CHAPTER 17

Developing Countries
SECTION 1: Economic Development SECTION 2: Challenges to Growth SECTION 3: Paths to Economic Development

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SECTION 1

Economic Development

Objectives:
 What characteristics do developing countries have in common?  How can scarcity of resources affect a developing nation?

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SECTION 1

Economic Development

Characteristics of developing countries:
 low per capita GNI  limited or insufficient use of resources  high population growth rate  dependence on agricultural production

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SECTION 1

Economic Development

Potential effects of resource scarcity on a developing nation:
 inability to compete in the global marketplace  inability to trade  limited economic growth  dependence on a subsistence agriculture

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SECTION 2

Challenges to Growth

Objectives:
 How do many developing countries respond to scarce factors of production?  How can the status of an economic infrastructure help or hinder a developing country?  How can political instability challenge a developing nation?
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SECTION 2

Challenges to Growth

Many developing countries’ response to scarce factors of production:
 specialization in the production of goods  increased spending on primary and secondary education  nationalization, expropriation, and privatization of industries and businesses

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SECTION 2

Challenges to Growth

Impact of an economic infrastructure on a developing country:
 can limit or expand development  can discourage or promote production and trade  can restrict or improve development of human resources  can discourage or encourage savings and investment  can lead to nationalization, expropriation, and privatization of industries and businesses
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SECTION 2

Challenges to Growth

Potential effects of instability on a developing nation:
 can discourage foreign investment  can disrupt normal business activity  can destroy capital investment  can restrict economic development

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SECTION 3
Paths to Economic Development

Objectives:
 What are the characteristics of the socialist and capitalist models of decision making?  What types of aid do governments extend to developing countries?  What are the key public sources of foreign aid?
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SECTION 3
Paths to Economic Development

Characteristics of the socialist model of decision making:
 ability of government to direct and redirect resources and production toward specific economic goals  inefficiency  bureaucratic resistance to change  corruption
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SECTION 3
Paths to Economic Development

Characteristics of the capitalist model of decision making:
 freedom to make economic decisions  difficulty in redirection of resources and production toward specific economic goals

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SECTION 3
Paths to Economic Development

Types of aid governments extend to developing countries:
 economic assistance  military aid  emergency assistance

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SECTION 3
Paths to Economic Development

Key public sources of foreign aid:
 the World Bank  the International Monetary Fund  the United Nations  regional organizations

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CHAPTER 17

Wrap-Up
1. How is per capita GNI used to classify developing nations? 2. What are developing nations’ three major obstacles to capital formation? 3. Why is scarcity a problem for developing nations? 4. How can leaders influence economic growth and development in a nation that uses the capitalist decision-making model? 5. Provide an example of each of the following: economic assistance, military assistance, and emergency assistance.
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