International Economics
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Course Introduction
International Economics explores the principles and dynamics governing economic interactions between countries, focusing on topics such as international trade, exchange rates, trade policies, globalization, and the balance of payments. The course examines the theories that explain why countries trade, the distributional effects of trade, and how governments regulate and influence economic relations with tools like tariffs, quotas, and trade agreements. Students will analyze current global issues, learn to interpret data related to international flows of goods, services, and capital, and assess the implications of international economic policies for both developed and developing economies.
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) Which of the following is not an important objective of development?
A)increases in per capita income
B)the expansion of available choices
C)increases in individual and national self-esteem
D) all of the above are important objectives of development
Answer: D
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) The core values of development include
A)increasing income per person.
B)reducing the inequality of income.
C)the ability to meet basic needs.
D) all of the above.
Answer: C
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Chapter 2: Comparative Economic Development
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Sample Questions
Q1) Explain why purchasing power parity measures of income levels tend to show a smaller difference between poor and rich countries.
Answer: PPP measures show the number of units of developing country currency required to purchase a basket of goods and services in the developing country market that costs one dollar in the U.S. Prices for most services tend to be much cheaper in developing countries than in the U.S.
Q2) What are the three main indicators that make up the Human Development Index?
Answer: Life expectancy, educational attainment, GDP per capita measured in PPP terms.
Q3) What are remittances and what role do they in developing countries? How could this potentially benefit an economy?
Answer: An answer should pose a definition, mention how remittances reduce poverty for many migrants and their families, and speak to the possible net increase in labor force skills driven by the desire to emmigrate.
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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Page 4
Chapter 3: Classic Theories of Economic Growth and Development
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Sample Questions
Q1) 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.
Q2) According to the theory of structural patterns of development, which of the following tends to occur as a country develops?
A)A shift from agriculture to industry and services
B)An increase in the percentage of income spent on food
C)Growth of the rural sector
D) A decline in trade as a share of GNP
Answer: A
Q3) Which of the following is a criticism of the neoclassical counter-revolution school's approach?
A)Markets are not competitive in developing countries.
B)Externalities are common in developing countries.
C)Inequality may worsen when interventions are removed in developing countries.
D) All of the above.
Answer: D
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Chapter 4: Contemporary Models of Development and Underdevelopment
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Sample Questions
Q1) Explain what is meant by the term coordination failure and provide an example.
Q2) Is a coordination failure a type of market failure? Explain.
Q3) Explain how relatively high wages in the modern sector, as compared to the traditional sector, can lead to a coordination failure.
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) How can the O-ring theory help explain the existence of a low-level equilibrium that an economy may find itself in?
Q6) 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.
Page 6
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?
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Chapter 5: Poverty, Inequality, and Development
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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 are factor price distortions, and what are their major causes in developing countries?
Q3) The functional distribution of income refers to the distribution of income between A)individuals or households.
B)rural individuals or households.
C)urban individuals or households.
D) the factors of production (land, labor and capital).
Q4) Consider the following distribution of income in a 12-person economy, with the modern urban ?wage 10, the traditional rural income 2, and the informal urban wage 4: (2, 2, 2, 2, 4, 4, 4, 4, 10, 10, 10, 10).
a.Suppose rural incomes are raised to 3, other things equal. Show the change using the Lorenz curve. How would this type of growth be characterized? (It is suggested that you use the Fields growth decomposition in answering. This shows traditional sector enrichment growth.) b.Calculate the Ahluwalia-Chenery Welfare Index for terciles (3 fractiles) under GNP weights and equal weights. Which index is higher and why?
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Chapter 6: Population Growth and Economic Development:
Causes, Consequences, and Controversies
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Sample Questions
Q1) 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.
Q2) The number of live births per 1000 people in the population per year is the A)hidden momentum of population growth.
B)population growth rate.
C)demographic transition.
D) crude birth rate.
Q3) Explain the reasons for the hidden momentum of population growth and state its implication for population levels.
Q4) Has population growth been a burden for China? Please answer true or false and explain.
Q5) 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.
Page 8
Q6) Why might improvements in children's public health care services lower fertility?
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Chapter 7: Urbanization and Ruralurban Migration: Theory and Policy
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Sample Questions
Q1) 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.
Q2) Describe some of the benefits and costs associated with the emergence of large cities in developing countries.
Q3) Are developing-country cities too large, too small, or about right in size? Justify your answer with evidence from developing economies.
Q4) Explain some important policy measures that you would expect to reduce excessive rural-urban migration. Explain.
Q5) The informal sector exhibits
A)free entry.
B)labor intensive methods.
C)small, competitive firms.
D) all of the above.
Q6) Describe some of the causes of urban giantism in developing countries.
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Q7) Explain what is meant by urban bias. What are the major effects of urban bias?
Chapter 8: Human Capital: Education and Health in Economic Development
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Sample Questions
Q1) Although Progresa/Oportunidades has been successful in Mexico, why might a similar program not work elsewhere?
Q2) Education of girls is a crucial development investment because A)it leads to improved child health.
B)it leads to reduced fertility.
C)women do most of the work in agriculture.
D) All of the above.
Q3) Developing countries have not benefited as much as expected from their higher education programs because of A)lack of program focus on the needs of the country.
B)increasing returns to scale in each individual's education.
C)graduates getting jobs in the private sector.
D) all of the above.
Q4) 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.
Page 10
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Chapter 9: Agricultural Transformation and Rural Development
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) 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
Q2) 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.
Q3) 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.
Q4) Sharecropping can be best understood as
A)a type of agreement preferred by peasants.
B)a type of agreement preferred by landlords.
C)a compromise between peasant and landlord preferences.
D) a type of agreement preferred by neither but given by tradition.
Q5) What are the key characteristics of the agrarian system in Asia that distinguish it from that of Latin America? Explain your answer.
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Chapter 10: The Environment and Development
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Sample Questions
Q1) Describe the effect of the loss of biodiversity on productivity and health.
Q2) Explain what developed countries can do to respond constructively to the environmental damage being done in developing countries.
Q3) A resource that is publicly owned and allocated under a system of unrestricted access is known as
A)a socialist resource.
B)a collective resource.
C)a common property resource.
D) a transferable resource.
Q4) Recurrent flooding in Bangladesh is causing the land area of the country to shrink. In what ways might environmental mismanagement play a role in explaining this phenomenon?
Q5) 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
Q6) Describe the costs of deforestation.
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) In what ways may social evaluations of costs and benefits differ from those implied by market prices? Explain carefully.
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) A shadow price is
A)the price in the previous period.
B)the price in the next period.
C)the social value of a good or service.
D) the market value of a good or service.
E) none of the above.
Q4) An example of a market-facilitating legal practice is
A)clearly established property rights.
B)corruption of government officials.
C)extensive licensing requirements for starting firms.
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) The nominal rate of protection shows the extent to which the domestic price of imported goods exceeds
A)what the price would be without tariffs.
B)the cost of intermediate inputs.
C)the social opportunity costs of the good.
D) the no-trade equilibrium price.
Q2) The real price trendline for non-fuel primary commodities from 1960-2005 has been
A)unchanged.
B)steadily increasing.
C)steadily decreasing.
D) first decreased and then increased.
Q3) State and explain three (or some other number chosen by the instructor) reasons why the scope for further expansion of developing country commodity exports is likely to be limited.
Q4) Which of the following is a nontariff barrier policy tool?
A)Sanitary regulations
B)Average duties
C)Phased liberalization
D) Ad valorem tax
14
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Chapter 13: Balance of Payments, Developing-Country
Debt, and the Macroeconomic Stabilization Controversy
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33 Verified Questions
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Sample Questions
Q1) 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?
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) What economic variables would you need to consider in order to distinguish between a developing country with a short-term balance of payments problem and one in a debt crisis? Explain what data you would need to look at and why.
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) Why may the debt crisis be only "sleeping," rather than "dead?"
Q6) How did the Mexican debt crisis of the early 1980s come about? How has the Mexican economy coped during the past 20 years, in the aftermath of the debt crisis? What has been the legacy of the debt crisis for the Mexican economy?
Page 15
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Chapter 14: Foreign Finance, Investment, and Aid: Controversies and Opportunities
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34 Verified Questions
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Sample Questions
Q1) 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
Q2) The largest recipient of remittances in dollars in the year 2004 was A) India.
B) Mexico.
C) Pakistan.
D) The Philippines.
Q3) What are the main forms through which foreign capital flows into LDCs? Discuss the evolution of the various forms over the last decade.
Q4) The amount of foreign aid in proportion to developed countries' GNP has A)increased over time.
B)remained fairly stable over time.
C)decreased over time.
D) fluctuated widely but has shown no clear trend.
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Chapter 15: Finance and Fiscal Policy for Development
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Sample Questions
Q1) From 1995-1997, tax revenue as a percent of GDP
A)was roughly equal between developing and developed countries.
B)was a few percentage points higher for developed than for developing countries.
C)was a few percentage points lower for developed than for developing countries.
D) was much higher (approximately double) for developed countries than for developing ?countries.
E) was much higher (approximately double) for developing countries than for developed ?countries.
Q2) A development bank
A)accepts deposits from the poor.
B)makes loans for industry expansion.
C)is an agency such as the World Bank.
D) all of the above.
E) none of the above.
Q3) Which of the following is an objective of macroeconomic stabilization?
A)Eliminating current account deficits
B)Controlling inflation
C)Restoring fiscal balance
D) All of the above
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Chapter 16: Some Critical Issues for the Twenty-First Century
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Sample Questions
Q1) A production facility whose operations are distributed across countries to take advantage of price differentials is known as
A)a multinational corporation.
B)a free trade area.
C)a global factory.
D) all of the above.
E) none of the above.
Q2) Which of the following is/are among the agreements of Agenda 21 of the Rio Summit?
A)Development assistance for poverty alleviation
B)Research and extension for environmentally sound agriculture
C)Expanded family planning resources
D) Establishment of biodiversity funds
E) All of the above
F)None of the above
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) Explain how the cost of rain forest preservation can be lowered for developing countries?
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