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Part-01 Role Play Questions

Answer of question No-01 (Page No 219 -221)


Sudan is a resource-rich, agricultural and poverty Stricken country but still some people of this
rich country are poor. Economists have found three major reason behind this problem.
First, extreme income inequality leads to economic inefficiency. This is partly because at any
given average income, the higher the inequality, the smaller the fraction of the population that
qualifies for a loan or other credit. Moreover, with high inequality, the overall rate of saving in
the economy tends to be lower, because the highest rate of marginal savings is usually found
among the middle classes. Although the rich may save a larger dollar amount, they typically save
a smaller fraction of their incomes, and they almost always save a smaller fraction of their
marginal incomes. Landlords, business leaders, politicians, and other rich elites are known to
spend much of their incomes on imported luxury goods, gold, jewelry, expensive houses, and
foreign travel or to seek safe havens abroad for their savings in what is known as capital flight.
Such savings and investments do not add to the nations productive resources; in fact, they
represent substantial drains on these resources.
The second reason to be concerned with inequality above the poverty line is that extreme income
disparities undermine social stability and solidarity. Also, high inequality strengthens the
political power of the rich and hence their economic bargaining power. Usually this power will
be used to encourage outcomes favorable to themselves. High inequality facilitates rent seeking,
including actions such as excessive lobbying, large political donations, bribery, and cronyism.
When resources are allocated to such rent-seeking behaviors, they are diverted from productive
purposes that could lead to faster growth. Even worse, high inequality makes poor institutions
very difficult to improve, because the few with money and power are likely to view themselves
as worse off from socially efficient reform,
Finally, extreme inequality is generally viewed as unfair. The philosopher John Rawls proposed a
thought experiment to help clarify why this is so. Suppose that before you were born into this
world, you had a chance to select the overall level of inequality among the earths people but not
your own identity. That is, you might be born as Bill Gates, but you might be born as the most
wretchedly poor person in rural Sudan with equal probability. Rawls calls this uncertainty the
veil of ignorance.
Proposed Policies that will help in reduce poverty and improve income distribution
If Sudan aim to reduce poverty and excessive inequalities in their distribution of income need to
know how best to achieve their aim. Then following economic and other policies Sudan
government should take.

Altering the Function distribution


The returns to labor, land, and capital as determined by factor prices, utilization levels,
and the consequent shares of national income that accrue to the owners of each factor.
Mitigating the size distribution
The functional income distribution of an economy translated into a size distribution by
knowledge of how ownership and control over productive assets and labor skills are
concentrated and distributed throughout the population. The distribution of these asset
holdings and skill endowments ultimately determines the distribution of personal income.
Moderating (reducing) the size distribution at the upper levels
Through progressive taxation of personal income and wealth. Such taxation increases
government revenues that decrease the share of disposable income of the very rich
revenues that can, with good policies, be invested in human capital and rural and other
lagging infrastructure needs, thereby promoting inclusive growth. (An individual or
familys disposable income is the actual amount available for expenditure on goods and
services and for saving.)
Moderating (increasing) the size distribution at the lower levels
Through public expenditures of tax revenues to raise the incomes of the poor either
directly (e.g., by conditional or unconditional cash transfers) or indirectly (e.g., through
public employment creation such as local infrastructure projects or the provision of
primary education and health care). Such public policies raise the real income levels of
the poor above what their personal income levels would otherwise be, and, as will
become clear in later chapters, can do so sustainably when they build the capabilities and
assets of people living in poverty.

Answer of question No-02 (Page No-311 to 318 and page No 344 to 345)
Many people of Rural Jamaica are now moving towards urban Jamaica because urban areas have
more opportunities for employment, especially in competitive, progressive industries, such as
computer, technology and high-level corporations. Cities often have a better quality of living,
and though cost of living is higher in most cities, the trade-off for a better quality of life is worth
it for some people. Education centers are more prevalent and common in urban areas, so for
people interested in furthering their education, a city has many more opportunities than rural
areas.
Social and personal life are two other commonly quoted reasons for moving. Cities provide more
opportunities to get out and meet people, such as social clubs, bars, dance clubs and supports
group. For people with unique interests, it is easier to find like-minded individual in urban areas
than in isolated rural regions. Some people move to urban areas for personal reasons, such as
getting closer to the family or work of a significant, or to find better opportunities for their
children.

Proposed policies

In order to maintain the balance of urban-rural migration Jamaica must follow following policies

Creating an appropriate rural-urban economic balance


A more appropriate balance between rural and urban economic opportunities appears to
be indispensable to ameliorating both urban and rural unemployment problems and to
slowing the pace of rural-urban migration. The main thrust of this activity should be in
the integrated development of the rural sector, the spread of rural nonfarm employment
opportunities, improved credit access, better agricultural training, the reorientation of
social investments toward rural areas, improving rural infrastructure, and addressing
shortcomings of rural institutions (including corruption, discrimination, and
stratification), the presence of which has the effect of raising the cost of delaying outmigration.
Expansion of small-scale, labor-intensive industries.
The composition or product mix of output has obvious effects on the magnitude (and in
many cases the location) of employment opportunities because some products (often
basic consumer goods) require more labor per unit of output and per unit of capital than
others. Expansion of these mostly small-scale and labor-intensive industries in both urban
and rural areas can be accomplished in two ways: directly, through government
investment and incentives and improved access to credit, particularly for activities in the
urban informal sector, and indirectly, through income redistribution (either directly or
from future growth) to the rural poor, whose structure of consumer demand is both less
import-intensive and more labor-intensive than that of the rich.
Eliminating factor price distortions.
There is ample evidence to demonstrate that correcting factor price distortionsprimarily
by eliminating various capital subsidies and curtailing the growth of urban wages through
market-based pricingwould increase employment opportunities and make better use of
scarce capital resources. But by how much or how quickly these policies would work is
not clear. Moreover, their migration implications would have to be ascertained. Correct
pricing policies by themselves are insufficient to fundamentally alter the present
employment situation.
Choosing appropriate labor-intensive technologies of production.
One of the principal factors inhibiting the success of any long-run program of
employment creation in both urban industry and rural agriculture is the almost complete
technological dependence on (typically laborsaving) machinery and equipment from the
developed countries. Domestic and international efforts can help reduce this dependence
by developing technological research and adaptation capacities in developing countries.
Such efforts might first be linked to the development of small-scale, labor-intensive rural
and urban enterprises.

Part-02 Text Book Questions


Answer of Question NO: 01, (Page No 122-124)
International dependence model
International dependence model is described as the developing countries are troubled by
institutional, political, and economic rigidities both domestically and internationally, and they are
dependent on dominance of developed countries.
There are basically three international dependence approaches briefly described below:
1. Neoclassical dependence model:
Neoclassical dependence model follows mass thinking.
It described that underdeveloped countries exists because of rich and poor
countrys relationship in which one is dependent over other respectively,
It is a model which explains that underdevelopment lies in developing countries
because they are following the same old colonial system and allowing the ruler
countries to rule over them.
This system is not limited it is international and due to that unequal power exists
and conceptualized.
In developing countries some group of people enjoy high income and facilitated
by developed counties directly or indirectly, their power is high due to that
developing economy is undeveloped still.
2. False paradigm model:
It described as the developing countries have failed to develop because their development
strategies are based on the predetermined models of developed countries and that
sometimes fails to fit in developing countries.
3. Dualistic development thesis:
Dualism concept is present everywhere.
It described as rich has high portion of income and poor has low ratio of income,
underdevelopment lies because of income disparities between rich and poor people.
This theory has 4 assumptions:
Traditional economies will vanish when wealth of nation distributed equally.
Co-existence of rich and poor is a historical concept and cannot be vanished,
difference will always be there.
No one is willing to put efforts to reduce this system, it will be continued.
Superior existence put no efforts to reduce inferiority.
False paradigm model:
This is the 2nd international dependence approach in which countries are underdeveloped
because the models that are used in developing countries are wrongly implemented. The people,
leading university intellectuals, trade unionist, high level government economist, and other civil

servants all get trainings and learn these models or techniques from foreign and apply those
models in developing countries regardless of the fact that they both nations are different from
each other.
Yes in my point of view these models are realistic in MDC-LDC economic relations because
MDC have more ability to invest their money in different projects and utilize them for their
success because their people are more educated and healthier and their kids life expectancies are
higher than LDCs. It is the fact that the more educated the nations are, the more chances are
available for their development. MDCs kids goes to private schools learn and become able to
read books of standardized language apart from their local language while in LDCs kids goes to
local or primary schools and cannot learn more because of poor facilities and focus on their
learning.
Interdependence model and false paradigm model are realistic in MDC-LDC economics relations
because these models also describes that there is a lot of income disparities between rich and
poor people due to that poor countries have failed to develop.
Under development occurs when countries fails to utilize their resources with their full capacity
and because of that local and regional development become slower as compare to the
surrounding countries.
Just like international dependence model and false paradigm model, they state that the main
cause of underdevelopment is income disparity between rich and poor people and poor
utilization of resources, it is analyzed that more than 60% of resources are consumed by rich
people of the Pakistan and remaining 40% of resources are consumed by majority of poor people
that cause malnutrition and unhealthier lifestyles of people and that make the economic condition
worst.

Answer of Question No: 03 ( Page No 115-119)


Lewis theory of development:
Explanation and Illustration
This theory is given by Lewis and he described in this theory that underdevelopment is because
of not utilization of resources properly, that has been arise from the concept of dualism.
Lewis gave a condition in this model that every economy has two sectors, one is traditional
sector and the other one is modern sector.
In traditional sector labor is in surplus but the marginal production of labor tends to zero, while
in modern sector the demand of labor is high and the marginal production of labor is also high.
So according to Lewis if we transfer the labors of traditional sector to modern sector than they
can show high level of productivity because they needs more labors and if we fulfill their
requirement then output can be maximum.

In other words we can say that in modern sector self-sustaining growth, employment expansion
is assumed to continue until all the surplus labors are absorbed in the modern economy.
Criticism of Lewis theory:
The assumptions that Lewis have given are criticized
1. Lewis assumed that rate of labor transferred and employment creation are proportional to
the capital accumulation. But in real sense it is not true, the labor tranferred to modern
sector and employment creation are proportional to the capital accumulation but not with
the exact rate.
2. 2nd assumption that Lewis has given is there is a full employment in urban sector and low
employment in rural sector. But in real sense it is not like that, urban sector has not
always full employment sometimes it has excess of employment and sometimes it has
moderate employment. And likewise rural sector always does not have low employment
rate it fluctuates.
3. 3rd assumption that Lewis has given is wages always remains constant. But in real sense it
is not true when labor supply is too high then wages become lower and when labor
demand exceeds then wages becomes high. And there is always negotiation between
employer and employee who negotiates on wages and fix the wages where there is winwin situation for both the parties.
4. 4rth assumption that Lewis has given is marginal labor of productivity tends to zero in
rural sector. But its not true because it is the problem not only with the rural sector but its
also with the urban sector, sometimes its marginal productivity becomes lower as
compare to rural sector.

Answer Question No: 08 (Page No 22)


Women plays the most important role in economic growth because when more women work,
economies grow. As the participation of females increase in the labor force the gap between man
and women will decrease and economies grow at fastest rate.
Different countries research have shown that the more proportion of income is handled by
women in whole family either it came from its own earning or from other cash transfers and she
spends this money in upbringing of her children by providing them better education and health
facilities so that they can become successful in their future and that ultimately leads to provide
benefit to our economy.
When women get jobs in different organizations then they will be able to earn more and due to
this their family income will increase, which ultimately raise their life standards and make them
modern. With increment in income their children can get better private education and that would
increase the number of literate people in the country. Therefore to see rapid development and
biggest impact on growth society must empower and invest in its women.
Economic growth does not always gained through gender equality but it can be get through
meeting the social status in the society. When a country reach to globalization then it would

create more employment opportunities, and due to that more and more women will join the labor
force and would get chance of reaching to decision making positions and due to that their social
status can be increased and then women can be compared to man physically, mentally, and with
their respective status. Different trainings for boys, girls and adults should be arranged so that
they can stay together, work together, think together, and grow together, it will maintain their
status together.
The research on role of women in economic development of Pakistan has concluded that
uneducated and unskilled women serving their poor families and remain unaware of their rightful
place in the society. The women are the important part of economic process of this country,
72.2% of women are working in the agriculture sector, 13% of females are working in
manufacturing sector, and 11% of women are working in social services sectors. Around 2million
of women are part of rural labor force in which more than half are working inside their homes
and others are working outside but they are not getting proper income or returns as compare to
their work, as a result women work continues to be tedious and their potential productivity
remain unrealized due to that their motivational level reduces and they cannot get potential to
study more and groom their self.

Answer of Question NO: 09 (Page No 204-206)


When we look at the poverty it is defined as the lack of income or assets, the people who have
very lower income and hardly able to fulfill their basic needs of life are coming under the
poverty line. The reason of poverty is as people increase their generations, the overall population
growth of the country increases and due to that then people remain unable to provide basic
facilities to their kids like proper education, health care, adequate housing, proper sanitation, and
good nutrition. Those people by virtue of constrain involve themselves into the armed conflicts,
terror, irregular activities and they become powerless to improve their circumstances. This
situation of any economy is directly pointing it out that over population is the cause of poverty
not the effect.
The developing countries are not involving more women in the workforce this is the biggest
reason that country remains unable to reduce population growth. If more number of girls are sent
to schools and institutes of primary and higher education respectively, then there are chances that
they might get enough awareness about the reality of life and in future they will produce the
number of children whom they can nurture satisfactorily without leaving them to die for hunger.
And it is obvious that educated women teach their kids all the moral norms and value of culture
that would ultimately reduce the crime rate in the country and kids will serve to their country in
positive way.
Developing countries should implement certain strict policies in their countries like one-childper-family policy, and in case of disobey of this law the parents should be punished strictly by
the code of law and there will be no leniency in case of disobeying the law. This technique will
restrict countries from producing more kids and population growth will also be decreased in the

coming years. Another way through which country can reduce population growth is making
people aware about contraception which is the usage of artificial techniques and procedures to
avoid pregnancy while engaging in sexual intercourse. These techniques can help countries to
reduce population that would ultimately benefits people of country by reducing poverty level.