World Economic Systems and Development
This domain examines how economies are organised and how development is measured and compared. Questions test capitalism, socialism and mixed economies, core–periphery relations, development indicators and theories such as Rostow’s stages and dependency theory.
Core rules and concepts
- Capitalism relies mainly on private ownership and markets; socialism on public ownership and planning; mixed economies combine both.
- Development is broader than growth: income, health, education, inequality and sustainability all matter.
- GDP/GNI per capita measures output or income; PPP adjusts for price differences; HDI combines life expectancy, education and GNI per capita; GII highlights gender inequality.
- Core–periphery models show unequal exchange and concentration of high-value activity.
- Rostow’s stages are descriptive, not a universal recipe; dependency theory stresses external constraints.
Worked example
Country A has nominal GDP per capita of $2,000 but PPP $8,000 and HDI 0.62. Country B has nominal $10,000, PPP $12,000 and HDI 0.70. Reasoning: A’s low nominal figure reflects cheap domestic prices, so PPP narrows the income gap; B still leads on HDI because health and education are better. Conclusion: use PPP for living-cost comparison and HDI for multidimensional development; neither alone proves welfare.
Traps that cost marks
- Equating GDP growth with development; distribution and non-income dimensions are ignored.
- Confusing nominal and PPP figures, or comparing HDI ranks across different years.
- Treating Rostow’s stages as compulsory for every country.
- Assuming correlation between income and HDI is perfect.
In answers, state the indicator, its components, its unit and its limitation before comparing countries.