Economic Growth And Development

Question 1

What is economic growth

Answer 1

Measured by real GDP per capita and is simply a measure of our economic welfare or standard of life

Question 2

What is economic development

Answer 2

Much broader concept that tries to measure both standard and quality of life

Question 3

What are the problems with using GDP per capita as a measure of development

Answer 3

Takes no account of income inequality
Does not address broader concept of development in regard to quality of life
GDP data is problematic in the way it is measured eg traffic jam
Doesn’t measure sustainability
Ignores social indicators-education,life expectancy

Question 5

What does the HDI include

Answer 5

Life expectancy
Average expected years of schooling
GDP per capita

Question 6

What are some alternative ways of measuring economic development

Answer 6

Poverty index-percentage of households in a country deprived along 3 dimensions:monetary poverty,education, basic infrastructure services
Genuine progress indicator(GPI)-alternative metric to GDP which accounts for externalities

Question 7

What are the characteristics of LEDCs

Answer 7

Low HDI
Poor human capital-low levels of health and education
Economy dominated by primary sector
Savings gap-low levels of domestic saving due to low incomes therefore lack of loanable funds for private investment
High birth rate

Question 8

What are young dependants

Answer 8

Percentage of population below 16

Question 9

What are old dependants

Answer 9

Percentage of population above 65

Question 10

Who are the economically active

Answer 10

People between 16 and 65 these are the working group who effectively support the dependant population

Question 11

What does the population pyramid look like for an LEDC

Answer 11

Wide base-due to high birth rate meaning lots of young dependants
Very triangular due to low life expectancy
Leads to LEDCs having a high dependency ratio

Question 12

What does it mean to have poor human capital

Answer 12

The workforce has low levels of skills, education, training, and health.

Question 13

What are the barriers to economic development

Answer 13

Poor human capital
Poor infrastructure
The savings gap
Primary dependency
Corruption,crime and instability

Question 14

What is human capital

Answer 14

Measures the quantity and productivity of an economies working population

Question 15

Why does uneducated labour limit economic development

Answer 15

Low wages
High poverty
Leads to factor immobility due to a lack of skills

Question 16

Why does the savings gap limit economic development

Answer 16

Lack of savings mean a lack of capital to invest and with a high capital to output ratio the increase in GDP will be even lower from investment

Question 17

Why does primary dependency limit economic development

Answer 17

Agricultural products have a low YED meaning priced stay low despite income rises leading to deteriorating terms of trade

Question 18

Why does corruption crime and civil unrest limit economic development

Answer 18

Destroyed crucial infrastructure
Disrupts agricultural seasons
Deters both domestic investment and FDI
Reduced productivity
Reduces ability to achieve LR growth

Question 19

Example of corruption

Answer 19

Nigeria government funds stolen due to corruption limiting development

Question 20

Example of economic development but not economic growth

Answer 20

Welfare payments will increase living standards of poorest people increasing life expectancy
However they may reduce incentives to work and therefore increase unemployment and reduce the productive capacity of the economy

Question 21

Example of economic growth but worsened development

Answer 21

Government spending on defences will increase AD and will increase real GDP
However if this is funded through taxation it could leave working people worse off due to lower disposable income

Question 22

What are the market based policies to promote economic growth

Answer 22

Market based SS policies
Export oriented industrialisation

Question 23

What are the interventionist policies to promote economic development

Answer 23

Interventionist supply side policies
Import substitution industrialisation(protectionism)
Expenditure switching policies-eg investment

Question 25

Examples ofmarket based SS policies promote economic development

Answer 25

Cut corp tax to promote investment Deregulation and privatisation to promote competition and efficiency However do they lead to development aswell?

Question 26

What is export oriented industrialisation(EOI)

Answer 26

An economic growth strategy where a country focuses on producing goods for export to global markets, rather than just producing for its own domestic consumption. • The country builds factories and industries aimed at selling products overseas. • It tries to become part of international trade to grow its economy. Increased trade also exposes businesses to foreign competition leading to increased productivity

Question 27

What are the problems with EOI

Answer 27

Hampered by deteriorating terms of trade as the real value of primary commodities fall Stops LEDCs ability to earn export earnings to import capital goods needed to develop manufacturing industries Vulnerable to protectionism Over dependence on external demand

Question 28

What are some examples of interventionist supply side policies to increase development

Answer 28

Increased gov spending on healthcare,education and infrastructure However this is hampered by corruption

Question 29

What is import substitution industrialisation ( protectionism) and how does it increase development

Answer 29

Tax imports Increased world equilibrium prices Increases domestic production creating jobs and reducing imports Increases AD This is down to protect infant industries to let them grow without larger foreign competition

Question 30

Problems with import substitution industrialisation

Answer 30

Largely unpopular and been seen to be unsuccessful when implemented Businesses protected from competition can become x inefficient with higher AC Consumers lack choice Higher prices

Question 31

What is expenditure switching policies and how does it increase development

Answer 31

Increased domestic output and jobs Reduces imports Increases exports by being more internationally competitive Eg export subsidies,tariffs or currency depreciation,investment

Question 32

What are the problems with expenditure switching polices

Answer 32

Seen as anti competitive Retaliation

Question 33

What are the different types of aid

Answer 33

Multilateral-coming from many countries Unilateral-from one diner to one recipient(consequence of previous ties) Tied-aid that has to be used for a specific purpose-cynical Untied-can be used in anyway Emergency-given in times of crisis NGOs-charities like oxfam

Question 34

Benefits of aid

Answer 34

Provides Gov revenue to LEDCs they can spend on development projects Plugs savings gap-funds made available for private sector investment

Question 35

Costs of aid

Answer 35

Breed dependence and corruption Can hurt domestic businesses eg farmers

Question 36

Eval of aid

Answer 36

Hasn’t worked for 70 years-aid hasnt resulted in growth in any countries

Question 37

Advantages of trade as a route to development

Answer 37

Increased consumer choice and satisfaction Increased competition leads to need for business efficiency Increased movement of capital and finance can help plug savings gap Increased FDI

Question 38

Disadvantages of trade as a route to development

Answer 38

MNCs can lead to net welfare loss if they exploit workers and tax systems while repatriating profits Increased competition can stifle infant industries Deteriorating terms of trsde

Question 39

Disadvantages of trade as a route to development

Answer 39

MNCs can lead to net welfare loss if they exploit workers and tax systems while repatriating profits Increased competition can stifle infant industries Deteriorating terms of trsde

Question 40

What is the difference between standard of living and quality of life

Answer 40

Standard of living-This refers mainly to material well-being — the level of wealth, income, and consumption of goods and services. Quality of life-This is a broader, more holistic concept that includes non-material factors influencing well-being and happiness. Includes things like education and healthcare

Question 41

What are the implications of poor human capital

Answer 41

Low productivity Weak international competitiveness Lower incomes and living standards Strained public services Slower economic development Deters FDI Reduced mobility of labour