Book Title
Economic Development 11th Edition

ECB 71150

December 15, 2016
An individual's demand for education is most affected by
(a) direct and indirect costs of schooling.
(b) development priorities of the country.
(c) the desire to escape agricultural work.
(d) all of the above.
Sectors where the development process leads to a more rapid expansion of demand than
supply in goods or factor markets are known as
(a) the crisis in planning.
(b) input-output analysis.
(c) bottlenecks.
(d) infant industries.
The long-run social benefits of infant industry protection are more likely to be realized
(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.
The proportion of the total population aged 0-15 and over 65, is known as the
(a) dependency burden.
(b) unproductive population.
(c) surplus labor.
(d) population momentum.
About how many people lack access to basic sanitation?
a. 20 million
b. 200 million
c. 500 million
d. 1 billion
e. 2 billion
According to Kuznets, in the process of development inequality in an economy will
(a) first rise and then fall.
(b) first fall and then rise.
(c) remain about the same.
(d) show no definite pattern.
About how many people lack access to safe water?
a. 20 million
b. 200 million
c. 500 million
d. 1 billion
e. 2 billion
The Solow residual helps explain growth that derives from
(a) increasing the size of the labor force.
(b) increasing the size of the capital stock.
(c) increasing the capital-labor ratio.
(d) anything except increases in the size of the labor force or the capital stock.
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
Which of the following is an argument against MNCs?
(a) A reduction in inequality.
(b) An increase in the use of labor intensive technology.
(c) A deterioration of the balance of payments accounts.
(d) An increase in government tax revenue.
(e) None of the above.
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.
The average level of effective protection has exceeded 300% for which of the following
A. Pakistan and Uruguay.
B. Argentina and Brazil.
C. Phillipines and Mexico.
D. India and China.
As a percentage of GNI, which of the following countries provides the greatest
amount of foreign aid?
(a) United Kingdom.
(b) United States.
(c) Italy.
(d) Sweden.
The African agrarian system is characterized by
(a) absentee landlords.
(b) a dual agrarian system known as latifundio-minifundio.
(c) land fragmentation.
(d) shifting cultivation.
Which of the following is a low-income country?
a. Mexico
b. Thailand
c. Turkey
d. Bangladesh
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.
The "cost of rainforest preservation" can be lowered for developing countries by
(a) the development of alternative rainforest products.
(b) research on agriculture in rainforest soils.
(c) encouraging rainforest settlement of the poor.
(d) subsidies for activities like cattle raising.
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.
The rate of natural increase in the population of developing countries is most correlated
(a) advances in developed country technology
(b) increases in developing country income
(c) an increase in the fertility rate
(d) all of the above.
Which of the following is not a reason why the prospects for the further expansion of
developing country commodity exports is likely to be limited?
(a) Low income elasticities for these products.
(b) Low likelihood of development of further synthetic substitutes.
(c) Continued agricultural protection despite trade agreements.
(d) Declining terms of trade.
Most successful examples of modern economic growth have occurred in a country with
a. a temperate-zone climate.
b. a market economy.
c. exports of manufactured goods.
d. all of the above.
How many people still live on less than the equivalent of $1.25 per day (new definition
of "extreme poverty")?
a. 100 million.
b. 500 million.
c. 1.4 billion.
d. 2.2 billion.
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.
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.
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.
The Millennium Development Goals include
a. eliminating the proportion of people living on less than $1 per day.
b. universal primary education.
c. increasing exports by one half.
d. all of the above.
Which of the following is a nontariff barrier policy tool?
(a) Sanitary regulations.
(b) Average duties.
(c) Phased liberalization.
(d) Ad valorem tax.
Developing countries might be unable to respond smoothly to changing international
price signals because of
(a) a lack of government regulation.
(b) an abundance of skilled labor.
(c) inelastic supply curves.
(d) limited foreign exchange.
Carefully explain some of the similar problems faced by otherwise diverse countries in
Africa, Asia, and Latin America.
Which of the following is a major argument of trade optimists?
(a) Industrial policy can increase productivity of developing country manufacturing
(b) New synthetic substitutes are constantly being discovered and improved.
(c) Developing country efficiency would improve with trade liberalization.
(d) All of the above.
In a world of perfect certainty, sharecropping would be less efficient than a farm owner
working his own farm because
(a) sharecroppers receive only half of their marginal product.
(b) paying a worker a wage gives him or her an incentive to shirk.
(c) sharecroppers are exploited by landlords.
(d) renting farmland concentrates risk on the renters.
(e) all of the above.
An economic community
(a) attempts to raise prices by restricting quantity.
(b) seeks to stabilize commodity prices.
(c) seeks concesssional loans.
(d) imposes a common external tariff.
(e) none of the above.
About how many girls and women are said to be "missing" in LDCs?
(a) 2 million
(b) 20 million
(c) 100 million
(d) 2 billion
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.
If the current account is a deficit of 25 then
(a) the capital account is a surplus of 25.
(b) the cash account is a surplus of 25.
(c) the capital account is a surplus of 25 if the cash account is zero.
(d) the cash account is a deficit of 25.
Suppose that a developing country devotes extensive resources towards improving the
education and skill level of the labor force. How might this help the country avoid a
coordination failure? Is this strategy likely to be successful? Why or why not?
Discuss the benefits of using a "poverty weighted" index of GNP growth as a measure
of social welfare as opposed to using the growth in GNP to measure change in social
Suppose the rural wage is $1 per day. Urban modern sector employment can be
obtained with 5 probability and pays $2 per day. Will there be any rural-urban
migration? Explain your reasoning, stating explicitly any simplifying assumptions, and
show all work.
State at least two major benefits of promoting non-governmental organizations in
developing countries as sources and conduits of foreign assistance.
What are the key assumptions of the Lewis model that give rise to its conclusions? How
would the theory's conclusions differ if these assumptions do not hold?
What is an overvalued exchange rate? What factors may cause a country's currency to
become overvalued?
Outline the elements of an IMF stabilization package. Explain the mechanism by which
it is expected to help a balance of payments deficit. How successful have these
packages been? Explain your answer.
China has adopted a unique approach to the population growth problem. Please explain.
Have they been successful? Please explain.
In what ways do the actual and potential roles of central banks differ between
developed and developing countries?
Suppose that a good that was formerly an import becomes an export, perhaps after an
import substitution and export promotion strategy. How is this change reflected in the
production possibility frontier?
What is the difference between a devaluation and a depreciation?
Apply what you have learned about development and development theories so 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?
Explain what is meant by urban bias. What are the major effects of urban bias?
Explain the role of risk and uncertainty in an analysis of the economic behavior of
peasant farmers. What kinds of questions does this analysis enable us to answer?
Explain how international trade and trade policy helped South Korea transform itself
from an underdeveloped country to a high income country in the space of a single
generation. You might begin by discussing South Korea's trade strategy. Why do you
think international trade is of such vital importance to South Korea?
Compare and contrast the path of economic development for Haiti and the Dominican
Republic? How did differences in in earlier institutions and the policies pursued by the
two nations play a role in determining the development related outcomes?
About how many people are living in extreme poverty in the world? Which regions
have the greatest percentages of people living in extreme poverty?
Outline the principal sources of the debt crisis.

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