Economic Development

Foreign Aid


Foreign aid is the process of help in which two countries are involved vastly. It includes the international transfer of capital, goods, or services from a country or international organization to another. The main aim behind such process is to benefit recipient country and its population. Also, this involves the transfer of commodities and financial resources which denotes the motive to help countries in development and to fight poverty.  International Monetary Fund (IMF), the World Bank and the United Nations Children’s Fund (UNICEF) are perfect examples that have provided a significant amount of aid (Lancaster & Dusen, 2005, p. 4-6).  In the subject to the role of foreign aid in economic development, there is mix results can be seen. On the basis of research by economist there is a conflict that is raised. It is because; some countries like Israel, Taiwan and South Korea had grown with aspect of foreign aid. In supportive way, it is believed that aid increases power, money, and support to recipient government which helps them to make the grip over society as well. On the other hand, some countries like India and Pakistan have gained quite little or more like nothing from foreign aid so some economist resulted that there is no connection between economic development and foreign aid (Easterly, 2003).



Trade and Tariffs


Trading between two countries is determined as the exchange of ability or goods to fulfill some lacking. If two countries are trading with each other and want to get better results than both should split the production equally across countries.  Tariffs are like a tax on import and export of goods or price that is paid by rail, bus route, and electricity usage. Tariffs can be used by United State to adjust market prices of goods so that the export of jobs can be restricted. Such restriction makes all manufacturers more caring towards workforce and provides them all rights like minimum wage, workers’ compensation, insurance, unemployment insurance. So it can be determined that tariffs helps to increase jobs in US. Trade restrictions affect countries in both ways, negative and positive. As per these are imposed some loss and some gain. For example, if a U.S. government imposes a quote on imported T-shirts then U.S. consumers of T-shirts will be losers and U.S. producers will be winners.  Tariffs impose losses to the economy because it increases the cost of domestic procedures. Such increment results less sell in those foreign markets which directly impacts the organizational development of the region. Decline in organization development affect the economy of the region and this results s huge loss in economy as well.


Exchange Markets and Rates


Balance of payment (BOP) refers to accounting records of all monetary transactions that is done between a country and the rest of the world. BOP cannot be accounted in surplus because it is not necessary that exports of the country will be always remaining same as its imports. The global market for foreign exchange currency is quite messy due to availability of several currencies around the world. To determine the demand for British pound in foreign exchange maker one should take some aspects into account. Export of goods and services done by the UK is one of the important factors that show demand of pounds in other countries.  Foreign investment flowing into the UK is also a factor that helps to determine the demand of the exchange market. Lastly, official buying of currency by central bank is the aspect through which demand of the exchange market for British pound can be specified  (Coyle, 2000, p. 38-43).Determination of exchange rates can be possible with the assessment of flexible exchange rate system. It is a monetary system which facilitates supply and demand within a country and through such inclusion, an exchange rate can be determined easily (Carbaugh, 2010, p. 123-128).


Developing Countries


Developing countries are those that were poorest earlier but now have begun to build an industrial base. These countries hadn’t yet achieved stable growth and income and production which are also called underdeveloped or less developed countries.  These are different from industrial market economies because an industrialized economy includes features of productive, sophisticated banking systems and financial markets. United States, Canada, Japan, Germany, France, the United Kingdom, and Italy are the categories of industrial market economy whereas all countries in the Middle East and all countries in Latin America except Cuba are counted as developing countries (Wilson, 2004, p. 32-38). International economy refers to the mix of economics around the world which share a link with each other. Developing countries get affected with international economy quite hugely due to the inter-linkage between all. It is because if an industrialized economy gets affected with any factor then it will affect all developing countries as well. This results in a slow growth among developing countries and lose in economic growth also be tolerated. Likewise, the US recession has impacted all over the world quite effectively (McEachern, 2010, p. 26-30). Almost all countries were facing recession like USA which has stopped growing speed of the developing countries most effectively.


Bretton Woods System


The Bretton Woods System has come into light after 25 years of World War 2, it was the international monetary system that was based on stable and adjustable exchange rates. In this system, the exchange rate not permanently fixed, can be exchanged at occasional terms. In this system, the central bank of countries in-spite of United State was given a task to maintain the fixed exchange rate between their currencies and the dollar. This system was collapsing, because United State has denied taking part in such assessment (Steil, 2013, p. 6-10).  This system was collapsed due to inflation in the United State and indetermination in the value of the dollar has affected the growth in the American trade deficit.The system was quite instable and includes floating rates with unstable features. This was quite ineffective in terms of growth of the economy of countries. The system has collapsed because it includes so many instructions which cannot be followed by United State even after huge efforts. The instability among exchange rate was the basic problem that disturbs the flow of the economy and related transaction in which nations are involved (Züfle, 2011, p. 4-9).




  • Carbaugh, R,J. (2010). Contemporary Economics: An Applications Approach. M.E. Sharpe.
  • Coyle, B. (2000). Foreign Exchange Markets. Global Professional Publishi.
  • Easterly, W. (2003). Can Foreign Aid Buy Growth?. The Journal of Economic Perspectives, 17(3), 23-48.
  • Lancaster, C. & Dusen, A.V. (2005). Organizing U. S. Foreign Aid: Confronting the Challenges of the Twenty-first Century. Brookings Institution Press.
  • McEachern, W.A. (2010). Economics: A Contemporary Introduction.: A Contemporary Introduction. Cengage Learning.
  • Steil, B. (2013). The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order. Princeton University Press.
  • Wilson, E.J. (2004). The Information Revolution and Developing Countries. MIT Press.
  • Züfle, N. (2011). The new Bretton Woods system. GRIN Verlag.

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