Chapter 10 Key Issue 3 "Why Do Countries Face Challenges to Development?

What are the two obstacles that developing countries must face in trying to encourage more rapid development?

*Adopting policies that successfully promote development
*Finding funds to pay for development

What are the two models developing countries choose to promote development?

Self Sufficiency or International Trade

In the self sufficiency model countries encourage ____________, discourage _____________, and protect _____________.

Encourage: Domestic production of goods
Discourage: Foreign ownership of businesses and resources
Protect: Their own businesses from international competition

Name 2 key elements of the self sufficiency path to development.

*Barriers (limits on the importation of goods from other places)
*Nursing fledgling businesses (By isolating them from large international competition)
*Spreading equal investment
*Incomes in the countryside keep pace with those in the city (Which reduces

In the international trade model, countries ________________ and ___________.

Open themselves to foreign investment and international markets

The five stages in the Rostow Model are:

1. Traditional society
2.Preconditions for take off
4.Drive to Maturity
5.Age of mass consumption

The United States is in what stage of the Rostow Model?

Stage 5

Which one of these countries is NOT one of the four Asian Dragons?
a. Hong Kong
b. Taiwan
c. China
d. South Korea

c. China
The four Asian Dragons are South Korea, Singapore, Taiwan, and Hong Kong

What enabled the Four Asian Dragons to sell products inexpensively in developed countries?

Low labor costs

Most countries embraced the _______________. Long time advocates of self-sufficiency converted to this approach, especially during the _____s.

Embraced the International Trade Approach
Especially during the 1990s

To promote the international trade development model, countries representing 97% of the world trade established the _____________ in ______.

World Trade Organization (WTO), 1995

WTO works to reduce barriers to international trade in two ways. What are they?

1. Through the WTO, countries negotiate reduction or elimination of international trade restrictions on manufactured goods
2.The WTO enforces agreements. It can charge other countries for breaking agreements or violating a copyright or patent

Investment made by a foreign country is known as...

Foreign Direct Investment (FDI)

T/F does investment flow equally around the world?


Most FDI originates in ___________ and is destined for ______________

Developed Countries

The two major lenders to developing countries are _______________ and ______________________

The World Bank and the International Monetary Fund (IMF)

The World Bank includes the ___________________ and ______________________

International Bank for Reconstruction and Development (IBRD) and the International Development Association

The _____ lends money raised from sales of bonds to private investors; the ___ lends money from government contributors


The ___ provides loans to countries experiencing balance-of-payments

International Monetary Fund (IMF)

The World Bank and IMF were conceived at a _______________ to avoid repetition of _________________

1944 United Nations Monetary and Finical Conference; to avoid repetition of the disastrous economic policies that led to the Great Depression

Name a common reason that funded projects end up being failures.

*Projects don't function as intended because of faulty engineering
*Recipient nations squander or spend aid on armaments or the aid is stolen
*New infrastructure doesn't attract other investment

T/F debts actually exceeds annual income in a number of countries


The stimulus strategy is...

The strategy for fighting economic downturns that says the government should spend more money than they collect in taxes. Governments should stimulate the economy by putting people to work building infrastructure projects. Once the economy recovers, peopl

The austerity strategy is...

The strategy for fighting economic downturns that says the government should sharply reduce taxes so that people and businesses can revive the economy by spending their tax savings. Spending on government programs should be sharply cut as well in order to

A structural adjustment program is...

A program that contains economic reforms or adjustments such as economic goals, strategies for achieving the objectives, and external financing requirments

Name 2 of the common reforms required of a developing country.

*Spending only what it can afford
*Directing benefits to the poor, not just the elite
*Diverting investments from military spending to health and education spending
*Investing scarce resources where they will have the most impact
*Encouraging a more produ

Name one of the negative results of a structural adjustment program

*Cuts in health, education, and social services that benefit the poor
*Higher unemployment
*Loss of jobs in state enterprises and civil service
*Less support for those most in need

A microfinance is...

A provision of small loans and other financial services to individuals and small businesses in developing countries that are unable to obtain loans from commercial banks