Econ assignment

a) Explain the various types of aid which a developing country might receive.

Developing countries are countries that have low real GDP per capita and have large basic sectors that produce basic commodities. Aid can be defined as assistance that countries overseas provide to that particular country. There are three ways in which aid can be provided, humanitarian, bilateral and multilateral. Humanitarian aid is aid through a big organization such as agencies like the United Nations. There are ways it can be given to particular problems such as natural disasters such as the 3.11 earthquake in Japan.
Bilateral aid is a way to provide assistance from country to country and multilateral aid is when a group of different countries pay money into one organization.

b) Aid is an effective means of promoting the development of poorer countries. Evaluate this statement.

Development is when a country increases in the ability of producing goods and services and thus can provide a higher quantity of goods to increase the standard of living. However, economic growth is not the same as development. Aid is important to developing countries because it provides a way for the country to increase their general sectors that produce basic commodities. Aid can furthermore allow the developing country to increase their GDP per capita and thus, increase the standard of living. Ways in which aid can be provided to developing countries in order to promote development include humanitarian, bilateral and multilateral. The most efficient way to provide assistance would be bilateral because it is direct aid given from one country to another.

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Paper 1 reflections

I just saw Ms. Q’s comments for my Paper 1. I see that she spent a lot of time reading it and commenting and I feel like for the amount of analysis she made, I could have studied harder for sure. With the opportunity of taking a retest, I shall take that chance to step it up and study more for next time. kobe

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Common characteristics of Togo (Developing economy)

Low Per Capita Income
Togo has a low income per capita
GDP per capita is $900
country comparison to the world is 220
population below poverty line is 32%

High Population Growth
Togo has population below the poverty line.
Togo popoulation growth rate is 2.8%
country comparison to the world is 20

High Unemployment and underemployment
There is a high unemployment rate in this country
Unemployment rate is NA%

Over Dependence on Primary Sector
GDP, composition by sector:
agriculture: 47.4%
industry: 25.4%
services: 27.2%

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New caMoodle Glossary

Today, I visited the new glossary available for CA students. I thought it was very neat and a good way to help us learn more efficiently. Part of the reason for the previous claim is because there are games now available. One of the many games I tried today was Tic Tac Toe as shown above.
The game consists of clicking on one of the squares and then, a question is provided on the left hand side, if the answer is right, its an “O”, but if the answer is wrong, its an “X”. According to the number of right and wrong answers, it determines whether the player will get a straight line or not.
This new glossary is good because it provides a new way for students to learn. We can then learn and have fun at the same time.

I also went to the new “Protected: New Triple A Resource “An Introduction to Economics”” today. i think its very useful. i will definitely go back to it before the exams as i think this contains all the information required to learn for the exams along with visuals that simply help readers better understand thus, more efficiently.

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Definitions and Diagrams

Tariff – a duty (tax) that is placed upon import to protect domestic industries from foreign competition and to raise revenue for the government.

Subsidy – an amount of money paid by the government to a firm, per unit of output, to encourage output and to give the firms an advantage over foreign competitors.

Dumping – the selling of a good in another country at a price below its unit cost of production.

Free trade – international trade that takes place without any barriers such as tariffs, quotas, or subsidies.

A customs union – an agreement made between countries, where the countries agree to trade freely among themselves, and they also agree to adopt common external barriers against any country attempting to import into the customs union, for example, the Switzerland-Liechtenstein customs union.

Trade creation – when the entry of a country into a trading bloc leads to the production of a good moving from a high cost producer to a low cost producer. if, for example, a country joins the EU, its car producers are no longer subject to the EU common external tariff and it can export more cars to EU member countries.

Trade diversion – when the entry of a country into a customs union leads to the production of a good moving from a low cost producer to a high cost producer. When the United Kingdom, for example, joined the EU it had to impose a common external tariff on butter from the low cost producer New Zealand, and start to import butter from high cost EU producers.

The World Trade Organization (WTO) – an international body that sets the rules for global trading and resolves disputes between its member countries. It also hosts negotiations concerning the reduction of trade barriers between its member nations.

The balance of payments accounts measure the international trade performance of an economy and show how well it is managing to match imports and exports of goods and services and the flows of investment in and out of the country. The current account records imports and exports of goods (sometimes known as the ‘balance of trade’ or ‘visible trade’) and imports and exports of services (sometimes known as ‘invisible trade’).

Capital account deficit – where the revenue from the export of goods and services and income flows is greater than the expenditure on the import of goods and services and income flows over a given time period.

Current account deficit – where revenue from the export of goods and services and income flows is less than the expenditure on the import of goods and services and income flows over a given time period.

Exchange rate – the price of one currency expressed in terms of another.

Fixed exchange rate – an exchange rate system where one currency is fixed in value against another. It involves the government working to keep the parity via intervention on the currency markets. These give certainty but can cost vast sums of foreign exchange from national reserves.

Floating exchange rate – an exchange rate which accepts that market forces will determine rates based on how they view a country’s trade performance and its economic and political stability. These systems cost less to maintain but can result in vast swings and changes in currency values. This can seriously affect trade performance and confidence.

Managed exchange rate – where the rate is floating but between upper and lower limits that the domestic government keeps it to. It brings more stability but at less cost to the national reserves.

Depreciation – a fall in the value of one currency in terms of another currency in a floating exchange rate system.

Appreciation – an increase in the value of one currency in terms of another currency in a floating exchange rate system.

Devaluation – a decrease in the value of a currency in a fixed exchange system.

Revaluation – an increase in the value of one currency in a fixed exchange system.

Deteriorating terms of trade – where the average price of exports falls relative to the average price of imports.

Elasticity of demand for exports – a measure of the responsiveness of the quantity demanded of exports when there is a change in the relative price of exports.

Elasticity of demand for imports – a measure of the responsiveness of the quantity demanded of imports when there is a change in the relative price of imports.

Comparative Advantage Diagram

China has an absolute advantage in the production of both shoes and cloth. It can produce more of both products than India can with the same factor inputs. Nevertheless, India has a comparative advantage in producing shoes, since they only give up 2.5 meters of cloth for each pair, whereas China gives up 4 meters of cloth. Thus China should specialize in cloth and India in shoes.

Free Trade Diagram

When Free Trade happens, the corn is then traded at a world price which is the Sworld new curve.

Subsidy Diagram

Putting a subsidy on certain goods, the price for consumers remains the same but imports fall and domestic production increases, a way to manipulate imports and exports in a way.

Tariff Diagram

Putting a tariff upon imported goods will increase the price, adding on a tariff upon that price. A tariff is a tax imposed on imports and is a way to protect a nation’s trade market. This consequently allows a country to grow.


The J curve basically is the shape of a curve that represents an economic growth after a fall. The Marshall-Lerner condition does not happen in the short run but rather in the medium to the long run. The export elasticity of demand then is low in the short run and will be higher in the long run.

A floating currency Diagram

This diagram shows how a value of a currency is determined by the demand. The supply on the other hand, is determined by the foreign exchange market.

Appreciation of a currency Diagram

Appreciation is an increase in value of a currency in terms of another currency. This ultimately happens in a floating exchange rate system.

Depreciation of a currency Diagram

Depreciation of a currency is the fall in value of a currency in terms of another currency. This ultimately happens in a floating exchange rate system.

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Section 4

This is Manon’s slide show

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China manipulating currency

China has recently been accused of currency manipulation from many nations and economists around the world. These accusations are results of Chinese currency being extremely low to make exports harder on the global market. As a consequence, this has slowed economic recovery for many nations because the Chinese products are cheaper and thus, have a higher demand from many countries.

There has been a fixed rate, or an exchange rate that the Chinese government keeps constant in comparison to another currency. As a result of the economic crisis in 2008, China has had all those accusations for keeping their currency low. This has been done according to Chinese monetary policies in the government office.

Because of the US debt, the RMB has been able to keep its low value. As a consequence, it floods the currency market with the RMB and takes the American dollar off the market simply because the RMB has been kept low. According to the law of supply and demand, the US dollar increases and the RMB decreases, increasing demand for Chinese products but decreasing demand for US products.

According to the diagram below, there is a shift of supply to the right from S1 to S2. As a result, the price decreases from P1 to P2 on the y axis and the quantity of RMB increases from Q1 to Q2. Therefore, the RMB value decreases, as desired.

After reading the given articles, there seems to be consequences to China’s currency manipulation. The United States owes China such a big US debt and thus, it devalues the value of RMB especially when compared to USD. However, China’s low valued currency affects other nations’ currency as well. As a consequence, there may be a currency conflict among several nations. A currency war is a conflict when many countries weaken or strengthen their currency altogether because they affect each other directly, so one little action or move from one nation can create a move from others, as they all move together.

Recently, the city of Beijing in China has made statements in releasing some government control over the exchange rates as to make the RMB’s value increase. Thus, China has the interest in increasing its currency’s value, which shows that China has been manipulating its currency and devalued it.

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Portfolio selection

The Marshall-Lerner Condition and the J-curve: This is a good post that reviews and article and then relates to an economic concept. Thus, a diagram is used at the bottom of the post to represent the economic concept.

Globalization Debate Reflections: This is a good example of reflections about a specific assignment we have done in class. Negatives and positives about the debate are discusses in the post, giving a good review of how the class assignment went.

China manipulating currency: This is a good example of an extended blog post which well analyses a series of given articles that discuss about Chinese currency and their low value which affects other nations

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Hope might be in sight for the UK: The Marshall-Lerner Condition and the J-Curve

This, is an article that discusses about the UK’s sudden increase in imports, representing the J-curve in economic terms. This is because of a sudden increase in overseas demand because of UK’s weak currency. Although the imports are increasing, the weak pound does not improve the exports. Britain has not run into surplus yet. Most analysts are seeing a progress in exports. With this sudden increase in imports, it has shown the “fastest output growth in almost a decade”, states the article. Banks in the UK say that this increase in imports will be helping the UK with the recession.

We could see this situation as a Marshall-Lerner condition. A Marshall-Lerner condition is a condition that states that the “current account will improve after a depreciation if the sum of the price elasticities of demand for imports and exports is greater than 1”. Likewise in the article, the situation being analysed is a condition related to demand as the sudden increase in imports is a result of a the increase in overseas demand. However, the Marhshall-Lerner condition is a medium to long run. A deterioration of trade balance may happen even though overseas demand increases because people overseas do not react immediately and so export demand will take time to change. An initial deterioration of the trade balance follower by an improvement can be drawn in a graph called the J-curve which starts in the deficit area to a surplus area, thus going from negative to a positive area, forming the J-curve.

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Russia, Country in Surplus (via Ansish’s Economics Blog)

Great post. Now I know about Russia.

Russia, Country in Surplus The current account of Russia has increased since 1994 to 2010. Overall, the current account of Russia is positive, and it means they have a surplus. The amount of imports to the country is lower than the amount of exports. The current account has dropped significantly between 2007 and 2010, but it still stayed positive. Summary of Article on Russia's Surplus : Russia is expect … Read More

via Ansish's Economics Blog

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