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Strategies for Economic Development

Strategies for Economic Development

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Economics
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Subect: Macroeconomics
 
Strategies for Economic Development 
Today in developing economies, the market plays a much stronger role. In most parts of the world,including nondemocratic countries like China, state ownership has declined and prices are mostly set in markets. International agencies like the International Monetary Fund (IMF), whose primary goals are to stabilize international exchange rates and to lend money to countries with problemsfinancing international transactions, and the World Bank, which lends money to countries fordevelopment projects, have pushed hard for market oriented reforms.Market-oriented reforms, however, have not eliminated the role of government. The governmentsplay a vital role in creating institutions that allow markets to work effectively 
physical institutionslike roads and schools, and business and legal institutions such as accounting systems and property rights. Many governments also use their taxing and expenditure policies to favor specific sectorsover others as they try to grow. Industrial policy, in which governments actively pick industries tosupport as a base for economic development, is still carried on at some level in most developingnations.The greater central control of the economy in China was very evident during the recent recession inthe speed with which China could direct its government expenditures as it sought to stimulate itseconomy.
 
 Exports or Import Substitution? 
As developing nations expand their industrial activities, they must decide what type of trade strategy to pursue. Development economists discuss twoalternatives: import substitution or export promotion. Import substitution is a strategy used todevelop local industries that can manufacture goods to replace imports.If fertilizer is imported, import substitution calls for a domestic fertilizer industry to producereplacements for fertilizer imports. This strategy gained prominence throughout South America
 
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The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not forsubmitting the same in lieu of their academic submissions for grades.
Macroeconomics Homework Help from Classof1.com 
Subect: Macroeconomics
 
in the 1950s. At that time, most developing nations exported agricultural and mineral products,goods that faced uncertain and often unstable international markets. Under these conditions,the call for import substitution policies was understandable.Special government actions, including tariff and quota protection and subsidized imports of machinery, were set up to encourage new domestic industries. Multinational corporations werealso invited into many countries to begin domestic operations.
 
Microfinance In the mid-1970s, Muhammad Yunus, a young Bangladeshi economist created theGrameen Bank in Bangladesh. Yunus, who trained at Vanderbilt University and was a formerprofessor at Middle Tennessee State University, used this bank as a vehicle to introducemicrofinance to the developing world. In 2006, Yunus received a Nobel Peace Prize for his work.Microfinance is the practice of lending very small amounts of money, with no collateral, andaccepting very small savings deposits. It is aimed at introducing entrepreneurs in the poorestparts of the developing world to the capital market. By 2002, more than 2,500 institutions weremaking these small loans, serving over 60 million people. Two-thirds of borrowers were living below the poverty line in their own countries, the poorest of the poor. Yunus, while teaching economics in Bangladesh, began lending his own money to poorhouseholds with entrepreneurial ambitions.

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