Economics of Developing Countries
Pre-Test Questions
Course Introduction
This course examines the economic challenges and opportunities facing developing countries, focusing on the structural features that distinguish their economies from those of developed nations. Key topics include theories of economic growth and development, poverty, inequality, population dynamics, education, health, and the roles of institutions and governance. The course also explores international trade, foreign aid, investment, and the impact of global economic policies on development outcomes. Through empirical studies and policy analysis, students will gain a deeper understanding of strategies for sustainable growth and the complex socio-economic factors shaping development around the world.
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
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Sample Questions
Q1) 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.
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) Development economics must have a scope wider than traditional economics because
A)values and attitudes play little role in the pace of development.
B)people in developing societies do less utility-maximizing.
C)transformation of social institutions is necessary for development.
D) all of the above.
Answer: C
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.
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Chapter 2: Comparative Economic Development
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Sample Questions
Q1) How is poverty measured? What is the extent of poverty in the developing world?
Answer: The concept of absolute poverty is discussed in the text and the progression of absolute poverty in the developing world is shown in . If the concept of relative poverty was discussed in the lectures, instructors may look for that distinction in the answer.
Q2) Why might the use of more advanced technology not be a sufficient condition for sustained economic growth?
Answer: It may require an inefficiently high capital labor ratio and complementary factors, especially education, may be lacking. Additional points depend on lecture coverage.
Q3) 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
Q4) What are the three major components of economic growth?
Answer: Capital accumulation, labor force growth, and technological progress.
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Page 4
Chapter 3: Classic Theories of Economic Growth and Development
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Sample Questions
Q1) In the public choice (or new political economy) approach to development the emphasis is on
A)growth in the rural sector.
B)the self-interested behavior of public officials.
C)the dependence of LDCs on former colonial powers.
D) the inherent efficiency of developing country markets.
Answer: B
Q2) The neoclassical counter-revolution school supports
A)Trade restrictions.
B)State-owned enterprises.
C)Eliminating government regulations.
D) Limitations on foreign investors.
Answer: C
Q3) 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
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Chapter 4: Contemporary Models of Development and Underdevelopment
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Sample Questions
Q1) 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.
Q2) In endogenous growth models, it is assumed that
A)there are external economies from public or private investments.
B)there are diminishing marginal returns to capital.
C)growth is explained by forces outside the model.
D) the capital labor ratio is constant.
Q3) Explain what is meant by the term coordination failure and provide an example.
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) Explain the basic idea behind the Big Push model?
Q7) Explain how the government can help the economy avoid a coordination failure. Page 6
Q6) How can the O-ring theory help explain the existence of a low-level equilibrium that an economy may find itself in?
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Page 7
Chapter 5: Poverty, Inequality, and Development
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Sample Questions
Q1) Distribution of income according to percentiles, such as the highest 40 percent or lowest 20 percent ?is known as the _______________ distribution of income.
A)size
B)functional
C)GNP-weighted
D) equal-weighted
Q2) 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
Q3) About what percent of the world's poorest people are female?
A)30
B)50
C)70
D) 90
Q4) Explain the difference between size and functional measures of income distribution.
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Chapter 6: Population Growth and Economic Development:
Causes, Consequences, and Controversies
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Q1) The government of China has explicitly stated that the goal of its strict population control measures ?is to raise income per capita. What are the mechanisms at work in such a claimed relationship? Are there any counterarguments?
Q2) The rate of natural increase in the population of developing countries is most correlated with A)advances in developed country technology.
B)increases in developing country income.
C)an increase in the fertility rate.
D) All of the above.
Q3) What is meant by the demographic transition? What are the differences in the demographic transition between the current developed economies and developing countries?
Q4) India's population is expected to overtake that of China within the next decade. What differences between these two nations could have contributed to this outcome?
Q5) Explain what is meant by "investment in children," describing the goals and methods of the parents.
Q6) China has adopted a unique approach to the population growth problem. Please explain. Have they been successful? Please explain.
Page 9
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Chapter 7: Urbanization and Ruralurban Migration: Theory and Policy
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Sample Questions
Q1) What are the characteristics of those who migrate to urban areas? What positive and negative effects does their leaving have on those who remain?
Q2) 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.
Q3) 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%
Q4) What are the main features of the Harris-Todaro model of rural-urban migration?
Q5) Are developing-country cities too large, too small, or about right in size? Justify your answer with evidence from developing economies.
Page 10
Q6) Why is urban giantism less prevalent in mature democracies?
Q7) Explain what is meant by urban bias. What are the major effects of urban bias?
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Chapter 8: Human Capital: Education and Health in Economic Development
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Sample Questions
Q1) Explain why the education of girls is probably the most cost-effective development investment. Be sure to include in your answer some discussion of at least two of the following: absolute poverty; health and development; fertility; and agriculture.
Q2) The supply of public school places is determined by
A)individuals' demand for education.
B)direct and indirect costs of schooling.
C)political processes, often unrelated to economic criteria.
D) all of the above.
Q3) According to the 2005 UNDP Human Development Report child mortality (under age 5) has declined in all regions of the world except A)South Asia.
B)Sub-Saharan Africa.
C)Middle East and North Africa.
D) None of the above.
Q4) Explain some of the reasons why developing countries have not realized a greater positive development impact from their higher education programs.
Q5) Why do you think Uganda has been so successful at decreasing the prevalence of HIV/AIDS?
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Chapter 9: Agricultural Transformation and Rural Development
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Sample Questions
Q1) Is sharecropping economically efficient or inefficient? Explain.
Q2) 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
Q3) Explain the case for land reform in Latin America. Are there any potential negative effects? What steps could be taken to address these effects?
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 concept, goals, and methods of integrated rural development.
Q6) 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.
Q7) What is the Alliance for a Green Revolution in Africa and who are its primary supporters?
Q8) What are the primary determinants of agricultural labor productivity?
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Chapter 10: The Environment and Development
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Sample Questions
Q1) The free rider problem is a situation in which
A)effluents such as CFCs combine with ozone and decrease concentrations of that protective chemical.
B)one agent secures benefits that others pay for.
C)there are excessive subsidies given to polluting buses or other forms of mass transit.
D) perfect property rights exist.
Q2) 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.
Q3) Explain what developed countries can do to respond constructively to the environmental damage being done in developing countries.
Q4) Describe the costs of water pollution.
Q5) Describe the costs of deforestation.
Q6) What are the main environmental challenges facing the Philippines? What are the key ingredients of PA 21, the government plan to deal with these?
Q7) Describe the effect of the loss of biodiversity on productivity and health.
Page 13
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Chapter 11: Development Policymaking and the Roles of
Market, State, and Civil Society
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Sample Questions
Q1) Explain what is meant by market failure.
Q2) 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?
Q3) Which of the following is a reason for the failure of development plans?
A)Unreliable data
B)Unanticipated economic disturbances
C)Lack of political will
D) All of the above
E) None of the above
Q4) As an agent of economic development, in what areas do NGOs have a comparative advantage, compared to governments or markets?
Q5) 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.
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Chapter 12: International Trade Theory and Development Strategy
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Sample Questions
Q1) 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?
Q2) Why is it impossible that all industries in a developing country qualify as infant industries?
A)You cannot have a comparative advantage in everything.
B)You cannot have an absolute advantage in everything.
C)This would violate international law.
D) This would reduce the terms of trade.
Q3) The purpose of commodity buffer stocks is
A)to moderate price fluctuations.
B)to raise commodity prices.
C)to encourage commodity substitution.
D) to guarantee national security.
Q4) Which of the following countries provides the best example of a successful import substitution development strategy?
A)Chile
B)Taiwan
C)Argentina
D) Botswana
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Chapter 13: Balance of Payments, Developing-Country
Debt, and the Macroeconomic Stabilization Controversy
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Sample Questions
Q1) The flow of private foreign investment and grants and loans is included in a country's A)current account.
B)capital account.
C)cash account.
D) None of the above.
Q2) 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?
Q3) What is meant by the term odious debt?
Q4) Special Drawing Rights are financial assets created by
A)the World Bank.
B)the United Nations Development Program.
C)multinational corporations.
D) the International Monetary Fund.
Q5) An IMF official was quoted as acknowledging that the Fund's stabilization packages have often led to adjustment without growth. However, he said, "the Fund is a firefighter, not a carpenter, and you cannot expect the firefighter to rebuild the house as well as put out the fire." Provide a balanced evaluation of this statement.
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Chapter 14: Foreign Finance, Investment, and Aid: Controversies and Opportunities
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Sample Questions
Q1) The direct benefits of out-migration to a developing nation include A)loss of skilled workers.
B)increased remittances.
C)job growth.
D) larger capital formation.
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) A model comparing savings and foreign exchange constraints to see which is binding for economic growth is known as a A)project appraisal.
B)two-gap model.
C)computable general equilibrium.
D) trickle down model.
E) None of the above
Q4) Explain the motives of developed countries in providing foreign aid.
Q5) Why does investment by multinational corporations not necessarily help to close the foreign exchange gap?
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Chapter 15: Finance and Fiscal Policy for Development
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Sample Questions
Q1) Describe the costs and benefits of privatization of state-owned enterprises. In which cases would privatization seem most advisable?
Q2) What are the key elements that need to be considered in developing an optimal sequence of financial sector liberalization? Will the order differ across countries? Why or why not?
Q3) How can joint liability lower the interest rate for microborrowers?
Q4) Why do NGOs target women borrowers while making microloans?
Q5) 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.
Q6) Explain how group lending works.
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Page 18
Chapter 16: Some Critical Issues for the Twenty-First Century
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Sample Questions
Q1) The first Earth Summit of 1992 was held in A)Kyoto.
B)Rio de Janeiro.
C)Johannesburg.
D) Beijing.
Q2) Explain how the cost of rain forest preservation can be lowered for developing countries?
Q3) 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
Q4) By 2000, middle-income developing countries were responsible for about A)one half of the emissions of greenhouse gases of those of developed countries. B)two thirds of the emissions of greenhouse gases of those of developed countries. C)about the same amount of emissions of greenhouse gases as those of developed countries.
D) more than the emissions of greenhouse gases of developed countries.
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