Financial Markets, Economic Development, Strategies Influencing Growth And Development Flashcards

Question

How does Dudley Sears define development

Answer 1

The reduction and elimination of poverty, inequality and unemployment within a growing country

Answer 2

Human Development Index- between 1 and 0 with one is high level of economic development Life Expectancy Index Education Index- mean year of schooling and expected year of schooling Income Index- GNI at PPP

Answer 3

Wide divergence within country Don’t represent short term changes Higher national wealth GNI doesn’t mean welfare- spending on military High GNI may also hide widespread inequality

Answer 4

Human Poverty Index- assess life expectancy, poverty and literacy rates HPI-1 in Developing countries, HPI-2 in developed countries Gender Development Index- measure gender gaps in human development by looking at disparities between men and women using HDI Multi-Dimensional Poverty Index- 10 indicators including child mortality, access to sanitation and drinking water.

Answer 5

Millennium Development Goals -UN committed to combat poverty, hunger, disease, illiteracy, environmental degradation and discrimination against women

Answer 6

Can’t just say it leads to development Raises per capita income- lifting people out of extreme poverty Increased per capita GDP gives households and businesses greater financial resources to save (Harrod Domar growth model) Creating new jobs, circular flows of income Higher income reducing income and wealth inequality Faster economic growth- higher profit and can be reinvested- increased productivity and productive potential Accelerate changes in patterns of production- shifting away from dual economy- towards services Economic Growth generate higher tax revenue- providing funds to public spending

Answer 7

Level of infrastructure- transport and communication Education- literacy rate, help economy to develop from manual labour to new high tech industries Inward Investment- higher levels of capital and TNCs into economy Level of Saving- Harrod Domar growth model, higher saving can increase investment and growth Political stability- instability could hinder growth as lower investment and spending

Answer 8

Primary Product Dependency- developing countries dependent on export of primary products- could hinder economic growth as fluctuations in global demand- ‘resource curse’ Volatility of commodity prices- prices of commodities fluctuate hugely due to change in global supply- uncertainty for countries dependent on these exports- making it difficult for governments to plan budget and investment Savings Gap- Harrod Domar Model- country needs certain levels of saving to invest into capital which increase economic growth- savings gap is when country does not save enough to finance the investment for steady growth Foreign Currency Gap- shortage of foreign currency necessary for importing goods and services- countries struggle to purchase essential imports- especially when currency depreciates Capital flight- individual or businesses move their investment out of the country due to political instability or unfavorable economic condition- outflow of capital Demographic Factors- ageing population, shrinking workforce, pressure on pensions and social systems -young population, labour supply, but high unemployment if economy can’t create enough jobs Debt- high levels of debt, cause huge proportion of budget for interest payments rather than investment Access to credit and banking- fundamental as individuals can take loans to invest into new projects and improve skills Infrastructure- transportation energy and communication- or else, inefficiency- investment in these can enhance productivity and attract foreign investment Education and skills- more productive labour force and improved economic performance Property rights- if don’t have secure rights to their property, less likely to invest in improvements Macroeconomic stability- low inflation and stable exchange rates

Answer 9

High levels of bureaucracy- costly and time coonsuming- reducing output Risk of illness and disease due to poor vaccination Poor climate and suffer from natural disasters Civil wars

Answer 10

Trade liberalisation- remove trade barriers to increase competition and efficiency and quality - more choices for firms and consumers, lower CoP, to be more competitive, lower price- higher disposable income and standards of living However, prevent infant industries developing Removal of subsidies- encourage efficiency and competition, greater choices for consumers Government funds allocated to more productive use However, harm domestic industries in short term as they are exposed to competition Policies to attract inward investment- removal of legal barriers, deregulation However, need to keep policies such as protection of environment, or else economic growth are at the expense of sustainable development Allowing price mechanism to work more freely- cancelling minimum and maximum prices and break up state run monopolies Floating exchange rates system- allow currency values to fluctuate according to market forces, enhance economic stability as adjusts to changes in global economy- manage current account deficit and surplus, manage inflation and maintain competitiveness However, unpredictable Microfinance scheme- financial services to individuals and small businesses offering small loans empowers entrepreneurs and stimulate local economy However, incentivises people to take on debt which has high interest rates Privatisation- increase efficiency and competitiveness However, creating of natural monopolies

Answer 11

Effective tax structure and collection- gov revenue on education, healthcare and infrastructure, improving living standards, life expectancy and productivity- increasing economic development However, needs to be equitable or else could have greater burden on poor e.g high VAT State Intervention in the welfare system- provide people with income during ill health, unemployment, or retirement- raise people out of poverty and enables more consumption rather than saving and decreased debt Infrastructure Spending- essential and lower cost for businesses and facilitate trade and investment However, very expensive for developing countries Supporting banking investment and infrastructure- Harrod Domar Model- increase investment generates economic growth increasing per capita income and higher saving, more lending However, lower income countries have low saving ratios as extra income is used for consumption to meet basic needs Education and training- investment in these enhancement human capital. Skilled workforce is more productive and innovative. E.g fund schools, vocational training programs However, time lag Protectionism- imposing tariff and quotas to shield domestic industries from foreign competition However, inefficiencies and higher prices in the long term Managed exchange rate- governments can protect economy from volatility and maintain export competitiveness However, market distortions and expensive Promoting Joint Ventures with Global companies- encourage partnership between local and global companies to facilitate knowledge transfer and technology sharing- local businesses can access international market and increase growth However, loss of control as decision making must not be shared with another organisations Buffer Stock Scheme- maintaining reserve of commodity to stabilise price, protect producers and consumers from price fluctuations However, higher gov spending and incentivise over production

Answer 12

Having comparative advantages in production of primary products and restricting for developing countries due to volatile price and PED elastic. Require government encouragement of new industries in different sectors such as manufacturing Lewis’ model of a dual economy argues that developing countries can make huge economic growth by encouraging labour to move from unproductive agricultural sector to more productive manufacturing sector. Concentrated in agricultural sector- low savings, low productivity, and low growth However, countries with poor infrastructure is struggle to switch to manufacturing. It is better to allow free market to decide to which industries to invest in

Answer 13

Investment in tourism- create jobs However, local people may feel excluded from areas Debt Relief- removing costly debt repayments with high interest rate, free up money to be reinvested elsewhere However, moral hazard of people creating bad loans World Bank tied debt relief with structural changes- countries have to prove that they no longer have same circumstances which created the debt in the first place Development of primary industries- essential for developing countries so provide stable income base, create jobs and boost exports However, need to be diversified- primary product dependency Fairtrade Schemes- ensures producers in developing countries receive fair prices for their products- empowers communities and economic growth Migration and remittances- allow migrants from low income economies to work and send back remittances, financial support

Answer 14

Financial assistance given directly form one country to another 2020, UK to India- £400 million focusing on healthcare infrastructure and vaccine

Answer 15

Provided by multiple countries or international organisations such as UN or World Bank

Answer 16

Loans offered at below market interest rates from development banks such as the World Bank or Asian Development Bank Designed to make it easier to finance projects without heavy debt burden

Answer 17

Financial assistance that the recipient country needs to used the aid money to purchase G+S from donor countries However, it limits ability of recipient country to choose the most appropriate solution for their needs- inefficiencies But it boosts donor’s economy

Answer 18

Providing expertise, technology and knowledge to assist developing countries in addressing specific challenges UNDP- United Nations Development Programme- partnered with Africa nations to provide assistance in renewable energy projects

Answer 19

Funds provided to recipient country that don’t require repayment Don’t add to recipient’s debt burden

Answer 20

International monetary cooperation Promote exchange rate stability Help deal with balance of payments adjustments and economic crisis through loans and advices

Answer 21

Provide grants and soft loans Offer policy advice and technical assistance to developing countries Co-ordinates projects with government

Answer 22

Solving issues including social injustices Don’t receive money or support from government- have their own fundraising

Financial Markets, Economic Development, Strategies Influencing Growth And Development Flashcards

(46 cards)