Podcast
Questions and Answers
Which key factor does the Keynesian model emphasize for economic growth?
Which key factor does the Keynesian model emphasize for economic growth?
- Government spending
- Accumulation of human capital
- Technological innovation
- Accumulation of capital (correct)
What does the Harrod-Domar model primarily focus on in relation to economic growth?
What does the Harrod-Domar model primarily focus on in relation to economic growth?
- Relationship between inflation and employment
- Government policies on taxation
- Savings as a constant proportion of income (correct)
- Impact of foreign investment
Which of the following aspects is NOT considered explicitly by the Keynesian Growth Theory?
Which of the following aspects is NOT considered explicitly by the Keynesian Growth Theory?
- Law of diminishing returns to capital (correct)
- Impact of saving on growth
- Role of consumer spending
- Investment as a function of saving
What is the main implication of Rostow's stages of growth model within the context of growth theories?
What is the main implication of Rostow's stages of growth model within the context of growth theories?
In relation to the Harrod-Domar model, what conclusion can be drawn about saving?
In relation to the Harrod-Domar model, what conclusion can be drawn about saving?
How do the growth theories discussed relate to the rapid growth of East Asian economies?
How do the growth theories discussed relate to the rapid growth of East Asian economies?
What aspect of economic development is overlooked by the Harrod-Domar model?
What aspect of economic development is overlooked by the Harrod-Domar model?
Which of the following statements best describes a limitation of the Keynesian Theory?
Which of the following statements best describes a limitation of the Keynesian Theory?
What does the Harrod-Domar model suggest is necessary for maintaining a steady rate of growth of full employment income?
What does the Harrod-Domar model suggest is necessary for maintaining a steady rate of growth of full employment income?
Which of the following best describes the warranted growth rate as introduced by Roy Harrod?
Which of the following best describes the warranted growth rate as introduced by Roy Harrod?
What is indicated by a lower capital-output ratio in the context of economic growth?
What is indicated by a lower capital-output ratio in the context of economic growth?
Which of the following factors is NOT directly mentioned as affecting economic growth in the Harrod-Domar model?
Which of the following factors is NOT directly mentioned as affecting economic growth in the Harrod-Domar model?
What are the two main factors that the Harrod-Domar model cites as determinants of economic growth?
What are the two main factors that the Harrod-Domar model cites as determinants of economic growth?
What is a key assumption of the power-balance theory regarding international trade?
What is a key assumption of the power-balance theory regarding international trade?
What is a potential drawback of maintaining a steady rate of growth in a capitalist economy as per the Harrod-Domar model?
What is a potential drawback of maintaining a steady rate of growth in a capitalist economy as per the Harrod-Domar model?
How do power-balance theories view the relationship between income levels and savings in poor countries?
How do power-balance theories view the relationship between income levels and savings in poor countries?
What consequence do power-balance theories suggest occurs due to the deteriorating terms of trade for poor countries?
What consequence do power-balance theories suggest occurs due to the deteriorating terms of trade for poor countries?
According to the Harrod-Domar model, how is the warranted growth rate calculated if the saving rate is 10% and the capital-output ratio is 4?
According to the Harrod-Domar model, how is the warranted growth rate calculated if the saving rate is 10% and the capital-output ratio is 4?
Which of the following statements accurately reflects the balance of power concept in international relations?
Which of the following statements accurately reflects the balance of power concept in international relations?
How do higher savings influence economic growth according to the Harrod-Domar model?
How do higher savings influence economic growth according to the Harrod-Domar model?
According to power-balance theory, which factor is claimed to inhibit agricultural productivity in poorer countries?
According to power-balance theory, which factor is claimed to inhibit agricultural productivity in poorer countries?
What has led to the discredit of power-balance theories in some regions like East and Southeast Asia?
What has led to the discredit of power-balance theories in some regions like East and Southeast Asia?
Which of the following actions can states take to pursue a policy of balance of power?
Which of the following actions can states take to pursue a policy of balance of power?
Which factor contributes to the exploitation of poorer economies by richer ones, according to power-balance theories?
Which factor contributes to the exploitation of poorer economies by richer ones, according to power-balance theories?
What is the primary focus of the Fei-Ranis model regarding economic development in underdeveloped countries?
What is the primary focus of the Fei-Ranis model regarding economic development in underdeveloped countries?
How does the Fei-Ranis model view the labor supply in underdeveloped countries?
How does the Fei-Ranis model view the labor supply in underdeveloped countries?
What two sectors does the Fei-Ranis model identify in the context of a dual economy?
What two sectors does the Fei-Ranis model identify in the context of a dual economy?
What role do saving and investment play according to the Fei-Ranis model?
What role do saving and investment play according to the Fei-Ranis model?
What criticism is directed at the Fei-Ranis model?
What criticism is directed at the Fei-Ranis model?
Why is agricultural output crucial in the Fei-Ranis model?
Why is agricultural output crucial in the Fei-Ranis model?
How do Fei and Ranis perceive the relationship between money and physical capital in production?
How do Fei and Ranis perceive the relationship between money and physical capital in production?
What is a key aspect of the developmental problem highlighted in the Fei-Ranis model?
What is a key aspect of the developmental problem highlighted in the Fei-Ranis model?
What primary factor contributes to the slower growth of industrial countries compared to rapidly growing poorer countries?
What primary factor contributes to the slower growth of industrial countries compared to rapidly growing poorer countries?
What does the Fei-Ranis model primarily explain regarding economic development?
What does the Fei-Ranis model primarily explain regarding economic development?
Which sector in the Fei-Ranis model typically has higher productivity and wages?
Which sector in the Fei-Ranis model typically has higher productivity and wages?
What drives labor migration from rural to urban areas in the Fei-Ranis model?
What drives labor migration from rural to urban areas in the Fei-Ranis model?
What is one reason the services sector has historically seen low productivity growth in industrial countries?
What is one reason the services sector has historically seen low productivity growth in industrial countries?
Which aspect of human capital development is emphasized for economic growth in industrial countries?
Which aspect of human capital development is emphasized for economic growth in industrial countries?
How does the Fei-Ranis model classify economies?
How does the Fei-Ranis model classify economies?
What is a critical issue affecting the agricultural sector in the context of the Fei-Ranis model?
What is a critical issue affecting the agricultural sector in the context of the Fei-Ranis model?
Study Notes
Economic Development Theories
- Five main growth theories shape the understanding of economic development, particularly observed in East Asian economies.
Keynesian Model
- Emphasizes the significance of capital accumulation for economic growth.
- The Harrod-Domar model links growth rate to saving levels and capital productivity.
- Saving is a constant proportion of income defined as Y = C + S, where S represents saving and investment.
- Explores requirements for sustained full employment growth without inflation or deflation.
- Suggests that investment must grow in proportion to the marginal propensity to save and capital-output ratio.
Harrod-Domar Model
- Defines two questions: requirements for steady growth at full employment and the feasibility of long-term full employment equilibrium.
- Economic growth depends on:
- Level of Savings: Higher savings enhance investment capacity.
- Capital-Output Ratio: A lower ratio indicates more efficient investment, leading to higher growth rates.
- Introduces 'warranted growth rate' which is the rate at which savings are entirely invested, keeping the capital-output ratio constant.
Power Balance Theory
- Focuses on international dynamics of power and trade, affecting development levels among countries.
- Explains how poor nations, exporting raw materials, face a deteriorating terms of trade against wealthier nations.
- Suggests that low incomes hinder saving rates, limiting development prospects.
Structuralist Theory
- Highlights the jobs creation conflict between traditional agricultural sectors and modern industrial sectors.
- The Lewis-Fei-Ranis Model differentiates between two economic sectors, analyzing labor movement and productivity disparities.
- Proposes industrialization through labor shifts from low-productivity agriculture to higher-productivity industry.
New Growth Theory
- Not explicitly covered but serves as a modern continuation or critique of earlier theories, focusing on technological innovation and human capital as growth drivers.
- It emphasizes long-term sustained growth influenced by knowledge and efficiency improvements in industries.
Summary
- Each theory offers insights into the complex mechanisms underlying economic growth, with emphasis on saving, investment, and international dynamics impacting development.
- The application of these theories provides critical understanding for analyzing the economic trajectories of developing and developed nations.
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Description
Explore key concepts in economic development through this quiz on growth theories. Topics include the Keynesian Model, Harrod-Domar Model, Solow Theory, and more. Assess your understanding of these fundamental theories affecting economic growth.
