World of Economy Question Answer 2022

World of economy 3 1
WORLD OF ECONOMY 3
Students Name
Course
Professor’s name
University
(City)State
Date

World of economy 3 2
World of Economy 3
Development and Globalization
Question 1
The main strategy of the IMF has been a top-down policy that focuses on improving how a state
functions, how it relates to society, and how it manages the overall economy.
Question2
The main characteristic of good governance is that governments undergo reforms in terms of
public sector management through judicial predictability, the rule of law, as well as lower levels
of corruption.
Additionally, it encompasses government accountability to the civil society by allowing the
participation of social groups in the decision making process (Balaam and Dillman, 2015).
Also good governance entails the creation of conditions that facilitate markets to function better
in the economy through the promotion of stronger private property rights, better competition
practices and improved financial oversight.
Question 3
A structuralist would criticize the strategies that center mainly on upholding good corporate
governance for the fact that they fail to uncover the structures that underlie all the economies,
and their interrelations with each other.

World of economy 3 3
Question 4
It is challenging for many nations to get out of the middle income trap because most nations are
unable to develop the features of good governance such as public-private networks and effective
state agencies. As such, their political dysfunctions hinder the formation of stable cooperative
coalitions. Additionally, most countries have social groups that are fragmented due to high
inequality and informal economies (Balaam and Dillman, 2015).
Question 5
I agree with those who argue that poverty is as a result of structural factors and the best solution
to curb it is redistribution of national income. Mainly, this is because this view aims at improving
the poor people’s access to financial services such as savings accounts and credit while at the
same time providing opportunities for grassroots entrepreneurship. In turn, this has a higher
chance of uplifting the economic position of the poor than handing them handouts which does
nothing to improve their economic empowerment.
Question 6
I believe that strategies should focus on enhancing growth first, and afterwards welfare would
follow. Mainly, this is because, developing a strategy that provides the people with
entrepreneurship skills and provides access to capital at the grassroots level would provide a long
term solution to their poverty as they can now generate an income for a longer period of time as
compared to the alternative.
Does the Rise of middle class lock in good government in the developing world by Nancy
Birdsall

World of economy 3 4
Question 1
The rise of the middle class should make countries optimistic owing to the fact that it is
associated with continued growth and a reduction in inequality. Specifically, the middle class
champions for good government and helps to uphold it by sponsoring public goods through the
willful payment of taxes. Thus, nations are likely to enjoy economic and political stability
associated with good government.
Question 2
An income-secure middle class refers to individuals who have a low possibility of becoming
poor as a result of an unexpected household shock such as floods, sickness or unexpected
unemployment.
Question 3
The distinction is important to the author because it appears to reflect a difference in the
aspirations and values of the population. As such, the strugglers are less secure materially and,
are therefore more sensitive to political decisions that tend to increase their cost over the short
term. The secure middle class on the other hand have a planning horizon that is longer and are in
a better place to center on public goods.
Question 4
The optimism must be challenged because most people in the developing world live in nations
where less than 20 percent of the population is middle class (Birdsall, 2013). Thus, the middle
class is still too small to be a factor in the demand for good government, thereby dimming the
development prospects.

World of economy 3 5
Question 5
The two assumptions are as follows:
i. A larger middleclass has a bigger interest in an accountable and responsive government
and higher chance of having its common interests reflected in political life,
ii. They have a higher likelihood of supporting a social contract in which the taxes they pay
directed to collective and public goods
iii. Other critical aspects include:
i. Whether whatever growth there is will be distributed well to benefit the strugglers
Question 6
The key claim of the paper is that the middle class is good for good government. I strongly agree
with this argument given that it is the materially secure middle class that often benefit from the
government and therefore demand it. Additionally, it helps to sustain it. Therefore, if the middle
class is dominant in the country, then it would eventually result in good government.
The UN monthly Briefing, April 2020
Question 1
A significant reduction in consumer purchases in the United States and the European Union will
decrease imports of goods from less developed nations. Furthermore, the global tourism industry
has been affected with any countries closing their borders. Therefore, developing countries will
be significantly affected as a result the pandemic.

World of economy 3 6
Question 2
The tourism sector in the Bahamas is potentially threatened by the current situation. Mainly, this
is due to the restrictions on international travels by major economies. Thus, tourists from these
economies cannot travel to the Bahamas, meaning that the country will significantly lose out on
tourism income, leading to increased unemployment and loss of livelihood for households.
Question 3
In the worst case scenario, the global production would reduce by 0.9 percent instead of the
projected growth of 2.5 percent. This is due to the expected demand-side shock whereby global
demand for goods and services contracts significantly. Likewise, the decline in oil prices would
significantly affect the oil producing economies. Thus, the global growth rate would sink further,
leading to a global financial crisis.
Question 4
This is because lower income workers do not have the appropriate labour market protection since
a large proportion of them work in the informal sector. Also, most of them work in industries
such as the food industry and retail sales, that have most been affected by the pandemic. As a
Question 5
Policy measures used currently comprise of slashing interest rates and injecting liquidity into the
economy. Indeed, these two policies are largely expansionary monetary fiscal and monetary
policies that aim at ensuring that there is enough money in circulation to prevent demand-
deficient recessions. As such, availability of money in circulation would ensure that the demand
in the economy is maintained, thereby keeping the economy afloat.

World of economy 3 7
Question 6
The crisis is likely to promote inequality between nations. A large proportion of the people in
many countries do not possess a large financial wealth to live beyond the national poverty line
for a period longer than three months. Thus, prolonged restrictions among nations coupled with
slower economic growth will increase the level of inequality among nations.
Causes and Consequences of Income Inequality by (Dabla-Norris et al., 2015)
Question 1
The objective of the authors is to highlight the widening income inequality among economies
and show why policymakers should focus on the middle class and poor. They also explain the
different trends in inequality development across countries.
Question 2
There is no one-size-fits-all approach to tackling inequality because empirical research indicate
that the drivers of disparity and their consequences vary from one nation to another for different
income groups. For this reason, the nature of policies used would vary among nations by
considering country-specific institutional settings and constraints (Dabla-Norris et al., 2015)
Question 3
The Gini coefficient is a statistical measure of distribution that is used as a measure of economic
inequality, wealth distribution and income distribution among a population.
Question 4

World of economy 3 8
It matters for growth because, according to studies by the IMF, income inequality has a negative
effect on growth and sustainability. Therefore, for there to be growth in an economy, then there
should be low income inequality.
Question 5
Technological change can bring about a disproportionate rise in the demand for skilled labour
over unskilled or low–skilled labour by rendering many jobs obsolete due to automation of tasks
or raising the skill level needed to get those jobs. In turn, this results in inequality between the
skilled and unskilled labour in the country (Dabla-Norris et al., 2015).
Question 6
These labor market regulations tend to improve the income distribution. For instance,
unionization tends to increase the bargaining power of labour, thereby reducing wage inequality.
Question 7
It is the role of the government to ensure that the Gini coefficient in its country is maintained at
optimal levels that indicate fair income distribution and low income inequality.
Thomas Piketty, Capital in the 21st Centrury (2013)
Question 1
For Thomas Malthus, the primary threat was overpopulation. For this, he proposed all
welfare assistance to the poor should be stopped and the reproduction by the poor should be
severely scrutinized (Piketty, 2013).

World of economy 3 9
Ricardo was mainly concerned with the long-term evolution of land prices and rents. He
believed that land scarcity would be a major problem. He proposed that the government
should impose a progressively increasing tax on land rates.
Marx believed that the main threat was wage stagnation. He however concluded that no
stable socio-economic or political equilibrium was possible (Piketty, 2013)
Question 2
His predecessors fail to consider the fact that inequality is a product of many generations. It has
taken thousands of years to develop the degree of inequality that exists now, and therefore that
should have been considered.
Question 3
The Kuznet curve is the theory that inequality anywhere is expected to follow a bell-curve. It
increases first, and then declines over the course of economic development and industrialization.
Piketty claims it is not trustworthy because it was formulates for the wrong reasons, during an
unusual period of history, and its empirical underpinnings are extremely fragile.
Question 4
The three main points made include:
i. the long run dynamics of income inequality
ii. the return of a patrimonial or wealth based society
iii. the future of wealth concentration

World of economy 3 10
Question 5
Globalization cannot be the only explanation for increasing inequality due to the fact that
individuals and nations have access to different levels of resources and wealth, thereby bringing
about inequality
Question 6
Piketty defines the patrimonial middle class as the 50th to 90th percentile.
Question 7
The example of Germany shows that market and social values of capital can significantly vary
and property relations are legally, historically and socially determined.
Question 8
The inequality between top-billionares and the average cannot go on forever due to a global tax
on wealth that significantly reduces the wealth on return on capital, thereby reducing the income
inequality.
Question 9
He applauds government influence in economic matters as the intervention of government results
in the reduction of income inequality within economies.
Discourse on the origins of inequality by J.J.Rousseau
Question 1

World of economy 3 11
The states of a human being are the primeval asocial state of nature (original state of human
beings), primitive cultures (state of savageny) and unhappy civilized societies (state of
civilization). The most preferable state in his opinion is the original state of human beings
(Rousseau, 2020)
Question 2
i. The development of law, society and government
ii. The development of language
iii. The development agriculture and metallurgy (Rousseau, 2020)
Question 3
According to Rousseau, inequality is not necessary. This is because inequality arises from a
progression of evolution that has corrupted humankind and subjected it to laws which supports
an untenable kind of inequality.
Question 4
The law is advantageous to the rich because society has a complex set of evaluations and the
society has developed notions of class that generally favor the rich more than the poor.
Question 5
The rule of natural right is linked to natural law and self preservation.
Question 6

World of economy 3 12
Economic inequality is not good since it results in an increase in social, political, and economic
problems. There are significant effects of inequality, among them a lower level of satisfaction
and happiness among the populace, lower economic growth.
The age of sustainable development by Jeffrey Sachs
Question 1
Approximately an increase of 75-80 million people is added to the population of the world each
year (Sachs, 2020).
Question 2
The rule of seventy says that seventy divided by the growth rate gives the number of years to
double the size of a particular economy (Sachs, 2020).
Question 3
The elements of a normal pathway to economic growth are agriculture to modern manufacturing
and services. This pathway is agreeable, owing to the history of most modern economies that
evolved from the agrarian revolution to the modern economies of today.
Question 4
He believes inclusive economic development and growth can help improve and better the life
conditions of people in less developed countries. The development should be environmentally
sustainable.
Question 5

World of economy 3 13
Sachs is largely a structuralist. Mainly, this is because he bases his work king into account the
structural and fundamental underlying features when undertaking economic analysis.
Question 6
I would speak about the challenges faced by developing economies in the midst of the Covid-19
pandemic and how these economies can be helped to regain their momentum after the pandemic.
Reference List
Balaam, D. and Dillman, B., 2015. Introduction to International Political Economy. 7th ed.
Melbourne: Routledge, pp.294-299.
Birdsall, N. 2016. Does the Rise of the Middle Class Lock in Good Government in the
Developing World?. [Online] Global Center for Global Development. Available at:
http://www.cgdev.org/publication/doesrisemiddleclasslockgoodgovernmentdevelopingworld[Acc
essed 15 April 2020]./
Dabla-Norris, E., Kochhar, K., Suphaphiphat, N., Ricka, F., and Tsounta E. (2015). [pdf]. Causes
and Consequences of Income Inequality: A Global Perspective.

World of economy 3 14
Picketty, T. 2013. [pdf]. Capital in the 21st Centrury (2013) – Introduction
Rousseau, J. J, 2020. World Views and Values: Rousseau, Discourse on the Origins of Inequality
(lecture 2). [video] Available at: < https://www.youtube.com/watch?v=Vjagpa4aAvI >
[Accessed 15 April 2020].
Sachs, J., 2020. The Age of Sustainable Development | Lecture 1, Chapter 2. [video] Available
at: <https://www.youtube.com/watch?v=0FidThcFCAc> [Accessed 15 April 2020].
United Nations. 2020. Monthly Briefing: COVID-19 Disrupting Lives, Economies And Societies.
[online] Available at: <https://www.un.org/development/desa/dpad/publication/world-economic-
situation-and-prospects-april-2020-briefing-no-136/> [Accessed 15 April 2020].