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a) Explain why countries have achieved different levels of economic development. (10)

b) Discuss the view that economic development is impossible without a significant element of state planning. (15)

Reply 21

tanusha-tomsk

^

a) some general points:
- Civil war / general political unrest - disturbing employment, compromising production etc. (fairly obvious)
- Economic unstability - fluctuating rate of growth/interest, > disturbing demand and investment, then via multiplier restricts investment and limits output.
- AIDS and other deseases, poor medical care, slower life expectancy - affects labour >> production and also demand.
- Earthquakes, floods, tsunami, tornado etc. (you can give obvious examples) - production and the whole economy compromised.
- etc etc etc...

b) Well, takes a bit of time this one. I guess this will be some of the points:

Why state planning is not a necessity:
- D & S allocate resourse with maximum efficiency > production rises etc,
- Government doesn't take advantage in form of massive tax etc > in theory more incentives for enterpreneurs BUT is this going to speed up development? [Discuss how growth alone doesn't guarantee development]

Why state planning is essential:
- Merit, Demerit, Public goods - the biggest factor for Development (the classics here, healthcare & education).
- Infrastructure that ensures protection of the poor and more equal distribution of resources (in theory - the gov. likely to be corrupt)

That's all I could think of, hope you can find some more!

Reply 22

Savannah

To what extent is it possible for a country to enjoy rapid economic growth, price stability adn an equilibrium on the current account of its balance of payments? (15 marks)

thankyou!

Reply 23

tanusha-tomsk

^
Obviously, rapid economic growth will cause faster rate of inflation through the standard expenditure multiplier (investment + gov. spending+consumer spending increase >>> AD increases >>> higher rate of inflation), will [other things being equal] cause a deficit/increase a deficit on the Balance of Payments (prices rise faster in this country compared to others >>> goods & services less price-competitive >>> more imports of foreign 'cheaper' goods + fewer exports >>> more debit and fewer credit items on the BofP >>> deficit).

However, if (as above) there are fewer exports and more imports, AD=C+I+G+(X-M) will [other things being equal] decrease (the X-M factor), bringing the AD down >>> lower rate of inflation. To what extent will it offset the increase in spending caused by confidece in the growing economy? Depends on how fast the economy is growing, in theory this could be possible but Consumer Spendng is the single biggest component of AD. Employment rises (to meet and increased Demand) - standard exp. multiplier effect again, more consumption + investment = higher AD.

Also, is the economic growth rate flucktuating? If so, this might be a part of economic cycle and is likely to last short period of time >> because of the time lags the effects might not take place before the cycle reverses.

How quick is the economic growth? If *relatively* high like 4% (or 10% for developing countries) - given that 'normal' rate of growth is 3% and 8% respectively - then the government will have time to respond to the changes and adapt its policies (notably monetary policy - increasing interst rate to avoid 'overheating' and policy - reducing Gov. spending and increasing Taxation) to offset the possible consequences of rapid economic growth. Does this mean that it will also reverse the rapidness of economic growth and it will return to 'normal'? Depend on how good is the government/financial institutions (like Bank of England/MPC etc.) All of that depend on how efficient is the government.

If the rate of growth is way higher than it should have been, it will be difficult for government to react anyway and the size of multiplier will be more extensive.

Conclusion - the theory is conditional on those factors: rate of growth only *relatively* high, government effective, and the countries position in BofP to begin with. Could be possible, but of course a lot more difficult to predict/control the changes in reality.

Savannah

thankyou!

awww how nice when people say that :smile:

thank you!

Reply 24

713

could someone help with the question Togeda already posted?
1) Why do the treasury prefer the RPIX as the measure of inflation as opposed to the RPI or the RPIY?
thanks,i have to answer the same question in an essay

Reply 25

chrissay88

Hey guys, i'm wondering if any of you could help me. I'm trying to go through a question, and wanted to know how i should goo about answering. Any help is appreciated big time!!!!

1. Using marginal productivity theory, examine the view that wages are not determined by productivity alone, but by the interaction of demand and supply for workers of various skills.

2. Discuss 2 factors which might explain differences between the german labour force participation rate sand those in other countries of mainland europe.

(1) for this one i thought about explaning MRP theory, and then talking about wage differentials, elasticities of supply bla bla bla.

(2) ageing population, performance of their economy attractive benefits system.

Any other ideas?

Reply 26

Day Dream

can u help me answer this 1? its a 15 marker, and the 10marker b4 it was just to explain the theory behind the Lewis Thoery [summin bout movement of suplus labour???], so im guessin that will come into play into the answer sumwhere but i duno where

discuss the problems likely to be faced by the governmnet of a developing country if it attempts to change the structure of production (15)

thanks =)

Reply 27

tanusha-tomsk

chrissay88, I'm sorry, I don't do Labour Economics.
I'll find the theory about the MRP and read it, and then get back to you with my ideas.

Reply 28

tanusha-tomsk

Day Dream

discuss the problems likely to be faced by the governmnet of a developing country if it attempts to change the structure of production (15)

Without going into Labour Economics (I don't do it) this is what I know from Development Economics:
- Changing the structure of production might involve changing the nature of the jobs and re-distribution of responsibility. Labour in develpoing countries is highly inflexible because the skills are not very well developed and not transferable - difficult to realise any plans.
- Any frictional unemployment that might occur will be very dangerous for the population - they most likely have no savings to get them through the unemployment.
- If mechanisation of the process (mini industrial revolution) is to occur, the funds of the government wouldn't be sufficient for this. Taxation is highly ineffective because there's hardly anything to tax - it would be practically slavery.
- Assuming the government wants to transfom the production to make i more efficient, some jobs would be lost - again, crucial for the population.

Day Dream

thanks =)

You are welcome :smile:

Reply 29

tanusha-tomsk

ali206, this is an economics not a business thread! Can't help you.
Good luck anyway!

Reply 30

tanusha-tomsk

713 and Togeda, I'm sorry, I don't know the answer to that. This is also a very specific question and is extremely difficult to find on the internet :frown:

I think you'll be better off asking one of your teachers. Sorry, good luck!

Reply 31

sweet_gurl

Hi,

I'm doing AS AQA Unit 2 on the macroeconomy and for homework, have to answer to this question: 'Should the rapid increase in consumer spending and borrowing in the UK be a cause for concern for the government?' and was wondering what kind of things should I be mentioning?

I have an extract which says that the knock-on effects of high debts could 'drag share prices down and even push the country close to a recession'. Can you please tell me how the knock on effects lead to this, and what are the consequences of share prices being dragged down?

Thanks!

Reply 32

Day Dream

tanusha-tomsk

Without going into Labour Economics (I don't do it) this is what I know from Development Economics:

its a question from development econmics :smile:

.... could u expand on some of tht theory u mentioned, coz all ive been taugh t so far is a definition of development and HDI lol

Reply 33

713

ok but thanks for trying

Reply 34

clueless101

Hey I was wondering if you guys could help me with this q? (Jakez already helped me, but just wanted another opinion. Tanusha-Tomsk- I PMed you but no reply ..?)

Buffer Stock Schemes (past paper question): EdExcel As Unit 2: Why markets fail

Question:
Analyse, with the aid of a supply and demand diagram, how a buffer stock scheme was intended to regulate the cocoa market.

Firstly what kind of S&D diagram do i use? The usual one or the buffer stock one...but theres usually 2 b.s.s. diagrams- good harvest n bad harvest? Which one or both?

What does it mean by 'analyse' as oppose to just 'explain'.

Help appreciated

Thanks!

Reply 35

CorpusNinja

Day Dream

its a question from development econmics :smile:

.... could u expand on some of tht theory u mentioned, coz all ive been taugh t so far is a definition of development and HDI lol

lol, tanusha is getting swamped! i'm bad at these types of q but...

What about technological barriers, for example they may not be able to afford the necessary technology (I presume they would want to industrialise or move ahead in some way, which inevitable requires new equipment).
Tariffs are often in place in developing countries so these could make technology unaffordable for firms - (obv the government could get past these tariff themselves)
Skills and training may be inadequate for the labour force so investment in training schemes will be required, which costs money!

Reply 36

Mustard-man

essay question on globalisation (nuff. spec) something like 30 or 40 marks....
Examine the effect of high oil prices on long-term growth of global trade.

Reply 37

tanusha-tomsk

sweet_gurl

'Should the rapid increase in consumer spending and borrowing in the UK be a cause for concern for the government?'

Yes because:
- High consumer spending will lead to an increase in Aggregate Demand through the standard expenditure multiplier (spending increase >> firms increase output to match higher demand >> employment rises >> incomes rise >> further increases in consumption). A shift in AD will, other things being equal, lead to a rise in general price level >> inflation.
- Higher borrowing will not only act as the above by providing funds for highr spending, but also will have an effect of an increased money supply. Some economists (monetarists) believe that inflation rate is directly linked to the money supply. If a loan is taken out, the money supply will have increased and money devalued in real terms.
- Evaluation points: by how much have spending and borrowing risen? How high was the inflation before that and what are the consequesnses of a higher rate of inflation? Consider also other components of AD (e.g. investment, governments spending and net exports=exports-imports) and their significance (consumer spending is the single biggest component).

No because:
- Monetary (controlling interest rates and money supply) and fiscal (controlling governments spending) policies are somewhat effective methods of controlling inflation.
- Through the above process the rate of economic growth (the productive potential of the economy) is likely to increase and a higher rate of inflation (although undesirable) might not be such a high cost to pay for good economic growth and the uprise of the economy.
- High prices make goods less price-competitive internationally - lower exports and higher imports - increased deficit on the Balance of Payments Current Account.
- Evaluation points: Economic policies are not always effective and the inflationary pressures are obvious. Some argue that these policies lower inflation at a cost of slowing investment and governments spending on healthcare etc. Time lags of implementing policies? Interst rates are fixed every month but governments spending and taxation is presented in a Budget report once in a year - takes time to implement.

sweet_gurl

I have an extract which says that the knock-on effects of high debts could 'drag share prices down and even push the country close to a recession'. Can you please tell me how the knock on effects lead to this, and what are the consequences of share prices being dragged down?

My intellegent guess to the first part: if the debts are high the consumers will have fewer opportunities to put money into shares. The demand for thares goes down >> prices for them fall.
To the second part of the question: if the share prices are down consumer confidence falls - their wealth has decreased [on average, consumers hold 50% of their wealth in property and 25% in shares; other 25% are savings and other assets]. Consumer spending will be down, as well as the investment, esp. smaller businesses - less funds to fall back on should the business go bankrupt.

sweet_gurl

Thanks!

You are welcome :smile:

Reply 38

Mustard-man