Economic Development Flashcards
(21 cards)
What’s the difference between economic growth and development
Growth is a rise in GDP; development is increasing capability
What is the Human Development Index
HDI is a measure of improvements in people’s lives
What are the 3 factors that are part of Human Development Index
Life expectancy and birth
GDP per capita
Mean and expected years of schooling
What are the limitations of HDI
Inequality
Sustainability
Quality of education
Years of healthy life
Mental wellbeing
Inaccuracy of data
What is the Multidimensional Poverty Index
An alternative measure that uses 10 indicators across living standards, health and education
What are some key barriers to economic development (7)
- Infrastructure gaps
- Primary export dependency
- Corruption
- Access to credit
- Education and Healthcare
- Debts
- High inequality
- Lack of competition
What is primary product dependency
When a country exports a narrow range of products
What is the Prebisch-Singer hypothesis and why does it work
Suggests that over the long run, real prices of primary commodities decline compared to manufactured goods
this is due to tech making primary stuff cheaper and innovation making manufactured goods have more value added
What is the Dutch disease
Where the discovery of natural resources causes an appreciation of exchange rate and loss of export competitiveness
What is the Harrod-Domar model
A model reflecting on how an increase in savings is directly linked to an increase in investment
What is the savings gap
The difference between savings and investment
What is a foreign currency gap
Imbalance between foreign currency inflow and outflow
Why is the foreign currency gap bad
It limits trade ability
What is capital flight
Uncertainty or instability leading to hot money outflows causing further instability
What is external debt
Money owed to non-domestic entities
Why is external debt a barrier to growth
- Debt payments hinder budget
- Credit rating loop
What are some free market strategies for growth
- Trade liberalisation
- Deregulation
- Floating exchange rate (frees up capital)
- Microfinance
- Reducing taxation
What are some interventionist strategies
- Trade protectionism
- Human capital development(SSP)
- Managed exchange rate
- Buffer stock scheme
What is the difference between free market and interventionist policies
free market are ones that let the market correct market failure and interventionist is when the government steps in to correct market failure
What are the cons of giving a country aid
- dependancy
- corruption
- less incentive to find reforms
What is the difference between capital and current expenditure
capital is more for the long term productivity of the economy and current is more the short term expenses that keep the country running
