International Economic Development Exam 2 Review - ECS 3013...

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ECS 3013 – International Economic Development – Spring 2013Review for Exam 2 – Chapters 5 – 7*The exam will consist of essay/short answer questions, graphing, and matching (terms andconcepts to definitions)Cp 5 – Poverty, Inequality, and Development:1.The following income distribution data are for Brazil:QuintilePercent ShareLowest 20%3.0%Second quintile6.9%Third quintile11.8%Fourth quintile19.6%Highest 20%58.7%Highest 10%43.0%a.Carefully graph the Lorenz curve, labeling the axes.b.Explain how to find the Gini coefficient, graphically.c.Brazil’s national income is $300Billion. What is the approximate dollar income ofthe bottom 20%? Bottom 40%?d.Brazil’s population is approximately 150 million. Suppose that each householdmakes the average income for its quintile. What is the level of poverty if thepoverty line is $400 per capita?e.Suppose one percent of national income were transferred from the richest 20%of households to the poorest 20% of households. Show the effect on relativeinequality.f.Under the same transfer, what is the effect on poverty?2.Consider the following distribution of income in a 12-person economy, with the modernurbanwage3, the traditional rural wage1: (1,1,1,1,1,1,3,3,3,3,3,3). The wage for thepoverty line1.25. Calculate GNI for all sectors of the economy combined. Calculatethe % of income for the bottom 50% and top 50% of income earners in this economy.Carefully graph the Lorenz curve labeling it as (1), and be sure to label the axes. Next,suppose that rural incomes are raised to 1.5 through expanded agricultural exports(traditional sector enrichment). Re-calculate GNI for all sectors of the economycombined. Calculate the % of income for the bottom 50% and top 50% of incomeearners in this economy.

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