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Unit Four IB Definitions (SL)
Absolute poverty
A situation where a household’s income is less than $1
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Aid
A transfer of resources to developing countries on concessionary terms
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Appropriate Technology
Where technology caters to the particular economic, social and environmental
characteristics of its users
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Bi-lateral aid
Aid given directly from one country to another
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Capital flight
Currency or other assets leaving a country to seek a safe haven
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Cultural erosion
The substitution of local goods and traditions for foreign/global goods and traditions
brought about by globalisation
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Debt
Money owed by one country to another country
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Dependency theory
Stresses external causes of underdevelopment
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Developed countries have hindered the development of
developing countries through:
 Colonialism (stripping resources/forced specialisation on primary sector
products)
 Poor advice i
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fill the savings gap through borrowing
 Corruption of political elite

Deregulation
The removal of laws and regulations that apply to firms
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Developing countries
A country with low per capita income, high rates of poverty, and low HDI values
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Single indicators: e
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Real GNI per capita at PPP, infant mortality
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g
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Differences in size and availability of natural resources
2
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Political stability
4
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Education
6
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Population
8
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Dumping
One country selling a good into another country at below the cost of production
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Developing countries can
face dumping from developed countries - especially in agriculture
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Economic growth
Actual Economic Growth = Increase in real GDP over a period of time
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Education enhances human capital and therefore makes it more productive
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Improvements in health is difficult without improvements in education (education on
proper hygiene etc)
Birth rate control is facilitated by education - family planning advice may prevent
families becoming too large
Educated females have a higher opportunity cost than those who are not educated and
are therefore more likely to have small families so they can continue to work

More education = higher incomes = more saving and investments

Export led growth
An outward looking growth strategy based on increased international trade
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Foreign Debt
The total debt owed by a government to foreign lenders
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Makes up part of Investment in AD
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Gini Coefficient
An index that is derived from the Lorenz curve
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The higher the figure, the more unequal the income distribution
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GNI
GNI measures the economic activity generated by factors of production owned by
residents of a country (including the output of firms owned by domestic citizens,
which are located in foreign countries, however, foreign owned companies located in
the country are not counted)
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Healthy children are likely to become more educated and therefore more productive
Heavily Indebted Poor Countries (HIPC)
The HIPC initiative has identified 40 countries (mainly sub-Saharan) who could be
potentially eligible for debt relief if they meet certain criteria
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Measures between 0 and 1
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Its main roles are:
 Ensure the stability of the international monetary system
 Promote international monetary cooperation
 Lend money to help members in balance of payments difficulties
Import Substitution Industrialisation
A strategy to reduce imports using protectionism to allow domestic industry to grow
(or to be established)
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Differences in treatment
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Can be narrow or wide
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Informal markets
Markets in which economic activity is not officially measured/recorded and therefore
not included in GDP calcualtions
Infrastructure (both a demand and supply side policy)
Definition: Basic necessities or facilities required in order for other activities to
function e
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roads, airports, water systems, other utilities
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Import substitution is an
example of an inward looking policy
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Standard and availability of education affect the quality of labour (human capital)
Lorenz curve
A graphical way of depicting the distribution of income within a country
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Low development trap
A circular chain trapping individuals/societies in to low development E
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Low incomes = low levels of education and healthcare = low human capital = low
productivity = low incomes
Micro-credit
Small loans given to people to start micro enterprises
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Include: Poverty, hunger, maternal and child mortality, disease, inadequate shelter,
gender inequality, environmental degradation
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Multi-lateral aid
Assistance from a number of countries through organisations like the World Bank
NGO
Non governmental organisations are not associated with a government
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Official development assistance
(ODA) is aid that is given to a country by another government or official government
agency
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E
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Low incomes = low savings = low investment = low productivity = low incomes
Preferential Trading Area:
The first stage of integration
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Primary commodities
Extracted (coal, tin) and agric goods (wheat)
Property rights
Gives people a legal right to own property and assets
Purchasing power parity
Income per capita at PPP shows the level of consumption available to an average
citizen of the country
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As a
result income figures at PPP tend to reduce the gap between richer and poorer
countries
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Real GNI per capita
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Regional trade agreement
An agreement between countries in a region to lower trade barriers between each
other
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Defined as household income below 50% of the
median household income
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Social indicators
Elements which affect how developed a country is
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Linked to functioning
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Sustainability
In economic terms, sustainability is linked to the concept of sustainable development,
which is development that meets the needs of today without compromising the ability
of future generations to meet their needs
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Tadaro’s “core values of development” (use to evaluate HDI)
Sustenance: ability to meet basic needs
Self esteem: to be a person
Freedom from servitude: to be able to choose
Tied Aid
Grants or loans that are given to a country on the condition that they are used in a
particular way - often to be spent on goods and services from the donor country
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World Bank
Collection of 5 individual organisations
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Aims to promote free trade between all nations

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