Eccon Dev ICAO – Lesson 3 Answers

Learning Activities: Essay

Activity for Modular Learner:

Instruction: Essay. Explain each statement

1. Effective conversion of new capital into higher level of output requires
structural,
institutional and attitudinal reforms. Do you agree or disagree with the
statement?
Support your agreement or disagreement.
Answer:
I agree with the statement that effective conversion of new capital into a higher
level of output requires structural, institutional, and attitudinal reforms.
Structural reforms are necessary to address inefficiencies, rigidities, and
bottlenecks within the economy, allowing for the smooth flow of capital and
resources. Institutional reforms, such as improving governance, enhancing the
rule of law, and ensuring property rights protection, create a favorable business
environment that encourages investment and innovation. Attitudinal reforms,
including changes in mindset and attitudes towards entrepreneurship, risk-taking,
and productivity, are crucial for fostering a culture of innovation and productivity
growth.
Without these reforms, new capital injections may not lead to the desired
outcomes, as existing structural constraints, weak institutions, and unfavorable
attitudes can hinder the effective utilization of capital and limit the potential for
higher output levels. Therefore, comprehensive reforms that address structural,
institutional, and attitudinal factors are essential for maximizing the impact of new
capital on economic growth and development.
2. What is a modern sector?
Answer:
In economics, a modern sector refers to the part of an economy that is
characterized by advanced technology, higher productivity, and typically consists
of industries engaged in manufacturing, services, and knowledge-based activities.
The modern sector is often associated with urban areas and is characterized by
higher wages, better working conditions, and greater integration with global
markets. It represents the more developed and dynamic segment of the economy,
which drives economic growth, innovation, and productivity improvements. The
modern sector is contrasted with the traditional or subsistence sector, which is
typically characterized by lower productivity, informal employment, and a reliance
on agriculture or low-skilled activities.
3. Enumerate five forms of investments to human capital.
Answer:
1. Education and Skill Training: Investing in education systems, from primary to
tertiary levels, helps develop a skilled and knowledgeable workforce. This
includes improving access to quality education, promoting vocational
training programs, and enhancing the availability of technical and
specialized skills needed for economic sectors.
2. Healthcare and Nutrition: Investing in healthcare infrastructure, ensuring
access to quality healthcare services, and promoting nutrition programs
contribute to a healthy and productive workforce. This includes building
hospitals and clinics, expanding vaccination programs, and implementing
initiatives that improve overall public health.
3. Entrepreneurship and Business Development: Encouraging
entrepreneurship and supporting small and medium-sized enterprises
(SMEs) through training programs, mentorship, and access to finance
fosters innovation, job creation, and economic growth. This includes
initiatives such as business incubators, entrepreneurial education, and
financial support for startups.
4. Research and Development (R&D): Promoting research and development
activities drives innovation and technological advancement. Investments in
R&D involve funding for scientific research, creating research institutions,
and supporting collaboration between academia, industry, and government
to develop new technologies and products.
5. Social Safety Nets and Poverty Alleviation: Investing in social safety nets,
such as conditional cash transfer programs, healthcare subsidies, and food
security initiatives, helps reduce poverty and inequality. These investments
provide support to vulnerable populations, improve access to basic needs,
and foster human capital development.
These investments in human capital are vital for economic development as they
enhance productivity, foster innovation, reduce poverty, and create sustainable
and inclusive growth.
4. How do you think should an economy develop?
Answer:
Economic development should involve a combination of strategies. Firstly,
investing in human capital through education and skill development helps build a
skilled and productive workforce. Secondly, fostering innovation and technological
advancement through research and development promotes productivity growth
and competitiveness. Thirdly, creating a conducive business environment with
supportive policies, infrastructure development, and access to finance encourages
entrepreneurship and private sector growth. Finally, ensuring equitable and
inclusive development through poverty reduction measures, social safety nets,
and sustainable practices promotes long-term and balanced economic growth.
Activity for Online Learner:

For your activity in Lesson 3, do the following:

1. Click on the following link:
https://openknowledge.worldbank.org/bitstream/handle/10986/33555/9781464
815706.pdf?sequence=10&isAllowed=y
Read the “The Economy in the Time of COVID-19 Semi-Annual Report of the
Semiannual Report of the Latin America and Caribbean Region”. State the three
policy responses provided by World Bank to address economic crisis in the
selected countries. Briefly describe in your own understanding each policy
recommendation of World Bank?
Answer:
1. Fiscal and monetary policy measures: The World Bank recommends
implementing fiscal and monetary policies to address the economic crisis
caused by the COVID-19 pandemic. These measures may include increasing
public spending to stimulate economic activity, providing tax deferrals or
reductions to support businesses and individuals, and lowering policy
interest rates to encourage borrowing and investment.

2. Easing regulations to support business continuity: The World Bank suggests

temporarily easing regulations to ensure business continuity despite the
social distancing measures in place. For example, allowing households and
firms temporary relief from paying utility bills can help alleviate financial
burdens during the crisis and support the continuation of economic
activities.

3. Additional spending to protect vulnerable populations: The World Bank

emphasizes the importance of additional spending aimed at protecting the
most vulnerable segments of the population. This includes individuals who
cannot work or have lost their jobs due to containment measures. Such
spending may involve implementing social safety nets, providing direct
 financial assistance, and offering support for basic needs to ensure the well-
being of those affected by the crisis.
These policy recommendations are intended to mitigate the negative impacts
of the COVID-19 pandemic, stimulate economic recovery, and protect the
welfare of individuals and businesses during these challenging times.
2. Based on the policy recommendations of the World Bank, which
contemporary theory of development best describes the economic crisis
addressed. Discuss.
Answer:
Based on the policy recommendations provided by the World Bank, the
economic crisis addressed during the COVID-19 pandemic aligns closely with
the Keynesian theory of development.
Keynesian economics emphasizes the role of government intervention in
managing aggregate demand and stabilizing the economy during periods of
recession or crisis. The policy recommendations put forth by the World Bank
involve fiscal and monetary measures, such as increasing public spending, tax
deferrals, and lowering policy rates, which are central to Keynesian economic
theory.
Assessment:
Part I. Complete the table below.
Table – Check the answers in separate word doc.

Part II. Guided by the HVR Framework explain how small and medium
enterprises in your own community can help propel economic development?
Use the guide questions below to answer this part.
1. What is the common nature of business in your area?
Answer:
Some common types of businesses in the vicinity may include food and
beverage establishments that cater to the needs of students, faculty, and staff,
as well as the local community. Stationery and bookstores may also be
prevalent to serve the educational needs of students. Additionally, small retail
shops, convenience stores, and services such as photocopying and printing
may be found in the area.
2. What is the most pressing problem faced by the proprietors?
Answer:
Competition, rising operational costs, access to financing, market demand
fluctuations, labor issues, and regulatory compliance.
3. What sector can best address the problem?
Answer:
While the private sector and industry associations also play a crucial role in
addressing these challenges, the government's policies, regulations, and
support mechanisms can have a significant impact in creating an enabling
environment for businesses to thrive and overcome these obstacles.
4. What can you recommend to solve the problem stated in item 2?
Answer:
Proprietors can focus on differentiation by offering unique products or services,
emphasizing quality, and providing excellent customer service.
Proprietors can explore cost-saving measures such as optimizing energy usage,
negotiating better deals with suppliers, and streamlining operations to improve
efficiency.
Proprietors can explore various financing options such as traditional bank
loans, venture capital, crowdfunding, or government-backed programs.
Proprietors can diversify their customer base and product offerings to reduce
reliance on a single market or customer segment.
Proprietors should prioritize creating a positive work environment, offering
competitive wages, and providing opportunities for growth and development.
Proprietors should stay informed about relevant regulations and ensure
compliance through proactive measures.