Economics of Development 7th Edition

74 CHAPTER OUTLINE I. Many writers have suggested that the recent global economic downturn did not affect developing countries as severely as it did developed countries. But the truth is that developing countries were not insulated from the global recession in part because their exports to Eu rope and the United

1 CHAPTER 1 CHAPTER OUTLINE I. The textbook opens with three vignettes: one of Rachmina Abdullah, a young Malaysian woman; another of Getachew, a young Ethiopian man; and one of Viktor and Yulia from Ukraine. These three contrasting stories re ect the profound economic and social changes under way in developing

68 CHAPTER OUTLINE I. This rst section introduces the relationship between investment and devel- opment and outlines the two categories of investment: public and private. It explains the dominant role that is played by private investment in developing countries and stresses the importance of the effective use of capital. The main message

76 | Chapter 11 equity, however, actually serve such ends. In many instances, the nonpoor turn out to bene t more than the poor. In any case, policies on land tenure, factor pricing, and rural- urban terms of trade may be more potent than s- cal mea sures for promoting distributional goals.

82 CHAPTER OUTLINE I. Financial policy in developing countries encompasses all mea sures intended to in uence the size, structure, and operation of nancial markets and the sys- tem of nancial intermediaries. The nancial system plays a key role in devel- opment by supplying nancial assets (including money, variously de ned), by mobilizing

90 CHAPTER OUTLINE I. Private foreign debt has played an important role in nancing investment in less- developed countries. The chapter begins by noting the extreme volatility of these ows: expanding and then contracting. It then discusses the advan- tages and disadvantages of foreign borrowing. The advantages are that a coun- try can

97 CHAPTER OUTLINE I. Foreign aid is a controversial topic with detractors from the right and left. The text provides various examples to highlight the nature of the public debate. By de nition, foreign aid consists of grants or subsidized loans. Aid then falls into one of the following main categories:

103 CHAPTER OUTLINE I. Although most development policies relate to the long- term outcomes, short- run stabilization problems often dominate the policy agenda. Serious macroeconomic imbalances can arise from external or internal shocks or from the cumulative effects of prior mismanagement. Stabilization prob- lems were especially widespread during the 1970s, 1980s, the

112 CHAPTER OUTLINE I. Chapter 16 focuses on agriculture and its role in development. The chapter opens with an overview of the food crises and price shocks that the world particularly the developing world has experienced since 2006. The authors then state their explicit purpose: to address the role of agriculture

119 CHAPTER OUTLINE I. As the previous chapter discussed the role of agriculture in economic develop- ment, the current one opens by addressing the concern of what policies and institutions are needed to maximize those contributions. It explores what kind of agricultural policies governments should promote, what kind of invest- ments are most

126 CHAPTER OUTLINE I. Trade provides low- and middle- income nations with signi cant opportuni- ties to improve welfare and accelerate growth and development. Open trade allows producers to have a larger market in which they can sell, and it allows consumers to have greater choices in purchases of goods and ser

135 CHAPTER OUTLINE I. Nearly all developing countries try to accelerate the pace and in uence the pattern of industrialization. Two main trade strategies have been pursued for this purpose: inward- looking import substitution and export- led, outward- looking industrialization. The core premise of import substitution is that infant industries need

8 CHAPTER OUTLINE I. Development economics ultimately is about explaining the underpinnings of mass poverty and suggesting sensible strategies for achieving rapid and equi- table growth. This chapter addresses the mea sure ment of economic growth and development across economies and over time. II. Because this chapter deals with aggregate growth initially,

143 CHAPTER OUTLINE I. Chapter 20 examines the economics of managing natural resources, including environmental quality. Few developing countries have been able to convert resource wealth into rapid economic growth. Too often, resources are degraded or depleted without producing sustainable development. The inef ciencies stem partly from market failures. For example,

15 CHAPTER OUTLINE I. This chapter provides a nontechnical overview of economic growth. The main questions posed are why are some countries rich and others poor, and why do some countries grow quickly and others grow slowly? The chapter broadly observes the per for mance of groups of countries and divides

21 CHAPTER OUTLINE I. The authors provide the building blocks common to modern theories of growth: the production function (technology), saving and investment behavior, the relationship between existing stock of capital and new investment, and labor force growth. II. The chapter presents two models of growth that have informed much of

30 CHAPTER OUTLINE I. This chapter begins by asking what makes development happen? The authors then provide an overview of the history of developmental thought with special emphasis on the role of the government. The material reviews Smith, Ricardo, Marx, Harrod- Domar and more contemporary thoughts on the nature and role

38 CHAPTER OUTLINE I. Chapter 6 probes the relationship between economic growth and the goal of improving human welfare. After World War II, economists tended to accept that the bene ts of growth would trickle down to the poor. This complacent view was challenged by evidence of rising income in e

45 CHAPTER OUTLINE I. The chapter begins with the view of former World Bank president Robert McNamara, who maintained that population growth was a threat of cata- strophic consequences. It then contrasts the view of the more recent president of the World Bank, James Wolfensohn, who rarely referred to population growth. The

53 CHAPTER OUTLINE I. Whereas Chapter 7 dealt with the quantity of labor, Chapters 8 and 9 focus on the quality of human resources and the investment in human capital. The introductory section looks at stylized facts on education by introducing termi- nology. While stocks refer to the total amount of schooling

60 CHAPTER OUTLINE I. The chapter begins with the stark contrast between Denmark and Sierra Leone in terms of general health, with the help of anecdotes and health indica- tors. It clari es that low incomes explain much, but not all, of the disparity in health outcomes across countries and regions. Health

Chapter 1 : Patterns of Development MULTIPLE CHOICE 1. While working in the Japanese electronics factory in Penang, Rachmina Abdullah: a. saved money to provide herself with a better future. b. became a wealthy urbanite who sought after the better amenities of life. c. decided to permanently

Chapter 10 : Investment and Savings MULTIPLE CHOICE 1. In an economy with a 9 percent interest rate, the present value of $1,000 that you will receive three years from now is: a. $772. c. $917. b. $1,295. d. $1,090. ANS: A DIF: Difficult REF:

Chapter 11 : Fiscal Policy MULTIPLE CHOICE 1. When governments raise expenditures or cut taxes on individuals and corporations so that they can raise their expenditures, such actions are referred to as: a. fiscal policy. c. indexing. b. monetary policy. d. regressive taxation. ANS: A

Chapter 12 : Financial Development and Inflation MULTIPLE CHOICE 1. What, particularly in a developing country, is the most visible and vital component of the financial system (as acceptor of deposits and grantor of shorter-term credit)? a. investment banking c. foreign investors b. commercial banking d. hedge

Chapter 13 : Foreign Debt and Financial Crises MULTIPLE CHOICE 1. The economic impact of debt flows is magnified by their effect on all of the following EXCEPT: a. macroeconomic stability. c. World Bank transparency. b. the exchange rate. d. government budgets. ANS: C DIF:

Chapter 14 : Foreign Aid MULTIPLE CHOICE 1. When the U.S. government provides a grant to build an electricity generator: a. it counts as foreign aid. b. it does not count as foreign aid. c. it depends; sometimes it counts as foreign aid. d. it counts as

Chapter 15 : Managing Short-Run Crises in an Open Economy MULTIPLE CHOICE 1. During the 1970s, 1980s, and 1990s, many economies became unbalanced because of: a. the expansion of the WTO. b. the emergence of NAFTA and the EU as powerful reenergized economic forces. c. world market

Chapter 16 : Agriculture and Development MULTIPLE CHOICE 1. Between 2006 and 2008, the world experienced its worst food crisis since the: a. swine flu epidemic. c. 1970s. b. 1930s. d. fall of the Soviet Union. ANS: C DIF: Easy REF: 583 TOP: Agriculture and

Chapter 17 : Agricultural Development: Technology, Policies, and Institutions MULTIPLE CHOICE 1. Before the 1950s, agriculture in nearly all developing countries relied on: a. hybrid crops and irrigation. b. traditional technologies and crop varieties. c. the new and emerging Green Revolution. d. grants and charity provided by

Chapter 18 : Trade and Development MULTIPLE CHOICE 1. The bulk of world trade originates and is exchanged between ________ economies. a. high-income c. developing b. low-income d. closed ANS: A DIF: Easy REF: 667 TOP: Trade Trends and Patterns MSC: Factual ANS: A DIF:

Chapter 19 : Trade Policy MULTIPLE CHOICE 1. What was GATT? a. an international organization that oversaw multilateral trade negotiations and tariff policies b. a voluntary export-restriction agreement governing international trade in textiles c. a free-trade area in southeast Asia d. an Eastern European trading bloc that

Chapter 2 : Measuring Economic Growth and Development MULTIPLE CHOICE 1. GNP or GDP divided by total population provides a measure of: a. the wellness index. c. per capita income. b. the gap between the rich and poor. d. the poverty index. ANS: C DIF:

Chapter 20 : Sustainable Development MULTIPLE CHOICE 1. Which British economist predicted that continued population growth would bring the world to disaster? a. John Stuart Mill c. Adam Smith b. David Ricardo d. Thomas Malthus ANS: D DIF: Easy REF: 757 TOP: Sustainable Development MSC:

Chapter 3 : Economic Growth: Concepts and Patterns MULTIPLE CHOICE 1. Countries with slow growth include all of the following EXCEPT: a. Madagascar. c. Kenya. b. Nigeria. d. Venezuela. ANS: A DIF: Easy REF: 56 TOP: Divergent Patterns of Economic Growth Since 1960 MSC: Factual

Chapter 4 : Theories of Economic Growth MULTIPLE CHOICE 1. The father of modern growth theory is: a. David Ricardo. c. Robert Solow. b. Thomas Malthus. d. Jeffrey Sachs. ANS: C DIF: Easy REF: 89 TOP: Theories of Economic Growth MSC: Factual ANS: C DIF:

Chapter 5 : States and Markets MULTIPLE CHOICE 1. After David Ricardo and Karl Marx, economists shifted to trying to understand how markets worked, and economic growth was: a. taken for granted. b. taken to a higher level of research. c. suppressed as an area of research,

Chapter 6 : Inequality and Poverty MULTIPLE CHOICE 1. The single most important variable explaining the number of people in poverty in a given country is: a. the literacy rate. c. per capita income. b. the HDI. d. population. ANS: C DIF: Easy REF: 165

Chapter 7 : Population MULTIPLE CHOICE 1. By 2008, Finland had reached the fourth stage of its demographic transition, in which its population growth had fallen close to: a. 5 percent. c. 0 percent. b. 2.2 percent. d. 7.5 percent. ANS: C DIF: Easy REF:

Chapter 8 : Education MULTIPLE CHOICE 1. Grade survival rates estimate: a. how many children actually complete a certain grade level. b. how many children die from disease and malnutrition at each grade level. c. how many grades of school the country can afford to offer. d.

Chapter 9 : Health MULTIPLE CHOICE 1. The World Health Organization (WHO) defines health as: a. the absence of illness or disability that prevents one from engaging in normal functions. b. a condition of physical well-being, consistent with the standards of ones national culture. c. a state