Economic Growth and Development
Exam Solutions
Course Introduction
This course explores the fundamental theories, models, and empirical evidence related to economic growth and development. Students will examine the determinants of long-term economic expansion, the roles of capital accumulation, technological progress, and institutional factors, and the differences between developed and developing economies. Key topics include poverty, income inequality, human capital, policy interventions, and the impact of globalization on growth. The course integrates real-world case studies to enhance understanding of the complex challenges and strategies associated with fostering sustainable development.
Recommended Textbook Economics of Development Seventh Edition by Dwight H. Perkins
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548 Flashcards
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Page 2
Chapter 1: Patterns of Development
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Sample Questions
Q1) All of the following reasons have contributed to the enhancement of economic development among the developing nations of the world EXCEPT for:
A) the information revolution.
B) the globalization of culture.
C) lower transport costs.
D) the spread of democracy.
Answer: B
Q2) Which of the following statements is true about globalization?
A) It is a term used by different people to mean different things.
B) It covers more than just economics.
C) It is not a new phenomenon.
D) All of the above.
Answer: D
Q3) By the World Bank's classification system,Malaysia,Iran,and Brazil are:
A) low-income countries.
B) upper-middle-income countries.
C) industrial economies.
D) backward economies.
Answer: B
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Page 3
Chapter 2: Measuring Economic Growth and Development
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Sample Questions
Q1) The total number of Millennium Development Goals established in the year 2000 were:
A) 5.
B) 8.
C) 10.
D) 18.
Answer: B
Q2) In some nations,illegal activities may even be included when calculating GDP; this is most notable in Afghanistan where the GDP includes:
A) military expenses.
B) child trafficking.
C) money laundering.
D) poppy production.
Answer: D
Q3) The 1980s are often referred to as "the lost decade" in:
A) Asia.
B) the Middle East.
C) Scandinavia.
D) Latin America.
Answer: D
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Chapter 3: Economic Growth: Concepts and Patterns
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Q1) Economist Stephen Radelet has demonstrated that,by stabilizing economic and political problems in the mid-1990s,17 sub-Saharan African countries experienced an annual average total factor productivity growth rate of:
A) 0.25 percent.
B) 1.5 percent.
C) 2.75 percent.
D) 7.75 percent.
Answer: B
Q2) A country's labor force grows 1.2 percent and its capital stock grows 3 percent.Assume that labor share of output is 0.25.If the economy grows 4.55 percent,how much does total factor productivity grow?
A) 0.5 percent
B) 1 percent
C) 1.5 percent
D) 2 percent
Answer: D
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Chapter 4: Theories of Economic Growth
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Q1) The most unsettling conclusion of the Solow model is the conclusion that once the economy reaches its long-run potential level of income,economic growth simply:
A) declines, leading to what is referred to as a "failed state."
B) matches population growth, with no chance for sustained increases in average income.
C) causes a rapid inflation, leading to an erosion of gains made during the growth period.
D) subsides, as socialism becomes an acceptable form of political economy for the people.
Q2) Diminishing marginal product of capital,returns to scale
Q3) Suppose the saving rate for a low-income country is given.If production becomes less capital intensive,the ICOR will ________ and the growth rate will _________.
A) increase; increase
B) decrease; increase
C) decrease; decrease
D) increase; decrease
Q4) Human capital,effective units of labor
Q5) Savings,investment
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Chapter 5: States and Markets
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Sample Questions
Q1) One of the criticisms of the growth policies of the 1960s was that too much attention was paid to the growth rate of GDP and not enough attention was paid to:
A) the foreign exchange rate.
B) monetary and fiscal policies.
C) how the benefits of growth were distributed.
D) General Agreement on Tariffs and Trade (GATT).
Q2) Big push,backward linkages
Q3) The Harrod-Domar model placed investment and capital at the center of:
A) exploitation of the masses.
B) economic growth.
C) enhancing a nation's status among the community of nations.
D) the tariff and quota debate.
Q4) Structural adjustment,economic distortions
Q5) Which of the following is NOT one of the five elements needed to support a well-functioning market system?
A) holding the exchange rate fixed
B) achieving a relatively stable macroeconomic environment
C) allowing relative prices to reflect relative scarcities
D) establishing competition
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Chapter 6: Inequality and Poverty
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Sample Questions
Q1) Most frequency distributions of income have the following shape:
A) rectangular.
B) normal.
C) lognormal.
D) none of the above.
Q2) Based on recent estimates of 2005 purchasing power parity (PPP)dollars,developmental economists now estimate living in extreme poverty as living below:
A) $1.00 a day.
B) $1.25 a day.
C) $1.57 a day.
D) $4.95 a day.
Q3) Kuznets,Lewis
Q4) Trade liberalization,anti-globalization
Q5) According to the World Bank,64 million people were recently pushed into "extreme poverty" due to:
A) civil war in the Sudan.
B) global warming and its impact on agriculture.
C) the collapse of the Soviet Union.
D) the financial crisis of 2008.
8
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Chapter 7: Population
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Sample Questions
Q1) Infant death rate,life expectancy
Q2) In 2009,approximately what percentage of the population lived in low-income countries?
A) 15 percent
B) 50 percent
C) 70 percent
D) 84 percent
Q3) Which of the following is NOT considered a "school of thought" on population and development?
A) population optimism
B) population revisionism
C) population pessimism
D) population reactionism
Q4) Dependency ratio,asset accumulation
Q5) Which of the following is NOT a lesson learned from China's family planning policy?
A) Economic growth at the same time helps decline in population growth.
B) Though successful, family planning policies may have long-term consequences.
C) Gender imbalance may result.
D) Other nations can replicate China's policies.
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Chapter 8: Education
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Sample Questions
Q1) Stocks,flows
Q2) Deworming,attendance
Q3) In low-income countries,the social rate of return generally is highest for investment in:
A) university education.
B) primary education.
C) vocational education.
D) adult education.
Q4) In the past 50 years,what has happened to the gender gap in education?
A) It has been declining.
B) It has been rising.
C) It has stayed the same.
D) It has had a mixed response, first declining, then rising.
Q5) The goal of the Programme for International Student Assessment is to assess how well 15-year-olds,who are approaching the end of their compulsory schooling year,can:
A) read and write at a fourth-grade level.
B) successfully acquire a paying job at home or abroad.
C) meet the challenges of today's societies.
D) be willing and able to move onto the next level of education.
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Chapter 9: Health
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Sample Questions
Q1) Increased income allows people,particularly the poor,to buy more of the following EXCEPT:
A) clothing and apparel.
B) better housing.
C) food.
D) health care.
Q2) Productivity,health as investment
Q3) In developing countries,major gains in life expectancy have been achieved primarily by reducing mortality rates for which population group?
A) the elderly
B) rural workers
C) the very young
D) women of childbearing age
Q4) The WHO defines health as a state of complete mental,physical,and social well-being and not merely the absence of disease.However,this construct or formula,in this end,is:
A) obsolete.
B) proving all former measurement of health as faulty.
C) being discounted and rendered worthless by the World Bank.
D) more difficult to measure.
Page 11
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Chapter 10: Investment and Savings
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Sample Questions
Q1) Net present value,internal rate of return (IRR)
Q2) Economic openness,investment
Q3) Public investment,externality
Q4) Foreign savings,domestic savings
Q5) The majority of direct foreign investment in developing countries comes:
A) equally from the private and public sectors.
B) predominantly from the public sector.
C) predominantly from the private sector.
D) from multinational corporations.
Q6) Export-oriented,labor-intensive,"footloose" industries should:
A) never be offered tax holidays.
B) at times be offered tax holidays because they can be more readily influenced by such incentives, as their options are wider than other industries.
C) at times be offered tax holidays because they are more likely to provide positive spillover.
D) both B and C
Q7) FDI,growth
Q8) Positive spillover,negative spillover
Q9) Foreign direct investment (FDI),multinational corporations (MNCs)
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Chapter 11: Fiscal Policy
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Sample Questions
Q1) Heavy taxes on alcohol and tobacco are favored because:
A) they are progressive.
B) they display a high price elasticity of demand.
C) most governments want to discourage consumption of these items.
D) all of the above.
Q2) Development expenditures,recurrent expenditures
Q3) Tax incentives,tax shelters
Q4) As usually applied,the value-added tax (VAT)is a:
A) form of excise tax.
B) tax on income.
C) tax on consumption.
D) tax on domestic production.
Q5) State-owned enterprises (SOEs),subsidies
Q6) Fiscal policy,monetary policy
Q7) The value-added tax (VAT)form of the sales tax is preferred in many developing countries because:
A) a large share of VAT revenue is collected prior to the retail level.
B) the VAT can be levied at a higher rate.
C) firms have no way to suppress information on their purchases and sales.
D) there is no need to conduct periodic audits to ensure compliance.
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Chapter 12: Financial Development and Inflation
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Sample Questions
Q1) Deep finance,positive real interest rates
Q2) Fiscal policy,stimulus package
Q3) Which of the following is essential to a strategy of deep finance?
A) avoiding a government budget deficit
B) maintaining very high real interest rates
C) avoiding strongly negative real interest rates
D) all of the above
Q4) Which of the following is NOT one of the basic roles essential for the smooth functioning of the financial system?
A) a medium of exchange and store of value, called money
B) a channel for mobilizing savings from numerous sources and channeling them to investors, called financial intermediation
C) a means of transferring and distributing risk across the economy
D) an efficient and comprehensive tax system, allowing more revenue for domestic governments
Q5) International reserves,value of imports
Q6) Inflation tax,negative real rates
Q7) Real interest rate,deep finance
Q8) Open-market operations,moral suasion
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Chapter 13: Foreign Debt and Financial Crises
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Sample Questions
Q1) Odious debt,Spanish-American War
Q2) The amount due for principal and interest payments in a given year is known as:
A) total revenue.
B) economic profit.
C) debt service.
D) redundancy.
Q3) Rational panics,bank runs
Q4) Although the debt crisis effectively ended in the early 1990s for most middle-income countries that had borrowed heavily from commercial banks,it continued for many low-income countries,especially those in:
A) the Middle East.
B) East Asia.
C) Latin America.
D) Africa.
Q5) At the simple level,a country's debt sustainability depends on:
A) its foreign exchange rate and openness to trade.
B) how much it owes and its capacity to make the required payments.
C) potential for facing adverse weather conditions.
D) willingness to devaluate its currency.
Q6) Debt overhang,heavily indebted poor countries (HIPC)
Page 15
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Chapter 14: Foreign Aid
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Sample Questions
Q1) Beginning in 2002,which country became the largest aid recipient in the world?
A) Iraq
B) Iran
C) Vietnam
D) India
Q2) As aid increases,GDP growth:
A) increases.
B) decreases.
C) stays the same.
D) none of the above; there is no definite relationship between the two.
Q3) True or False: Being a former colony substantially increases the probability of receiving aid flows.
A) True
B) False
C) True only for former colonies of Great Britain
D) True only for older colonies
Q4) Official development assistance (ODA),Development Assistance Committee (DAC)
Q5) Future of aid,recipient participation
Q6) Absorptive capacity,aid
Q7) Bilateral assistance,multilateral assistance
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Chapter 15: Managing Short-Run Crises in an Open Economy
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Sample Questions
Q1) International Monetary Fund,balance of trade
Q2) The domestic price of a tradable good is determined by which equation?
A) Pt = e/P*t
B) Pt = P*t/e
C) Pt = eP*t
D) Pt = e -P*t
Q3) Starting from an equilibrium in both markets,an increase in absorption will cause:
A) the supply curve to shift to the left for both tradables (T) and nontradables (N).
B) the demand curve to shift to the right for both T and N.
C) the demand curve to shift to the right for N and to the left for T.
D) no shift in the curves, but the economy moves to a position of inflation and external surplus.
Q4) Which of the following should be classified as a nontradable?
A) rural road construction services
B) wheat production wholly consumed within the country
C) computer equipment that cannot be produced locally
D) all of the above
Q5) Official exchange rate,devaluation
Page 17
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Chapter 16: Agriculture and Development
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Sample Questions
Q1) Between 2006 and 2008,the world experienced its worst food crisis since the: A) swine flu epidemic.
B) 1930s.
C) 1970s.
D) fall of the Soviet Union.
Q2) Subsistence level,institutionally fixed wage
Q3) The neoclassical model argues that there must be a balance between:
A) imports and exports.
B) industry and agriculture.
C) tariffs and quotas.
D) the pace of modernization and respect for tradition.
Q4) Agricultural productivity,technical change
Q5) Intersectoral linkages,indirect linkages
Q6) These two basic assumptions of David Ricardo have played an important role in two-sector models:
A) rents and taxation.
B) buyers and sellers.
C) diminishing returns and labor surplus.
D) constant returns to scale and economic efficiency.
Q7) Structural transformation,Engel's Law
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Chapter 17: Agricultural Development: Technology, policies, and Institutions
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Sample Questions
Q1) Pastoral nomadism,settled agriculture
Q2) Actual performance,potential performance
Q3) Common property resources,land tilting
Q4) Since the 1980s,the growth rate of yields in the world's major cereal crops has:
A) trended steadily upward.
B) been mostly consistent and remained the same over the past 30 years.
C) trended strongly downward.
D) fluctuated radically because of the objectives of different governmental policies around the world.
Q5) Perennial crops,livestock systems
Q6) Traditional agriculture,Green Revolution
Q7) Intercropping,optimal crop mix
Q8) Intensive annual crops,mixed farming
Q9) The months preceding the next harvest,when prices are at their highest,are known as the:
A) drought.
B) lean season.
C) anticipatory season.
D) season of hope.
Page 19
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Page 20
Chapter 18: Trade and Development
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Sample Questions
Q1) Which term labels the problem that emerging economies could face when experiencing export booms of primary commodities?
A) Holland sickness
B) Dutch disease
C) Netherlands syndrome
D) Dutch illness
Q2) Expanded production of primary products can stimulate ________ by making lower-cost primary goods available as inputs to other industries.
A) backward linkages
B) forward linkages
C) horizontal linkages
D) vertical linkages
Q3) Geographic location,trade
Q4) Most world trade involves manufactured goods,but ________ still represent about one-third of the value of all traded goods.
A) primary products
B) secondary products
C) intermediate materials
D) processed materials
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Chapter 19: Trade Policy
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Sample Questions
Q1) Effective rate of protection,value added
Q2) To minimize losses to consumer surplus,protection for infant industries should be provided through:
A) subsidies.
B) quotas.
C) tariffs.
D) an overvalued exchange rate.
Q3) Import quota,deadweight loss
Q4) What effect do high import tariffs have on a country's export industries?
A) Tariffs reduce the demand for foreign exchange, so the home currency appreciates; this hurts exports.
B) Tariffs reduce the demand for foreign exchange, so the home currency depreciates; this boosts exports.
C) Tariffs reduce the demand for foreign exchange, so the home currency appreciates; this boosts exports.
D) Tariffs do not affect exports, just imports.
Q5) Trade liberalization,benefits of exporting
Q6) East Asian Tigers,export-orientation
Q7) Rent seeking,import licensing
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Chapter 20: Sustainable Development
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Sample Questions
Q1) Resource rent,depletion
Q2) The ________ suggests that a sustainable development path for countries that depend on nonrenewable resources requires the rents from those resources to be continually invested rather than consumed.
A) Hartwick rule
B) Solow growth model
C) Malthus theory
D) Ricardo rule
Q3) Present value,optimal target
Q4) Fragile environments of the world are largely populated by the world's:
A) rich.
B) poor.
C) industrialized population.
D) developed economies.
Q5) Which of the following is a function of forest income in rural livelihoods?
A) safety nets to help compensate production shortfalls
B) support for current consumption
C) a source of income growth
D) all of the above
Q6) Natural capital,intangible capital
Page 23
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