Economic Growth
Midterm Exam
Course Introduction
This course explores the fundamental theories, models, and empirical evidence concerning the process of economic growth across countries and regions. Students will examine the determinants of long-term growth, including capital accumulation, technological innovation, human capital, and policy factors. Topics include classical and modern growth theories, the roles of institutions and government, income inequality, and the impact of globalization. By analyzing case studies and cross-country data, the course equips students with an understanding of why some economies grow faster than others and the challenges policymakers face in fostering sustainable development.
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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Page 2
Chapter 1: Economics, Institutions, and Development: a Global Perspective
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22 Verified Questions
22 Flashcards
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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) 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
Q3) Provide a definition of development economics. Justify your choice carefully.
Answer: See the section in Chapter 1 entitled, "The Nature of Development Economics," on Pages 9-10 for some ideas about how the students might answer this question. They should in some way say that development economics is more than just growth in GDP.
Q4) It has been said that "underdevelopment is a state of mind." Comment.
Answer: You may look for a discussion of the role of modern values in the development process, as on Pages 13-14 of the text.
Page 3
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Chapter 2: Comparative Economic Development
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Sample Questions
Q1) Explain how low levels of living can turn into a vicious cycle in developing countries.
Answer: See the section on low levels of living in the chapter.
Q2) 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
Q3) Which measure uses a common set of international prices for all goods and services produced?
A)purchasing power parity income levels
B)GNP price deflators
C)foreign exchange rate conversions to U.S.dollars
D) the exchange rate
Answer: A
Q4) What are some of the main ways in which the economies of developing countries differ from one another?
Answer: See the Key Concepts above for a summary.
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Chapter 3: Classic Theories of Economic Growth and Development
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) On which of the following does the neoclassical counter-revolution school most blame underdevelopment?
A)Misguided government policies
B)Relatively rigid cultural traditions
C)The legacy of colonialism
D) Unfair trade practices on the part of developed countries
Answer: A
Q2) The false paradigm model attributes lack of development to
A)Inadequate attention to price incentives.
B)Inappropriate advice from rich country economists.
C)Low levels of savings and investment.
D) A lack of government regulation.
Answer: B
Q3) According to the dependence theory, the developing world is known as the A)backward areas.
B)periphery.
C)first world.
D) center.
Answer: B
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Chapter 4: Contemporary Models of Development and Underdevelopment
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Sample Questions
Q1) Explain how relatively high wages in the modern sector, as compared to the traditional sector, can lead to a coordination failure.
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) 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?
Q4) The new growth theory attempts to explain
A)the rate of population growth within a country.
B)the rate of capital accumulation within a country.
C)the factors that determine the size of the Solow residual.
D) why there are diminishing returns to capital.
Q5) Is it possible for a super-entrepreneur to solve all of the coordination failure problems within?a developing economy? Discuss.
Page 6
Q6) Explain how the government can help the economy avoid a coordination failure.
Q7) Explain the basic idea behind the Big Push model?
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Chapter 5: Poverty, Inequality, and Development
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44 Verified Questions
44 Flashcards
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Sample Questions
Q1) Discuss the reasons why developing countries so often use a technology with an excessively high capital labor ratio.
Q2) What is a Lorenz curve? Draw one, labeling the axes.
Q3) Increasing GNP is a necessary but not a sufficient condition for improving living standards in less developed countries. True or false, explain.
A)True
B)False
Q4) Which of the following policies may decrease the level of capital intensity in industry?
A)an increase in the cost of capital
B)a decrease in the minimum wage
C)an increase in the elasticity of substitution
D) All of the above
Q5) Which of the following groups is (are) more likely to be poor?
A)Minorities
B)Indigenous people
C)Women
D) All of the above.
Q6) What is the Grameen Bank and what is its contribution to tackling rural poverty?
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Chapter 6: Population Growth and Economic Development:
Causes, Consequences, and Controversies
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Sample Questions
Q1) Explain the reasons for the hidden momentum of population growth and state its implication for population levels.
Q2) At present, approximately how many years would it take for the world's population to double?
A)35
B)58
C)96
D) 211
Q3) Has population growth been a burden for China? Please answer true or false and explain.
Q4) Explain what is meant by "investment in children," describing the goals and methods of the parents.
Q5) The hidden momentum of population growth is caused by A)the demographic transition.
B)population age structure.
C)the opportunity cost of a woman's time.
D) children's contribution to income.
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Q6) Is there evidence that an increase in per capita income stimulates population growth?
Chapter 7: Urbanization and Ruralurban Migration: Theory and Policy
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Sample Questions
Q1) 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%
Q2) 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.
Q3) 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
Q4) 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) Explain how a better educated population will also tend to be healthier, and vice versa, that a healthier population will tend to be better educated.
Q2) What factors cause private and social rates of return for primary and secondary education to diverge in developing countries?
Q3) What is educational inequality and how is it measured? Why is it important to measure the degree of educational inequality in a country? Explain your answer.
Q4) Write an essay on the economic relationship of greatest concern for development between ?education and a.the level of growth.
b.the character of growth.
c.inequality.
d. fertility.
e. absolute poverty.f.international migration.
Q5) What are the critical health challenges facing developing countries today and what measure(s) are being taken to confront these challenges? Explain your answer.
Q6) What is human capital and why is it crucial to expand human capital as part of the development process?
Page 10
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Chapter 9: Agricultural Transformation and Rural Development
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Sample Questions
Q1) In Bangladesh, the government guarantees rice farmers that it will buy rice at a specific price. Explain the costs and benefits to farmers in good and bad harvest years.
Q2) What role should the governments play with respect to the agricultural sector in developing countries in their attempts to alleviate poverty?
Q3) Absentee landowners characterize the agrarian system of A)Asia.
B)Latin America.
C)Sub-Saharan Africa.
D) All of the above.
Q4) It is important to place particular stress on the role of women in rural development programs because
A)women have received less training in the past.
B)women perform a large majority of the work in the rural sector.
C)women tend to allocate more resources to their children's health and education
D) All of the above.
Q5) Is sharecropping economically efficient or inefficient? Explain.
Q6) What are some of the specific policies aimed at improving the productivity of women farmers in Kenya?
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Chapter 10: The Environment and Development
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Sample Questions
Q1) The annual income that can be consumed without diminishing the total capital assets of a nation is
A)purchasing power parity income.
B)sustainable national income.
C)environmental capital stock.
D) per capita income.
Q2) Describe the costs of deforestation.
Q3) 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.
Q4) 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.
Q5) Provide a short definition of sustainable development.
Q6) Discuss the relationship between poverty, growth, and the environment.
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) What are accounting, or "shadow" prices for project appraisal? In what way do they differ from market prices, and why do we need them? Additional question or part of question: How can reference to world prices help countries gauge the real opportunity costs of development projects?
Q2) Which of the following is not a rationale for development planning?
A)Capital market failures
B)Rent seeking behavior
C)Attitudinal or psychological impact
D) All are rationales for development planning in developing countries.
Q3) A plan that sets targets to cover all major aspects of the national economy is known as a/an _____ plan.
A)interindustry
B)complete
C)comprehensive
D) economic
Q4) In the Harrod-Domar model, if the savings rate is 20% and the incremental capital output ratio is five, abstracting from depreciation, what is the implied growth rate?
Q5) Why must projects be appraised? What do we learn from project appraisals?
Q6) Explain what is meant by market failure.
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Chapter 12: International Trade Theory and Development Strategy
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Sample Questions
Q1) The long-run social benefits of infant industry protection are more likely to be realized if
A)investors believe that tariff barriers are permanent.
B)investors believe that tariff barriers are transitory.
C)tariff barriers increase over time.
D) tariff barriers are replaced with quotas over time.
Q2) A country simultaneously raises tariffs on manufactured goods and overvalues the exchange rate. Why might these seemingly contradictory policies be pursued together?
Q3) Nontariff barriers
A)decrease foreign exchange earnings.
B)reduce the quantity of goods exported.
C)lower the effective price received for exports.
D) all of the above.
Q4) 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.
Page 14
Q5) Explain the difference between nominal and effective tariffs.
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Chapter 13: Balance of Payments, Developing-Country
and the Macroeconomic Stabilization Controversy
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33 Verified Questions
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Sample Questions
Q1) What is meant by the term odious debt?
Q2) Debt service payments appear in
A)the current account.
B)the capital account.
C)the cash account.
D) errors and omissions.
Q3) The basic transfer is defined as
A)net capital inflow.
B)interest payments on foreign debt.
C)net capital inflow divided by interest payments on foreign debt.
D) net capital inflow minus interest payments on foreign debt.
Q4) Provide a definition of the current account, the capital account, and the cash account. What is the relationship between the three accounts?
Q5) Exchange of developing country debt (at a discount) for private ownership of state-owned assets is called
A)debt-equity swaps.
B)debt restructuring.
C)the Brady Plan.
D) debt-nature swaps.
Page 15
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Chapter 14: Foreign Finance, Investment, and Aid: Controversies and Opportunities
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Sample Questions
Q1) What are the main forms through which foreign capital flows into LDCs? Discuss the evolution of the various forms over the last decade.
Q2) Critically evaluate the following statement: "If no other assistance is available, tied aid should be accepted anyway, on the grounds that developing countries should accept any help they can get."
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) Why does investment by multinational corporations not necessarily help to close the foreign exchange gap?
Q5) State three major potential advantages of foreign direct investment for a developing country. State three major potential disadvantages.
Q6) Discuss how remittances can help reduce poverty and meet other development objectives in recipient nations.
Page 16
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Chapter 15: Finance and Fiscal Policy for Development
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Sample Questions
Q1) Discuss the pros and cons of the recent introduction and expansion of stock markets in the developing countries.
Q2) How can joint liability lower the interest rate for microborrowers?
Q3) In what ways do the actual and potential roles of central banks differ between developed and developing countries?
Q4) What is a development bank? What are some of the reasons they have not had greater success?
Q5) Among the rationales for state-owned enterprises is A)the existence of a monopoly.
B)the need for capital formation.
C)the desirability of national control over strategic sectors of the economy.
D) all of the above.
E) none of the above.
Q6) 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.
Q7) Why do NGOs target women borrowers while making microloans?
Page 17
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Chapter 16: Some Critical Issues for the Twenty-First Century
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Sample Questions
Q1) Explain how the cost of rain forest preservation can be lowered for developing countries?
Q2) 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.
Q3) "We have a long way to go in development, but we have already come very far." Justify both halves of this statement with reference to any statistics you remember (you may approximate).
Q4) Which of the following African countries has experienced higher school enrollments and lower ?child mortality in the past few years?
A)Angola
B)Congo
C)Mozambique
D) None of the above
Page 18
Q5) What is the relationship between land reform and rain forest preservation?
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