Economic Development

• economic growth

  an increase in a country’s real national output (real GDP) [SR]

  an increase in the productive capacity of the economy [LR]
• Economic development

  the sustainable increase in living standards for a country, typically characterised by increases in life span, education levels, and income.
• What is the dutch disease?

  refers to the adverse impact of a sudden discovery of natural resources on the national economy

  export revenues will increase and there will be increased investment into that sector

  The surge in export incomes can cause an appreciation of a country’s

  exchange rate which then makes other sectors trying to export less price competitive in overseas markets.
• Prebisch-Singer Hypothesis (PSH)

  suggests that, over the long run, real prices of primary commodities such as coffee and cocoa decline relative to prices of manufactured

  goods such as cars and washing machines.
• What is one strategy to avoid the natural resource curse?

  Economic Diversification
• How can economic diversification help countries?

  By developing non-primary sectors like manufacturing
• What is economic growth defined as?

  An increase in real GDP
• What does GDP represent?

  The monetary value of all goods and services
• What does HDI measure?

  Quality of life using various factors
• What factors are included in the HDI?

  Life expectancy, knowledge, and standard of living
• What does the Human Poverty Index (HPI) focus on?

  Severe deprivation in health, education, and living standards
• What is income inequality?

  The unequal distribution of income among individuals
• What is a savings gap?

  The gap between investment and needed growth level
• What is Dutch disease?

  Adverse impact of resource discovery on economy
• What is a foreign currency gap?

  Insufficient capital flows to cover deficits
• What is capital flight?

  Rapid movement of funds from domestic economy
• What characterizes a developed country?

  High standard of living and advanced infrastructure
• What does LEDCs stand for?

  Less Economically Developed Countries
• What is a poverty trap?

  Little incentive for low-income workers to earn more
• What is foreign aid?

  Overseas development assistance from one country
• What do property rights confer?

  Legal control or ownership of a good
• What is primary product dependency?

  Heavy reliance on exporting primary products
• What does FDI stand for?

  Foreign Direct Investment
• What are MNCs?

  Firms operating in more than one country
• How do economic growth and economic development differ?

  Growth is increase in national income; development is quality of life improvement
• What are four characteristics of a less-developed country?

  • Low income levels and high poverty rates
  • Poor infrastructure and limited industrialization
  • Low levels of education and healthcare
  • Heavy reliance on agriculture and primary product dependency
• What are three indicators used in the HDI?

  Life expectancy, mean years of schooling, GNI per capita
• How does corruption hinder economic growth?

  By misallocating resources and deterring investment
• Why are inadequate human capital and savings rate constraints on economic development?

  They reduce productivity and available capital for lending
• How can poor infrastructure hinder economic growth?

  • Reduces business productivity due to increased costs
  • Limits investment and trade opportunities
• How do market-based strategies differ from interventionist strategies?

  Market-based reduces government intervention; interventionist involves active government role
• How does trade promote economic development?

  By contributing to global efficiency and welfare
• How has investment in education and training boosted economic development in various countries?

  • UK: Skilled workforce and innovation
  • Norway: Free education and high employment
  • South Korea: Focus on STEM and R&D
  • Germany: Dual education system supports industries
• What are three benefits of joint ventures for developing countries?

  • Technology and skill transfer
  • Job creation and economic growth
  • Access to capital and global markets
• What are two drawbacks of joint ventures for developing countries?

  • Exploitation of local resources and labor
  • Threat to local businesses from multinationals
• What are three drawbacks of overseas aid to developing countries?

  • Dependency on aid
  • Misuse and corruption of funds
  • Market distortion harming local businesses