Reducing Poverty

What is economic growth?

The increase in a country’s real national output, caused by improvements in the quality or quantity of factors of production.

How does economic growth affect the PPF?

It causes an outward shift in the Production Possibility Frontier (PPF).

What is economic development?

It refers to improvements in living standards, life expectancy, and freedoms. It considers the quality of life and sustainability of growth.

How is economic development different from economic growth?

Economic development focuses on well-being and sustainability, while growth focuses on output and production.

Why does China provide aid to Africa?

It is a policy instrument for China to strengthen economic and political ties with Africa.

Why do consumers in LEDCs have a high propensity to consume (less economically developed countries)?

Due to limited incomes, they tend to spend rather than save.

How can aid help LEDCs (less economically developed countries)?

Aid can:

• Fill the savings gap

• Reduce human capital inadequacies

• Improve infrastructure

• Help pay off debt

What are the criticisms of aid?

• Corruption can divert aid

• Dependency on aid

• Dumping of goods (e.g. mosquito nets) can harm local businesses

What are the views of Dambisa Moyo and Jeffrey Sachs on aid?

• Dambisa Moyo: Against aid due to corruption and dependency.

• Jeffrey Sachs: Supports aid and believes rich countries should meet UN targets of 0.7% of GDP for aid.

What are NGOs?

Non-Governmental Organisations that are independent from governments and businesses, often focusing on human rights, healthcare, or environmental issues.

What is FDI?

Capital investment from one country into another to gain a lasting interest in a foreign enterprise.

How does FDI help LEDCs?

• Creates jobs

• Encourages innovation & technology transfer

• Promotes long-term sustainable growth

What is microfinance?

Small loans given to people who are normally unable to access bank loans, allowing them to start businesses and gain financial independence.

What are the benefits of microfinance?

Helps break dependence on aid & loan sharks

Increases employment & entrepreneurship

Has high repayment rates

What are the limitations of microfinance?

• Loans could be used for consumption rather than investment

• Businesses may fail (e.g. in Tamil Nadu, only 2% survived)

• Data on loan usage may not be reliable

Why is developing human capital important?

• Increases productivity and allows for advanced technology

• Reduces skills shortages

• Helps countries move up the supply chain (e.g. from primary production to manufacturing & services)

How has global primary school enrolment changed?

Increased from 80% to 90% (1980-1990), but secondary & tertiary education remain low.

What are examples of physical infrastructure?

Transport, energy, water, and telecommunications.

How does poor infrastructure affect businesses?

• Increases supply costs

• Reduces labour mobility

• Causes delays & inefficiencies

What is an example of poor infrastructure limiting development?

India’s poor irrigation system causes food production issues and leads to higher food prices.

What is the AIIB, and why is it important?

Asian Infrastructure Investment Bank (AIIB) is led by China and funds Asian energy, transport, and infrastructure projects.

How has China used infrastructure to develop?

• Invested 9% of GDP in infrastructure

• Built high-speed Maglev trains

• Helped 100 million people get better access to power & telecommunications

Why do some economists criticise China’s infrastructure focus?

• Opportunity cost of not investing in healthcare & education

• Over-investment in airports (80% of people already live within 100km of one)