Deck 21: Economic Growth in Developing and Transitional Economies

Question 1

Many spokespersons of African countries complain that the U.S. and other developed countries heavily subsidize cotton. What is the reason for their discontent and what argument are they making with respect to their own economic development?

Answer 1

They argue that the subsidies lead to worldwide overproduction and distort cotton prices, depriving poor African countries of one of their few goods for which they have a comparative advantage in international trade. Not only is cotton crucial to their economies, it is the often the sole agricultural product for their countries to trade.

Question 2

What are some of the issues that economists have to worry about when studying developing nations that are very different from those of advanced industrialized nations?

Answer 2

In developing nations, an economist may have to worry about chronic food shortages, explosive population growth, and hyperinflations that reach triple, and even quadruple, digits. The United States and other industrialized economies rarely encounter such difficulties.

Question 3

Explain the "vicious-circle-of-poverty" hypothesis.

Answer 3

Suggests that poverty is self-perpetuating because poor nations are unable to save and invest enough to accumulate the capital stock that would help them grow.

Question 4

Explain what social overhead capital is.

Question 5

Explain why health and nutrition are essential to workforce development.

Question 6

In the 1960 nations could be divided into three distinct groups. Discuss these three groups and offer examples of countries that fit into each of these categories.

Question 7

Why have many developing countries pursued industry at the expense of agriculture? What has been the result of this strategy?

Question 8

What are the common characteristics of developing countries?

Question 9

Why is it that today it is more difficult to categorize countries into the three neat groups like the one that were used in the 1960s.

Question 10

What is brain drain?

Question 11

Define social overhead capital.

Question 12

When economists refer to the "brain drain" in developing countries what do they mean?

Question 13

Which part of the world is often classified as the "Fourth World" and why?

Question 14

What is microfinance?

Question 15

Define GNI or Gross National Income.

Question 16

Can the same principles that have been used in the study of advanced economies be used to study less developed economies as well? Explain your answer.

Question 17

Describe the state of affairs in the developing world concerning social overhead capital?

Question 18

List the three main sources of economic development.

Question 19

Define the following four references and name a country that you argue would fall into each category.
(a) First World
(b) Second World
(c) Third World
(d) Fourth World

Question 20

What is the distribution of the world's population between the developed nations and developing nations? What is the distribution of income between these two groups and their consumption as a percentage of world income?

Question 21

What are some of the forms that central planning has taken in developing nations today?

Question 22

Explain how each of the following limits the economic growth of developing nations:
(a) Insufficient capital formation
(b) A shortage of human resources
(c) A lack of social overhead capital

Question 23

What might the World Bank actually be a less efficient means of financial intermediatinon than private international banks?

Question 24

What has been the reaction of many governments to the failure of central planning?

Question 25

Explain import substitution.

Question 26

Critically evaluate the following statement: "People in developing countries are not poor because they have large families. Rather, they have large families because they are poor."

Question 27

Define the fertility rate and the mortality rate.

Question 28

Explain how economists use random experiments.

Question 29

In a nutshell what has been the reality of central planning?

Question 30

What is the function of the World Bank?

Question 31

Define import substitution. Evaluate the success of import substitution strategies in developing countries.

Question 32

Historically, why did the import-substitution strategy become popular among developing nations?

Question 33

Why were Thomas Malthus' fears of increasing impoverishment for Europe and America unfounded?

Question 34

What is export promotion? Give a few examples of countries that have tried it.

Question 35

What is the International Monetary Fund and what are its primary goals?

Question 36

Why are property rights important in economic development?

Question 37

Explain how rapid population growth can hinder labor productivity.

Question 38

While increases in population are often seen as a problem by some observers can you think of a way in which an increase in population can be a positive factor?

Question 39

What are natural experiments?

Question 40

What is capital flight?

Question 41

Explain the "tragedy of commons."

Question 42

Explain why growth is not necessarily synonymous with development.

Question 43

Explain why privatization can help the economy become more efficient.

Question 44

With regard to transition economies what is meant by shock therapy?

Question 45

Is the developing world moving toward centralized planning or free markets? Justify your answer.

Question 46

Identify the six basic requirements that economists generally agree must exist for a successful transition from socialism to a market-based system.

Question 47

Why is it that the enforcement of contracts by government is so crucial to the conduct of business?

Question 48

In facilitating the transition from a centrally planned to a market-oriented economy, explain the difference between the "shock therapy" versus "gradualism" approach.