Deck 22: Macro Policy in Developing Countries

Question 1

What is meant by the term dual economy

Answer 1

Dual economy:
Dual economy refers to presence of two sectors in an economy that is traditional sector and market based sector. The traditional sector uses local currency or barter system to conduct their business, while market based sectors use foreign currency to conduct a business and the prevalent international laws for execution of contracts.
Developing economy has characteristics of dual economy where a large portion of population is engaged in traditional sectors and small portion of population are engaged in modern sectors. This characteristic also signifies the transition phase of a developing economy to a developed economy.

Question 2

What is meant by "the dual economy"

Answer 2

DUAL ECONOMY -
Dual economy refers to an economy in which two sectors co - exist simultaneously. One is the traditional sector other is the modern market sector that have international orientation.
In traditional sector, also referred to as non - market sector, trade takes place in subsistence way based on traditional manner. Transaction in this sector takes place in barter form as well.
In modern market sector that have international orientation, trade takes place on same understanding and manner in which it takes place in any developed country.
Developing countries are generally dual economies.

Question 3

Should developing countries send their students abroad for an education

Answer 3

Right education is considered as an important component of successful development strategy whereas wrong education works as an important impediment to growth and development.
Due to lack of good educational avenues in their own country, students from developing countries have to go abroad, especially to developed nations, to pursue higher studies.
Some of these students also believe that foreign education, especially in developed country, will give them a chance to get employment opportunities abroad as their own countries have lack of good paying employment avenues.
It has been seen that large percentage of developing country students' that go abroad for educational purpose does not return and most of them are bright students, so there is certainly a lot of brain drain and developing countries does not get chance to utilize their skills and educational credentials for development purposes.
On the other hand, it has also been witnessed that many foreign educated persons return to their homeland and make it possible for their country to develop with their entrepreneurial skills and dynamic leadership.
Therefore, due to both positive and negative aspect of foreign education, one cannot specifically state that developing countries should send their students or should not send their students abroad for an education.
It has been experienced that developing countries have little right education and more wrong education. The reason for this is that most developing countries have their education system designed on western lines. So the education, these systems are dispensing is not in tune with problems faced by these countries.
Developing countries should try to design their education system that fit their culture and match the needs of their societies because only that kind of education system would be conducive to growth.
This will not only stop the brain drain but will also compel the settled abroad natives to return and contribute to their own homeland.

Question 4

The Grameen bank is an example of a successful micro credit reform.t focuses its loans on women.
a.Why do many of the micro credit policies focus on women rather than men
b.Does your answer in a suggest anything about other policies that might help developing countries develop (Feminist)

Question 5

Why do governments in developing countries often seem more arbitrary and oppressive than governments in developed countries

Question 6

If developing countries are so unstable and offer such a risky environment for investment, why do foreigners invest any money in them at all

Question 7

What impact does measuring income per capita using the purchasing power parity approach have on the comparison of incomes between developed and developing countries as opposed to measuring them based on exchange rates Explain your answer.

Question 8

True or false Income inequality leads to higher levels of savings by the rich and therefore has significant advantages for developing countries.xplain your answer.

Question 9

According to the Peruvian economist Hernando de Soto, in the 1980s, getting a deed for property in Peru involved 207 bureaucratic steps, took 43 months, and cost 10 weeks' worth of the official minimum wage.
a.What problems would that create for economic development
b.What problems would the lack of titling create for public utilities

Question 10

Spend one day living like someone in a developing country.at almost nothing and work lifting stones for 10 hours.hen, that same evening, study this chapter and contemplate the bootstrap strategy of development.

Question 11

How does a regime change differ from a policy change

Question 12

Why might credentialism be an obstacle to growth

Question 13

If everyone knows that the cause of inflation in developing countries is the creation of too much money, why don't these countries stop inflation

Question 14

If you were a foreign investor thinking of making an investment in a developing country, what are some things that you would be concerned about

Question 15

What are the risks to a developing country of sending an individual to a U.S.ollege

Question 16

Islam considers the interest on loans to be an instrument of oppression of the poor by the wealthy.hat is why interest is banned by the Qur'an.n 2003, member countries of the Islamic Development Bank owed $883 billion in external debt and paid $14 billion in interest.
a.ow could loans be an instrument of oppression
b.ow could loans be an instrument of development
c.he Islamic Development Bank makes loans that remain within Islamic law.hat do you suppose are the conditions for those loans (You might want to look at its Web site at www.isdb.org for help.) (Religious)

Question 17

In what way do bribes limit development

Question 18

What is the difference between development and growth

Question 19

What is the inflation tax

Question 20

If you suddenly found yourself living as a poor person in a developing country, what are some things that you now do that you would no longer be able to do What new things would you have to do

Question 21

Interview a foreign student in your class or school.sk about each of the seven obstacles to economic develop­ment and how his or her country is trying to overcome them.

Question 22

Should a country control the size and makeup of its population Why

Question 23

In what way is economic development the only choice for developing countries

Question 24

In an inflation, who else, besides government, gets revenue from an inflation tax

Question 25

How could too much education cause problems for development

Question 26

Christians are called to be Christ-like, a "light to lighten the nations" (Luke 2:32).
a.n light of the basic biblical norms of justice, righ­teousness, and stewardship, how should a nation decide how much development aid to provide devel­oping countries
b.s it within Christian norms to make that aid conditional (Hint: Consider the biblical concept of forgiveness, which includes repentance and the restoration of right relationships.) (Religious)

Question 27

The brief argument for globalization goes something like this.ountries that trade a lot grow quickly and poverty rates decline in rapidly growing countries.herefore, glo­balization promotes rapid growth and alleviates poverty and is far superior to economic isolation.adicals believe that the globalization debate is not about economic isola­tion vs.ntegration into the world economy; rather, the real debate is about what policies allow a developing econ­omy to successfully engage with the world economy.he advocates' case tells us about a country's degree of engage­ment with the world economy but not the manner of that engagement.rom the radical perspective, knowing that international trade and faster economic growth rates are positively correlated hardly constitutes an endorsement of the neo-liberal policy of lower barriers for trade and the movement of international capital.
a.ow should a developing economy engage with the global economy: through free trade and financial liberalization policies
b.ould the strategies promoted by the opponents of globalization-more national control and limits on the movement of foreign and domestic capital-be better polices for engaging with the world economy (Radical)

Question 28

Why doesn't the fact that the "inflation solution" is only a temporary solution stop many developing countries from using it

Question 29

Why are economic statistics incomplete measures of quality of life

Question 30

What are three ways in which the institutions of developing countries differ from those in developed countries

Question 31

A United Nations study reported that more than 300 million low-income women owned businesses in developing countries, but only 5 million had access to credit other than from money lenders.ow might the UN alleviate this obstacle to growth What other obstacles might exist for women entrepreneurs in developing nations (Difficult)

Question 32

What is wrong with saying that people in developing countries are worse off than people in the United States

Question 33

It has been argued that development economics has no general theory; it is instead the application of common sense to real-world problems.
a.o you agree or disagree with that statement Why
b.hy do you think this argument about the lack of generality of theories is made for developing countries more than it is made for developed countries

Question 34

What is conditionality, and how does it relate to the balance of payments constraint

Question 35

Why does restructuring in developed countries suggest that the distinction between growth and development can be overdone

Question 36

Distinguish between convertibility on the current account and full convertibility.

Question 37

Say that you have been hired to design an education system for a developing country.
a.hat skills would you want it to emphasize
b.ow might it differ from an ideal educational system here in the United States
c.ow much of the U.S.ducational system involves credentialism, and how much involves the learning of relevant skills

Question 38

When thinking about development, it is often presented as an analytic exercise, but development policies have very real consequences.
a.ho is responsible for economies that fail to develop
b.ho will primarily suffer the consequences from a failure at economic development
c.f your answers to a and b differ, how might that dif­ference affect the development policies chosen How does this difference possibly affect the choice of devel­opment policies (Institutionalist)

Question 39

Why might an economist favor activist policies in developed countries and laissez-faire policies in developing countries

Question 40

How does corruption limit investment and economic growth

Question 41

How does the exchange rate method of comparing incomes differ from the purchasing power method of comparing incomes

Question 42

Choose any developing country and answer the following questions about it:
a.hat is its level of per capita income
b.hat is its growth potential
c.hat is the exchange rate of its currency in relation to the U.S.ollar
d.hat policy suggestions might you make to the country

Question 43

In the 1990s, Germany passed a law requiring businesses to take back and recycle all forms of packaging. large group of businesses formed a company to collect and recycle these packages.ts costs are 4.5 cents per pound for glass, 9.5 cents per pound for paper, and 74 cents per pound for plastic.his accounts for a recycling cost of about $100 per ton for glass and $2,000 per ton for plastic; the average recycling cost of paper is $500 per ton. developing country has offered to create a giant landfill and accept Germany's waste at a cost of $400 per ton, which includes $50 per ton sorting and transport costs and a $350-per-ton fee to be paid to the developing country.
a.Should Germany accept this proposal
b.Will the proposal benefit the developing country

Question 44

Does the fact that suicide rates are lower in developing countries than in the United States imply that Americans would be better off living in a developing country Why

Question 45

Why does political instability present an economic problem for developing countries

Question 46

Why are investment and savings so low in developing countries