JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY

DEVELOPMENT ECONOMICS

4.1

GROUP 4

No NAMES REG NO.

1 LISA KING’ARA NJERI HDB 222-0426/2020
2 TEDDY OCHIENG’ HDB 222-0435/2020
3 VICTOR NYAMAWI HDB 222-0686/2020
4 OSBORN BARASA HDB 222-0484/2020
5 ERIC MUNENE RUBARA HDB 222-0409/2020
QUESTION 1

Explain the economic theories and their applications in forecasting economic development

There are several economic theories that are commonly used in forecasting economic
development. Below are some of the most important economic theories and their applications in
forecasting economic development:

a) Classical Economics: This theory is based on the idea that markets are self-regulating and
that prices adjust to balance supply and demand. Classical economics predicts that
economies will eventually return to full employment equilibrium, even in the face of
short-term fluctuations. In forecasting economic development, classical economics is
used to predict long-term trends and identify potential imbalances in the economy.
b) Keynesian Economics: This theory is based on the idea that government intervention is
necessary to stabilize the economy during times of recession or depression. Keynesian
economics predicts that government spending can stimulate economic growth and reduce
unemployment. In forecasting economic development, Keynesian economics is used to
predict short-term fluctuations and identify potential policy interventions that can
stabilize the economy.
c) Monetarism: This theory is based on the idea that the money supply is the most important
factor in determining economic growth and inflation. Monetarists believe that controlling
the money supply is the key to stabilizing the economy. In forecasting economic
development, monetarism is used to predict money supply changes and identify potential
inflationary pressures.
d) New Classical Economics: This theory is based on the idea that people make rational
economic decisions based on their expectations of the future. New classical economists
believe that government intervention can be counterproductive and that market forces
should be allowed to operate freely. In forecasting economic development, new classical
economics is used to predict the behavior of consumers and businesses and to identify
potential market failures.

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 e) New Keynesian Economics: This theory is based on the idea that markets are not always
perfectly efficient and that government intervention may be necessary to correct market
failures. New Keynesian economists believe that prices and wages are sticky and that
government policy can be used to overcome this stickiness. In forecasting economic
development, new Keynesian economics is used to predict the effects of government
policy on the economy and to identify potential market failures that may require
government intervention.

In practice, economic forecasters may draw upon multiple economic theories to make accurate
predictions about the future state of the economy. By understanding each theory's key
assumptions and predictions, forecasters can better anticipate how the economy will respond to
various events and policy changes.

QUESTION 2

Explain the various principles of planning

Planning is an important concept in development economics. It involves the identification of

development goals, the formulation of strategies to achieve these goals, and the allocation of
resources to implement these strategies. Below are some of the key principles of planning in
development economics:

a) Long-term perspective: Planning should be based on a long-term perspective, taking into

account the future needs and challenges of the economy. This requires a thorough
understanding of the economic, social, and environmental factors that are likely to impact
development in the future.
b) Comprehensive approach: Planning should be comprehensive, taking into account all
aspects of development, including economic growth, social development, and
environmental sustainability. A comprehensive approach ensures that development is
balanced and sustainable over the long term.

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 c) Stakeholder participation: Planning should involve the participation of all stakeholders,
including government agencies, private sector organizations, civil society groups, and the
general public. Stakeholder participation ensures that development goals and strategies
are aligned with the needs and aspirations of all members of society.
d) Flexibility and adaptability: Planning should be flexible and adaptable, allowing for
changes in the economic, social, and environmental context. Flexibility and adaptability
enable planners to respond to changing circumstances and adjust strategies as necessary.
e) Resource mobilization: Planning should be based on a realistic assessment of the
resources available for development. Resource mobilization involves identifying and
mobilizing the necessary financial, human, and technical resources to implement
development strategies.
f) Monitoring and evaluation: Planning should be accompanied by a monitoring and
evaluation process to assess progress toward development goals and to identify areas for
improvement. Monitoring and evaluation enable planners to learn from experience and to
refine development strategies over time.

By following these principles of planning, development economists can help to ensure that
development is sustainable, inclusive, and equitable over the long term. Planning can also help to
identify potential challenges and opportunities and to guide the allocation of resources toward
the most effective development strategies.