Chapter 30Growth and the Less-Developed Countries  • Key Concepts  • Summary  • Practice Quiz  • Internet Exercises      ©...
In this chapter, you will  learn to solve these   economic puzzles:Is there aadifference between Is trade better “engine o...
What is one way tocompare the well-being of one country to another?      GDP per capita                   3
What is GDP Per Capita? The value of final goods  produced (GDP) divided  by the total population                    4
What are IndustriallyAdvanced Countries (IACs)? High-income nations that  have market economies  based on large stocks of ...
Who are the IACs?The United States, Canada, Australia, New Zealand, Japan, and most of the countries of Western Europe    ...
What are Less-Developed  Countries (LDCs)? Economies based on  agriculture which are  lacking large stocks  of technologic...
Who are the LDCs?Most countries of Africa, Asia, and Latin America                    8
GDP per Capita for IACs and LDCs by Region, 1997$24,847          $3,880                   $2,320    $2,060                ...
What are problems incomparing GDPs per Capita?• Measurement errors• Income distribution• Fluctuations in exchange rates• D...
Is GDP per Capitacorrelated with other measures of Quality       of Life?        Yes                11
What are Quality of Life Indicators?• Life expectancy• Adult literacy• Daily calorie supply• Energy consumption  per capit...
What Factors come together to Produce a  Country’s Growth?• Natural resources• Investment in capital• Investment in human ...
Q                                   Exhibit 480     Manufactured Goods                                Economics Growth7060...
Economics                 GrowthGrowth in resources or technological      advance                      15
What is infrastructure? Capital goods usually  provided by the  government, including  highways, bridges,  waste and water...
What is a major  problem for LDCs?They find themselves in a vicious cycle of poverty                    17
What is the Vicious  Circle of Poverty?The trap in which countries are poor because they cannot afford to save and invest,...
What are the PoliticalFactors Favorable for Economic Growth?  • Law and order  • Infrastructure  • International trade    ...
Economic growth and development  Natural      Human         Capital   Technological resources                             ...
What is Foreign Aid?The transfer of money or resources from one government to another for which no repayment is required  ...
What is the Agency forInternational Development? AID is the agency of the   U.S. State Department   that is in charge of U...
What is the World Bank?  The lending agency   that makes long-term   low-interest loans and   provides technical   assista...
What is the InternationalMonetary Fund (IMF)?The lending agency that makes short-term conditional low-interest loans to de...
What is the NewInternational Economic    Order (NIEO)?A series of proposals made by LDCs calling for changes that would ac...
Key Concepts           26
Key Concepts•   What is GDP Per Capita?•   What are Industrially Advanced Countries (IA•   What are Less-Developed Countri...
Key Concepts cont.•   What is the Vicious Circle of Poverty?•   What are the Political Factors Favorable for E•   What is ...
Summary          29
GDP per capita provides ageneral index of a country’s standardof living. Countries with low GDPper capita and slow growth ...
Industrially advanced countries(IACs) are countries in which GDP percapita is high and output is produced bytechnologicall...
Less-developed countries(LDCs) are countries with lowproduction per person. In thesecountries, output is producedwithout l...
The Four Tigers of the PacificRim are Hong Kong, Singapore,South Korea, and Taiwan. Thesenewly industrialized countries ha...
GDP per capita comparisons aresubject to four problems: (1) theaccuracy of LDC data is questionable,(2) GDP per capita ign...
Economic growth and economicdevelopment are related, but somewhatdifferent, concepts. Economic growth ismeasured quantitat...
In addition to GDP per capita,economic development includesquality-of-life measures, such as lifeexpectancy at birth, adul...
Economic growth and developmentare the result of a complex process thatis determined by five major factors: (1)natural res...
The vicious circle of poverty is atrap in which the LDC is too poor tosave and therefore it cannot invest andshift its pro...
One way for a poor country to gainsavings, invest, and grow is to usefunds from external sources, such asforeign private i...
Low incomeLow productivity   Low savings         Low investment                          40
Chapter 30 Quiz   ©2000 South-Western College Publishing                                            41
1. An LDC is defined as a country   a. without large stocks of advanced capital.   b. without well-educated labor.   c. wi...
2. According to the definition given in the  text, which of the following is not an  LDC?   a. India.   b. Egypt.   c. Chi...
3. Which of the following is true when  comparing GDPs per capita between nations?   a. The GDP per capita is subject to g...
4. LDCs are characterized by   a. high life expectancy.   b. high adult literacy.   c. high malnutrition   d. all of the a...
5. According to the classification in the text,  which of the following is an LDC?   a. United Arab Emirates.   b. Israel....
6. When the government fixes the exchange rate  above market exchange rates,   a. international trade falls.   b. the infr...
7. Which of the following statements is true?   a. An LDC is a country with a low GDP per     capita, low levels of capita...
8. An outward shift of the production  possibilities curve represents   a. economic growth.   b. a decline in economic dev...
The Effect of External Financing on LDCs(quantity per year)Capital Goods                                         B        ...
9. Which of the following problems do LDCs  face?   a. Low per capita income and high GDP     growth rate.   b. Low popula...
10. Which of the following best defines the  vicious circle of poverty?   a. The GDP per capita must rise before     peopl...
11. Which of the following is   infrastructure?    a. International Harvester tractor plant.    b. Waste and water system ...
12. Economic growth and development in  LDCs are low because many of them lack  a. capital investment.  b. technological p...
Economic growth and development  Natural      Human         Capital   Technological resources                             ...
13. Which of the following makes short-term  conditional low-interest loans to developing  countries?   a. Agency for Inte...
14. Which of the following argues that IACs  should help LDCs by imposing lower trade  barriers on poor countries than on ...
Internet ExercisesClick on the picture of the book, choose updates by chapter for the latest internet exercises           ...
END      59
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03 growth and the less-developed countries

  1. 1. Chapter 30Growth and the Less-Developed Countries • Key Concepts • Summary • Practice Quiz • Internet Exercises ©2000 South-Western College Publishing 1
  2. 2. In this chapter, you will learn to solve these economic puzzles:Is there aadifference between Is trade better “engine of Why are someforeign aid growth” than countries economic growth and rich and others poor? economic development? and loans? 2
  3. 3. What is one way tocompare the well-being of one country to another? GDP per capita 3
  4. 4. What is GDP Per Capita? The value of final goods produced (GDP) divided by the total population 4
  5. 5. What are IndustriallyAdvanced Countries (IACs)? High-income nations that have market economies based on large stocks of technologically advanced capital and well-educated labor 5
  6. 6. Who are the IACs?The United States, Canada, Australia, New Zealand, Japan, and most of the countries of Western Europe 6
  7. 7. What are Less-Developed Countries (LDCs)? Economies based on agriculture which are lacking large stocks of technologically advanced capital and well-educated labor 7
  8. 8. Who are the LDCs?Most countries of Africa, Asia, and Latin America 8
  9. 9. GDP per Capita for IACs and LDCs by Region, 1997$24,847 $3,880 $2,320 $2,060 $970 $500 $390IACs Latin Europe Middle East Sub- South America and East Asia Saharan Asia and Central and and Africa Caribbean Asia North Pacific Africa 9
  10. 10. What are problems incomparing GDPs per Capita?• Measurement errors• Income distribution• Fluctuations in exchange rates• Differences in living standards 10
  11. 11. Is GDP per Capitacorrelated with other measures of Quality of Life? Yes 11
  12. 12. What are Quality of Life Indicators?• Life expectancy• Adult literacy• Daily calorie supply• Energy consumption per capita 12
  13. 13. What Factors come together to Produce a Country’s Growth?• Natural resources• Investment in capital• Investment in human capital• Low population growth• Infrastructure 13
  14. 14. Q Exhibit 480 Manufactured Goods Economics Growth7060 PPC2504030 PPC12010 Agricultural Goods Q 100 200 300 400 500 14
  15. 15. Economics GrowthGrowth in resources or technological advance 15
  16. 16. What is infrastructure? Capital goods usually provided by the government, including highways, bridges, waste and water systems, and airports 16
  17. 17. What is a major problem for LDCs?They find themselves in a vicious cycle of poverty 17
  18. 18. What is the Vicious Circle of Poverty?The trap in which countries are poor because they cannot afford to save and invest, but they cannot save and invest because they are poor 18
  19. 19. What are the PoliticalFactors Favorable for Economic Growth? • Law and order • Infrastructure • International trade 19
  20. 20. Economic growth and development Natural Human Capital Technological resources Political resources investmen progressendowment environment development t 20
  21. 21. What is Foreign Aid?The transfer of money or resources from one government to another for which no repayment is required 21
  22. 22. What is the Agency forInternational Development? AID is the agency of the U.S. State Department that is in charge of U.S. aid to foreign countries 22
  23. 23. What is the World Bank? The lending agency that makes long-term low-interest loans and provides technical assistance to less- developed countries 23
  24. 24. What is the InternationalMonetary Fund (IMF)?The lending agency that makes short-term conditional low-interest loans to developing countries 24
  25. 25. What is the NewInternational Economic Order (NIEO)?A series of proposals made by LDCs calling for changes that would accelerate the economic growth and development of the LDCs 25
  26. 26. Key Concepts 26
  27. 27. Key Concepts• What is GDP Per Capita?• What are Industrially Advanced Countries (IA• What are Less-Developed Countries (LDCs)?• What are Quality of Life Indicators?• What Factors come together to Produce a Cou 27
  28. 28. Key Concepts cont.• What is the Vicious Circle of Poverty?• What are the Political Factors Favorable for E• What is Foreign Aid?• What is AID?• What is the World Bank?• What is the IMF?• What is the NIEO? 28
  29. 29. Summary 29
  30. 30. GDP per capita provides ageneral index of a country’s standardof living. Countries with low GDPper capita and slow growth in GDPper capita are less able to satisfy basicneeds for food, shelter, clothing,education, and health. 30
  31. 31. Industrially advanced countries(IACs) are countries in which GDP percapita is high and output is produced bytechnologically advanced capital.Countries that earn high income withoutwidespread industrial development, suchas the oil-rich Arab countries, are notincluded in the IAC list. 31
  32. 32. Less-developed countries(LDCs) are countries with lowproduction per person. In thesecountries, output is producedwithout large amounts oftechnologically advanced capitaland well-educated labor. The LDCsaccount for about three-fourths ofthe world’s population. 32
  33. 33. The Four Tigers of the PacificRim are Hong Kong, Singapore,South Korea, and Taiwan. Thesenewly industrialized countries haveachieved high growth rates andstandards of living approachingthose of many of the IACs. 33
  34. 34. GDP per capita comparisons aresubject to four problems: (1) theaccuracy of LDC data is questionable,(2) GDP per capita ignores the degreeof income distribution, (3) changes inexchange rates affect gaps betweencountries, and (4) there is noadjustment for the cost-of-livingdifferences between countries. 34
  35. 35. Economic growth and economicdevelopment are related, but somewhatdifferent, concepts. Economic growth ismeasured quantitatively by GDP percapita, while economic development isa broader concept. 35
  36. 36. In addition to GDP per capita,economic development includesquality-of-life measures, such as lifeexpectancy at birth, adult literacy rate,and per capita energy consumption. 36
  37. 37. Economic growth and developmentare the result of a complex process thatis determined by five major factors: (1)natural resources, (2) human resources,(3) capital, (4) technological progress,and (5) the political environment. Thereis no single correct strategy foreconomic development, and a lack ofstrength in one or more of the five areasdoes not prevent growth. 37
  38. 38. The vicious circle of poverty is atrap in which the LDC is too poor tosave and therefore it cannot invest andshift its production possibilities curveoutward. As a result, the LDC remainspoor. 38
  39. 39. One way for a poor country to gainsavings, invest, and grow is to usefunds from external sources, such asforeign private investment, foreign aid,and foreign loans. Borrowing by manyLDCs led to the debt crises of the1980s, which was resolved by writingoff and restructuring the loans. 39
  40. 40. Low incomeLow productivity Low savings Low investment 40
  41. 41. Chapter 30 Quiz ©2000 South-Western College Publishing 41
  42. 42. 1. An LDC is defined as a country a. without large stocks of advanced capital. b. without well-educated labor. c. with a low GDP per capita. d. that is described by all of the above.D. LDCs are economies based on agriculture such as most countries of Africa, Asia, and Latin America. They have a low level of capital, a low level of education, and low standard of living. 42
  43. 43. 2. According to the definition given in the text, which of the following is not an LDC? a. India. b. Egypt. c. China. d. Ireland.D. Interestingly, Israel, Portugal, and Greece are listed as LDCs measured primarily by annual GDP per capita. 43
  44. 44. 3. Which of the following is true when comparing GDPs per capita between nations? a. The GDP per capita is subject to greater measurement errors for LDCs compared to IACs. b. The GDP per capita does not measure income distribution. c. The GDP is subject to fluctuations from changes in exchange rates. d. All of the above. D. United Arab Emirates, for example, has a high GDP per capita, but is not a IAC because of a lack of widespread industrial development. 44
  45. 45. 4. LDCs are characterized by a. high life expectancy. b. high adult literacy. c. high malnutrition d. all of the above. e. none of the above.E. All of the above are characteristics of industrially advanced countries (IACs). 45
  46. 46. 5. According to the classification in the text, which of the following is an LDC? a. United Arab Emirates. b. Israel. c. Hong Kong. d. Greece. A. United Arab Emirates has a high GDP per capita but there is a lack of widespread industrial development. 46
  47. 47. 6. When the government fixes the exchange rate above market exchange rates, a. international trade falls. b. the infrastructure improves. c. real GDP per capita rises. d. the vicious circle of poverty is broken. A. When the exchange rate of a country increases it becomes more expensive for foreigners to buy goods and services from that country. 47
  48. 48. 7. Which of the following statements is true? a. An LDC is a country with a low GDP per capita, low levels of capital, and uneducated workers. b. The vicious circle of poverty exists because GDP must rise before people can save and invest. c. LDCs are characterized by rapid population growth and low levels of investment in human capital. d. All of the above are true. D. All of the above statements are true statements. 48
  49. 49. 8. An outward shift of the production possibilities curve represents a. economic growth. b. a decline in economic development. c. a decrease in human capital. d. a decrease in resources. A. 49
  50. 50. The Effect of External Financing on LDCs(quantity per year)Capital Goods B Kb Ka PPC1 PPC2 Ca Consumer Goods (quantity per year) 50
  51. 51. 9. Which of the following problems do LDCs face? a. Low per capita income and high GDP growth rate. b. Low population growth and low per capita income. c. Rapid population growth and low human capital. d. Low per capita income and high saving rate. C. Investment in human capital generally results in increases in GDP per capita. 51
  52. 52. 10. Which of the following best defines the vicious circle of poverty? a. The GDP per capita must rise before people can save and invest. b. People cannot save while capital accumulates. c. Increased GDP per capita relates to lower population growth. d. Poverty, saving, and investment are related like a circle.A. The vicious circle of poverty is the trap in which countries are poor because they cannot afford to invest and save, but they cannot save and invest because they are poor. 52
  53. 53. 11. Which of the following is infrastructure? a. International Harvester tractor plant. b. Waste and water system provided by government. c. USAir airplane. d. Service of postal workers.B. Infrastructure refers to capital goods usually provided by the government, including highways, bridges, and airports. 53
  54. 54. 12. Economic growth and development in LDCs are low because many of them lack a. capital investment. b. technological progress. c. a favorable political environment. d. all of the above. e. none of the above.D. Economic growth and development involve a complex process that is determined by several interrelated forces. 54
  55. 55. Economic growth and development Natural Human Capital Technological resources Political resources investmen progressendowment environment development t 55
  56. 56. 13. Which of the following makes short-term conditional low-interest loans to developing countries? a. Agency for International Development (AID). b. World Bank. c. International Monetary Fund (IMF). d. New International Economic Order (NIEO). C. AID is the agency of the U.S. State Department that is in charge of U.S. aid to foreign countries. The World Bank makes long-term low-interest loans to LDCs. NIEO is a series of proposals made by LDCs to improve their economic growth. 56
  57. 57. 14. Which of the following argues that IACs should help LDCs by imposing lower trade barriers on poor countries than on rich countries? a. The Agency for International Development (AID) b. The World Bank. c. International Monetary Fund (IMF). d. New International Economic Order (NIEO). D. The NIEO has made a series of proposals to help improve LDCs economic growth. Lower trade barriers is one of these proposals. 57
  58. 58. Internet ExercisesClick on the picture of the book, choose updates by chapter for the latest internet exercises 58
  59. 59. END 59
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