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your PRINT Name ________________________________________ Summer 2001
Economics 163: Economic Development Professor Byrns
Your grade depends on the 100 points worth of questions you answer least well. (I.E., omit questions by crossing them out.) Look on the last page to determine which essay questions you will answer. Then, PRINT a CAPITAL letter in the margin to the left of each MC question corresponding to its best answer.
Multiple Choice: Two points each. 1. Autarchic subsistence economies are necessarily characterized by (a) very low incomes. (b) consumption being limited only what to what people can produce. (c) people receiving only food for pay. (d) anarchistic forms of government. (e) all of the above. 2. Which of the following African countries have recently experienced widespread death and destruction due to ethnic conflict? (a) Rwanda (b) Zaire (c) Somalia (d) Rwanda and Somalia (e) all of the above 3. The number of units of LDC currency required to purchase a basket of goods and services in the LDC market that costs one dollar in the U.S. is given by (a) GNP price deflators. (b) Human Development Index ranking. (c) purchasing power parity. (d) all of the above. 4. About how much greater is the infant mortality rate in the poorest LDCs than in rich, high human development countries such as Japan? (a) 2 or 3 times greater (b) 10 times greater (c) 20 times greater (d) 40 times greater (e) 80 times greater 5. Not among policy proposals of the neoclassical counter-revolution school would be: (a) promoting free trade. (b) easy entry for multinational corporations. (c) privatizing state-owned enterprises. (d) promoting trade unions. (e) promoting vigorous competition. 6. In the public choice (new political economy) approach to development the emphasis is on the (a) value of 'non-selective' interventions. (b) self-interested behavior of public officials. (c) dependence of LDCs on former colonial powers. (d) inherent efficiency of developing country markets. 7. The underlying assumption of the Harrod-Domar growth model is that (a) the incremental capital-output ratio is given by k=K/Y. (b) capital accumulation largely determines economic growth. (c) growth is sustainable only if agricultural productivity rises. (d) all of the above. 8. If the labor force increases only proportionally as population grows and if technology remains constant, per capita GDP will probably: (a) increase. (b) decline. (c) remain unchanged. (d) grow faster than the population. (e) be more cyclical. 9. That part of measured economic growth not attributable to expansion of either capital or labor is known as (a) surplus growth. (b) excess growth. (c) the Solow residual. (d) the Todaro paradox. (e) the technological imperative. (f) surplus value. 10. 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. 11. W.W. Rostow's final stage of growth entails an age of: (a) high mass consumption. (b) rapid human development. (c) takeoff to sustained growth. (d) stagnant maturity.
12. Not among the broad subcategories of infrastructure would be (a) communications. (b) a finacial system. (c) government and a legal system. (d) capitalization. (e) transportation. (f) education. (g) health. 13. Microcredit banking is an infrastructural development entailing: (a) expanded availability of ATMs. (b) making small loans available to woefully underfinanced entrepreneurs, primarily poor women. (c) interest-free lending to support schools and health services. (d) channeling foreign aid to the most productive enterprises. 14. The Gini coefficient provides a measure of the level of (a) absolute poverty. (b) relative inequality. (c) disguised unemployment. (d) the rate of growth. 15. The number of people in the world who are absolutely poor is closest to (a) a quarter-billion. (b) a half-billion. (c) one billion. (d) two billion. (e) four billion. 16. The idea that income inequality will first rise and then fall with development of a modern industrial sector is least consistent with (a) modem sector enrichment growth. (b) modern sector enlargement. (c) Kuznets' inverted-U hypothesis. (d) empirical studies of developing economies. 17. not among common characteristics of the poor in LDCs is that they are more likely to (a) live in a rural area. (b) come from larger families. (c) be less educated. (d) be males with no dependents. 18. Calculating income shares according to source, such as wages, rent, interest, and profit, is known as the (a) size distribution of income. (b) functional distribution of income. (c) GNPweighted distribution of income. (d) source-weighted distribution of income. 19. Developing countries that adopt capital-intensive technologies tend to rapidly have (a) relatively higher Gini coefficients. (b) relatively lower Gini coefficients. (c) Gini coefficients equal to one. (d) Gini coefficients equal to zero. 20. Evidence that the shares of landowners, labor, and capital are relatively consistent in economies everywhere tends to support the assumptions underpinning: (a) Harrod-Domar growth models. (b) Marxist theories of development. (c) the Solow growth model. (d) W.W. Rostow stages of growth. (e) Malthusian population theories. 21. Optimistic projections place world population by 2025 at (a) between 4 and 6 billion. (b) between 6 and 8 billion. (c) between 8 and 10 billion. (d) between 10 and 12 billion. 22. The world rate of population growth is closest to (a) 1%. (b) 2%. (c) 3 %. d . 4%. 23. Which of the following factors contributes most to successful fertility reduction policies? (a) high levels of religious fundamentalism in the population. (b) high opportunity costs of women's time (c) high contraception knowledge (d) low barriers to education 24. A direct implication of the view that childbearing is an economic decision is the idea that: (a) people have additional children only if they can earn a profit by doing so. (b) social factors have no effect on childbearing decisions. (c) compulsory education increases fertility because educated children have potentially higher salaries. (d) fertility should fall with improved opportunities for women to work in jobs outside the home. 25. The term capital-intensive technique refers to high levels of capital in relation to (a) output. (b) labor. (c) per capita income. (d) education levels. 26. Daily employment without regular hours or a wage contract is known as (a) casual employment. (b) the informal sector. (c) sharecropping. (d) underemployment.
27. The theory that the key to sustained growth in LDCs is massive industrialization and investment in infrastructure is called: (a) redistributive growth. (b) the false paradigm. (c) the big push. (d) neocolonial dependence. (e) the employment/output tradeoff. 28. Underemployment involves: (a) street hawking in the urban informal sector. (b) rural unemployment except during peak harvesting and planting. (c) underutilization of skills due to scarcity of complementary inputs. (d) all of the above. 29. The price reflecting the true social opportunity costs of labor is known as its (a) price index. (b) equilibrium price. (c) shadow price. (d) marginal (d) share. all of the above. 30. The theory that modem sector urban firms pay a higher than equilibrium wage to attract and retain a higher quality workforce and/or to obtain higher productivity is known as (a) labor market disequilibrium. (b) dependency. (c) efficiency wages. (d) all of the above. 31. Least likely to cause shadow prices to differ from current prices for goods or resources would be (a) price floors or ceilings. (b) externalities. (c) efficiency wages. (d) central planning. (e) minimum wage laws. (f) vigorous competition. (g) free-riders. 32. The `brain drain" from LDCs is probably most attributable to (a) infrastructural flaws and inadequate complementary resources. (b) excessively high Gini ratios. (c) high K/L ratios. (d) inappropriate advice from development economists. 33. An argument based on efficiency (instead of equity) criteria that supports policies to promote an informal "labor markets" sector is that: (a) the formal sector fails to provide enough employment. (b) informal sector workers are poorly educated. (c) it relies on high capital intensity. (d) many recent migrants are able to find employment there. 34. Individuals who would like to work but who have abandoned the search for employment following fruitless attempts to find jobs are called (a) discouraged workers. (b) alienated workers. (c) unemployed workers. (d) all of the above. 35. Todaro argues that education of girls is a crucial development investment because (a) it leads to improved child health. (b) it leads to reduced fertility. (c) unskilled women work predominantly in low-productivity forms of agriculture. (d) all of the above. 36. The fact that developed countries have strong, widely attended university systems indicates that (a) university expansion should be a development priority. (b) universities teach skills used on the job. (c) developing countries place too much stress on agriculture. (d) none of the above. 37. Concentration of resources on advanced rather than primary education in developing countries tends to lead to (a) greater inequality. (b) higher fertility. (c) more international migration. (d) all of the above. 38. Crops produced entirely for the market are known as (a) basic needs. (b) mixed farming. (c) hybrid crops. (d) cash crops. (e) commercial production. 39. Although inferior to a competitive minifundio system in which farmers owned their own land, efficiency in agriculture in LDCs would be promoted most if the other systems listed below were replaced by (a) a latifundio system. (b) sharecropping. (c) tenant farming. (d) slavery. (e) feudalism. 40. In which of these developing regions has food production per capita steadily fallen over the last quarter century? a. Africa (b) Near East (c) Far East (d) Latin America
41. The LEAST severe of the following problems associated with environmental degradation in rural sectors of LDCs is (a) water pollution. (b) slash and burn agriculture. (c) soil erosion. (c) deforestation. (d) hydrocarbon emissions from trucks and cars. 42. The idea that optimal environmental quality merely requires enforceable ownership of environmental resources, and that the optimal "price/quantity" solution for using the environment does not depend on which party has these property rights, is known as (a) Coase's theorem. (b) the Leontieff paradox. (c) the Kuznets equation. (d) Rostow's Law. (e) environmental dialectics. 43. A publicly owned resource that is allocated under a system of unrestricted access is known as a (a) socialist resource. (b) collective resource. (c) common property resource. (d) commercial resource. (e) privatized resource. 44. When access to the benefits of good cannot be denied without incurring prohibitively high costs for exclusion, the result is an inefficiency known as the (a) free-rider problem. (b) privatized good problem. (c) excessive subsidies problem. (d) tax evasion shortfall. (e) corruption motive. 45. The level of annual income that can be consumed without diminishing the total capital assets of a nation is the (a) purchasing power parity income. (b) sustainable national income. (c) environmental capital stock. (d) all of the above. (e) none of the above. 46. The ratio of a country's average export price to its average import price is its (a) absolute advantage. (b) comparative advantage. (c) terms of trade. (d) exchange rate. (e) purchasing power parity. 47. Autarchy refers to (a) a closed economy based on total self-reliance. (b) developing country common market and related agreements. (c) developing country dictatorships. (d) the caste system and related social structures. (e) none of the above. 48. Which of the following is not among arguments for trade liberalization? (a) increased technical efficiency (b) accelerated technical progress (c) decreased shortages of foreign exchange (d) infant industry argument. 49. If world market demands for primary products (food, fiber, and raw materials) that are major exports for many LDCs are price and income inelastic, and if technological advances increase supplies of these products, then there is a tendency for (a) adverse changes in the terms of trade a problem known as "damnification"-- and declines in real national incomes of LDCs. (b) income inequalities in LDCs to decline. (c) spin-offs from new technologies to stimulate economic growth. (d) rural-urban migration to be slowed. 50. Economic integration is more likely to be successful if a country's polices are driven by: (a) nationalism. (b) political desire for prestige projects. (c) diverse economic systems. (d) religious fundamentalism. (e) none of the above. 51. An LDC suffering high inflation, rising budget and trade deficits, and a rapidly expanding money supply (a) is "in transition." (b) has "macroeconomic instability." (c) is practicing "import substitution." (d) is in Rostow's "take-off" stage. (e) is politically stagnant. 52. The gradual decline over time in the value of one currency in terms of another as a result of market forces of supply and demand is called (a) the exchange rate paradox. (b) depreciation. (c) devaluation. (d) defenestration. (e) none of the above.
53. Worldwide, capital is scarce and labor is abundant. The reverse is true in the US. Thus, freer trade tends to cause US: (a) wages to rise while the return on capital rises in foreign countries. (b) workers to face competition from foreign labor and capital to flow into the United States. (c) capital owners to benefit more than US workers do. (d) workers to leave North America in the long run. Essay Questions: 20 points each (Maximum two questions.) Maximum length for each is one page. Use the backs of these pages to answer these questions. 1. Discuss whether historical stages of development in the United States and other advanced nations provide models for development policies in today's LDCs. 2. Suppose you were the chief economic advisor to Nelson Mandela when he became the head of state in South Africa. Briefly describe the two most important policies you would urge him to enact. 3. Draw a flow chart to describe the trap of underdevelopment, and describe each part of the flow chart. 4. Describe how income elasticities of demand for e.g., children, environmental quality, and infrastructure (e.g., communications, secure financial investments, transportation, and education) can help sustain economic development as an especially primitive LDC begins to break out of a trap of underdevelopment.
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