Economic development

Traps in Economic development

• Development planning misconceptions
  Growth = increase in real GDP. Development = growth plus improved welfare (health, education, reduced poverty). Rolling plans are revised annually; perspective plans are long-term.
• Confuses monetary and fiscal policy tools
  Monetary (central bank): interest/policy rate, open market operations, reserve requirements. Fiscal (government): taxation and public spending, budget deficit/surplus.
• Reverses the direction of the effect
  Trace the chain step by step (e.g. buying securities → banks gain cash → money supply rises) and check the sign at every link.
• Misreads population structure
  High birth rate → broad base, many young dependants. Low birth + low death → ageing population.
• Chooses a true but irrelevant statement
  Re-read the question's key term and test each option against it, not against whether it is true in general.
• Uses the everyday meaning of a term
  Economic terms have precise definitions. Recall the textbook definition before matching.
• Balance of payments errors
  Visible trade = goods (balance of trade). Invisible = services (shipping, tourism, insurance). Current account = visibles + invisibles + income + transfers. Capital account = investment and loans.
• Over-generalises a rule
  Economic laws hold 'other things being equal' and within limits. Be suspicious of options with always/never/all.