Development Economics Flashcards

Only 10 flashcards are shown at a time! Once you’ve mastered these 10 Economic terms, click the shuffle button below for 10 new terms. There are approximately 45 flashcards covering Development Economics.

Capital Flight
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When the scarce capital available to a less developed country leaves for the safety and security of a more developed economy. Financial capital flight occurs when savers prefer to put their money in foreign banks to domestic banks, reducing the supply of loanable funds in a poor county. Human capital flight is also known as “brain drain” when the skilled workers in a poor country prefer to seek work in a richer country, reducing the production possibilities of the less developed country.

Capital Flight
Public sector
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Refers to the activities undertaken by the government or the state. “Public sector investment” generally refers to government spending on infrastructure.

Public sector
Private sector
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Refers to the activities undertaken by the private households and firms in an economy. “Private sector spending” includes household consumption and investment by private, non-government-owned firms.

Private sector
More Economically Developed Country (MEDC)
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A term referring to a country in which the average income is above approximately $15,000 PPP per year, in which most people have access to health care and education. Includes most of Europe, North America, parts of Latin America and East Asia.

More Economically Developed Country (MEDC)
Tragedy of the commons
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When there exists a common access resource, over which there is no private owner, the incentive among rational users of that resource is to exploit it to the fullest potential in order to maximize their own self gain before the resource is depleted. The tragedy, therefore, is that common resources will inevitably be depleted due to humans’ self-interested behavior, leaving us with shortages in key resources essential to human survival.

Tragedy of the commons
Production possibilities curve
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A graph that shows the various combinations of output that the economy can possibly produce given the available factors of production and the available production technology.

Production possibilities curve
Tied aid
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Aid given by a more developed country to a less developed country that comes with “strings attached”, e.g. the recipient nation must spend any of the money received on goods and services produced by the lending country.

Tied aid
World Bank
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An international agency which makes soft loans to less economically developed countries, mostly for infrastructure projects or other investments which improve the physical or the human capital of the developing country.

World Bank
Absolute Poverty

 

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Definition: The state of people who live on less than $1.25 per day (purchasing power parity), as defined by the World Bank. Generally, such individual are unable to afford the basic necessities of life: food, shelter, education, health, etc.

Example: Because of the high HIV infection rate, the low per capita income, the short life expectancy and the low literacy rates, there are many people living in absolute poverty in sub-Saharan Aftica

Absolute Poverty
Sustainable development
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A system for achieving improvements in living standards which is able to endure over a long period, characterized by the use of renewable resources and other technologies that both improve living standards and protect the environment

Sustainable development

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