Chapter 1

1.
a.
b.
c.
d.

Countriestendtobeclassifiedasmoreorlessdevelopedbasedon
theliteracyrate.
thepovertyrate.
thelevelofincomepercapita.
thetypesofgoodstheyproduce.

2.
a.
b.
c.
d.

Whichofthefollowingdemonstratesinternationalinterdependence?
theoilshocks
thedebtcrisis
globalwarming
alloftheabove.

3.
a.
b.
c.
d.

Asubsistenceeconomyis
averylowincomeeconomy.
aneconomyinwhichpeoplemakewhattheyconsume.
aneconomyinwhichpeoplereceivefoodforpay.
alloftheabove.

4.
a.
b.
c.
d.

Developmenteconomicsisthestudyofthe
alleviationofabsolutepoverty.
transformationofinstitutions.
allocationofresourcesindevelopingcountries.
alloftheabove.

5.
a.
b.
c.
d.

Developmenteconomicsmusthaveascopewiderthantraditionaleconomicsbecause
valuesandattitudesplaylittleroleinthepaceofdevelopment.
peopleindevelopingsocietiesdolessutilitymaximizing.
transformationofsocialinstitutionsisnecessaryfordevelopment.
alloftheabove.

6.
a.
b.
c.
d.

Agooddefinitionofthemeaningofdevelopmentisthe
eliminationofabsolutepoverty.
improvementinthequalityoflife.
fulfillmentofthepotentialofindividuals.
alloftheabove.

7.
a.
b.
c.
d.

Whichofthefollowingisnotanimportantobjectiveofdevelopment?
increasesinpercapitaincome
theexpansionofavailablechoices
increasesinindividualandnationalselfesteem
alloftheaboveareimportantobjectivesofdevelopment

8.
a.
b.
c.
d.

TheMillenniumDevelopmentGoalsinclude
eliminatingtheproportionofpeoplelivingonlessthan$1perday.
universalprimaryeducation.
increasingexportsbyonehalf.
alloftheabove.

9.
a.
b.
c.
d.

Thecorevaluesofdevelopmentinclude
increasingincomeperperson.
reducingtheinequalityofincome.
theabilitytomeetbasicneeds.
alloftheabove.

Chapter2
1.

An example of an upper-middle income country is

a.
b.
c.
d.

India.
Brazil.
Indonesia.
Nigeria.

2.
Anewlyindustrializedcountryis
a. thesameasahighincomecountry.
b. anycountrythathasexperiencedsustainedgrowthinindustry.
c. aspecialclassificationgiventosomeuppermiddleincomecountriesthathave
achievedrelativelyadvancedmanufacturingsectors.
d. anycountrythathasmovedoutoflowerincomestatus.
3.
a.
b.
c.
d.

Whichofthefollowingisnotanuppermiddleincomecountry?
Brazil
SouthAfrica
Pakistan
Argentina

4.
a.
b.
c.
d.

Whichofthefollowingisalowincomecountry?
Mexico
Thailand
Turkey
Bangladesh

5.
a.
b.
c.
d.

Oneofthecomponentsofthehumandevelopmentindexis
thepercentageofthepopulationwhoarehighschoolgraduates.
theaveragedailyintakeofprotein.
lifeexpectancyatbirth.
thenumberofdoctorsperhundredpeopleinthepopulation.

6.
a.
b.
c.
d.
e.

Whatpercentoftheworldsnationshaveatleastfivesignificantethnicpopulations?
010
1020
2030
3040
over40

7.
Whatfractionofdevelopingcountrieshaverecentlyexperiencedsomeformofsignificant
interethnicconflict?
a. lessthanonetenth
b. atenthtoonequarter
c. onequartertoonehalf
d. overonehalf

8.
WhichofthefollowingAfricancountrieshasexperiencedwidespreaddeathanddestructiondueto
ethnicorclanbasedconflictinthepreviousdecade?
a. Rwanda
b. Sudan
c. Somalia
d. alloftheabove
9.
a.
b.
c.
d.

Whichmeasureusesacommonsetofinternationalpricesforallgoodsandservicesproduced?
purchasingpowerparityincomelevels
GNPpricedeflators
foreignexchangerateconversionstoU.S.dollars
theexchangerate

10. Thenumberofunitsofdevelopingcountrycurrencyrequiredtopurchaseabasketofgoodsandservicesin
adevelopingcountrythatcostsonedollarintheU.S.isgivenby
a. GNPpricedeflator.
b. HumanDevelopmentIndexranking.
c. purchasingpowerparity.
d. theexchangerate.
11. Abouthowmanypeoplelackaccesstobasicsanitation?
a. 20million
b. 200million
c. 500million
d. 1billion
e. 2billion
12. Abouthowmanypeoplelackaccesstosafewater?
a. 20million
b. 200million
c. 500million
d. 1billion
e. 2billion
13. Abouthowmanymalnourishedchildrenunderagefivearethereinthedevelopingworld?
a. 20million
b. 150million
c. 500million
d. 1billion
e. 2billion

14. Neutraltechnologicalprogressoccurswhen
a.
b.
d.
e.

higheroutputlevelsareachievedwiththesamequantityandcombinationsoffactorinputs.
higheroutputlevelsareachievedbymorecapitalintensivemethods.
higheroutputlevelsareachievedbymorelaborintensivemethods.
higheroutputlevelsareachieved.

15. Conditionsoftodaysdevelopedcountriesatthestartoftheirindustrializationdifferfromconditionsinthe
developingworldinthat
a. populationgrowthrateswerehigher.
b. moreadvancedtechnologywasavailable.
c. thereweremoreopportunitiesfordevelopmentassistance.
d. noneoftheabove.
16. Mostsuccessfulexamplesofmoderneconomicgrowthhaveoccurredinacountrywith
a. atemperatezoneclimate.
b. amarketeconomy.
c. exportsofmanufacturedgoods.
d. alloftheabove.
17. WhichofthefollowingisnotanindicatorthatisusedbytheWorldBankinmeasuringthelevel
ofeconomicdevelopment?
a. lifeexpectancyatbirth.
b. adultliteracyrate.
c. infantmortalityrate.
d. alloftheabovearenotusedbytheWorldBank.
18. Thedependencyburdenis
a. ameasureofthedegreetowhichthelessdevelopedcountriesaredependentontherichindustrial
countries.
b. theaveragenumberofchildrenthatawomangivesbirthtoduringherlifetime.
c. thenumberofbabiesbornper1000persons.
d. thepercentofthepopulationthatisbelow15andabove65yearsofage.
19. Howmanypeoplestillliveonlessthantheequivalentof$1.25perday(newdefinitionofextreme
poverty)?
a. 100million.
b. 500million.
c. 1.4billion.
d. 2.2billion.
20. WhichofthefollowingisnotanindicatorthatisusedtocomputetheHumanDevelopmentIndex?
a. lifeexpectancyatbirth.
b. realGDPpercapita.
c. infantmortalityrate.
d. adultliteracyrate.

21. ThecombinedGDPofdevelopingcountriesconstitutesapproximately
a. 5percentofglobalGDP.
b. 20percentofglobalGDP.
c. 30percentofglobalGDP.
d. 40percentofglobalGDP.
22. Developingcountriesarestartingtoconvergewithdevelopedcountriesinthelongruninwhatrespect?
a. Growthrate
b. Incomeinequality
c. Population
d. Percapitaincome
23. WhichregionintheworldhasthelowestGNIpercapitabasedontheWorldBankAtlasmethod?
a. SubSaharanAfrica
b. EastAsia/Pacific
c. SouthAsia
d. LatinAmerica/TheCaribbean

Chapter3
1. Which of the following is not a policy proposal of the neoclassical counter-revolution school?

(a)
(b)
(c)
(d)

promotingfreetrade
privatizingstateownedenterprises
welcomingmultinationalcorporations
promotingtradeunions

2.
(a)
(b)
(c)
(d)

WhichofthefollowingisanassumptionoftheLewistwosectormodel?
surpluslaborintheruralsector
highunemploymentintheurbanmodernsector
risingrealurbanwages
risingmarginalproductoflaborintheruralsector

3.
(a)
(b)
(c)
(d)

Thefalseparadigmmodelattributeslackofdevelopmentto
inadequateattentiontopriceincentives.
inappropriateadvicefromrichcountryeconomists.
lowlevelsofsavingsandinvestment.
alackofgovernmentregulation.

4.
(a)
(b)
(c)
(d)

Whichofthefollowingisacriticismoftheneoclassicalcounterrevolutionschoolsapproach?
marketsarenotcompetitiveindevelopingcountries.
externalitiesarecommonindevelopingcountries.
inequalitymayworsenwheninterventionsareremovedindevelopingcountries.
alloftheabove.

5.
Whichofthefollowingapproachesdoesnotofferaninternationaldependenceexplanationof
underdevelopment?
(a) thefalseparadigmmodel
(b) theneoclassicalcounterrevolution
(c) thedualisticdevelopmentmodel
(d) theneocolonialdependencemodel
6.
(a)
(b)
(c)
(d)
7.
(a)
(b)
(c)
(d)

Theneoclassicalcounterrevolutionschoolsupports
traderestrictions.
stateownedenterprises.
eliminatinggovernmentregulations.
limitationsonforeigninvestors.
Implicitassumptionsfromwhichtheoriesevolveareknownas
aparadigm.
biases.
stylizedfacts.
normativeeconomics.

8.
Onwhichofthefollowingdoestheneoclassicalcounterrevolutionschoolmostblame
underdevelopment?
(a) misguidedgovernmentpolicies

(b) relativelyrigidculturaltraditions
(c) thelegacyofcolonialism
(d) unfairtradepracticesonthepartofdevelopedcountries
9.
Accordingtothetheoryofstructuralpatternsofdevelopment,whichofthefollowingtendstooccur
asacountrydevelops?
(a)
(b)
(c)
(d)

ashiftfromagriculturetoindustryandservices
anincreaseinthepercentageofincomespentonfood
growthoftheruralsector
adeclineintradeasashareofGNP

10. Inthepublicchoice(ornewpoliticaleconomy)approachtodevelopmenttheemphasisison
(a) growthintheruralsector.
(b) theselfinterestedbehaviorofpublicofficials.
(c) thedependenceofLDCsonformercolonialpowers.
(d) theinherentefficiencyofdevelopingcountrymarkets.
11. Asituationinwhichgovernmentinterventionintheeconomyworsenstheeconomicoutcomeistermed
(a) neoclassicalfailure.
(b) socialism.
(c) governmentfailure.
(d) dependencyrevolution.
12. Accordingtothedependencetheory,thedevelopingworldisknownasthe
(a) backwardareas.
(b) periphery.
(c) firstworld.
(d) center.
13. TheunderlyingassumptionoftheHarrodDomargrowthmodelisthat
(a)
(b)
(c)
(d)

theincrementalcapitaloutputratioisgivenbykY/K.
growthismainlydeterminedbycapitalaccumulation.
growthcanbesustainedonlyifagriculturalproductivityrises.
developingcountriessavetoomuchandinvesttoolittle.

14. ThesupplycurveoflabortoindustryintheLewismodelishorizontalifthereissurpluslaborin
agriculture.Thisconditionpersistsaslongas
(a) themarginalproductoflaborislessthantheaverageproductoflaborinagriculture.
(b) themarginalproductoflaborinagricultureislessthanthemarginalproductoflaborinindustry.
(c) therearediminishingreturnstolaborinagriculture.
(d) themarginalproductoflaborinagricultureiszero.
15. Internationaldependencetheoriesdistinguishbetweentwogroupsofcountriesknownas
(a) richpoor.
(b) developeddeveloping.

(c) centerperiphery.
(d) independentdependent.
16. WhichofthefollowingisanassumptionoftheLewistwosectormodel?
(a) surpluslaborinindustry.
(b) positivemarginalproductoflaborinagriculture.
(c) anupwardslopinglaborsupplycurveinindustry.
(d) noneoftheabove.
17. Themarketfriendlyapproachtodevelopmentemphasizes
(a) selfinterestedbehaviorofpublicofficialsinLDCs.
(b) thedependenceofLDCsonformercolonialpowers.
(c) theinherentefficiencyofmarketsindevelopingcountries.
(d) thatmarketsinLDCsfailsometimesandselectiveinterventionscanpromoteeconomicdevelopment.
18. Thelinearstagestheoryofeconomicgrowthfailstorecognizethatincreasedinvestmentis
(a) bothanecessaryandasufficientcondition.
(b) anecessarybutnotasufficientcondition.
(c) asufficientbutnotanecessarycondition.
(d) neitheranecessarynorasufficientcondition.
19. Whichofthefollowingarecomponentsofeconomicgrowth
(a) growthinlaborforce.
(b) technologicalprogress.
(c) investment.
(d)
alloftheabove.

Chapter4

1. The Solow residual helps explain growth that derives from

(a)
(b)
(c)
(d)
2.

Inendogenousgrowthmodels,itisassumedthat
(a)
(b)
(c)
(d)

3.

increasingthesizeofthelaborforce.
increasingthesizeofthecapitalstock.
increasingthecapitallaborratio.
anythingexceptincreasesinthesizeofthelaborforceorthecapitalstock.

thereareexternaleconomiesfrompublicorprivateinvestments.
therearediminishingmarginalreturnstocapital.
growthisexplainedbyforcesoutsidethemodel.
thecapitallaborratioisconstant.

Incontrasttotheearlierneoclassicalmodelsofeconomicgrowth,inendogenousgrowthmodels,
thereismoreemphasison
(a) humancapital.
(b) externalities.
(c) increasingreturnstoscale.
(d) alloftheabove.

4.
(a)
(b)
(c)
(d)

Thenewgrowththeoryattemptstoexplain
therateofpopulationgrowthwithinacountry.
therateofcapitalaccumulationwithinacountry.
thefactorsthatdeterminethesizeoftheSolowresidual.
whytherearediminishingreturnstocapital.

(a)
(b)
(c)
(d)

TheScurveisusedtoillustrate
thetypicalpathtakenbythecurrentaccountovertime.
economicfluctuationsintheeconomy.
thetypicalgrowthpathofadevelopingeconomy.
theexistenceofmultipleequilibria.

5.

6.

Thebigpushtheoryarguesthatcoordinationfailuresmayarisebecauseof
(a)
(b)
(c)
(d)

pecuniaryexternalities.
technologicalexternalities.
lackofhumancapital.
alloftheabove.

7.

TheOringtheoryplacesemphasison
(a) educationofthelaborforce.
(b) skillcomplementarities.
(c) purchasesofmachineryandequipmentbyfirms.
(d)
noneoftheabove.

Chapter5

1. The absolute poverty line

(a)
(b)
(c)
(d)

decreasesasrealincomegrows.
showstheaverageincomeofthelowestincomegroup.
canbemeasuredwiththeLorenzcurve.
noneoftheabove.

2.
(a)
(b)
(c)
(d)

TheGinicoefficientprovidesameasureof
thelevelofpoverty.
thelevelofrelativeinequality.
disguisedunemployment.
therateofgrowth.

3.
(a)
(b)
(c)
(d)

KuznetsinvertedUhypothesis
impliesthatthingsmustgetworsebeforetheygetbetter.
suggeststhatinequalitywillworsenandthenimproveasacountrygrows.
suggeststhatinequalitywillimproveandthenworsenasacountrygrows.
pointsoutsixcharacteristicsofmoderneconomicgrowth.

4.
(a)
(b)
(c)
(d)

AccordingtoKuznets,intheprocessofdevelopmentinequalityinaneconomywillnormally
firstriseandthenfall.
firstfallandthenrise.
remainaboutthesame.
shownodefinitepattern.

5.
Povertyisbetterstudiedwithsizedistributionmeasuresthanthosebasedonfactordistribution
because
(a) laborincomemaybehighlyconcentratedinwellpaidmodernsectorworkers.
(b) somepoorfarmersmayreceiveasizableshareofincomeinrent.
(c) incomefromnonmarketactivitiessuchasforagingmaybeimportant.
(d) alloftheabove.
6.
(a)
(b)
(c)
(d)
(e)

Thenumberofpeopleintheworldwhoareabsolutelypoorisclosestto
aquarterbillion.
ahalfbillion.
oneandahalfbillion.
twobillion.
fourbillion.

7.
(a)
(b)
(c)
(d)

Withmodernsectorenrichmentgrowth,inequalitywill
firstriseandthenfall.
firstfallandthenrise.
remainaboutthesame.
noneoftheabove.

8.

Withmodernsectorenlargementgrowth,inequalitywill

(a)
(b)
(c)
(d)

firstriseandthenfall.
firstfallandthenrise.
remainaboutthesame.
alloftheabove.

9.
(a)
(b)
(c)
(d)

Higherincomecountriestendtohavelowerlevelsofabsolutepovertybecause
moreemploymentopportunities
morepublicassistance
greaterentrepreneurshipopportunities.
alloftheabove.

10. Oneofthecharacteristicsofthepooristhattheyare
(a) morelikelytobeemployedinthemodernindustrialsector.
(b) morelikelytocomefromsmallfamilies.
(c) morelikelytobewelleducated.
(d) morelikelytoliveinaruralarea.
11. Whichofthefollowingpoliciesmightincreaselaborintensityinindustry?
(a) adeclineinthecostofcredit
(b) adeclineintheminimumwagerate
(c) adeclineintheelasticityofsubstitution
(d) alloftheabove.
12. Whichofthefollowingpoliciesmaydecreasethelevelofcapitalintensityinindustry?
(a) anincreaseinthecostofcapital
(b) adecreaseintheminimumwage
(c) anincreaseintheelasticityofsubstitution
(d) alloftheabove.
13. TheAhluwaliaChenerywelfareindex
(a) isamethodusedtomeasurechangesinabsolutepoverty.
(b) showsthevaluejudgementimplicationsofusingthechangeinincomepercapitaasameasureof
thechangeindevelopment.
(c) isamethodusedtomeasurechangesininequality.
(d) isamethodusedtomeasurethegrowthrateofGDP.

14. Aboutwhatpercentoftheworldspoorestpeoplearefemale?
(a) 30
(b) 50
(c) 70
(d) 90
15. AbouthowmanygirlsandwomenaresaidtobemissinginLDCs?
(a) 2million
(b) 20million
(c) 100million
(d) 2billion
16. Whichofthefollowinggroupsis(are)morelikelytobepoor?
(a) minorities
(b) indigenouspeople
(c) women
(d) alloftheabove.
17. Distributionofincomeaccordingtopercentiles,suchasthehighest40%orlowest20%isknownasthe
_______________distributionofincome.
(a)
(b)
(c)
(d)

size
functional
GNPweighted
equalweighted

Answer: A
18. Whatconclusioncanbereachedfromthefollowingdataonincomeshares?

Bangladesh
Indonesia
(a)
(b)
(c)
(d)

PercentageofIncomeReceived
by
Lowest40%
Highest20%
17.3
45.3
14.4
49.4

absolutepovertyismorewidespreadinBangladesh
thesizedistributionofincomeismoreunequalinIndonesia
Bangladeshhadadoptedastrategyofredistributionwithgrowth
growthinBangladeshiscalculatedusingpovertyweightsratherthanincomeweights