Compared to the developed countries, the LDCs have
A. higher birth rates and lower death rates
B. higher birth rates and higher death rates
C. lower birth rates and lower death rates
D. lower birth rates and higher death rates
The Gini coefficient provides a measure of:
A. the level of poverty
B. the level of relative inequality
C. disguised unemployment
D. the rate of growth
According to the Harrod-Domar model, an increase in growth rates depends on
A. Increase in capital-output ratio
B. Decrease in capital-output ratio;
C. Increase in marginal propensity to consume;
D. None of the above
If the birth rate is 6% and the death rate is 2%, the natural rate of population increase is:
A. 0 .3%
B. 3.0%
C. 4.0%
D. 8.0%
The LDCs want foreign capital in the form of
A. loans when they want to retain control of domestic industry
B. equity when they want to share risks with foreign investors
C. long-term loans for long-term infrastructure projects
D. all of the above
The Solow model emphasizes the role of which of the following factors of production?
A. Land
B. Land
C. Capital
D. Natural resources
In an exogenous growth model, growth is caused by
A. capital accumulation.
B. government policies.
C. human capital accumulation
D. forces that are not explained by the model itself.
Suppose that two countries share identical levels of total factor productivity, identical labor force growth rates and identical savings rates. According to the Solow model
A. the country with the greater initial level of output per worker will grow more rapidly than the country with the smaller initial level of output per worker.
B. the country with the smaller initial level of output per worker will grow more rapidly than the country with the greater initial level of output per worker.
C. both countries will have the same growth rates of output per worker, even if they start out with different levels of output per worker.
D. if both countries start out with different levels of income per worker, both countries may have different growth rates of output per worker, but we cannot be certain which country will have the higher growth rate of output per worker
In the endogenous growth model, an increase in a worker’s level of human capital
A. increases the amount of additional human capital she can produce, but does not increase the amount of output she can produce.
B. increases the amount of additional output she can produce, but does not increase the amount of human capital she can produce.
C. increases both the amount of additional human capital she can produce and the amount of output she can produce.
D. increases neither the amount of additional human capital she can produce nor the amount of output she can produce.
According to Alesina and Dollar (2000) donor countries tend to allocate more aid to:
A. recipient countries with a low level of Human Development Index,
B. recipient countries that used to be former colonies of the donor and that are not necessarily poor,
C. recipient countries with a high level of population
D. none of the previous answers
Burnside and Dollar (2000) state that foreign aid can be effective if allocated where good policies are in place. How do they empirically measure the good policies?
A. controlling for the level of democracy inside the recipient country
B. using a variable that accounts for the type of fiscal policy implemented by the recipient government,
C. using a composite index that accounts for the fiscal, monetary and foreign policy
D. controlling for the level of corruption inside the recipient country.
If a war destroys a large portion of a country's capital stock but the saving rate is unchanged, the Solow model predicts output will grow and that the new steady state will approach:
A. a higher output level than before.
B. the same output level as before.
C. a lower output level than before.
D. the Golden Rule output level.
What conclusion can be reached from the following data on income shares?
Percentage of Income Received by Lowest 40% Highest 20%
Bangladesh 17.3 45.3 Indonesia 14.4 49.4
A. absolute poverty is more widespread in Bangladesh
B. the size distribution of income is more unequal in Indonesia
C. Bangladesh has adopted a strategy of redistribution with growth
D. growth in Bangladesh is calculated using poverty weights rather than income weights
In the Harrod-Domar equation g = s/v, v is defined as
A. the value of the country’s capital stock
B. the ratio of the country’s capital stock to its output
C. the change in the country’s capital stock
D. none of the above
B. Decrease in capital-output ratio,
C. Increase in marginal propensity to consume,
In the Solow growth model, if investment exceeds depreciation, the capital stock will ______ and output will ______ until the steady state is attained.
A. increase; increase
B. increase; decrease
C. decrease; decrease
D. decrease; increase
D. controlling for the level of corruption inside the recipient country
With perfect income equality the Gini coefficient in a country would be :
A. infinity
B. 1
C. 0.5
D. 0
The concept of Purchasing Power Parity:
A. is based upon the cost of hamburgers around the world
B. is based upon the cost of the same market basket of goods in different countries
C. is based upon the market exchange rate
D. is based upon the nominal exchange rate
One study found that the Gini coefficient for Egypt .403 . was virtually the same as that for Australia .404. From this information one can conclude that Egypt and Australia:
A. had virtually the same number of households in absolute poverty.
B. had virtually the same percentage of households in absolute poverty.
C. had virtually the same Human Development Index level.
D. none of the above.
Compared to the developed countries, the LDCs have:
Which of the following statement is incorrect in the microeconomic household model for demand for children?
A. The higher the household income, the greater the demand for children
B. The higher the prices of all other goods relative to children, the smaller the quantity of children demanded
C. The higher the prices of all other goods relative to children, the greater the quantity of children demanded
D. The greater the strength of tastes for goods relative to children, the fewer children demanded
Griffin (1970) argues that:
A. Total foreign aid the country receives is positively correlated with total national savings
B. Aid-to-income ratio is positively correlated with national savings ratio
C. Total foreign aid the country receives is negatively correlated with total national savings
D. Aid-to-income ratio is negatively correlated with national savings ratio
Which was not the reason that the capital account of many less developed countries turned negative in 1984?
A. Rising debt service obligations
B. Protectionism in developed countries
C. Declines in lending by international banks
D. Capital flight
Which factor is not related to the Asian Financial Crisis in 1997?
A. Foreign investors’ optimism foreseeing little exchange rate risk.
B. Capital flight preceding the Crisis
C. Over-valued fixed exchange rate
D. Asset and real estate bubbles
In the two-gap model, which of the following gaps, when binding, leads to foreign aid having the largest impact on GNP?
A. Fiscal gap
B. Savings gap
C. Foreign exchange gap
D. None of the above.
Consider two countries A and B which produce wine and cheese. The per unit labour requirement for country A to produce wine and cheese is 6 and 3 respectively. For country B, the per unit labour requirement to produce wine and cheese is 3 and 4 respectively. Which of the following statements is true?
A. country A has a comparative advantage in producing wine
B. country A has an absolute advantage in producing wine
C. country B has an comparative advantage in producing cheese
D. country B has an absolute advantage in producing wine
Consider two countries A and B which produce wine and cheese. The per unit labour requirement for country A to produce wine and cheese is 6 and 3 respectively. For country B, the per unit labour requirement for wine and cheese is 1 and 2 respectively. Which of the following statements is true?
D. country B has an comparative advantage in producing wine
An implication for trade policy of a country following Import Substituting Industrialisation is that
A. tariffs and taxes on imports will be reduced
B. subsidies to exports will be increased
C. taxes and tariffs on imports be increased
D. taxes and tariffs will remain unchanged
According to Prebisch-Singer theory less developed countries should not rely on agriculture for export earnings because
A. the price elasticity of demand for agricultural goods is low
B. the income elasticity of demand for agricultural goods is low
C. the price elasticity of demand for agricultural goods is high
D. the income elasticity of demand for agricultural goods is high
When the terms of trade of a country decreases, it implies
A. the price of exports relative to the price of imports have decreased
B. the price of exports relative to the price of imports have increased
C. the price of exports relative to the price of imports have remain unchanged
D. the price of exports have increased and the price of imports have decreased
According to the Harrod-Domar model, an increase in growth rates depends on:
Without adjusting for "purchasing power parity", Real GDP tends to understate income in developing economies by
A. Underestimating saving
B. Ignoring government deficit spending
C. Omitting non-market transactions
D. All of the above
The Solow Growth Model predicts that
A. Rich nations will grow faster than poor nations
B. The rich will get richer and the poor will get poorer
C. The rich will get poorer and the poor will get richer
D. Poor nations will grow faster than rich nations
If the central prediction of the Solow Growth Model is valid,
A. Per capita Real GDP differences among nations will increase
B. Per capita Real GDP differences among nations will diminish
C. Economic freedom as measured by the Heritage Foundation Index will decrease
D. Population growth rates in rich countries will increase
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.
Lack of investment in strong education and health care systems:
A. Causes a deterioration in human capital and a decline in labor productivity;
B. Causes a deterioration in human capital and an increase in physical capital;
C. Increases human capital and a cause a decline in labor productivity;
D. Causes a decline in physical capital and a decline in labour productivity
According to Burnside and Dollar (2000):
A. Foreign aid has always a positive impact on growth but with diminishing returns;
B. Foreign aid has a positive impact on growth if associated with sound policies but with diminishing returns;
C. Foreignaiddoesnothaveapositiveimpactongrowthbutwithincreasingreturns;
D. Foreign aid has a positive impact on growth if associated with sound policies but with increasing returns.
Per Capita GDP is a good proxy for the growth of a country because:
A. is negatively correlated with Life expectancy;
B. is negatively correlated with Adult Literacy;
C. is positively correlated with Infant Mortality;
According to Galor and Zeira (1993):
A. Individuals who inherit less than f work as unskilled but their descendants in future generations will work as skilled workers;
B. Individuals who inherit less than f work as unskilled and so are their descendants in future generations;
C. Individuals who inherit more than f invest in human capital and all their descendants will remain in the skilled labour sector in future generations;
D. Individuals who inherit less than g may invest in human capital but after some generations their descendants become skilled workers;
Rural interest rates are likely to be:
A. Higher than in the organized credit market;
B. Same as in the organized credit market;
C. Lower than in the organized credit market;
The relationship between Per Capita Income and Infant Mortality is:
A. Negatively correlated
B. Positively correlated
C. Non correlated
In a share cropping contract, risk is:
A. Borne by the tenant,
B. Borne by the landlord,
C. Shared between landlord and tenant,
The Lewis model of the dual economy makes the following assumption(s)
A. The rural wage initially remains constant
B. Industry makes a profit by employing cheap labor
C. Rural wage will rise when industry expands sufficiently
