Unit 7—Developed and developing Economies:
There are various reasons why countries are at varying levels of development:
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Environmental |
Political |
Historical |
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Climate |
Corruption |
Colonial debt legacy |
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Fertile soil |
High military spending |
Slave trade |
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Natural resources |
Political instability |
Unfair trade deals |
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Natural disasters |
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LDC = Less Developed Country
MDC = More Developed Country
Problems of Development:
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Resource depletion
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Increased pollution
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Opportunity cost of the other land use
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Loses of animal habitats
LDC Characteristics:
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Low life expectancy
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Low income/capita
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Low levels of education
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Low levels of healthcare
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Large primary sector
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Raw material exports
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High population growth
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High dependency ratio
Measuring Development:
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GDP = Gross Domestic Product: Total value of final good and services produced within a country in a year
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GDP/Capita = GDP per person in a country
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Real GDP = GDP minus inflation
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HDI = Human Development Index: This is a quality of life index
Scale: 0 means poor quality of life 1 means high quality of life
Benefits of development:
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Increased incomes
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Higher levels of consumption
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Shorter working hours
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Increased tax for the governments
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Provision of public goods
Population Pyramids:
Unit 8—International Aspects:
Balance of payments = Current account + capital account + financial account + official reserves
Current Account:
This shows the income and spending from trade with other countries.
The main parts are:
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Trade: Revenue from imports and export of physical goods (manufactured items, food etc)
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Services: Revenue from buying and selling services with other countries (financial, airlines etc)
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Income: Adds wages from residents working abroad and subtracts foreign workers wages. Adds profits and dividends sent back by firms abroad and subtracts those leaving the country.
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Transfers: Aid sent and received between governments, (taxes/payments to/from the EU etc)
Key terms:
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Visible trade: Trade in physical items – ones that you can touch
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Invisible trade: Trade in services – things you can't touch
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Balance of trade surplus: Visible trade exports greater than imports
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Balance of trade deficit: Visible trade imports greater than exports
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Balance of payments surplus: Value of combined accounts is positive
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Balance of payments deficit: Value of combined accounts is negative
Absolute Advantage:
In economics, the principle of absolute advantage refers to the ability of a party (an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.
Comparative Advantage:
In economics, the principle of absolute advantage refers to the ability of a party (an individual, firm, or country) to produce a quantity of a good, product, or service at a lower opportunity cost than a competitor.
