Market orientated strategies
Name three types of market-orientated strategies that will promote growth and development
Trade liberalisation, Promotion of FDI, Removal of government subsidies, Privatisation, Floating exchange rate, Development of the financial sector
Name three interventionist strategies that promote growth and development
Development of human capital, Protectionism, Managed exchange rates, Infrastructure development, Promoting joint ventures with TNCs, Buffer stock schemes
Name three other strategies that were mentioned in the book
Industrialisation, Development of tourism, Development of primary industries, Debt relief, Foreign aid
What is the role of the IMF?
To make sure that exchange rate systems are working
State the Prebisch-Singer hypothesis
In the lon run, price of commodities will fall compared to price for maufactured goods.
Give a definition of trade liberalisation
the move towards greater free trade through the removal of protectionist barriers to trade
Explain a criticism of joint ventures with TNCs.
Some people argue that these joint ventures are ways for developing countries to gain new technology without contributing on their own.
Name three types of foreign aid
Grants, Loans, Tied aid, Bilateral aid, multilateral aid
Answer is definitvely wrong if "commercial loans" is named.
WHat is the difference between the world bank and the IMF?
World bank was set up to promote economic development
Name the components of the balance of payments
Current account, capital account, financial account
Explain how a country can promote FDI
Business friendly regulations, stable government, access to land, low tax rates
Analyze which type of education is most important to promote development
Possible talking points:
primary > secondary
problem of overeducation
Quality of education
Give the reasoning why the marginal products of rural workers might be zero in some cases
Can be done by other people (underemployment) or is not neccessary at all (unemployment)
What is the meaning of NGO?
Non-governmental organisation
Explain the term comparative advantage
A country has comparative advantage in production of a good if they can produce this good with lower opportunity cost than another country
Explain possible problems with subsidies that make their removal useful for promoting development
Poorly targeted, free market is better at allocating resources, high proportion of government spending, source of corruption
Explain how a buffer stock scheme works
Government owns a stock/ a reserve of a commodity.
If the free market price is too low, government will buy the commodity, increasing the price and the stock of the commodity they own.
If the free market price is too high, government will release part of their stock on the market.
Explain the advantages of tourism over manufacturing for a developing country
Demand is income elastic, creates large number of jobs, improves current account, multiplier effect through locally produced goods for tourists
Name a criticism of NGOs
Can never solve development problems on their own, government is needed.
Explain an adavantage of membership in a trading bloc
Trade creation, reduced competition, economies of scale, reduced transaction costs
Explain how microfinance schemes can promote development. Give also one criticism of microfinance schemes.
Small loans with reasonable interest rates allows investment that would otherwise not be possible.
Criticisms: Not helping the poor, not making a significant difference, lenders are reluctant to accept risk
Explain the problems with a managed exchange rate
DIfficult to maintain, Black markets destabilize the system, Corruption
Explain a problem with focusing on development of primary industries
Resource curse, dutch disease, instability of commodities
Explain why countries that get IMF loans criticise the IMF.
Because they are forced to do painful reform programmes.
State the Marshall-Lerner condition
If the combined price elasticities of demand for exports and imports are greater than 1, depreciation of the currency will improve the current account