Linear-Stages-of-Growth Model Overview
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Questions and Answers

What does the Harrod-Domar model primarily assume about the capital-output ratio?

  • It is constant (correct)
  • It is influenced by labor growth
  • It is affected by technological change
  • It varies over time

    • The Harrod-Domar Model considers labor force growth as a crucial factor for economic growth.

    False

    What were the primary conditions that facilitated the success of the Marshall Plan in Europe?

    Necessary structural, institutional, and attitudinal conditions.

    Underdevelopment is primarily due to __________ of resources within a country.

    <p>underutilization</p> Signup and view all the answers

    Match the economic models with their respective characteristics:

    <p>Harrod-Domar Model = Assumes constant capital-output ratio Lewis Two-Sector Model = Describes traditional and modern sectors Rostow Model = Describes stages of economic growth Marshall Plan = Aid program facilitating European recovery</p> Signup and view all the answers

    According to the discussed theories, what is necessary but not sufficient for development?

    <p>More savings and investments</p> Signup and view all the answers

    The Lewis Two-Sector Model does not account for surplus labor in the subsistence sector.

    <p>False</p> Signup and view all the answers

    What is the main focus of the economies of poor countries in the context of development?

    <p>Transforming from traditional subsistence agriculture to a more modern economy.</p> Signup and view all the answers

    Which model suggests that developing nations have failed due to wrong economic strategies provided by Western economists?

    <p>False-Paradigm Model</p> Signup and view all the answers

    The Dualistic-Development Thesis supports the idea that poverty and wealth co-exist in developing countries.

    <p>True</p> Signup and view all the answers

    What does the term 'dualism' refer to in the context of developing nations?

    <p>The coexistence of two mutually exclusive situations, such as wealth and poverty.</p> Signup and view all the answers

    The _________ rejects the Chenery Model, arguing that there are no standard patterns of development for poor countries.

    <p>International-Dependence Revolution</p> Signup and view all the answers

    Match the following theses with their descriptions:

    <p>False-Paradigm Model = Development failures due to incorrect Western advice International-Dependence Revolution = Focus on the control of developing nations by developed countries Dualistic-Development Thesis = Coexistence of wealth and poverty in society Chenery Model = Poses standard patterns for development</p> Signup and view all the answers

    Which of the following is NOT one of the four key arguments of the Dualistic-Development Thesis?

    <p>The presence of wealth is beneficial to all sectors</p> Signup and view all the answers

    The International-Dependence Revolution provides extensive insight into how countries can sustain development.

    <p>False</p> Signup and view all the answers

    Developing countries are often under direct and indirect economic control of their _________ oppressors.

    <p>domestic</p> Signup and view all the answers

    What is one argument made by the International-Dependence Revolution regarding economic policy for developing countries?

    <p>They should pursue autarky or inwardly directed development.</p> Signup and view all the answers

    The Neoclassical Counter-Revolution advocates for increased government intervention in economic activities in developing countries.

    <p>False</p> Signup and view all the answers

    What economic approach does the Neoclassical Counter-Revolution recommend for developing countries?

    <p>Freer markets and dismantling of public ownership.</p> Signup and view all the answers

    The Neoclassical Counter-Revolution argues that underdevelopment results primarily from __________.

    <p>poor resource allocation</p> Signup and view all the answers

    Match the following concepts with their corresponding descriptions:

    <p>Autarky = Policy of inwardly directed development Neoclassical Revolution = Resurgence of free-market policies Foreign Aid = Financial assistance to support development Government Intervention = Action that is seen as hindering economic growth</p> Signup and view all the answers

    What term describes an economy with a high degree of government intervention and regulation?

    <p>Statism</p> Signup and view all the answers

    According to the Neoclassical Counter-Revolution, what is a major cause of underdevelopment in developing nations?

    <p>Government corruption and inefficiency</p> Signup and view all the answers

    The Free-Market Approach assumes that government intervention in the economy is beneficial.

    <p>False</p> Signup and view all the answers

    The Neoclassical Counter-Revolution was primarily influenced by advocating for increased state control over production.

    <p>False</p> Signup and view all the answers

    The approach that suggests developing countries should limit ties with developed countries is known as __________.

    <p>autarky</p> Signup and view all the answers

    Name one of the Asian tiger economies that exemplify successful laissez-faire economics.

    <p>South Korea</p> Signup and view all the answers

    The _____ hand of market prices is often cited to explain how resources are allocated in a free market.

    <p>invisible</p> Signup and view all the answers

    Match each approach to its basic principle:

    <p>The Free-Market Approach = Markets are efficient without government intervention. Public-Choice Theory = Self-interest guides individual behavior. Market-Friendly Approach = Governments should create conditions for efficient market operations. Statist Model = High degree of government control over the economy.</p> Signup and view all the answers

    Which of the following is a characteristic of the Public-Choice or New Political Economy Approach?

    <p>Self-interest motivates all individuals.</p> Signup and view all the answers

    Governments should intervene in all aspects of the economy according to the Market-Friendly Approach.

    <p>False</p> Signup and view all the answers

    What is considered an inefficient outcome of state-owned enterprises?

    <p>Market distortion</p> Signup and view all the answers

    What is suggested as a necessary approach for developing nations to respond to local constraints?

    <p>Implementing local solutions</p> Signup and view all the answers

    Neoclassical theory applies universally to all economies without question.

    <p>False</p> Signup and view all the answers

    What type of government intervention is necessary in markets that do not operate efficiently?

    <p>Intelligent and equity-oriented intervention</p> Signup and view all the answers

    Development economics lacks a __________ accepted doctrine or paradigm.

    <p>universally</p> Signup and view all the answers

    Match the following concepts with their descriptions:

    <p>Market Pricing = Incentives for resource allocation Public Intervention = Government action to prevent market failures Local Solutions = Responses tailored to specific country constraints Universal Doctrine = A one-size-fits-all economic theory</p> Signup and view all the answers

    What enables governments to influence socially optimal resource allocations?

    <p>Prices as signals and incentives</p> Signup and view all the answers

    Developing economies should completely avoid markets in favor of government control.

    <p>False</p> Signup and view all the answers

    What can well-formulated government policies do for markets?

    <p>Facilitate the development of markets and shared growth</p> Signup and view all the answers

    Which of the following is a stage in Rostow's Stages of Growth Model?

    <p>Traditional society</p> Signup and view all the answers

    The Harrod-Domar Growth Model suggests that increased investment leads to slower economic growth.

    <p>False</p> Signup and view all the answers

    What is the primary focus of the Linear-Stages-of-Growth Model?

    <p>Successive stages of economic growth</p> Signup and view all the answers

    The age of high mass consumption is the __________ stage in Rostow's Stages of Growth Model.

    <p>fifth</p> Signup and view all the answers

    What is a limitation of Rostow's Stages of Growth Model?

    <p>It assumes all countries desire to develop in the same way.</p> Signup and view all the answers

    Match the following models to their key characteristics:

    <p>Rostow’s Model = Series of successive stages of growth Harrod-Domar Model = Growth dependent on savings and investment AK Model = Output depends on capital stock times a constant Linear-Stages-of-Growth = Development path based on Western experiences</p> Signup and view all the answers

    Underdevelopment is solely caused by external factors according to the Linear-Stages-of-Growth Model.

    <p>False</p> Signup and view all the answers

    What is considered a prerequisite for the 'take-off' stage in Rostow’s Model?

    <p>Mobilization of savings</p> Signup and view all the answers

    Study Notes

    Linear-Stages-of-Growth Model (1950s and 1960s)

    • Series of successive stages all countries must pass to achieve development
    • Right amount and mix of saving, investment, and foreign aid. Based on the more developed countries' experiences
    • Underdevelopment is internally driven, with internal constraints within the country.
    • Rostow's Stages of Growth Model (Walt Rostow): Five stages.
      • Traditional society
      • Pre-conditions for take-off
      • Take-off
      • Drive to maturity
      • Age of high mass consumption
      • Developed countries have passed the "take-off" stage
      • Developing countries need to follow rules of development to take-off
      • Mobilization of savings generates investments
    • Harrod-Domar Growth Model (Roy Harrod and Evsey Domar)
      • More investment leads to faster growth
      • Higher capital stock from increased investment leads to growth and then savings.
    • Limitations/Implications
      • Rostow's model is based on Western experiences, may not be applicable to all countries. Biased towards the Western model
      • Rostow's model assumes all countries want the same outcome and development measures.
      • Harrod-Domar Model: assumes a constant capital-output ratio. Economic growth can be improved with better investment efficiency. Doesn't account for labor force growth or technological change. Low level of new capital formation in poor countries.

    Theories and Patterns of Structural Change (1970s)

    • Economies of poor countries transform from agriculture to urbanized, industrialized economies.
    • Underdevelopment results from underutilization of resources as well as structural or institutional factors (including domestic and international dualism)
    • Lewis Two-Sector Model (W. Arthur Lewis, later modified by John Fei and Gustav Ranis)
      • Two sectors
        • Traditional, rural subsistence sector (surplus labor).
        • Modern industrial sector (productivity, high output)
      • Surplus labor moves from the traditional sector and increases industrial sector productivity
      • Emphasis on how labor transfer, and industrial investment growth, contribute to development.
    • Patterns-of-Development Analysis (Chenery Model)
      • Examines patterns of development for numerous countries throughout the post-war period. Identifies specific characteristics like agricultural to production shifts, capital and skill accumulation, and urbanization changes.

    International-Dependence Revolution (1970s)

    • Developing countries are affected by institutional, political, and economic rigidities. Internal and international constraints.
    • Dependence and dominance relationships with richer countries
    • Underdevelopment is driven by external factors.
    • Recognition of power imbalances in international relations.
    • International dependence emphasizes reforms to economic, political, and institutional structures.
    • Neocolonial Dependence Model
      • Underdevelopment due to continuing exploitative policies of former colonial powers.
      • Economic, political, and cultural policies.
      • Historical evolution of unequal international capitalist relationships
      • Poverty and underdevelopment in developing countries is caused by structures of industrial capitalism in rich countries.
    • False-Paradigm Model
      • Incorrect development strategies/models (provided by Western economists) have caused development failure.
      • Faulty advice from developed countries

    Neoclassical Counter-Revolution (1980s and 1990s)

    • Resurgence of free-market/neoclassical orientation in development
    • Government intervention slows economic growth, Underdevelopment caused by inefficient government policies
    • Developing countries should promote free markets and laissez-faire economics
    • Government intervention is bad for promotion of economic development
    • Markets are efficient
    • Neoclassical Counter Revolution (highlights the importance of individual incentives, deregulation, and free markets)
      • Free-Market Approach
        • Market efficiency: intervention is counterproductive.
      • Public-Choice or New Political Economy Approach
        • Self-interest guides all individual behavior; government is inefficient and corrupt
        • Minimal government is best.
      • Market-Friendly Approach
        • Markets are inefficient in certain aspects and government can improve markets

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    Description

    Explore the Linear-Stages-of-Growth Model from the 1950s and 1960s, which outlines the successive stages all countries must traverse to achieve development. Learn about Rostow's Stages of Growth and the Harrod-Domar Growth Model, including their implications and limitations. This quiz will test your understanding of economic development theories.

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