IGCSE Development Studies: Specimen Questions with Answers 23 - 24 of 98

Explanation

Economic Problems Face by a Developing Country Are as Follows

Economic Challenges

• Transition from free market economies produce, rising standards of living and expanding middle class
• “Brain drain” – migration of residents to other countries for education or job.
• Increasing gap between the rich and poor.

Political Challenges

• Increasing demand for political freedoms and individual rights.
• Example- Increasing demand for political freedom in Taiwan and South Korea.

Factor Markets

• Capital markets less efficiently in many developing countries while channeling money to the most productive use.
• Labor markets work in a less efficient manner where the wage gap between expanding and declining sectors is high.

Explanation

GDP is the worth of net produce in a country in a given financial year. For example- If it is said that a countries GDP fell by 2 % it means that the country՚s produce in the last year has fallen by 2 % . The reasons for fall in GDP can be –

• Fall in the demand by the consumers.
• Adverse impact on manufacturing and service sector affected due to natural causes like, monsoon.

GDP is the report prepared at the end of the financial year. Effect of decline in GDP on an economy is as follows:

• Unemployment: A reduction in production means that less people are employed which leads to less amount of money with the people to make purchases.
• Market situation won՚t be a good one
• A fall in GDP will result in reduction in the size of the economy.
• A decrease in the GDP will cause a fall in the average rate of interest in an economy.