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ECN115A Fall 2009 midterm exam v5 KEY v2

# ECN115A Fall 2009 midterm exam v5 KEY v2 - Economics of...

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1 Economics of Development (ARE/Economics 115-A): Growth, Poverty Alleviation, and the Environment Dr. Stephen A. Vosti Fall 2009 Midterm Exam Please write ALL your answers in your Blue Books. We will not collect the exam sheets, nor will anything appearing on these sheets be included in the grading process. Write legibly; you will receive no credit for answers we cannot read. All of your explanations should be concise and clear. Make sure your full name and your Discussion Section number are on all the Blue Books you submit. Please ‘nest’ Blue Books before submitting them. You have 80 minutes to complete this exam; all Blue Books must be submitted at the end of the exam period. The points associated with each question have been identified; use this information to organize your time. Boa sorte! Please note that the following are suggested answers; other answers may be acceptable. Students may be awarded partial credit on all questions. 1. Concepts, Terms, and Definitions – ( 20 points total , 10 points each) Select two of the following three sets of terms and in each case: 1) define each term in the sets you select, and 2) explain the interrelationships (if any exist) among the terms in each of the selected sets. Feel free to use diagrams and/or equations in your definitions and in your explanations of interrelationships. 1.a. T, t, Σ , r, B t , C t , NPV Definitions: T = time frame for evaluation, years t = year, annual time step for assessment Σ = sigma, summation operator r = discount rate B t = benefits in time period ‘t’ C t = costs in time period ‘t’ NPV = net present value Interrelationships among terms (see equation): NPV of any investment option is the discounted stream of net benefits associated with that option. 0 (1 ) t T t t t t B C NPV r

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2 1.b. Mortality, morbidity, life expectancy, HALE Definitions: Mortality = death of an individual, mortality rates can be expressed in terms of deaths per 1,000 or 100,000 in the general population, or can be age-specific, e.g., infant mortality rates (death during the first year of life divided by the number of live births). Morbidity = illnesses, usually serious and chronic illnesses (malaria, heart disease, etc.) that undermine the ability to work or to enjoy life, and that also generally shorten life. Morbidity can be expressed in absolute terms (e.g., number of malaria cases in a given country) or in relative terms (e.g., % of inhabitants that have heart disease). Life expectancy = the number of years an individual is expected to live; this number is calculated at birth. HALE = Health-Adjusted Life Expectancy; the number of years of healthy life (subtracting from Life Expectancy the time spend suffering from illnesses, disabilities, etc.) an individual can expect to live, again, this number is calculated at birth.
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