Economic Development and Globalization

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Questions and Answers

What is the primary characteristic of a market economy?

Individuals, rather than the government, make the majority of economic decisions.

What is the main goal of central planning authorities in a command economy?

To determine what products will be produced in what quantities and the prices at which they will be sold.

What is the primary difference between a market economy and a command economy?

Ownership and control of the factors of production.

What is the primary characteristic of a mixed economy?

Economic decisions are largely market driven, but the government intervenes in many economic decisions. Signup and view all the answers

What is the focus of monetary measures in assessing economic development and performance?

The total flow of goods and services in the economy of a nation. Signup and view all the answers

What was the priority of communist governments in terms of economic investments?

Industrial investments and military spending. Signup and view all the answers

What is Gross National Income (GNI) and how does it differ from Gross Domestic Product (GDP)?

GNI measures the value of all production in the domestic economy, including income received from other countries, minus payments made to other countries. It differs from GDP, which measures the total market value of goods and services produced within a nation's borders. Signup and view all the answers

What is the main difference between Gross National Product (GNP) and Gross Domestic Product (GDP)?

GNP includes income earned by citizens of a country, both within and outside the country, whereas GDP only measures production within the country's borders. Signup and view all the answers

What are developed economies shifting towards, and what do they rely on to support innovation?

Diversified, service-oriented activities, relying on information and technology to support product and process innovation. Signup and view all the answers

In the example of the Japanese multinational producing cars in the UK, how does this affect the UK's GDP and GNP?

The production is counted towards UK GDP, but the profits sent back to Japan are subtracted from UK GNP. Signup and view all the answers

What is a common practice among manufacturers in developed economies, and what is their motivation for doing so?

Outsourcing activities to low-cost factories in emerging economies, to take advantage of lower costs. Signup and view all the answers

What happens to profits earned by a UK firm from insurance companies located abroad?

The net income from overseas assets is added to UK GNP. Signup and view all the answers

Why is GNI considered a broader measure of economic performance than GDP?

GNI includes income received from other countries, less payments made to other countries, providing a more comprehensive picture of a country's economic activity. Signup and view all the answers

What are some of the characteristic differences between developed and developing economies?

Developed economies have higher income levels, more industrialization, better infrastructure, and higher standards of living, whereas developing economies have lower income levels, slight industrialization, incomplete infrastructure, and lower standards of living. Signup and view all the answers

What are some of the social and economic challenges typically found in developing countries?

Higher infant mortality, shorter life expectancy, lower literacy levels, poorer public hygiene, insufficient health care, and inadequate nutrition. Signup and view all the answers

What is the relationship between GDP, GNP, and international transactions?

GDP measures production within a nation's borders, GNP includes income earned by citizens, and international transactions affect the calculation of both. Signup and view all the answers

What is a characteristic of emerging economies, and how do they differ from developing economies?

Emerging economies are faster growing, quickly industrializing countries with accelerating growth in productivity, manufacturing, exporting, and per capita income. Signup and view all the answers

What changes are taking place in the financial systems, political institutions, and market infrastructure of emerging economies?

They are steadily modernizing. Signup and view all the answers

What are the three components of the Human Development Index (HDI) used to measure a country's quality of life?

Longevity, Knowledge, and Standard of Living Signup and view all the answers

What is the primary focus of estimators of economic progress toward improving happiness, such as the Your Better Life Index (YBLI)?

Evaluating economic performance in terms of matters that people believe are important, beyond monetary measures Signup and view all the answers

What are the different terms used to describe the shadow economy, and what activities fall under this category?

The shadow economy is also referred to as the black, gray, or parallel market, or the informal economy. It includes extra-legal activities such as driving an unlicensed taxi, street trading, or unregistered day care center, as well as illegal activities like drug-slinging, illicit gambling, cigarette and alcohol smuggling, and product piracy. Signup and view all the answers

What do perspectives like happynomics or welfare economics advocate for in redefining traditional performance standards of wealth?

Redefining standards to reflect principles of well-being, quality of life, and life satisfaction Signup and view all the answers

What is the primary objective of economic activity from the sustainability and stability perspective?

The primary objective of economic activity from the sustainability and stability perspective is to create an environment for people to enjoy long, healthy, and happy lives. Signup and view all the answers

What is the main focus of green economics?

Green economics focuses on the impact of economic activities on the natural environment and emphasizes the importance of sustainability. Signup and view all the answers

What does the Standard of Living component of the HDI measure?

GNI per capita (PPP) Signup and view all the answers

What are the two measures used to assess the Knowledge component of the HDI?

Adult literacy rate and the combined primary, secondary, and tertiary gross enrollment ratio Signup and view all the answers

What is the Net National Product (NNP) and how does it differ from GDP?

The Net National Product (NNP) measures the depletion of natural resources and degradation of the environment that result from making and consuming products, whereas GDP does not account for these factors. Signup and view all the answers

What is the primary purpose of estimating a country's human development, as measured by the HDI?

To help managers measure market potential Signup and view all the answers

What do Genuine Progress Indicators (GPI) measure?

Genuine Progress Indicators (GPI) measure the economic progress toward improving happiness by applying the same accounting framework used to calculate GDP. Signup and view all the answers

Why are estimators like NNP and GPI important in measuring economic progress?

Estimators like NNP and GPI are important because they provide a more comprehensive picture of a country's economic performance by accounting for the environmental and social costs of economic activities. Signup and view all the answers

Study Notes

Economic Development and Performance

Developed economies shift towards diversified, service-oriented activities, relying on information and technology for innovation.
Manufacturers in developed economies outsource activities to low-cost factories in emerging economies.
Developing economies have low-income levels, slight industrialization, incomplete infrastructure, and lower standards of living.

Characteristics of Economies

Developed economies: high-income levels, high industrialization, complete infrastructure, and high standards of living.
Emerging economies: faster-growing, industrializing countries like China, Mexico, Indonesia, and the Philippines, with accelerating growth in productivity and per capita income.
Economies in Transition: experiencing growth in productivity, manufacturing, exporting, and per capita income, leading to material improvements.

Economic Systems

Market Economy: private ownership and control of factors of production, with consumer sovereignty and freedom of market entry and exit.
Command Economy (Centrally Planned Economy): government ownership and control of factors of production, with central planning authorities determining production and prices.
Mixed Economy: combines market-driven decisions with government intervention, with a mix of private and public ownership.

Assessing Economic Development and Performance

Monetary Measures:
- Gross National Income (GNI): value of all production in the domestic economy, plus income from other countries.
- Gross Domestic Product (GDP): total market value of goods and services produced within a nation's borders.
- Gross National Product (GNP): total value of all final goods and services produced within a nation, minus profits sent abroad.

The Shadow Economy

Includes extra-legal and illegal activities that fall beyond official statistics.
Particularly influential in developing economies, with some countries moving to include shadow activities in their measurements.

Sustainability and Stability

Sustainability: creating an environment for people to enjoy long, healthy, and happy lives.
Green economics: measures economic performance in terms of its effect on long-term sustainability.
Estimators of economic progress:
- Net National Product (NNP): measures depletion of natural resources and environmental degradation.
- Genuine Progress Indicators (GPI): adjusts for environmental quality, health, livelihood security, equity, free time, and educational attainment.
- Human Development Index (HDI): estimates a country's degree of human development, including longevity, knowledge, and standard of living.

Happiness and Well-being

Perspectives like happynomics and welfare economics incorporate psychology, health, security, and sociology into economic assessments.
Estimators of economic progress:
- Your Better Life Index (YBLI): evaluates economic performance in terms of matters like housing, jobs, social relationships, health, security, and education.

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Description

This quiz covers the characteristic differences between developed and developing economies, including their economic and social features, role of technology, and globalization trends.