Practise evaluating how aid, trade, FDI, MNCs, debt, globalisation and international institutions affect growth, external accounts and living standards in developing economies.
Assess the impact of international aid on the standard of living in low-income countries.
Use Table A: AO1 Knowledge and understanding and AO2 Analysis and Table B: AO3 Evaluation to mark candidate responses to this question.
AO1 and AO2 out of 14 marks. AO3 out of 6 marks.
Indicative content
Responses may include:
AO1 Knowledge and understanding and AO2 Analysis
- Aid can be defined as any assistance given to a country that would not be provided through normal market forces.
- There are two main types of aid, humanitarian aid;
development aid.
Development aid would include many different types including: long term
loans;
tied aid;
bilateral aid and multilateral aid.
- Key characteristics of low-income countries would include: low levels of productivity;
high dependency ratios;
low GDP per capita;
significant
dependence on producing and exporting primary goods.
- Low living standards are generally associated with: high poverty levels;
inequality;
poor housing, education and health;
and rapid population
grow.
- Aid that focuses on the provision of new technology, building new factories and training the work force is likely that productivity, output, employment and income levels will rise.
- Aid can increase real wealth and higher levels of tax revenue are likely to
be received by a low-income country's government. This will enable more
expenditure on health, housing and education as well as increased access to more consumer goods. These improvements are generally associated with a rise in the standard of living.
5
AO3 Evaluation
- The links between an increase in aid and an increase in living standards are not clear. Sometimes aid only reaches a relatively small section of the population. For example, due to corruption.
- Different types of aid might produce different outcomes. For example, aid in the form of long-term loans might make it more difficult for low-income countries to escape the cycle of poverty.
- Aid is sometimes given for political reasons rather than the low-income countries where the need is the greatest.
- Tied aid might mean that low--income countries receiving such aid have to purchase goods and services from the donor country which are more expensive.
- Long term dependency upon aid might lead to a welfare mentality and reduce levels of innovation in the low-income country.
- A conclusion might attempt to form an overall judgement on the short term and long-term efficacy of development aid in relation to the improvement of living standards in low-income countries.
Marking guidance:
Accept all valid responses.
AO1 Knowledge and understanding and AO2 Analysis
AO3 Evaluation
Which policy by developed economies would be most beneficial for developing economies?
a ban on resource exploration by mining companies in developing economies
restrictions on investment by global firms in developing economies
the removal of restrictions on emigration of skilled labour from developing economies
the withdrawal of agricultural subsidies in developed economies
D
What is the most likely consequence of an increase in the number of multinational companies?
a decrease in advancements in technology
a decrease in foreign direct investment
an increase in exports
an increase in unemployment
C