Aeco330 quiz 1 - Aeco330 quiz 1 Growth Theories Ch 5 Cycle...

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Aeco330 quiz 1 Growth Theories Ch. 5 Cycle of poverty: countries are poor because they are poor 1. Demand Side Theory a. Income/Output is low, lower demand for goods and services b/c limited size of market b. Lower Profitability, Lower incentive to invest and expand for producers c. Production is low, output/income is low 2. Supply Side Theory a. Low income low savings b. Less amount of loan able funds for producers c. Lower investment low productivity and growth d. Low income/production/output Rostowe’s Stages of Growth 1. Traditional Society: little or no technology a. Pre-scientific understanding of gadgets b. Rural setup c. Output growth is very limited, usually due to growth in labor force d. Spiritual knowledge quest 2. Preconditions for ‘Take-off’ (10-50 years) a. Secular education/training b. Enabling a certain degree of capital mobilization c. Establishment of banks, proper currency system, entrepreneur class d. Secular manufacturing sector starts with a few sectors
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3. Take-off (50-100 years): sector-led growth (UK-cotton, Germany-Iron/steel, USA-Engineering) a. Main transition stage from traditional to modern society b. Acceptance of modern idea 4. Drive to maturity:
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