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FAQs on Economic Development : Source of Finance - Question Bank

1. What are some common sources of finance for economic development projects?
Ans. Some common sources of finance for economic development projects include government grants and loans, private investments, foreign direct investment, development banks, and international organizations like the World Bank and the International Monetary Fund (IMF).
2. How does government financing contribute to economic development?
Ans. Government financing plays a crucial role in economic development by providing funds for infrastructure development, education and healthcare systems, research and development, and other initiatives that promote economic growth. It helps create employment opportunities, attracts private investments, and improves living standards.
3. What is the role of private investments in economic development?
Ans. Private investments play a significant role in economic development by providing capital for businesses, industries, and infrastructure projects. They stimulate economic growth, create jobs, and contribute to technological advancements. Private investments can come from domestic or foreign sources and are often attracted through favorable investment policies and incentives.
4. How does foreign direct investment (FDI) contribute to economic development?
Ans. Foreign direct investment (FDI) refers to investments made by foreign entities in the domestic economy. FDI can contribute to economic development by bringing in capital, technology, and managerial expertise. It helps create jobs, boosts productivity, promotes innovation, and enhances international trade and integration.
5. What role do development banks and international organizations play in financing economic development?
Ans. Development banks and international organizations like the World Bank and the IMF play a critical role in financing economic development. They provide financial assistance, loans, grants, and technical support to developing countries for various development projects. These institutions help address the financing gap, promote sustainable development, and support initiatives that alleviate poverty and improve living conditions.
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