Improving Countries’ Standards of Living

Self-Check Questions

Create a table that identifies the macroeconomic policies for a high-income country, a middle-income country, and a low-income country.

Hint:

The following table provides a summary of possible answers.

High-Income
Countries
Middle-Income
Countries
Low-Income
Countries
  • Foster a more educated workforce
  • Create, invest in, and apply new
    technologies
  • Adopt fiscal policies focused on
    investment, including investment in
    human capital, in technology,
    and in physical plant and equipment
  • Create stable and market-oriented
    economic climate
  • Use monetary policy to keep inflation
    low and stable
  • Minimize the risk of exchange rate
    fluctuations, while also encouraging
    domestic and international competition
  • Invest in technology, human
    capital, and physical capital
  • Provide incentives of a market-
    oriented economic context
  • Work to reduce government
    economic controls on market
    activities
  • Deregulate the banking and
    financial sector
  • Reduce protectionist policies
  • Eradicate poverty and extreme
    hunger
  • Achieve universal primary
    education
  • Promote gender equality
  • Reduce child mortality rates
  • Improve maternal health
  • Combat HIV/AIDS, malaria,
    and other diseases
  • Ensure environmental
    sustainability
  • Develop global partnerships
    for development

Use the data in the text to contrast the policy prescriptions of the high-income, middle-income, and low-income countries.

Hint:

Low-income countries must adopt government policies that are market-oriented and that educate the workforce and population. After this is done, low-income countries should focus on eradicating other social ills that inhibit their growth. The economically challenged are stuck in poverty traps. They need to focus more on health and education and create a stable macroeconomic and political environment. This will attract foreign aid and foreign investment. Middle-income countries strive for increases in physical capital and innovation, while higher-income countries must work to maintain their economies through innovation and technology.