Development Economics
Exam Materials
Course Introduction
Development Economics explores the economic aspects of the development process in low-income countries, focusing on topics such as poverty, inequality, population growth, education, health, and structural transformation. The course examines theoretical frameworks and empirical evidence related to economic growth, the roles of markets and governments, and institutions in shaping development outcomes. Students analyze policy interventions aimed at promoting sustainable development, and address challenges such as global trade, foreign aid, and the impact of globalization on development trajectories.
Recommended Textbook
Economic Development 10th Edition by Michael P. Todaro
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16 Chapters
500 Verified Questions
500 Flashcards
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Chapter 1: Economics, Institutions, and Development: a Global Perspective
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22 Verified Questions
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Sample Questions
Q1) Countries tend to be classified as more or less developed based on A)the literacy rate.
B)the poverty rate.
C)the level of income per capita.
D) the types of goods they produce.
Answer: C
Q2) In what way is development economics greater in scope than traditional economics?
Answer: Development economics must encompass the study of institutional, political, and social as well as economic mechanisms for modernizing an economy while eliminating absolute poverty and transforming states of mind as well as physical conditions. More details found in the chapter.
Q3) Make a case that development economics might be merely a combination of all the other subfields?of economics, only applied to low-income countries.
Answer: See Question 3 above.
Q4) In reviewing discussions of life in developing countries, what is it about lifestyles in the low-income countries compared with lifestyles in the high-income countries that most strikes you? Why?
Answer: This is an open-ended question to stimulate reflection.
Page 3
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Chapter 2: Comparative Economic Development
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Sample Questions
Q1) What fraction of developing countries have recently experienced some form of significant interethnic conflict?
A)less than one-tenth
B)a tenth to one-quarter
C)one quarter to one half
D) over one half
Answer: D
Q2) About how many people lack access to safe water?
A)20 million
B)200 million
C)500 million
D) 1 billion
E) 2 billion
Answer: D
Q3) In what way does nationalism tend to be a hindering force in attaining modern economic growth and development, and in what way a facilitating force?
Answer: This is a question that would depend on what you have covered in lecture.
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Chapter 3: Classic Theories of Economic Growth and Development
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Sample Questions
Q1) Which of the following is an assumption of the Lewis two-sector model?
A)Surplus labor in industry
B)Positive marginal product of labor in agriculture
C)An upward sloping labor supply curve in industry
D) None of the above
Answer: D
Q2) The supply curve of labor to industry in the Lewis model is horizontal if there is surplus labor in agriculture. This condition persists as long as
A)the marginal product of labor is less than the average product of labor in agriculture.
B)the marginal product of labor in agriculture is less than the marginal product of labor in industry.
C)there are diminishing returns to labor in agriculture.
D) the marginal product of labor in agriculture is zero.
Answer: D
Q3) Patterns of development or structural change analysis stress internal change in a developing country's economic, industrial, and institutional structure. What are some of the most important changes?
Answer: Discussed in the text.
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Chapter 4: Contemporary Models of Development and Underdevelopment
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Sample Questions
Q1) Explain how the S-curve reflects the typical nature of complementarities?
Q2) Is it possible for a super-entrepreneur to solve all of the coordination failure problems within?a developing economy? Discuss.
Q3) The S-curve is used to illustrate
A)the typical path taken by the current account over time.
B)economic fluctuations in the economy.
C)the typical growth path of a developing economy.
D) the existence of multiple equilibria.
Q4) Explain how the government can help the economy avoid a coordination failure.
Q5) How can the O-ring theory help explain the existence of a low-level equilibrium that an economy may find itself in?
Q6) Suppose that a developing country devotes extensive resources towards improving the education and skill level of the labor force. How might this help the country avoid a coordination failure? Is this strategy likely to be successful? Why or why not?
Q7) Based on the HRV growth diagnostic framework and the case study in Box 4.2, what are the binding constraints faced by Brazil, El Salvador, and the Dominican Republic and how can these constraints be overcome?
Q8) Is a coordination failure a type of market failure? Explain.
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Chapter 5: Poverty, Inequality, and Development
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Sample Questions
Q1) The Ahluwalia-Chenery Welfare Index
A)is a method used to measure changes in absolute poverty.
B)shows the value judgement implications of using the change in income per capita as a measure of the change in development.
C)is a method used to measure changes in inequality.
D) is a method used to measure the growth rate of GDP.
Q2) The Gini coefficient provides a measure of
A)the level of poverty.
B)the level of relative inequality.
C)disguised unemployment.
D) the rate of growth.
Q3) What are the characteristics of the poor (be specific)?
Q4) Higher-income countries tend to have lower levels of absolute poverty because they A)have more employment opportunities.
B)have more public assistance.
C)have greater entrepreneurship opportunities.
D) All of the above.
Q5) Using a Lorenz curve diagram, explain how to calculate the Gini coefficient.
Q6) What is a Lorenz curve? Draw one, labeling the axes.
Page 7
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Chapter 6: Population Growth and Economic Development:
Causes, Consequences, and Controversies
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Sample Questions
Q1) Approximately how many women were estimated to be "missing" in China?
A)20-30 million
B)35-48 million
C)44-50 million
D) 52-58 million
Q2) Which of the following geographic regions is expected to experience the largest percentage increase in its population between 2003 and 2050?
A)Asia and Oceania
B)Latin America
C)North America
D) Africa
Q3) The Malthusian population trap assumes that
A)contraception is unavailable.
B)technological progress may be rapid.
C)fertility increases with per capita income.
D) All of the above.
Q4) Explain the reasons for the hidden momentum of population growth and state its implication for population levels.
Page 8
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Chapter 7: Urbanization and Ruralurban Migration: Theory and Policy
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Sample Questions
Q1) Even though women often constitute the majority of the rural-urban migrants in a country, they usually still remain employed in the informal sector. Why? What are the consequences of this?
Q2) Explain what is meant by urban bias. What are the major effects of urban bias?
Q3) Other things constant, the elimination of factor price distortions in developing countries would?most likely
A)decrease rural-urban migration.
B)have little effect on rural-urban migration.
C)increase rural-urban migration.
D) increase urbanization.
Q4) Discuss the importance of rural-urban migration as a source of urban population growth in various parts of the developing world, being as specific as you can.
Q5) For what percentage of urban population growth is rural-urban migration responsible?
A)Between 30% and 60%
B)Between 40% and 80%
C)Between 50% and 70%
D) Between 50% and 90%
Q6) Why is urban giantism less prevalent in mature democracies?
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Chapter 8: Human Capital: Education and Health in Economic Development
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Sample Questions
Q1) Credential inflation results from
A)a combination of cost-push inflation and demand-pull inflation.
B)rigidities in the industrial sector.
C)the need to select from among qualified applicants in the modern sector.
D) all of the above.
Q2) Why do you think Uganda has been so successful at decreasing the prevalence of HIV/AIDS?
Q3) Is child labor a problem in developing countries? Explain.
Q4) The World Bank approach to combating child labor stresses
A)making child labor legal under certain conditions.
B)tackling the sources of poverty.
C)encouraging families to migrate to richer countries.
D) providing each child with a handheld electronic toy so that children have an alternative to working.
Q5) Although Progresa/Oportunidades has been successful in Mexico, why might a similar program not work elsewhere?
Q6) What is human capital and why is it crucial to expand human capital as part of the development process?
Page 10
Q7) Why is eradicating child labor seen as an economic investment?
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Chapter 9: Agricultural Transformation and Rural Development
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Q1) What are the implications for a successful agricultural development strategy of the finding that women perform 60 percent to 90 percent of all work in the traditional rural areas?
Q2) A program through which new ideas, methods, and advice are offered to farmers to increase farm yields is known as
A)agricultural extension.
B)agricultural mechanization.
C)an agrarian system.
D) land reform.
Q3) What are the primary determinants of agricultural labor productivity?
Q4) Critically evaluate the following statement: Government policies to keep the price at which staple foods are bought and sold low helps to reduce poverty and inequality.
Q5) Explain the role of risk and uncertainty in an analysis of the economic behavior of peasant farmers. What kinds of questions does this analysis enable us to answer?
Q6) What role should the governments play with respect to the agricultural sector in developing countries in their attempts to alleviate poverty?
Q7) Is sharecropping economically efficient or inefficient? Explain.
Page 11
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Chapter 10: The Environment and Development
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Sample Questions
Q1) International resources shared by all countries, such as oceans and air, are known as
A)global commons.
B)free rider problems.
C)nonrenewable resources.
D) cooperative resources.
Q2) Describe the costs of water pollution.
Q3) What is the relationship between debt, falling commodity prices and rainforest degradation?
Q4) Which of the following conditions is violated if there is a free rider problem?
A)Universality
B)Exclusivity
C)Transferability
D) Enforceability
Q5) Debt-for-nature swaps are most generally
A)beneficial only to the developing country.
B)beneficial only to the developed country.
C)beneficial only to the bank which can write off the debt.
D) beneficial to all countries.
Q6) Describe the effect of the loss of biodiversity on productivity and health.
Page 12
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Chapter 11: Development Policymaking and the Roles of
Market, State, and Civil Society
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Sample Questions
Q1) If the incremental capital output ratio is 3 and the ratio of saving to national income is 9%, according to the Harrod-Domar model the growth rate of income is A)zero.
B)3%.
C)6%.
D) 12%.
Q2) If the population growth rate is 2%, the incremental capital output ratio is 3, the saving ratio is 24%, and the depreciation rate is 5%, the rate of growth of income is A)1%.
B)2%.
C)3%.
D) 5%.
E) 8%.
Q3) In the Harrod-Domar growth model, if 12.5% of income is saved, the incremental capital output ratio is 2.5 and the rate of depreciation is 4%, what is the implied rate of growth?
Q4) As an agent of economic development, in what areas do NGOs have a comparative advantage, compared to governments or markets?
Page 13
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Chapter 12: International Trade Theory and Development Strategy
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Sample Questions
Q1) Which of the following statements is true?
A)Larger countries (in terms of size) tend to be more open (in terms of larger share of exports in GDP) than smaller countries and developing countries tend to be less open than developed economies.
B)Larger countries (in terms of size) tend to be less open (in terms of lower share of exports in GDP) than smaller countries and developing countries tend to be less open than developed economies.
C)Larger countries (in terms of size) tend to be more open (in terms of larger share of exports in GDP) than smaller countries and developing countries tend to be more open than developed economies.
D) Larger countries (in terms of size) tend to be less open (in terms of lower share of exports in GDP) than smaller countries and developing countries tend to be more open than developed economies.
Q2) Provide a concise statement about the relationship between a developing country's emphasis on the export of traditional commodities and a.export earnings stability.
b.comparative advantage.
c.terms of trade.
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Chapter 13: Balance of Payments, Developing-Country
Debt, and the Macroeconomic Stabilization Controversy
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Sample Questions
Q1) Debt equity swaps may lead to
A)increased foreign ownership.
B)greater domestic inflation.
C)lower debt servicing requirements.
D) all of the above.
E) none of the above.
Q2) Explain how international trade and trade policy helped South Korea transform itself from an underdeveloped country to a high income country in the space of a single generation. You might begin by discussing South Korea's trade strategy. Why do you think international trade is of such vital importance to South Korea?
Q3) What is meant by the term odious debt?
Q4) A country with high inflation, rising budget and trade deficits, and a rapidly expanding money supply
A)is in transition.
B)has macroeconomic instability.
C)is practicing import substitution.
D) is practicing export promotion.
Q5) Why may the debt crisis be only "sleeping," rather than "dead?"
Q6) Outline the principal sources of the debt crisis.
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Chapter 14: Foreign Finance, Investment, and Aid: Controversies and Opportunities
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Q1) It has been argued that tied aid leads to inefficiencies in the recipient country's economy. Explain how this could occur.
Q2) Provide a concise statement on the relationship between multinational corporation investment and economic activity in developing countries with respect to: (a) the three gaps, (b) comparative advantage, (c) the debt crisis, (d) scale economies, and (e) pattern of consumption.
Q3) Suppose an MNC subsidiary buys 100 input units from its parent at a price of $2 each. It has $300 in additional production costs, and sells its 100 units of output for $6 to the MNC. It pays a 25% local profit tax. The MNC sells the output at home for $8, and its cost of producing inputs is $1. It pays a profit tax of 20% at home on repatriated profits. What is the subsidiary net profit, assume no selling costs at home? What is the MNC's total profit from the operation?
Q4) In the two-gap model, which of the following gaps, when binding, leads to foreign aid having the largest impact on GNP?
A)Fiscal gap
B)Savings gap
C)Foreign exchange gap
D) None of the above
Page 16
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Chapter 15: Finance and Fiscal Policy for Development
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Sample Questions
Q1) Compare and contrast the experience of Poland and Chile in their efforts at privatizing SOEs. Make sure you include a background discussion of privatization, methods adopted, and outcomes of privatization in the two countries.
Q2) Compare and contrast the workings of the organized and unorganized money markets in developing countries.
Q3) What is meant by the term dynamic incentives in the context of making loans to micro borrowers.
Q4) Explain how group lending works.
Q5) The evidence regarding military spending is that it
A)reduces growth.
B)has no effect on growth.
C)increases growth.
D) presents no clear pattern.
Q6) How can joint liability lower the interest rate for microborrowers?
Q7) What is a development bank? What are some of the reasons they have not had greater success?
Q8) In what ways do the actual and potential roles of central banks differ between developed and developing countries?
Q9) Why do NGOs target women borrowers while making microloans?
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Chapter 16: Some Critical Issues for the Twenty-First Century
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Q1) The economic transition refers to
A)transition from a less to a more-developed country.
B)transition from central planning to market economy.
C)countries that have some developed and some less-developed characteristics.
D) all of the above.
E) none of the above.
Q2) The "price of rain forest preservation" can be lowered for LDCs by
A)development of alternative rain forest products.
B)research on agriculture in rain forest soils.
C)encouraging rain forest settlement of the poor.
D) subsidies for activities like cattle raising.
E) all of the above.f.none of the above.
Q3) The developing region in which per capita income, food production, and industry have declined ?over an extended period is
A)sub-Saharan Africa.
B)East Asia.
C)Lain America.
D) South Asia.
E) all of the above.f.none of the above.
Q4) What is the relationship between land reform and rain forest preservation?
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