Promoting growth and development

edwinesosa's version from 2015-06-16 15:43


Question Answer
What are the sources of financeforeign aid + debt relief + microfinance + NGOs + FDI + IMF/World Bank
4 types of aidBi Lateral + multilateral + tied + untied
Strategies for Growth and Developmentpromoting sectors of the economy + importance of human capital + free trade + fair trade + free markets
Advantages of foreign aidSavings gap + fill the foreign exchange gap
evaluate foreign aidnot used for intended purpose (corruption) + if tied aid may purchase goods innapropriate for countries development + can lead to dependency +distorts price signals and disrupt local markets + time lag
advantages of debt reliefattract FDI + plug savings and foreign exchange gap + conditions for cancelation may encourage good governance + benefits to MEDCs if LEDCs prosper
negatives of debt reliefencourage irresponsible borrowing + saved money may not be spent well + bad for MEDCs


Question Answer
advantages of microfinancefunds direct to the poor + used to generate income + savings gap so harrod domar style growth + simple not compound interest
negatives of microfinanceno formal credit bureaus so clients may be lending from a variety of lenders + coercive collection methods leading to high number of suicides eg India + repayment rate (weekly) very high
advantages of NGOsavoids issue of government corruption + targetted help, not restrained by bureaucracy + small scale and adapted to local needs
negatives of NGOsunable to do large scale projects like infrastructure + Hilary Clinton foundation - money not used effectively + funding is unpredictable eg economic climate
advantages of MNCsform of external finance and therefore plug savings gap + boost to current account and financial account and foreign exchange + jobs + knowledge and technical transfer + provision of infrastructure + stability during economic crisis + encourage good governance eg free trade and low income tax
negatives of MNCslow wages + repatriate profits + tax avoidance
conditions of IMF and world bank support (structural adjustment policies) Stabalisation to reduce fiscal and current account deficits and stable inflation (macroeconomic stability)- higher interest rates +reduction in exchange rate + fiscal constraints; Structure, supply side - trade liberalisation for comparative advantage gains + privatisation + capital market liberalisation to allow funds to flow in and out and promote FDI
World bank rolepromote long term growth and development and lend at less than commercial rate
IMF goalfocuses on short term support in crises
negatives of international institutionsdominated by rich countries so emphasis on free trade benefits them + blanket policies + undermine state authority


Question Answer
evaluate focus on promoting human capitalreturns on primary education are the higher returns + brain drain
advantages of industrialisationhigher value added products + higher abnormal profits + higher productivity as marginal product of agricultural workers is 0 + more output and employment + wages living standards + attract FDI which plugs savings gap + less riskand more diversified ( not just primary products) + higher terms of trade + foreign currency gap + comparative advantage as cheap labour eg china
negatives of industrialisationpolution + neglect agriculture + surplus labour in urban areas (unemployment, poverty shanty towns ) + export dependent + world competition
advantages of labour intensive industrialisation strategiesless unemployment + less inequality + they have abundant cheap labour so their comparative advantage lies here
advantages of tourismdiversify economy + investment in infrastructure and attract MNCs + current account + tax
evaluate tourismvolatile earnings + foreign ownership of assets eg hotels so repatriate profits + seasonal + effect of world recession externalities


Question Answer
stages of rostow modeltraditional soceity - preconditions for take off - take off - drive to maturity - age of mass consumption
harrod domar model(cycle) Savings - investment- capital accumulation - economic growth
external investment harrod domarFDI , microfinance
why promote agriculturefeed the people, comparative advantage rising demand in india so prices up and inelastic PED
lewis model primary sectorlow labour productivity; low marginal revenue product; surplus labour
lewis model secondary sectorwages 30% higher; high labour productivity; high marginal revenue product of labour; abnormal profits for factory owners; high investment from profits; rising output and employment