Economic Growth And Development

Question 1

Give three effects of Growth

Answer 1

1) Higher Incomes
2) Higher profits
3) Fiscal Dividend

Question 2

Give three negatives of growth

Answer 2

1) Distribution of income (income inequality)
2) Negative externalities
3) Sustainability
4) Growth in one dominant sector e.g. Nigeria is dominant in oil sector

Question 3

Measures of development single indicators

Answer 3

1) GDP/ Per Capita
2) GNI
3) PPP
4) Health measures
5) Education measures

Question 4

What’s GNI

Answer 4

GNI, looks at incomes generated of all of a companies factor of a production.
It takes into account remittances, as FDI could take place in a country but a lot of GDP may be going back to the domestic country.

Question 5

Give two examples of health measures.

Answer 5

Life expectancy
Infant mortality

Question 6

Give two examples of Education Measures

Answer 6

Adult literacy
School enrollment

Question 7

Where did HDI rise from 1970 to 2010, and due to what nations.

Answer 7

1970 - 0.48
2010 - 0.68
Due to East Asia, Healthcare and infrastructure

Question 8

3 Instructional factors of development

Answer 8

Major 3
Education
Healthcare
Infrastructure
+ Taxation

Question 9

What effects effectiveness of Institutional factors

Answer 9

1) Corruption
2) Low corporate activity and tax incentives
3) Informal markets
4) Role of WTO
5) Appropriate us of technology
6) The empowerment of women
7) Income distribution

Question 10

3 factors of Political stability

Answer 10

FDI
AID
Democracy

Question 11

Factors of instability

Answer 11

1) Loss of infrastructure, wars (civil wars)
2) Loss of investment

Question 12

What’s a major threat to development economics

Answer 12

Corruption, so that leaders can take advantage and thus benefit from political stability.

Question 13

What are 3 examples of corruption

Answer 13

1) Inefficient regulation
2) Lower FDI, due to not sticking to your word
3) Bribes and corruption
4) Legal politicians, not adhering to legal issues

Question 14

What does corruption lead to

Answer 14

A misallocation of resources, government failure and lower economic development.

Question 15

What’s the growth poverty cycle in order 1–4

Answer 15

1) Low levels of investment
2) Low economic growth
3) Low incomes
4) Low levels of saving

Question 16

Development poverty cycle in order 1–4

Answer 16

1) Low levels of education and health
2) Low levels of human capital
3) Low productivity
4) Low incomes

Question 17

Why is microfinnace (microcredit) useful

Answer 17

Problems for developing countries is a lack of saving and investment
The distribution of small loans to individuals entrepreneurs or groups to stimulate business activity profits and incomes

Question 18

Advantages of micro finance

Answer 18

1) Fills saving gap
2) Can relive poverty
3) Source of finance without huge intrest
4) Can empower women entrepreneurs

Question 19

Downsides of micro finance

Answer 19

1) Entrepreneurial ventures not always successful
2) Lending can still apply exorbitant interest rates and bully, which promoted poverty and debt
3) Loans not big enough to alleviate poverty most money actually used for consumption

Question 20

Benefits of international trade and development

Answer 20

1) Exploit competitive advantage, natural resources. This increases exports which increases AD which increases growth and thus increases economic development
2) Consumers benefit from lower prices
3) Economies of scale, higher profits, higher fiscal dividend (corporation tax)
4) Technoloigical transfer, break away from primary sector dependence

Question 21

Policies to promote trade and development

Answer 21

1) Import Substitution Indsutrialisation, tariffs on improved manufactured goods to allow domestic industries to grow. inward looking policy
2) Export promotion
3) Trade linearisation
4) Bilateral Trade agreements
5) Diversification

Question 22

Import Substitution Industrialisation - Benefits and negative

Answer 22

Benefits
1) Protects domestic jobs
2) Protectes economies from domestic influence, dominance of MNCs

Negatives
1) Short run job creation vs long run employment growth
2) loss of competitive advantage
3) Retailory protectionism

Question 23

Export promotion - Benefits and Negatives

Answer 23

Benefits
1) Primary product dependence on developing countries
2) Potential technological advancements

Negatives
1) Protectionism abroad
2) Wider income inequality
3) Over dominance of MNC’s

Question 24

Trade liberisation - Benefits and Negatives

Answer 24

Benefits
1) Sustainable growth & development.
2) Creating macroeconomic stability, increased Confidence, Investemnt & FDI
3) Trickle down effect

Negatives
1) More poverty creation, MNCs too much power
2) Higher income inequality and exploitation of workers
3) fiscal cuts in key areas such as healthcare and education

Question 25

Bilateral Trade Agreemants - Benefits and Negatives

Answer 25

Benefits
1) Better market access
2) Greater specialisation of goods

Problems
1) Coincedence of wants
2) Higher cost of production
3) Trade barriers

Question 26

Diversification - Benefits and Negatives

Answer 26

Benefits
1) Protect against resource curse
2) New technology

Negatives
1) Tariff escalation
2) Highly skilled workforce needed

Question 27

Barriers to trade and development

Answer 27

1) resource curse
2) Price fluctuations
3) Access to international markets
4) Long term deadline in the terms of trade
5) Savings Gap

Question 28

What are the concerns of Aid

Answer 28

1) Corruption
2) Dependancy of Aid
3) Aid ‘weakness’ in developing countries
4) Loan repayments can cause indebtedness

Question 29

Market orientated strategies

Answer 29

Measures which make the economy more free, the minimum government intervention

Question 30

Give 3 types of market oriented startergies

Answer 30

Trade liberalisation
Promotion of FDI
Floating exchange rate
Micro finance schemes
Removal of government subsidies
Privatisation
Deregulation

Question 31

Market orientated startergies - Benefits and Negatives

Answer 31

Benefits
1) More efficient resource allocation
2) Incentive for competition and profit maximisation
3) Encourages FDI

Negatives
1) The private sector will not consider infastructure
2) Markets won’t efficiently produce roads, healthcare education etc
3) Market failure e.g.environmental
4) income inequality
5) Protectionism
6) Lack of job security

Question 32

Interventionist startergies

Answer 32

The government intervenes in the market to try and influence growth and development using interventionist strategies.

Question 33

Types of interventionist stratergies

Answer 33

1) Development of human capital
2) protectionism
3) Fixed exchange rates
4) Infastructure management
5) Import substitution

Question 34

Interventionist startergies - Benefits and negatives

Answer 34

Benefits
1) Infrastructure development
2) Government a major employee and investor in human capital within the public sector
3) Welfare/ State pension provision

Negatives
1) Bureaucracy, Inefficiency, Corruption
2) Natioanlised industries, loss making inefficiencies
3) Gov spending increases through borrowing and debt leads to higher indebtness

Question 35

Evaluation of market and interventionist startergies

Answer 35

1) Mixture of both market and interventions startergies are more beneficial
2) It depends on whether such problems can be taken care of