Macro A2 - Factors Influencing Growth & Development Flashcards
(39 cards)
How does Trade liberalisation influence growth and development
measures such as reducing tariffs, eliminating import quotas, and removing restrictions on foreign investment. It can have many positive impacts on growth.
Increased competitiveness
Access to larger markets
Improved resource allocation
Enhanced technology transfer
How does promotion of FDI lead to growth and development
FDI leads to:
Increase in Job Creation
Increase Capital Influx
Transfer of Technology and Skills
Improved Infrastructure
Boost in local supply chains.
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Leads to:
Increased Efficiency
Improved Resources Allocation
Reduced Government Spending
Increased Competition
How do floating exchange rates affect growth and development
Greater economic flexability
Improved monetary policy
Increased Volatility
Balance of payments concerns (Risk)
How do microfinance schemes affect growth and development
help these individuals and small businesses to improve their standard of living and become self-sufficient by providing them with the financial tools they need to start or expand a business, invest in their education, or purchase goods and services.
How does buffer stock schemes affect growth and development
Advantages of buffer stocks
Stable prices help maintain farmers incomes. A rapid drop in prices can make farmers go out of business, which leads to structural unemployment. Price stability encourages more investment in agriculture. Farming can have positive externalities e.g. helps rural communities.
How does industrialisation the Lewis model affect growth and development
Urban workers, engaged in manufacturing, tend to produce a higher value of output than their agricultural counterparts. The resultant higher urban wages (Lewis stated that a 30% premium was required) might therefore tempt surplus agricultural workers to migrate to cities and engage in manufacturing activity.
The Lewis model
It is also known as the two sector model, and the surplus labour model. It focused on the need for countries to transform their structures, away from agriculture, with low productivity of labour, towards industrial activity, with a high productivity of labour
How does the development of tourism affect growth and development
Government will invest in things such as infrastructure, wildlife protection,
How does the development of primary industries affect growth and development
The industry becomes an important source of economic growth, employment, tax revenue and export earnings. Without primary products, countries would be worse off. Developing economies have a large and elastic supply of labour willing and able to work in these industries.
Non-government organisations
+Examples
NGO activities include, but are not limited to, environmental, social, advocacy and human rights work. They can work to promote social or political change on a broad scale or very locally. NGOs play a critical part in developing society, improving communities, and promoting citizen participation.
For example: - Red Cross
The world Bank
offer support to developing countries through policy advice, research and analysis, and technical assistance. Our analytical work often underpins World Bank financing and helps inform developing countries’ own investments.
IMF
The IMF is an organization of 189 member countries that works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
- Exchange rate stability
- Balance of Payments adjustment
- Economic Surveillance
- Loans
Microfinance
A banking service provided to unemployed or low income individuals or groups who otherwise would have no access to to financial services
Benefits of Microfinance
Credit access.
Assistance with education.
Encourages saving.
Creates chances for employment.
Drawbacks of Microfinance
Higher interest rate compared to mainstream banks.
Easy to default on the loan.
The expertise of financial services is limited.
Insufficient investment validation.
Lewis model Negatives
Neglects international trade.
You will eventually run out of people.
People may not have the correct skills to work in a factory.
Labour isn’t cheap as people now know their worth.
Less rural labour.
Destroys rural areas economy.
Lewis model positives
It will, in turn lead to the generation of more savings in the capitalists sector. The additional saving, will not only help the entrepreneurs to invest more but also to improve the quality of capital invested. This will result in more employment of labour from the subsistence sector.
How tourism affects growth
The economic effects of tourism include improved tax revenue and personal income, increased standards of living, and more employment opportunities.
Positives of tourism
Tourism offers great opportunities for emerging economies and developing countries. It creates jobs, strengthens the local economy, contributes to local infrastructure development and can help to conserve the natural environment and cultural assets and traditions, and to reduce poverty and inequality.
negatives of tourism
Intense use of resources.
Physical damage to natural and marine areas.
Increased waste, pollution and emissions.
Land use and infrastructure development.
Why is aid given / what is the purpose of aid?
- Provides immediate accesss to capital for countries that might not be able to (ethically correct)
- improves international stability
- allows domestic county to provide indirect assistance to a foreign country
The Harold domar model
Used to explain an economy’s growth rate in terms of the level of saving and of capital. It suggests that there is no natural reason for an economy to have balanced growth.
Different forms of Aid.
- Debt Relief - Forgiving debt can save LDCs annual interest payments and leave them more resources for internal investment
- Direct AID- giving food, money and health care supplies directly to the countries in need
- Indirect Aid - Financing the building of infrastructure and communication networks which enable countries to develop
- Cheap Finance - Schemes like Micro aid finance give affordable loans so that countries can benefit from more local entrepreneurship
- Tied Aid - Aid which is dependent on reciprocal benefits such as agreeing to buy goods and services from the donor country.
- Untied Aid - Aid given without any strings attached.
- Bilateral aid -Aid given directly from one country to another
- Multilateral aid - Aid given from one country to an international organisation which is then distributed to a variety of different countries. For example, the Red Cross and Oxfam.
