Answer to Question #253292 in Macroeconomics for vtg

Question

1.1. what do you understand by the concept economic aid

1.2.disccuss the advantages and disadvantages if foreign aid

Answer 1

Solution:

1.1.). Economic aid refers to the unilateral transfer of resources from one economic entity (the donor) to another (the recipient). The aim of economics is to reduce poverty, enhance economic growth, facilitate social changes in poor nations and directly assist disadvantaged groups such as children and women.

 

1.2). Foreign aid refers to any kind of assistance that one nation voluntarily transfers to another, which can take the form of a grant, gift, or loan. It can also be food, supplies, humanitarian and military assistance.

The advantages of foreign aid include the following:

·        Emergency aid in times of disaster saves lives.

·        It helps rebuild livelihoods and housing after a disaster.

·        Foreign aid benefits the domestic economy at the same time as the international one.

·        It leads to the Provision of medical training, medicines, and equipment which can improve health and standards of living.

·        It can support countries in developing their natural resources and power supplies.

·        It Encourages industrial development which can create jobs and improve transport infrastructure.

·        Aid for agriculture can help increase food production and so improve the quality and quantity of food available.

 

The disadvantages of foreign aid include the following:

·        It has the potential to increase LEDCs' reliance on donor countries. Aid is sometimes a loan, not a gift, and poor countries may struggle to repay.

·        Aid may not reach the most vulnerable people. Local politicians may use aid for personal gain or political gain as a result of corruption.

·        Aid can be used to exert political and economic pressure on the recipient country. The country may end up owing a favor to a donor country or organization.

·        It could be a condition of the investment that the projects are run by foreign companies, or that a portion of the resources or profits is sent overseas.

·        Employers may benefit more from infrastructure projects than employees.