Vocabulary
What is a soft loan?
a loan that may never be paid back.
Name the 5 stages of development, in order if possible.
primitive equilibrium, transition, takeoff, semi development, and high development.
Explain how micro loans work.
a small unsecured loan, often as small as $50, is made primarily to women who want to undertake an income-generating project.
What is capitalism?
economic system in which private citizens own and use the factors of production to generate profit
What is privatization?
the conversion of state-owned factories and other property to private ownership.
Why is primitive equilibrium considered “primitive”?
it is “primitive” in the sense that the society has no formal economic organization.
What is the role of IMF?
it offers advice to all countries on monetary and fiscal policies. IMF also helps support currencies so that the countries can complete in an open market and attract foreign investors
What is privatization and why is it important?
privatization is the conversion of state-owned factories and other property to private ownership. It is important because entrepreneurs want to receive rewards for undertaking business ventures involving risk
What is external debt?
money borrowed from foreign banks and governments.
What happens to a country in the third stage of development?
A country in the takeoff stage begins to grow more rapidly, customs are put aside and seek new & better ways of doing things. People imitate new techniques that outsiders brought to the country. A country also starts to save & invest more of its national income. New industries begin to grow rapidly, industries use new production techniques, and agricultural productivity improves.
What is ASEAN?
it is a group of 10 Southeast Asian nations working to promote regional cooperation, economic growth, and trade
What are some problems of transition?
loss of political power, underestimating costs, and responding to new incentives
What is capital flight?
the legal or illegal export of a nation’s currency and foreign exchange.
What stage of development is the US in? Explain your reasoning.
High development
What is the importance of savings for developing countries? How can it save?
internally generated funds in many cases are the only source of capital for a developing country, and an economy must produce more than it consumes
What do people in countries transitioning into capitalism have to do when responding to incentives?
they have to learn how to make decisions on their own, take the initiative, interpret prices, and fend for themselves in free markets.
What is perestroika? Who introduced it?
the restructuring of the Soviet economy, by Mikhail Gorbachev.
Name some obstacles of development and explain how they are obstacles.
• population growth - when a population grows rapidly, there are more people to feed, and a greater demand for services exists
• natural resources & geography - limited natural resources, like unproductive land and harsh climates can hinder economic growth
• external debt - some nations borrow so much money that they may never be able to repay these loans
• other examples: disease, substance abuse, education, technology, corruption, war, capital flight, etc.
Why are micro loans important for developing countries?
because more than two-thirds of the GDP in a developing country is produced in activities that are not serviced by banks, the loans provide a way to extend the features of capitalism to the poorest of the poor
Differentiate between how China and Taiwan approached economic growth.
• China attempted to revolutionize industrial and agricultural production almost overnight with the Great Leap Forward
• the Taiwanese government tried to identify those industries most likely to grow in the future. Most of their plans target high-tech industries like aerospace and pharmaceuticals