Corruption

Question 1

Fair Trade Scheme

Answer 1

When you buy fair trade products, part of the fair trade price you pay goes directly to the producers and so it increases their incomes.

Question 2

Fair Trade Premium

Answer 2

A communal fund that fair trade farmers can spend on whatever will develop their communities the most.

Question 3

How can Fair Trade schemes lead to economic development?

Answer 3

Money goes straight to farmers → Increases their incomes → Increases consumption → Increases AD → Increases economic growth

Money goes straight to farmers → Increases their incomes → Increases income tax revenue → Increases government spending on development → Increases economic development

Question 4

According to one investigation, how much of the extra price paid for Fair Trade products goes to the farmer?

Answer 4

One investigation found that less than 1% of the extra price made its way to the farmers.

Question 5

How can Fair Trade schemes help to overcome some of the problems of corruption?

Answer 5

Fair Trade can help overcome the problems of corruption in two ways:
1. People buying Fair Trade pay a slightly higher price and some of the extra money is given directly to the producer. This raises their income which → increases consumption → increases AD → increases real GDP → increases development

2. Some money from Fair Trade goes to the Fair Trade Premium which is a communal fund for the community to spend on development. This bypasses the government which means it is less susceptible to corruption.

Question 6

One strategy for development used by some governments is to promote joint ventures between one of their firms and a multinational corporation. Why might this be an effective strategy for development?

Answer 6

Promoting joint ventures between small domestic firms and large multinational corporations has lots of advantages:

1. It provides a way of small domestic firms exporting to the rest of the world without having to face high barriers to entry. An increase in exports → increases injections → multiplier effect → more employment → more consumption → more AD → increase real GDP → economic development.
2. Small domestic firms can learn from large MNCs and so technology and knowledge can be transferred, which helps to increase productivity → right shift of LRAS → Increase economic growth → Increase economic development

Question 7

How might tourism be used as a strategy to promote economic growth and development?

Answer 7

Tourism can be a useful way to promote economic growth and development. Money from tourists is an injection into the economy → increases injections → multiplier effect → more employment → more consumption → more AD → increase real GDP → economic development.

Question 8

How might developing primary industries be used as a strategy to promote development?

Answer 8

A primary industry is one which is based around raw materials like agriculture. Some advantages of developing primary industries are:

1. It is a natural resource and can be a source of absolute advantage for a country e.g. weather conditions in some countries mean they can produce bananas at a much lower cost than the UK
2. Primary industries are often labour intensive and many developing countries have large populations with cheap wages. This means that exports of primary goods are often very internationally competitive. An increase in exports → increases injections → multiplier effect → more employment → more consumption → more AD → increase real GDP → economic development.

Question 9

Which of the following shows a disadvantage to using tourism as a strategy for development?

Answer 9

There are a few potential disadvantages of using tourism as a strategy for development:

1. Use of natural resources - tourism can damage natural resources and this is unsustainable (an island called Boracay, in the Philippines, was recently closed to tourism in order to try to clear up all the rubbish they had left on the island!)
2. It is very seasonal - there can be large injections at certain times of the year but then unemployment for lots of the year when there are no tourists.
3. It can lead to overdependence on one industry, which can leave the economy open to shocks (like when a terrorist attack in Tunisia practically destroyed their tourism industry).

Question 10

Which of the following shows a disadvantage of developing primary industries as a strategy for development?

Answer 10

There are a few potential disadvantages of using primary industries as a strategy for development:

1. It can lead to overdependence on one industry, which can leave the economy open to shocks
2. Prices of primary products are very volatile. A bad harvest, bad weather, or speculative buying of commodities can all create large changes in price, which can have a negative impact on the economy.
3. Prices of primary products are often low compared to manufactured products.This means that poor countries tend to export cheap products and import expensive products which means they only get poorer.

Question 11

What does it mean if a short run aggregate supply curve is shifted far to the left?

Answer 11

If the SRAS is shifted far to the left then real GDP is kept very low.

Question 12

What is likely to happen to spending on development following the relief of debt?

Answer 12

Without any national debt, Burundi has more money to spend on development. This means that they can improve education and healthcare rather than spending money paying back debt.

Question 13

Landlocked

Answer 13

When a country has no coasts as it is surrounded by other countries.

Question 14

Debt Relief

Answer 14

When you tell somebody that has borrowed money from you that they no longer have to pay it back.

Question 15

Landlocked chain of reasoning

Answer 15

Landlocked → Increases costs → Left shift of SRAS → Increases prices → Decreases competitiveness → Less profit → Less corporation tax revenue → Less government spending on development → Limits development