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Chapter 22: Q7RQ (page 456)

Question. True or False. Economists are unanimous that foreign aid greatly helps DVCs

Short Answer

Expert verified

The above-given statement is false.

Step by step solution

01

Foreign aid

Foreign aid refers to the financial assistance that Industrially Advanced Countries (IACs) provide to the developing countries in several forms. This financial assistance helps these countries to strengthen their economy by developing their infrastructure and thus increasing their capital flow.

02

Explanation for the statement being false.

Economists argue that the financial aid provided by the IACs doesn’t help much in the development of DVCs.

  • Most of the assistance is given with a motive to have an influential power over the economic decisions of the DVCs.
  • The majority of the aid is not utilized for development purposes. Corruption diverts the funds to personal political gains and to clear the debt.
  • The most affluent DVCs receive a major share of the aid, and those who are less affluent receive only less aid. So the financial aid is only helping some of the DVCs, and some are still not receiving the actual help they need.

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Most popular questions from this chapter

Question. Assume a DVC and an IAC currently have real per capita outputs of \(500 and \)50,000, respectively. If both nations have a 3 percent increase in their real per capita outputs, by how much will the per capita output gap change?

True or False. Some economists argue that the single best thing that IACs could do for DVCs in terms of economic growth is to eliminate trade barriers between IACs and DVCs.

Question. Assume that a very tiny and very poor DVC has income per capita of \(300 and total national income of \)3 million. How large is its population? If its population grows by 2 percent in some year while its total income grows by 3 percent, what will be its new income per capita rounded to full dollars? If the population had not grown during the year, what would have been its income per capita?

Question. A DVC’s population is growing 2 percent per year and output is growing 3 percent per year. If the government wants to improve living standards over coming decades, which of the following would probably be the best savings rate for the economy?

a. 2 percent.

b. 0 percent.

c. 10 percent.

d. 5 percent.

Question. True or False. The term developing country (DVC) is applied to rich nations like the United States and Germany because their economies are always growing quickly by developing new technologies.
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