Development Economics (TIU E-Track) Fall 2018 (Prof. Edmonds) SAMPLE QUESTIONS – for mid-term exam preparation MULTIPLE CHOICE 1. a. b. c. d. Which of the following demonstrates international interdependence? the oil shocks the debt crisis global warming all of the above. 2. a. b. c. d. Development economics is the study of the alleviation of absolute poverty. transformation of institutions. allocation of resources in developing countries. all of the above. 3. a. b. c. d. A good definition of the meaning of development is the elimination of absolute poverty. improvement in the quality of life. fulfillment of the potential of individuals. all of the above. 4. a. b. c. d. The Millennium Development Goals include eliminating the proportion of people living on less than $1 per day. universal primary education. increasing exports by one half. all of the above. 5. a. b. c. d. A newly industrialized country is the same as a high-income country. any country that has experienced sustained growth in industry. a special classification given to some upper-middle income countries that have achieved relatively advanced manufacturing sectors. any country that has moved out of lower income status. 6. Which measure uses measures of a common set of goods and services priced at each economy to provide a measure of relative costs across economies? a. purchasing power parity exchange rates b. GNI price deflators c. foreign exchange rate conversions to U.S. dollars d. the exchange rate 7. a. b. c. d. Most successful examples of modern economic growth have occurred in a country with a temperate-zone climate. a market economy. exports of manufactured goods. all of the above. 8. Index? a. b. c. d. Which of the following is not an indicator that is used to compute the Human Development life expectancy at birth. real GDP per capita. infant mortality rate. adult literacy rate. Development Economics (TIU E-Track) Fall 2018 (Prof. Edmonds) 9. Which region in the world has the lowest GNI per capita based on the World Bank Atlas method? a. Sub-Saharan Africa b. East Asia/Pacific c. South Asia d. Latin America/The Caribbean 10. Which of the following is not a policy proposal of the neoclassical counter-revolution school? (a) promoting free trade (b) privatizing state-owned enterprises (c) welcoming multinational corporations (d) promoting trade unions 11. (a) (b) (c) (d) Which of the following is a criticism of the neoclassical counter-revolution school’s approach? markets are not competitive in developing countries. externalities are common in developing countries. inequality may worsen when interventions are removed in developing countries. all of the above. 12. 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 13. A situation in which government intervention in the economy worsens the economic outcome is termed (a) neoclassical failure. (b) socialism. (c) government failure. (d) dependency revolution. 14. The supply curve of labor to industry in the Lewis model is horizontal if there is surplus labor in agriculture. This condition persists as long as (a) the marginal product of labor is less than the average product of labor in agriculture. (b) the marginal product of labor in agriculture is less than the marginal product of labor in industry. (c) there are diminishing returns to labor in agriculture. (d) the marginal product of labor in agriculture is zero. 15. (a) (b) (c) (d) International dependence theories distinguish between two groups of countries known as rich-poor. developed-developing. center-periphery. independent-dependent. 16. (a) (b) (c) (d) A market-friendly approach to development emphasizes self-interested behavior of public officials in LDCs. the dependence of LDCs on former colonial powers. the inherent efficiency of markets in developing countries. that markets in LDCs fail sometimes and selective interventions can promote economic development. 17. (a) (b) (c) (d) The linear stages theory of economic growth fails to recognize that increased investment is both a necessary and a sufficient condition. a necessary but not a sufficient condition. a sufficient but not a necessary condition. neither a necessary nor a sufficient condition. Development Economics (TIU E-Track) Fall 2018 (Prof. Edmonds) 18. (a) (b) (c) (d) In endogenous growth models, it is assumed that there are external economies from public or private investments. there are diminishing marginal returns to capital. growth is explained by forces outside the model. the capital-labor ratio is constant. 19. (a) (b) (c) (d) The new growth theory attempts to explain the rate of population growth within a country. the rate of capital accumulation within a country. the factors that determine the size of the Solow residual. why there are diminishing returns to capital. 20. (a) (b) (c) (d) The absolute poverty line decreases as real income grows. shows the average income of the lowest income group. can be measured with the Lorenz curve. none of the above. 21. (a) (b) (c) (d) Kuznets’ inverted-U hypothesis implies that things must get worse before they get better. suggests that inequality will worsen and then improve as a country grows. suggests that inequality will improve and then worsen as a country grows. points out six characteristics of modern economic growth. 22. (a) (b) (c) (d) With modern sector enlargement growth, inequality will first rise and then fall. first fall and then rise. remain about the same. all of the above. 23. (a) (b) (c) (d) Higher income countries tend to have lower levels of absolute poverty because more employment opportunities more public assistance greater entrepreneurship opportunities. all of the above. 24. (a) (b) (c) (d) Which of the following policies may decrease the level of capital intensity in industry? an increase in the cost of capital a decrease in the minimum wage an increase in the elasticity of substitution all of the above. 25. (a) (b) (c) (d) Which of the following groups is(are) more likely to be poor? minorities indigenous people women all of the above. 26. Distribution of income according to percentiles, such as the highest 40% or lowest 20% is known as the _______________ distribution of income. (a) size (b) functional (c) GNP-weighted (d) equal-weighted Development Economics (TIU E-Track) Fall 2018 (Prof. Edmonds) 27. Assuming that the Gini coefficient for Egypt is 0.403 and the Gini coefficient for Australia is 0.404, it is possible to conclude that both Egypt and Australia have (a) virtually the same number of households in absolute poverty. (b) virtually the same percentage of households in absolute poverty. (c) virtually the same level of the Human Development Index. (d) none of the above. 28. (a) (b) (c) (d) In stage III of the demographic transition, the birth rate and the death rate are relatively low. the birth rate and the death rate are relatively high. the birth rate is relatively high and the death rate is relatively low. the birth rate is relatively low and the death rate is relatively high. 29. (a) (b) (c) (d) The Malthusian population trap assumes that contraception is unavailable. technological progress may be rapid. fertility increases with per capita income. all of the above. 30. (a) (b) (c) (d) (e) Which of the following would most likely reduce the birthrate? public health improvements an increase in child mortality a decline in the availability of secondary education a reduction in the opportunity cost of a woman’s time all of the above. 31. (a) (b) (c) (d) Which of the following will cause a reduction in the birthrate? the population becomes less religious public healthcare improves education becomes more available an increase in the opportunity cost of a woman’s time 32. (a) (b) (c) (d) (e) Evidence suggests that population growth has negative effects on economic growth. poverty reduction. environment. education. all of the above. 33. (a) (b) (c) (d) The rate of natural increase in the population of developing countries is most correlated with advances in developed country technology increases in developing country income an increase in the fertility rate all of the above. 34. Which of the following geographic regions is expected to experience the largest percentage increase in its population between 2003 and 2050? (a) Asia and Oceania. (b) Latin America. (c) North America. (d) Africa. 35. (a) (b) (c) (d) The Malthusian population trap model has been criticized on the grounds that it ignores the role of technological progress. assumes that population growth is primarily determined by individual choice over the number of children to have. both (a) and (b) are correct. neither (a) nor (b) is correct. Development Economics (TIU E-Track) 36. (a) (b) (c) (d) Fall 2018 (Prof. Edmonds) An argument supporting promotion of the urban informal sector is the formal sector is incapable of providing enough employment. informal sector workers are poorly educated. it uses a relatively high capital intensity. it would reduce urban bias. 37. 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. 38. 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 39. 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 get jobs in the private sector. (d) all of the above. 40. It is important to place particular stress on the role of primary education in the development strategy because of (a) LDC’s comparative advantage from basic skills education. (b) the law of diminishing returns. (c) development emphasis on poverty alleviation. (d) all of the above. 41. (a) (b) (c) (d) Credential inflation results from a combination of cost-push inflation and demand-pull inflation. rigidities in the industrial sector. the need to select from among qualified applicants in the modern sector. all of the above. 42. that (a) (b) (c) (d) The fact that developed countries have strong, widely attended university systems indicates 43. (a) (b) (c) (d) The supply of public school places is determined by individuals’ demand for education. direct and indirect costs of schooling. political processes, often unrelated to economic criteria. all of the above. 44. (a) (b) (c) (d) Studies show that improved education of women in developing countries leads to lower infant mortality. better designed, market based development policies. lower international dependence. all of the above. university expansion should be a development priority. universities teach skills used on the job. developing countries place too much stress on agriculture. none of the above. Development Economics (TIU E-Track) 45. (a) (b) (c) (d) Fall 2018 (Prof. Edmonds) The World Bank approach to combating child labor stresses making child labor legal under certain conditions. tackling the sources of poverty. encouraging families to migrate to richer countries. providing each child with a computer so that children have an alternative to working. 46. As the number of years of schooling completed increases, the expected private return and private cost of education (a) increase at roughly the same rate. (b) increase at different rates with expected private return increasing at a slower rate than private cost. (c) increase at different rates with expected private return increasing at a faster rate than private cost. (d) do not increase. SHORT ANSWER QUESTIONS (write two or three sentence answers to the following questions). No need for complete sentences (bullet points would be fine). 47. What is Solow’s growth accounting approach and what does it show? 48. How do the basic assumptions of the Lewis Dual Economy model and the neo-classical dual economies models differ? 49. Define the headcount poverty ratio and the poverty gap; indicate which is a better measure of poverty and why this is the case. 50. What is the Todaro paradox and what is its cause? 51. Define “urban bias,” two causes of urban bias, and the effect of urban bias. 52. What happens in an economy at the “Lewis Turning Point” according to the Lewis Dual Economy model? 53. What distinguishes findings from impact evaluations from other types of intervention (program or project) impact assessments? 54. Name three different methodologies used to generate “counterfactuals” against which the impact of interventions can be judged. 55. Name two problems that can emerge that can endanger the conclusions that can be drawn from randomized controlled trials? ____________________________________________________________________________________________ MULTIPLE CHOICE ANSWERS 1. D 8. C 15. C 22. A 29. C 36. A 43. C 2. D 9. C 16. D 23. D 30. A 37. A 44. A 3. D 10. D 17. B 24. D 31. D 38. A 45. B 4. B 11. D 18. A 25. D 32. E 39. A 46. C 5. C 12. A 19. C 26. A 33. A 40. D 6. A 13. C 20. D 27. D 34. D 41. C 7. D 14. D 21. B 28. A 35. A 42. D SHORT ANSWER QUESTION ANSWERS – will be shared (in either written or short audio form) tomorrow.