ECONOMICS TOPIC 10 LESSON 5

ECONOMICS TOPIC 10 LESSON 5

Growth, Resources, and Development

ESSENTIAL QUESTION

How might scarcity divide our world or bring it together?

A Growing Population

Thanks to modern technology, the earth now produces more food than Malthus could have imagined. Still, rapid population growth remains one of the most pressing issues facing many less developed countries. 

Measuring Population Growth

he population growth rate is a measure of how rapidly a country’s population increases in a given year. It is expressed as a percentage of the population figure at the start of the year. The population growth rate takes into account the number of babies born, the number of people who died, and the number of people who migrated to or from a country.

Open Ended

Analyze Graphs Which of the selected countries have a population growth rate higher than the average 1.8 percent for less developed countries?

Causes of Rapid Population Growth

Many LDCs are experiencing increased life expectancy. While people are living longer, birth rates in some LDCs have not decreased. When births far outpace deaths, the population grows.

Causes of Rapid Population Growth

Age structure also contributes to rapid population growth. In many LDCs, a high proportion of the population is of childbearing age. As these younger adults have children, the population continues to grow. 

Population Growth Challenges

As its population grows, a country must expand employment opportunities, healthcare, education, and infrastructure just to maintain its existing standard of living. To actually improve the lives of its people, a nation has to generate a higher per capita GDP. Economic output must grow faster than the population grows.

Multiple Choice

Identify Central Issues Which of the following is contributing to rapid population growth in LDCs?

• increased life expectancy

• dropping birth rates

• steady literacy rates

• increased energy consumption

Physical Capital

The low productivity typical of LDCs is due in part to lack of physical capital. Without capital, industry cannot grow, and farm output remains low. Also, subsistence agriculture does not give farmers the opportunity to save. 

Educating and Training Growing Populations

Lack of human capital also hinders development. To be able to move beyond mere subsistence, a nation needs an educated workforce. Education and training allow people to develop new skills and adapt to new technologies and processes. 

Fill in the Blanks

Nutrition and Health

Poor nutrition and health also impede the development of human capital. Many people in less developed countries suffer from malnutrition, or consistently inadequate nutrition. (A worldwide increase in food prices in 2008 through 2011 aggravated the situation.) Malnutrition lowers the energy of adults and makes them more vulnerable to disease. 

Multiple Choice

Identify Patterns Which of the following is TRUE of literacy rates in many LDCs?

• The literacy rates in many LDCs are higher than those of developed countries.

• In many LDCs, the literacy rates for women are far ahead of those for men.

• Literacy rates in many LDCs are affected by the high rate of children leaving school at an early age.

• The literacy rates decrease yearly in many LDCs.

Multiple Choice

Make Generalizations Economic policies in many LDCs have traditionally favored

• small minorities and city dwellers.

• small minorities and those in rural areas.

• the masses who congregate in the cities.

• the masses who live in rural areas.

Internal Financing

the most favorable source of development funds is internal financing. Internal financing is capital derived from the savings of a country’s own citizens. 

Internal Financing

In most LDCs, though, large segments of the population do not have enough money to save. The wealthy few often keep their money in foreign banks or invest in foreign firms because these investments are safer. As a result, most poor countries have little capital available from internal financing

Foreign Investment

Capital that originates in other countries is called foreign investment. There are two types of foreign investment: direct investment and portfolio investment.

Foreign direct investment

occurs when investors establish a business in another country. For example, multinational corporations often build factories or other facilities in an LDC. Multinationals make this investment to take advantage of natural resources available in the less developed country or to tap into the large and cheap labor force.

foreign portfolio investment.

Instead of building businesses, foreign investors can make purchases in another country’s financial markets. 

Open Ended

Multinationals do business overseas in different ways. Analyze Charts Which of the examples above describes a multinational that builds a plant in a foreign country to test computer parts?

Borrowing and Debt

In the 1970s and 1980s, many less developed countries acquired loans from foreign governments and private banks to finance development. Some of that money was misspent because of inexperience or political corruption.

Foreign Aid

Sometimes, rather than making loans to developing nations, foreign governments give money and other forms of aid. For instance, many developed nations provide cash payments for building schools, sanitation systems, roads, and other infrastructure. These foreign aid grants do not need to be repaid.

Open Ended

Analyze Charts In 2013, the U.S. State Department provided more than $33 billion in aid to foreign countries. What are the two largest categories of spending?

Multiple Choice

Distinguish Which of the following is an example of internal financing?

• Countries receive foreign aid.

• Mutual funds buy stock in foreign companies.

• Investors establish a business in another country.

• Citizens of a country invest money in local banks.

World Bank

The largest provider of development assistance is the World Bank, founded in 1944. As discussed earlier, the World Bank raises money on world financial markets and also accepts contributions from the wealthier member nations. The World Bank uses these funds to offer loans and other resources to more than 100 less developed countries. 

United Nations Development Programme

The United Nations Development Programme (UNDP) is dedicated to the elimination of poverty. The UNDP is one of the world’s largest sources of grant funding for economic and social development. It assists over 177 countries and territories, in which the majority of the world’s poorest people live.

International Monetary Fund

the International Monetary Fund was founded in 1946 to stabilize international exchange rates. Today, the IMF has expanded its role in the world economy. It promotes development by offering policy advice and technical assistance to LDCs. It also intervenes when LDCs need help in financing their international transactions.

International Monetary Fund

If a country has trouble repaying a debt, the IMF may arrange a rescheduling plan. Debt rescheduling is an agreement between a lending nation and a debtor nation.

International Monetary Fund

The lending nation lengthens the time of debt repayment and forgives, or dismisses, part of the loan. In return, the LDC agrees to accept a stabilization program, changing its economic policies to meet IMF goals.

Open Ended

Analyze Charts The World Bank, UNDP, and IMF are international economic organizations. What goal do these three organizations share, as described in the purpose section of the chart?

Nongovernmental Organizations

Some private aid groups also work to help LDCs build their conomies. Nongovernmental organizations (NGOs) are independent groups that raise money to fund aid and development programs. Examples include the Red Cross, CARE, and the World Wildlife Fund.

Multiple Choice

Apply Concepts Which of the following actions would the International Monetary Fund MOST LIKELY be funding?

• building of water purification plants

• committing funds for primary and secondary education

• lending money to a country with high inflation

• promoting equal voting rights

Open Ended

How might scarcity divide our world or bring it together?