Constraints to growth

16 flashcards · Economics · by Addaneye

1. What are the constraints to growth?

   Poor education Poor infrastructure Poor health Population growth

2. Strategies of improving growth and development

   Improving education Promoting FDI Aid Providing education for girls

3. How is poor education a constraint to growth?

   Low levels of education >> low levels of human capital >> low productivity >> inward shift in LRAS >> limit real GDP >> limit economic development Low income >> little income tax >> low investment >> low development

4. How does improving education improve growth and development?

   Improved education >> higher human capital >> higher productivity >> outward shift of LRAS >>economic growth Higher incomes >> increase income tax revenue >> increased investment >> high development

5. Improving education - evaluation

   (Short run) More people in school so less people working >> fall in incomes >> fall in consumption >> fall in AD >> fall in real GDP >> limiting economic growth (Long run) If quality of education doesn't improve much >> low level of human capital >> low productivity >> limited economic growth

6. How is poor infrastructure a constraint to growth?

   Poor infrastructure >> causes delays for firms >> decreases productivity >> shifts LRAS inwards >> constrains growth Fall in productivity >> increase in costs >> increase in prices >> fall in profits >> decrease in corporation tax revenue >> less money to invest in development

7. How does promoting FDI improve growth?

   FDI >> increase in investments by firms >> increase in profits >> increase in corporation tax revenue >> increase in infrastructure spending >> improvement in infrastructure >> improving growth and development

8. Two ways of promotion FDI

   Reducing corporation >> increase in profits for firms >> increasing FDI Lower wage costs >> lower prices >> more profits >> more FDI

9. Promoting FDI - evaluation

   fall in minimum wage >> fall in incomes >> fall in AD >> limiting growth and development fall in corporation tax >> fall in corporation tax revenue >> fall in investment on development

10. Two main reasons for poor health in developing countries

    Poor healthcare Poor sex education

11. How does poor health constrain growth and development?

    Reduces workers' productivity Keeps children out of school

12. How does aid improve growth and development?

    Increase in productivity >> outward shift in LRAS >> increase in real GDP >> growth Increase in profits >> increase in corporation tax revenue >> increase in spending on development

13. Aid- evaluation

    Money may be spent by corrupt government officials rather than being spent on areas that will have a positive impact such as healthcare and infrastructure

14. How does population growth limit growth?

    More children means parents have less time to develop their careers and stay in unproductive jobs >> inward shift in LRAS More children in schools and hospitals >> fall in quality of healthcare and education >> fall in human capital & worse health >> decreasing productivity

15. How does providing education for girls improve growth and development?

    Improves human capital >> better jobs >> less kids >> decrease population >> increase productivity >> growth and development Improve sex education >> lower birth rate >> focus on careers >> increase in productivity

16. Education for girls - evaluation

    Religion - many religions teach that girls should stay at home so even with a good education, they may stay at home and have more kids