Course Introduction
Development Economics
Exam Practice Tests
Development Economics examines the economic aspects of the development process in low- and middle-income countries, focusing on the causes and solutions to issues such as poverty, inequality, and unemployment. The course explores theories of economic growth, the roles of institutions, policies for sustainable development, and the impacts of globalization and international aid. Emphasizing both empirical evidence and policy analysis, students learn to critically assess development strategies and interventions, with attention to topics such as health and education, agricultural transformation, migration, and financial inclusion.
Recommended Textbook
Economic Development 10th Edition by Michael P. Todaro
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16 Chapters
500 Verified Questions
500 Flashcards
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Page 2
Chapter 1: Economics, Institutions, and Development: a Global Perspective
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22 Verified Questions
22 Flashcards
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Sample Questions
Q1) Make a case that development economics might be merely a combination of all the other subfields?of economics, only applied to low-income countries.
Answer: See Question 3 above.
Q2) What are the Millennium Development Goals (MDGs) and how did they come about? What do you consider to be the most important of these and why?
Answer: The answer should stress that the goals cover a broad range of objectives both economic and social. These were put forward so that developing countries would have numerical targets against which their progress could be judged and, where warranted, appropriate assistance offered. An interim assessment of the MDGs can be found at: www.unmilleniumproject.org.
Q3) In reviewing discussions of life in developing countries, what is it about lifestyles in the low-income countries compared with lifestyles in the high-income countries that most strikes you? Why?
Answer: This is an open-ended question to stimulate reflection.
Q4) It has been said that "underdevelopment is a state of mind." Comment.
Answer: You may look for a discussion of the role of modern values in the development process, as on Pages 13-14 of the text.
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Chapter 2: Comparative Economic Development
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39 Verified Questions
39 Flashcards
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Sample Questions
Q1) Which of the following is a low-income country?
A)Mexico
B)Thailand
C)Turkey
D) India
Answer: D
Q2) Which of the following African countries has recently experienced widespread death and destruction due to ethnic or clan based conflict?
A)Rwanda
B)Zaire
C)Somalia
D) all of the above
Answer: D
Q3) Neutral technological progress occurs when
A)higher output levels are achieved with the same quantity and combinations of factor inputs.
B)higher output levels are achieved by more capital intensive methods.
C)higher output levels are achieved by more labor intensive methods.
D) higher output levels are achieved.
Answer: A
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Chapter 3: Classic Theories of Economic Growth and Development
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) The neoclassical counter-revolution school supports
A)Trade restrictions.
B)State-owned enterprises.
C)Eliminating government regulations.
D) Limitations on foreign investors.
Answer: C
Q2) 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.
Answer: D
Q3) Explain the concept of the "idea gap" in development economics.
Answer: Developing countries lack knowledge, information, and skills for production and productivity in comparison to more-developed countries.
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Page 5
Chapter 4: Contemporary Models of Development and Underdevelopment
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Sample Questions
Q1) In contrast to the earlier neoclassical models of economic growth, in endogenous growth models, there is more emphasis on A)human capital.
B)externalities.
C)increasing returns to scale.
D) All of the above.
Q2) What three factors distinguish models of endogenous growth from their neoclassical counterparts?
Q3) Explain what is meant by the term coordination failure and provide an example.
Q4) Based on the HRV growth diagnostic framework and the case study in Box 4.2, what are the binding constraints faced by Brazil, El Salvador, and the Dominican Republic and how can these constraints be overcome?
Q5) How can the O-ring theory help explain the existence of a low-level equilibrium that an economy may find itself in?
Q6) The Big-Push theory argues that coordination failures may arise because of A)pecuniary externalities.
B)technological externalities.
C)lack of human capital.
D) All of the above.
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Chapter 5: Poverty, Inequality, and Development
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44 Verified Questions
44 Flashcards
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Sample Questions
Q1) About how many people are living in extreme poverty in the world? Which regions have the greatest percentages of people living in extreme poverty?
Q2) Distinguish between economic growth by modern sector enlargement, modern sector enrichment, and traditional sector enrichment. For each of the three cases, show what happens to absolute poverty and to relative inequality, using a precise measure of each.
Q3) Explain the difference between size and functional measures of income distribution.
Q4) Kuznets' inverted-U hypothesis
A)implies that things must get worse before they get better.
B)suggests that inequality will worsen and then improve as a country grows.
C)suggests that inequality will improve and then worsen as a country grows.
D) points out six characteristics of modern economic growth.
Q5) Discuss some policies or strategies that would give firms an incentive to substitute labor for capital within modern production techniques.
Q6) Why are about 200 million girls and women said to be "missing" in developing countries?
Q7) Using a Lorenz curve diagram, explain how to calculate the Gini coefficient.
Q8) "The 1980s were a lost decade for the absolutely poor." Evaluate this statement.
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Chapter 6: Population Growth and Economic Development:
Causes, Consequences, and Controversies
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32 Verified Questions
32 Flashcards
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Sample Questions
Q1) At present, approximately how many years would it take for the world's population to double?
A)35
B)58
C)96
D) 211
Q2) Which of the following would most likely reduce the birthrate?
A)public health improvements
B)an increase in child mortality
C)a decline in the availability of secondary education
D) a reduction in the opportunity cost of a woman's time
E) All of the above.
Q3) China has adopted a unique approach to the population growth problem. Please explain. Have they been successful? Please explain.
Q4) Has population growth been a burden for China? Please answer true or false and explain.
Q5) What are some of the differences between the population policies of China and India? What factors may have contributed to their success or failure?
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Chapter 7: Urbanization and Ruralurban Migration: Theory and Policy
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23 Verified Questions
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Sample Questions
Q1) According to the United Nations Millennium Development Goals Report, the annual growth in percentage terms of the slum population from 1990-2001 has been the largest in:
A)Latin America and the Carribean
B)South-East Asia
C)Sub-Saharan Africa
D) Southern Asia
Q2) An argument supporting promotion of the urban informal sector is
A)the formal sector is incapable of providing enough employment.
B)informal sector workers are poorly educated.
C)it uses a relatively high capital intensity.
D) it would reduce urban bias.
Q3) Describe some of the causes of urban giantism in developing countries.
Q4) What are the main features of the Harris-Todaro model of rural-urban migration?
Q5) According to UN projections, what proportion of the world's urban population will reside in the urban areas of developing countries by 2025?
A)Two fifths
B)One half
C)Two thirds
D) Four fifths
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Chapter 8: Human Capital: Education and Health in Economic Development
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34 Verified Questions
34 Flashcards
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Sample Questions
Q1) Investment in human capital is very similar to investing in physical capital. True or false? Explain your answer.
Q2) According to the Regional HIV and AIDS Statistics data from WHO, which region of the world has the largest number of adults and children living with HIV?
A)South and South-East Asia
B)Sub-Saharan Africa
C)Latin America
D) North America
Q3) Why have poor nations invested so much money in education and health? Evaluate the soundness of these reasons.
Q4) Why do you think Uganda has been so successful at decreasing the prevalence of HIV/AIDS?
Q5) According to the 2005 UNDP Human Development Report child mortality (under age 5) has declined in all regions of the world except
A)South Asia.
B)Sub-Saharan Africa.
C)Middle East and North Africa.
D) None of the above.
10
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Chapter 9: Agricultural Transformation and Rural Development
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Sample Questions
Q1) Is sharecropping economically efficient or inefficient? Explain.
Q2) What are the key characteristics of the agrarian system in Asia that distinguish it from that of Latin America? Explain your answer.
Q3) The African agrarian system is characterized by A)absentee landlords.
B)a dual agrarian system known as latifundio-minifundio.
C)land fragmentation.
D) shifting cultivation.
Q4) Crops produced entirely for the market are known as A)basic crops. B)mixed crops.
C)hybrid crops.
D) cash crops.
Q5) In South Asia and sub-Saharan Africa, about what share of the labor force works in agriculture?
A)one tenth
B)one third
C)one half
D) two thirds
Page 11
Q6) What are the primary determinants of agricultural labor productivity?
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Chapter 10: The Environment and Development
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Sample Questions
Q1) Describe the basic issues involved in setting up a system of national accounts that includes the value of environmental capital and its loss.
Q2) An example of a biomass fuel is
A)coal.
B)nuclear fuel.
C)manure.
D) oil.
Q3) The annual income that can be consumed without diminishing the total capital assets of a nation is
A)purchasing power parity income.
B)sustainable national income.
C)environmental capital stock.
D) per capita income.
Q4) Provide a short definition of sustainable development.
Q5) In what way is better protection of the environment a possible result of successful development?
Q6) What is the relationship between debt, falling commodity prices and rainforest degradation?
Q7) Describe the effect of the loss of biodiversity on productivity and health.
Page 13
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Chapter 11: Development Policymaking and the Roles of
Market, State, and Civil Society
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Sample Questions
Q1) What are accounting, or "shadow" prices for project appraisal? In what way do they differ from market prices, and why do we need them? Additional question or part of question: How can reference to world prices help countries gauge the real opportunity costs of development projects?
Q2) What is the role of input-output analysis in development planning? What are the strengths and weaknesses of this technique?
Q3) What economic benefits might a developing country gain by reducing corruption? Discuss only economic benefits and provide examples from specific developing countries.
Q4) Which of the following is not a rationale for development planning?
A)Capital market failures
B)Rent seeking behavior
C)Attitudinal or psychological impact
D) All are rationales for development planning in developing countries.
Q5) How does the Washington Consensus differ from the Santiago Consensus?
Q6) Why must projects be appraised? What do we learn from project appraisals?
Q7) Explain what is meant by market failure.
Page 14
Q8) What is the primary composition/ownership pattern of the private sector in most developing countries?
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Page 15
Chapter 12: International Trade Theory and Development Strategy
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Sample Questions
Q1) Which of the following is a major argument of trade optimists?
A)Industrial policy can increase productivity of developing country manufacturing efficiency.
B)New synthetic substitutes are constantly being discovered and improved.
C)Developing country efficiency would improve with trade liberalization.
D) All of the above.
Q2) Why is it impossible that all industries in a developing country qualify as infant industries?
A)You cannot have a comparative advantage in everything.
B)You cannot have an absolute advantage in everything.
C)This would violate international law.
D) This would reduce the terms of trade.
Q3) Briefly explain the major argument of the factor endowment trade theory.
Q4) Discuss some of the factors that lead infant manufactured goods industries to become more efficient over time, and some of the factors that might lead them to fail to do so.
Q5) What is an overvalued exchange rate? What factors may cause a country's currency to become overvalued?
Q6) Explain the difference between nominal and effective tariffs.
Q7) What is the difference between a devaluation and a depreciation? Page 16
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Page 17
Chapter 13: Balance of Payments, Developing-Country
Debt, and the Macroeconomic Stabilization Controversy
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33 Verified Questions
33 Flashcards
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Sample Questions
Q1) Explain what is meant by capital flight. How would you distinguish capital flight from the normal desire of investors to diversify their portfolios by investing abroad?
Q2) Which of the following was not a factor contributing to the debt crisis in Latin America?
A)The oil shocks
B)Trade liberalization in many developing countries
C)An increase in global interest rates.
D) A lack of investment opportunities in the developed countries
E) All of the above
Q3) The flow of private foreign investment and grants and loans is included in a country's
A)current account.
B)capital account.
C)cash account.
D) None of the above.
Q4) Why may the debt crisis be only "sleeping," rather than "dead?"
Q5) Outline the elements of an IMF stabilization package. Explain the mechanism by which it is?expected to help a balance of payments deficit. How successful have these packages been? ?Explain your answer.
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Chapter 14: Foreign Finance, Investment, and Aid: Controversies and Opportunities
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34 Verified Questions
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Sample Questions
Q1) The best explanation for the late 1994/early 1995 collapse of the Mexican peso and stock market is
A)free movement of capital internationally is destabilizing for a developing country.
B)portfolio investments were camouflaging overvalued exchange rates.
C)debt for equity swaps had created imbalances in the ownership structure of the economy.
D) the potential benefits of NAFTA had been oversold.
Q2) MNCs can often decrease their tax liability through
A)use of more capital-intensive techniques.
B)use of transfer pricing.
C)use of more foreign input sources.
D) bargaining with the host country.
E) none of the above.
Q3) Explain what is meant by investment by MNCs that encourage inappropriate consumption.
Q4) State at least two major benefits of promoting nongovernmental organizations in developing countries as sources and conduits of foreign assistance.
Q5) Explain the motives of developed countries in providing foreign aid.
Page 19
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Chapter 15: Finance and Fiscal Policy for Development
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Sample Questions
Q1) What is a development bank? What are some of the reasons they have not had greater success?
Q2) What are the major market failures that imply a potential role for state intervention in financial markets?
Q3) Among the rationales for state-owned enterprises is
A)the existence of a monopoly.
B)the need for capital formation.
C)the desirability of national control over strategic sectors of the economy.
D) all of the above.
E) none of the above.
Q4) Macroeconomic stabilization involves
A)reduction of inflation.
B)reduction of government budget deficits.
C)reduction of trade deficits.
D) all of the above.
E) none of the above.
Q5) Compare and contrast the level of military spending in developing and developed economies. Compare and contrast the level of military and social spending in developing economies. What evidence is there regarding the link between economic development and military spending?
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Chapter 16: Some Critical Issues for the Twenty-First Century
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Sample Questions
Q1) State one of the agreements of Agenda 21 of the Rio Summit and describe its implications for development.
Q2) A production facility whose operations are distributed across countries to take advantage of price differentials is known as
A)a multinational corporation.
B)a free trade area.
C)a global factory.
D) all of the above.
E) none of the above.
Q3) By 2000, middle-income developing countries were responsible for about
A)one half of the emissions of greenhouse gases of those of developed countries.
B)two thirds of the emissions of greenhouse gases of those of developed countries.
C)about the same amount of emissions of greenhouse gases as those of developed countries.
D) more than the emissions of greenhouse gases of developed countries.
Q4) "We have a long way to go in development, but we have already come very far."
Justify both halves of this statement with reference to any statistics you remember (you may approximate).
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