Economic Growth and Development
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Course Introduction
This course explores the fundamental theories, models, and empirical evidence concerning economic growth and development. It examines the factors that contribute to long-term increases in income and improvements in living standards, including capital accumulation, technological change, education, institutions, and policy interventions. Topics include the distinction between economic growth and development, growth accounting, poverty and inequality, the role of governments and international organizations, and challenges faced by developing countries such as health, education, and infrastructure. Students will analyze real-world case studies to understand the diverse experiences of countries and critically assess strategies for achieving sustainable and inclusive economic progress.
Recommended Textbook
Economic Development 10th Edition by
Michael P. Todaro
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Page 2
Chapter 1: Economics, Institutions, and Development: a Global Perspective
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Sample Questions
Q1) It is not possible for a country to experience
A)economic development without economic growth.
B)economic growth without economic development.
C)economic growth and economic development simultaneously.
D) both (a) and (b) are correct.
Answer: A
Q2) Development economics is the study of the
A)alleviation of absolute poverty.
B)transformation of institutions.
C)allocation of resources in developing countries.
D) all of the above.
Answer: D
Q3) Which of the following demonstrates international interdependence?
A)the oil shocks
B)the debt crisis
C)global warming
D) all of the above.
Answer: D
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Chapter 2: Comparative Economic Development
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Sample Questions
Q1) Conditions of today's developed countries at the start of their industrialization differ from conditions in the developing world in that
A)population growth rates were higher.
B)more advanced technology was available.
C)there were more opportunities for development assistance.
D) none of the above.
Answer: D
Q2) In what way(s) do the development paths chosen by Pakistan and Bangladesh differ? What are the main factors that have contributed to these differing paths?
Answer: The key differences are the aspects of economic development discussed in the chapter. The case study at the end of the chapter provides comparative figures for the two countries and the main factors contributing to the divergent paths.
Q3) Which of the following is a low-income country?
A)Mexico
B)Thailand
C)Turkey
D) India
Answer: D
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4
Chapter 3: Classic Theories of Economic Growth and Development
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Q1) The market-friendly approach to development emphasizes
A)self-interested behavior of public officials in LDCs.
B)the dependence of LDCs on former colonial powers.
C)the inherent efficiency of markets in developing countries.
D) that markets in LDCs fail sometimes and selective interventions can promote economic development.
Answer: D
Q2) Apply what you have learned about development and development theories to speculate on the following thought experiment: What if anything might be different about today's international economic order if the Spanish had colonized North America and the English had colonized ?South America?
Answer: You may wish to note for students that there may be more than one correct answer. Careful reasoning and application of the material is necessary.
Q3) Describe one important criticism of Rostow's stages of economic growth theory.
Answer: The stages are only necessary and not sufficient conditions, savings is too aggregate a measure, the theory does not take into account the constraints of the international economic order, and there are counter examples such as Argentina.
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Page 5
Chapter 4: Contemporary Models of Development and Underdevelopment
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Q1) Is a coordination failure a type of market failure? Explain.
Q2) The O-ring theory places emphasis on
A)education of the labor force.
B)skill complementarities.
C)purchases of machinery and equipment by firms.
D) None of the above.
Q3) How can the O-ring theory help explain the existence of a low-level equilibrium that an economy may find itself in?
Q4) According to the HRV growth diagnostic framework why is there no "one size fits all" development policy?
Q5) Explain the basic idea behind the Big Push model?
Q6) 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.
Q7) Explain how the S-curve reflects the typical nature of complementarities?
Q8) Show in a diagram an S-curve and a 45-degree line. Are all three points of intersection stable equilibrium points? Explain. Page 6
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Page 7
Chapter 5: Poverty, Inequality, and Development
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Q1) The poverty gap is the
A)absolute number of people below the international poverty line.
B)percentage of the population below the international poverty line.
C)consumption (measured in dollars) necessary to bring everyone living below the poverty line up ?to the poverty line.
D) percentage of a country's total consumption necessary to bring everyone in the country living?below the poverty line, up to the poverty line.
Q2) The absolute poverty line
A)decreases as real income grows.
B)shows the average income of the lowest income group.
C)can be measured with the Lorenz curve.
D) None of the above.
Q3) "The 1980s were a lost decade for the absolutely poor." Evaluate this statement.
Q4) Generally speaking, higher-income countries tend to have less income inequality than low-income countries, however this does not always hold true. What could cause a low-income country to have low-income inequality?
Q5) About how many people are living in extreme poverty in the world? Which regions have the greatest percentages of people living in extreme poverty?
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Chapter 6: Population Growth and Economic Development:
Causes, Consequences, and Controversies
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Q1) Explain carefully the opportunity costs of a mother's time, what may lead these to change over time, and what effects these changes have on family decisions.
Q2) Which of the following will cause the largest reduction in the birthrate?
A)the population becomes less religious
B)public healthcare improves
C)education becomes more available
D) an increase in the opportunity cost of a woman's time
Q3) Children under the age of 15 represent about __________ percent of the population of developing countries.
A)25
B)29
C)53
D) 61
E) 75
Q4) What is meant by the demographic transition? What are the differences in the demographic transition between the current developed economies and developing countries?
Q5) Is there evidence that an increase in per capita income stimulates population growth?
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Chapter 7: Urbanization and Ruralurban Migration: Theory and Policy
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Q1) If the rural wage is 4 and the formal urban wage rate is 10, there will be rural to urban migration if the formal urban unemployment rate is
A)50%.
B)60%.
C)70%.
D) all of the above.
Q2) Why is urban giantism less prevalent in mature democracies?
Q3) Explain what is meant by urban bias. What are the major effects of urban bias?
Q4) The informal sector exhibits
A)free entry.
B)labor intensive methods.
C)small, competitive firms.
D) all of the above.
Q5) According to UN projections, what proportion of the world's urban population will reside in the urban areas of developing countries by 2025?
A)Two fifths
B)One half
C)Two thirds
D) Four fifths
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Chapter 8: Human Capital: Education and Health in Economic Development
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Q1) In developing countries higher educational facilities have tended to expand to the point where social benefits exceed private benefits. What is the economic explanation for this?
Q2) Explain some of the reasons why developing countries have not realized a greater positive development impact from their higher education programs.
Q3) What are the critical health challenges facing developing countries today and what measure(s) are being taken to confront these challenges? Explain your answer.
Q4) Why have poor nations invested so much money in education and health? Evaluate the soundness of these reasons.
Q5) Child labor is a widespread problem that applies primarily to children
A)between the ages of 5 and 14.
B)between the ages of 10 and 14.
C)between the ages of 12 and 14.
D) between the ages of 12 and 16.
Q6) Why is eradicating child labor seen as an economic investment?
Q7) Why should the development of a solid elementary education system take precedence over an expansion of the university system in developing countries?
Page 11
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Chapter 9: Agricultural Transformation and Rural Development
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Q1) Women bear a disproportionate burden in the agrarian system of sub-Saharan Africa, Asia and Latin America. In addition, their productivity is low. Explain these statements with specific examples from individual developing economies. What measures/policies have been implemented to deal with these two issues? Once again discuss with specific examples from individual developing economies.
Q2) In which of these developing regions has food production per capita steadily fallen over the last quarter century?
A)Africa
B)East Asia
C)South Asia
D) Latin America
Q3) In South Asia and Sub-Saharan Africa, about what share of output is contributed by agriculture?
A)one tenth
B)one fifth
C)two fifths
D) one half
Q4) What is the Alliance for a Green Revolution in Africa and who are its primary supporters?
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Chapter 10: The Environment and Development
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Q1) In what way do developing countries make the largest contribution to the global concentrations of greenhouse gases?
A)Vehicle emissions
B)Deforestation
C)Mining
D) Irrigation
Q2) Which of the following environmental problems are largely caused by persistent poverty?
A)Deforestation
B)Soil erosion
C)Groundwater contamination
D) All of the above
Q3) Provide a short definition of sustainable development.
Q4) Describe the costs of water pollution.
Q5) Describe the basic issues involved in setting up a system of national accounts that includes the value of environmental capital and its loss.
Q6) Discuss the relationship between poverty, growth, and the environment.
Q7) In what way is better protection of the environment a possible result of successful development?
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Chapter 11: Development Policymaking and the Roles of
Market, State, and Civil Society
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Q1) The price reflecting the true social opportunity costs of a resource is known as A)a shadow price.
B)an equilibrium price.
C)a world price.
D) a price index.
Q2) Which of the following is a rationale for development planning?
A)Government failure
B)Market failure
C)Failure of consumers to understand their preferences
D) All of the above are rationales for development planning.
E) None of the above are rationales for development planning.
Q3) Development plans have often failed because
A)they have been insufficiently specific about projects.
B)they have overlooked noneconomic considerations.
C)they have been overambitious.
D) All of the above.
E) None of the above.
Q4) What economic benefits might a developing country gain by reducing corruption?
Discuss only economic benefits and provide examples from specific developing countries.
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Chapter 12: International Trade Theory and Development Strategy
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Q1) A country simultaneously raises tariffs on manufactured goods and overvalues the exchange rate. Why might these seemingly contradictory policies be pursued together?
Q2) a.Under what circumstances is the effective rate of protection of a tariff greater than the nominal rate?
b.Why is this a concern for developing countries?
Q3) Briefly, what are the major causes of export earnings instability for developing countries?
Q4) In the North-South model, how are basic factors distinguished from advanced factors, and what are the implications for growth and development possibilities?
Q5) According to the Prebisch-Singer thesis
A)demand for primary products has steadily fallen.
B)profits of primary producers have steadily fallen.
C)primary producers' terms of trade have steadily fallen.
D) prices of primary products have risen over time.
Q6) Explain briefly the vent-for-surplus theory of international trade. What is the relevance of this theory to the current development experience of low income economies?
Q7) What are the terms of trade? What factors lead them to change over time?
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Chapter 13: Balance of Payments, Developing-Country
Debt, and the Macroeconomic Stabilization Controversy
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Q1) The need for exchange controls may arise from
A)overvalued exchange rates.
B)export promotion policies.
C)a current account surplus.
D) all of the above.
Q2) Consider debt-equity swaps as an approach to debt reduction. Briefly describe how this works. State two arguments in favor of significant reliance on this strategy and two arguments against.
Q3) A typical IMF stabilization package involves
A)erecting barriers against foreign investment.
B)overvaluing the exchange rate.
C)liberalization of exchange controls.
D) a reduction in interest rates.
E) all of the above.
Q4) About how much debt is held by the developing world (as a whole)? Which countries hold the most debt? Are these the countries where the debt burden is the greatest?
Q5) Discuss the options for financing a balance of payments deficit.
Q7) What is meant by the term odious debt? Page 16
Q6) Outline the principal sources of the debt crisis.
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Page 17
Chapter 14: Foreign Finance, Investment, and Aid: Controversies and Opportunities
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Q1) State at least two major benefits of promoting nongovernmental organizations in developing countries as sources and conduits of foreign assistance.
Q2) The developing area receiving the largest share of direct foreign investment is/are A)Africa.
B)Asia
C)Latin America.
D) transition economies.
Q3) Voluntary organizations that work with and on behalf of mostly local grassroots organizations in developing countries are termed A)international organizations.
B)nongovernmental organizations.
C)multilateral institutions.
D) equity organizations.
E) None of the above
Q4) What are the main forms through which foreign capital flows into LDCs? Discuss the evolution of the various forms over the last decade.
Q5) Explain the motives of developed countries in providing foreign aid.
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Chapter 15: Finance and Fiscal Policy for Development
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Q1) When it comes to the composition of tax revenues from different sources,
A)developing countries derive the largest portion of their revenue from income taxes and developed countries from consumption taxes.
B)developing countries derive the largest portion of their revenue from consumption taxes and developed countries from income taxes.
C)both developing countries and developed countries derive the largest portion of their revenue from income taxes.
D) both developing countries and developed countries derive the largest portion of their revenue from consumption taxes.
Q2) Why are women considered to be more creditworthy for microloans?
Q3) Does it matter how much a developing country saves? Explain why or why not. Discuss theories and evidence on whether developing countries can increase the net savings rate in the economy through public policy. In particular, consider whether this can be accomplished through increased or decreased taxation of one or more types, and increased or decreased government spending of one or more types.
Q4) Explain how group lending works.
Q5) How can joint liability lower the interest rate for microborrowers?
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Page 19
Chapter 16: Some Critical Issues for the Twenty-First Century
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Q1) Evidence of global warming is controversial as is its connection to rain forest destruction. Therefore, what is the case for a policy that affects developing countries' decisions regarding environmental preservation?
Q2) 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.
Q3) Which of the following was/were not among the causes of sub-Saharan Africa's decline in the 1980s?
A)Drought
B)Commodity price declines
C)Capital flight
D) Inefficient state owned enterprises
E) All of the above were among the causes.
Q4) State one of the agreements of Agenda 21 of the Rio Summit and describe its implications for development.
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