Strategies To Promote Growth & Development Flashcards

Question

What are the costs of government intervention approaches?

Answer 1

1) Low rates of E.G - large state sector stifle competition and enterprise - low productivity rates therefore slow growth 2) Resource and allocative inefficiency - absence of profit motive and limited competition - firms not produce at output P=MC 3) Government failure 4) Corruption 5) Increasing fiscal deficits - food subsidies and losses arising from inefficient nationalised industries 6) Increasing BoP deficits on c.a - over-valued exchange rates

Answer 2

Essential characteristic of economic development

Answer 3

1) Source of foreign exchange - tourist spend significant sums of money on goods and services provided in local economy - helps fill foreign exchange gap - help to improve the BoP on c.a 2) Investment by TNCs - I in hotels and associated services e. g will have multiplier effects on GDP 3) Infrastructure - I in various forms of infrastructure like roads, airports etc - some may be provided by TNCs as agreements - I also have multiplier effect on GDP - positive externalities for local businesses that benefit from improved infrastructure 4) Employment opportunities - tourist industry labour intensive - significant job creation 5) Increased tax revenues - due to all of above points - used to reduce absolute poverty, improve public services and redistribute incomes 6) Demand income elastic - real incomes rising, D increase> proportionately 7) Preservation of natural heritage - country has incentive to preserve natural heritage may be key source of attraction to tourists

Answer 4

1) Adverse effect of c.a of the BoP - capital goods required for building of hotels and equipment needed - food and gifts D by tourists - profits repatriated to foreign shareholders of TNCs - significant increase in M 2) Fluctuations associated with trade cycle - fall in D may be>proportionate 3) External costs 4) Employment - seasonal unemployment e. g skiing instructor - jobs created may only be low skilled and low paid if TNC supplies own managers & professional staff 5) Changes in fashion - developed world: Spain suffered from significant downturn in tourism in recent years as Europeans prefer more exotic destinations - climate change may affect tourism e. g Mike skiing 6) Negative impact on cultural values - tourists might undermine local way of life

Answer 5

A means of providing extremely poor families with small loans (microcredit) to help them engage in productive activities or grow their tiny businesses e.g successful establishment of Grameen Bank in Bangladesh

Answer 6

1) In contrast to development lending, microcredit insists on repayments 2) Interest is charged to cover costs involved 3) Focus is on groups whose alternative sources of finance are limited to informal sector, where interest charged would be high

Answer 7

1) Women (who form >97% of the clients) 2) Self-employed, often household-based entrepreneurs 3) Small farmers in rural areas 4) Small shopkeepers, street vendors and service providers in urban areas

Answer 8

1) Based on promise that poor people can make themselves richer if provided with access to credit - in practice wealth creation depends on the skills and knowledge of institutions as well as individuals 2) Not self-financing unless assistance from gov or aid agencies 3) High IRs charged without outside assistance 4) Most loans not used to start up businesses but to fund extraordinary items of expenditure 5) In LR not v.sucessful at creating prosperous small businesses 6) Overemphasis on microfinance might lead to reduction in aid

Answer 9

To address the injustice of low prices by guaranteeing that producers receive a fair price - paying P price above free-market level for their produce, provided they meet particular labour and production standards

Answer 10

1) Producers receive a higher P 2) Extra money available to spend on education, health, infrastructure, clean water supplies and other development programmed in producers' countries 3) Smaller price fluctuations, allowing producers to be shielded from market forces 4) Extra money used to improve quality of products 5) Producers enabled to diversify into other products

Answer 11

1) Distortion of market forces - low Ps due to overproduction and producers need to recognise this as signal to switch growing other crops - artificially high Ps encourage more producers to enter the market 2) Certification based on normative views on best way to organise labour e. g coffee, certification only available to cooperatives of small producers 3) Inefficient way to get money to poor producers - consumers pay large premium for fair trade goods but much goes to supermarkets in profits - only 10% of premium paid for fair trade coffee tickles down to producer 4) Guaranteeing minimum P provides no incentive to improve quality 5) May create dependency trap for producers

Answer 12

1) Increased lending 2) More flexibility in lending 3) Providing forecasts, analysis and advice 4) Developing future policy

Answer 13

1) Increased lending - lending commitments reaching > $250bn in 2010 2) More flexibility in lending - better at responding to individual needs of countries 3) Providing forecasts, analysis and advice - monitoring, forecasts and policy advice informed by global perspective and experience from previous crises been in high demand and used by G20 4) Developing future policy - considering implications of crisis for policy and regulation

Answer 14

When a country joins has to pay quota, based on their GDP 1/4 paid in SDRs, 3/4 paid in country's own country Quota important as it determines: - voting rights - about which may be borrowed from the IMF

Answer 15

IMF's unit of account Value of a fixed amount of yen, dollars, pounds & euros expressed in dollars at current exchange rate Represent potential claim on other countries' foreign currency reserves, which can be exchanged voluntarily - or other countries with high foreign currency reserves can buy SDRs from countries that need hard currency

Answer 16

Imposes structural adjustment programmes (SAPs), which set out the conditions on which loans are given - aim is to ensure that debtor countries do not default on repayment of debts

Answer 17

``` Based on free market reforms e.g free trade, removal of state subsidies on food, privatisation and reduction in public expenditure to reduce budget deficits Criticised because: - little to help world's poor - failed to promote development - increased inequality - caused environmental degradation - resulted in social and political chaos in many countries ```

Answer 18

SAPs had devastating effect on some developing country so change role to concentrate on aid directed towards: - countries following sound macroeconomic policies - healthcare; broadening education - local communities rather than gov's

Answer 19

Roles are currently blurred: both have role in developing world and poverty reduction - suggested they be reformed to reflect changing needs of global economy Critics suggest: 1) IMF should be slimmed down and undertake ST lending to crisis-hit countries 2) WB should act as development agency and undertake detailed credit appraisal of creditworthiness of recipient countries

Answer 20

Brought community-based development to forefront of strategies to promote growth and development) i. e focus moved away from state managed schemes - local control of small-scale projects - self reliance - emphasis on using skills available - environmental sustainability

Strategies To Promote Growth & Development Flashcards

(44 cards)