Lesson 8: Trade and Development

Please read  "Trade, Development & Sustainability", Parts 3-5

1. Why did the governments of less-developed countries tend not to productively invest the money they borrowed?

2. How can protectionist policies wipe out the gains of comparative advantage in international trade?

3. What are some of the political impediments to development in LDCs?

4. Why did colonized nations fail to develop domestic industries even after they attained independence?

5. The boundaries of colonies differed from those of the colonial powers because

a. they did not develop organically, but were imposed by fiat.
b. they cut across ethnic and linguistic regions.
c. they were imposed from without, not defended from within.
d. All of the above.
e. None of the above.

6. Why have some nations prospered while others failed to develop?

7. According to the reading, the most desirable effect of development on indigenous tribal societies would be

a. to provide greater education for successful assimilation.
b. to eradicate diseases that have long plagued them.
c. to relieve the pressure of development in their homelands.
d. to provide restitution for the abuses of the past.

8. Why did the US and many other nations agree to adopt a gold standard under the “Bretton Woods System”?

9. What was the original purpose of the International Monetary Fund? How have its functions changed in recent years?

10. How did developing nations hope to pay back the money they borrowed from the World Bank?

11. How did US monetary policy in the early 1980s contribute to the debt crisis in developing countries?

12. If a heavily indebted nation were to simply default on its foreign debts,

a. Deprived of ongoing foreign loans and aid, its ruling regime would be cast out of power.
b. A wave of bank failures would be kicked off.
c. Faced with high tariff barriers, its export markets would be removed.
d. All of the above.
e. a and c, but not b.

13. What has been the effect of “structural adjustment programs on indebted nations? What consequences of this can you identify in current events?

14. If "austerity programs" have been so disastrous and unpopular, why have nations not simply defaulted on their foreign debts?