the main industry in a country shifts from agriculture to manufacturing.

Question 7

what is a foreign currency gap

Answer 7

• more foreign currency flowing out of the country than in due to a trade defecit

Question 8

why is a foreign currency gap bad

Answer 8

eg lebanon needs to now sell its own currency to get the foreign currency. Leads to a depreciation of the lebanon pound leading to cost push inflation, decrease in output, lower economic growth

Question 9

what is capital fight

Answer 9

Capital flight is the uncertain and rapid movement of large sums of money out of a country.