MACRO APPLICATION Flashcards

Question

Pakistan's Gini coefficient

Answer 1

£2.7 trillion = 97% of GDP

Answer 2

-Iran holds 1,200 tcf of proven gas reserves as of 2017 -Ranking #29 in the world -Accounting for about 17% of the world's total gas -Iran has proven reserves equivalent to 162 times its annual consumption levels.

Answer 3

-In 2021/22, 13% of people in the U.K. were in absolute poverty before housing costs are considered (rising to 17% after housing costs). -The UK’s Gini coefficient for income inequality is 0.36 for 2021/22. -The UK’s Gini coefficient rose during the 1980s from 0.24 to 0.34.

Answer 4

$2.8 trillion

Answer 5

-The LIBOR (London Interbank Offered Rate) fixing scandal was a financial scandal that was uncovered in 2012 -Evidence emerged that some of the banks were artificially lowering or raising the LIBOR to benefit their own financial positions, such as by making their own borrowing costs appear lower than they actually were -Barclays, Royal Bank of Scotland and three other banks are being sued by investors for at least £1bn over rigging of the foreign exchange market in a test case for US-style class actions in the UK.

Answer 6

$700 billion of tax payers money

Answer 7

Nawaz Sharif jailed for 7 years for embezzling $160 million which was meant for a highway project

Answer 8

-Example of a Free trade area -RCEP became the world's largest trading bloc in monetary terms

Answer 9

China joined WTO in 2001 which led to the removal of protectionist measures, boosting China's export of goods like electronics, textiles etc

Answer 10

Rise in ecommerce giants such as Ali baba has allowed companies to sell products internationally and help facilitate global trade

Answer 11

Uk ---> 81 India ---> 68 Burundi ---> 57

Answer 12

UK ---> 15 years India ---> 9 years Burundi ---> 7 years

Answer 13

-Trade and development -HDI= 0.71 -Diamond exporter -Rapid growth -Inequality, Gini coefficient = 0.53 -Depletion of resources

Answer 14

-Botswana exports large quantities of rough diamonds (partnership with De Beers). As of 2023, Botswana produced 25.1 million carats of diamonds, making it the second-largest producer by volume globally. Approximately 19.3% of the world's total diamond production. -Botswana is a member of SACU and SADC. These regional agreements reduced trade barriers, allowing Botswana to access larger markets. -Botswana saved and reinvested much of its export revenue. Examples include creating the Pula Fund (sovereign wealth fund) to smooth out trade shocks and invest in future generations.

Answer 15

-Diamond exports brought huge revenues 💎 -Regional trade agreements (SACU, SADC) 🌍 -Revenue invested into education, health 🏥📚 -Strong institutions attracted FDI 🌟

Answer 16

-Overreliance on diamonds (commodity risk) ⚡ -Vulnerable to global market fluctuations 📉 -Slow diversification beyond mining 🏭 -High income inequality remains ⚖️

Answer 17

While trade has driven Botswana’s impressive growth, it has also created vulnerabilities. The economy is heavily dependent on diamonds, making it exposed to global price fluctuations — if diamond demand falls, national income can sharply decline. Efforts to diversify the economy have been slow, and sectors like manufacturing and tourism still contribute relatively little compared to mining. Furthermore, inequality remains high (as seen in the Gini coefficient), suggesting that the benefits of trade have not been evenly shared. Finally, Botswana faces risks linked to overreliance on a few trading partners, which could threaten stability if trade relationships weaken.

Answer 18

-Trade for development -Oil exporter -HDI = 0.53 -Corrupt gov -Need to diversify -Low oil prices = Nigerian recession

Answer 19

-Nigeria is Africa’s largest oil producer and exports crude oil mainly to countries like the USA, India, and China. Oil contributes about 90% of Nigeria’s export earnings. -Nigeria is a major member of ECOWAS (Economic Community of West African States). -Nigeria has started to diversify its economy into agriculture, manufacturing, and services. Programs like the Economic Recovery and Growth Plan (ERGP) (2017–2020) encouraged non-oil exports such as cocoa, textiles, and rubber to new markets.

Answer 20

-Over-reliance on oil still creates volatility. -Poor infrastructure (roads, ports) and corruption have sometimes limited the full benefits of trade. -Income inequality remains high despite growth.

Answer 21

-Aid for development -Interventionist government -HDI = 0.47 -Corrupt government and low incomes -50% of population in absolute poverty -Recieved $50 billion in aid

Answer 22

Ethiopia has used foreign aid to fund critical infrastructure projects, such as the development of major roads and energy production (e.g., the Grand Ethiopian Renaissance Dam). Improved infrastructure lowers transport costs, increases productivity, and attracts private investment, helping to stimulate long-term economic growth. Additionally, aid directed towards healthcare and education improves human capital by raising literacy rates and reducing disease burdens. A more educated and healthier workforce increases labour productivity, enabling Ethiopia to diversify its economy beyond agriculture into manufacturing and services.

Answer 23

However, over-reliance on aid can create dependency, reduce incentives for domestic resource mobilisation, and lead to governance issues if aid funds are mismanaged. Therefore, while aid has been a vital driver of development in Ethiopia, its long-run effectiveness depends on parallel improvements in governance, conflict resolution, and economic diversification.

Answer 24

-Ethiopia uses foreign aid to fund major infrastructure like roads, railways, and dams. The Grand Ethiopian Renaissance Dam (GERD) received partial funding support, aiming to boost energy production and support industrialisation. -Aid has supported improvements in healthcare and education access. Programmes funded by donors (e.g., the World Bank, USAID) have helped reduce child mortality and improve primary school enrolment rates. -Ethiopia, prone to droughts and famines, receives aid for food programmes. Schemes like the Productive Safety Net Programme (PSNP) provide food or cash to millions during agricultural crises, preventing mass hunger and supporting rural livelihoods.

Answer 25

KAA1: Aid for Infrastructure Example: Roads, Grand Ethiopian Renaissance Dam Explain: Reduces transport costs, increases productivity, attracts FDI Link to development: Boosts economic growth, job creation

Answer 26

KAA2: Aid for Human Capital (Health and Education) Example: USAID health programmes, World Bank education projects Explain: Improves literacy, reduces mortality → better workforce productivity Link to development: Supports industrialisation and higher income levels

Answer 27

-Risk of aid dependency — too much reliance on foreign help can discourage self-sufficiency. -Some projects suffer from corrupt government -Political instability and regional conflict (e.g., in Tigray) have disrupted aid effectiveness.

Answer 28

-HDI = 0.92 -Growth for development -Market based -Diversification -Strong gov -Diversification

Answer 29

1. Rapid Industrialisation (1960s onwards) South Korea shifted from a poor, agricultural economy to a highly industrialised nation. It focused on manufacturing exports — especially electronics and cars. High GDP growth rates (often 7–10% annually during the 1960s–80s) created massive job opportunities, reducing poverty dramatically. 2. Export-Led Growth Strategy South Korea pursued export-oriented industrialisation (EOI): Targeted industries for state support (like Samsung, Hyundai). Opened to global markets to sell goods competitively. Trade surpluses funded investment in education, health, and infrastructure. 3. Investment in Human Capital Heavy investment in education and skills development (high literacy, STEM skills). Created a highly productive workforce, driving further growth and innovation. 4. Reduction of Poverty and Improvement in Living Standards. Massive economic growth led to a rise in GDP per capita. Poverty fell sharply, and South Korea became classified as a high-income country by the World Bank by the 1990s.

Answer 30

-Early phases involved inequality and labour exploitation (e.g., long hours, weak unions). -Environmental costs from rapid industrialisation. -Reliance on exports means vulnerability to global shocks.

Answer 31

KAA1: Export-Led Growth Strategy -South Korea focused on exporting manufactured goods (cars, electronics). -Explain: Exports brought in foreign currency → boosted GDP → funded public services (health, education). -Develop: Helped South Korea avoid the "middle income trap" many countries fall into. -Link to development: Higher employment, better incomes, government revenue → improved living standards. -Evaluation 1: Risks of Export-Led Growth Vulnerable to global demand shocks (e.g., Asian Financial Crisis 1997). Overdependence on external markets can cause instability.

Answer 32

KAA2: Investment in Human Capital -Point: Massive investment in education (especially STEM subjects) and healthcare. -Explain: Created a high-skilled workforce, leading to innovation and higher productivity. -Develop: Higher wages, greater technological advancement → diversified economy into electronics, biotech, IT. -Link to development: Not just richer, but healthier, better educated, with broader human development. Evaluation 2: Short-Term Costs High pressure on students (mental health issues). Initial income inequality as growth benefited urban areas first (e.g., Seoul vs rural areas).

Answer 33

-FDI for development -Corporation tax rate is only 12.5% -HDI = 0.95

Answer 34

-Attracting Multinationals with Low Corporate Taxes Ireland set corporation tax at just 12.5%. Google, Facebook, Apple, Pfizer to set up European headquarters there. Result: Massive inflows of capital, jobs, and tax revenues (even though tax rates were low, the volume of investment was huge). -Technology and Pharmaceutical Sectors FDI flowed heavily into tech and pharmaceuticals. Ireland became known as the "Silicon Valley of Europe" and a major hub for medical manufacturing. These high-value industries pushed up GDP per capita to one of the highest levels in Europe. -Employment and Skills Development FDI created high-paying jobs in areas like tech support, R&D, finance, and pharmaceuticals. Helped reduce Ireland’s unemployment rate sharply (especially after the 1980s recession). Encouraged investment in education (especially IT and engineering skills) to meet multinational demand.

Answer 35

-Dependency on MNCs -Inequality, rural areas benefit less from FDI than large cities such as Dublin -Tax Haven Criticism and International Pressure Ireland faces criticism from the EU and OECD for offering ultra-low corporation taxes. Global moves toward minimum corporate tax rates (e.g., 15% G7 agreement) could reduce Ireland’s competitive advantage in attracting FDI.

MACRO APPLICATION Flashcards

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