INS 3003 Exam 2 with Complete Solutions 100% Verified
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Course
INS 3003
Institution
INS 3003
INS 3003 Exam 2 with Complete Solutions 100% Verified
How should underdeveloped countries start? - Answer- 1) Gain access to the machinery industry
2) Foreign Direct Investment (FDI) invest in foreign country; however, it is not the best option as at the end of the day, the foreign corporati...
INS 3003 Exam 2 with Complete
Solutions 100% Verified
How should underdeveloped countries start? - Answer- 1) Gain access to the machinery
industry
2) Foreign Direct Investment (FDI) invest in foreign country; however, it is not the best
option as at the end of the day, the foreign corporation owns the industry and the profit
will go back to the corporation's country.
3) Race to the bottom
If a country is looking for development, they should export what they could make better
and cheaper in order to enter the international competition.
Import Substitutions Industrialization (ISI) - Answer- Development strategy advocated
by the dependency theorists, designed to help countries be more self sufficient thus
decreasing dependency on the developed powers.
Wanted to implement a protectionists economic model that would close off their
economies from the international market to develop their own domestic industry and
substitute the goods they would import for good they make themselves. There is direct
government intervention.
Implemented high trade barriers:
1) Tariffs from 25% to 100% on importing goods (effective way to block imports)
2) Prohibitions against investment to be more self efficient as investors.
3) Intentionally over value the currency. It makes the goods they import cheaper for
them.
ISI failure - Answer- During the early years, it was believed to be successful; however,
towards the end it shifted as countries appeared to be more vulnerable, and devastated
their economies.
1) It did work for large countries (more resources) but small countries struggled.
2) It cut countries out from the International market
3) Many had to take out loans
4) Rise of interest rate
5) Inflation was over 100%
The model intended to be a short-term model and protect industries until they develop;
however, Latin America implemented the model as long-term which led to failure.
, Export-Led Growth Model - Answer- Implemented by Asia.
Countries begin by selling their cheaper natural resources but then investing the foreign
capital in development.
The goal as was not protection, but trade.
Strategy of the Export-Led Growth Model - Answer- 1) Lower currency: Make goods
cheaper to compete in the market.
2) High trade barriers: prevents overspending on import goods.
3) Reinvest: The money that is made is invested in additional development
4) State Component: It is a government guided model in which the government directly
participated by providing loans and subsidies to help new industries succeed.
Limitations of the Export-Led Growth Model - Answer- 1) States become overly
depended on exports therefore, whenever demand decreases their economy decreases
as well. Making their economy vulnerable.
2) Competition
3) States focuses on exporting to wealthy countries, which leads to surplus of goods at
the wealthy state and making them set import barriers.
Cony Capitalism - Answer- A version of corruption in which government issues loans
that are not competitive. When a government just hands out these loans without
requesting industries to compete for them, it makes industries irresponsible about it.
Asian Financial Crisis - Answer- 1) States tke short-term loans in dollars to try to make
money from long-term loans to others.
2) Thailand stock market began to fall and created a domino effect to its neighbor
countries (South Korea, Malaysia, Singapore, Indonesia, Philippines)
3) Thailand had n choice than to go off their own currency and adapt the dollar.
Which economic model is better? - Answer- The Export-Led Growth model proved to be
more successful as it provided a more powerful model for long-term
North Gap - Answer- 1) Where 90% of industry is located; therefore, money
2) Only 25% of population reside
3) GDP Per Capita rised from $20,000 in 1990 to $38,470 in 2013.
South Gap - Answer- 1) Agricultural based
2) Rich in resources
3) Used for extraction of resources
4) Known for earning less
5) 75% of world's population
6) About one billion live in abject poverty.
7) GDP Per Capita raised from $3,00 in 1990 to $6,450 in 2013. It is facing an
improvement of economy; however, it is not catching up with the North as they are
improving in big numbers as well.
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