Download Sample exam questions for second exam

ECO360: Development Economics
Rizzo
October 18, 2004
Practice Questions for 2nd Examination
1. Describe one of two reasons why industry will make up an increasing share of
GDP as a country develops.
Individual
Person 1
Person 2
Person 3
Person 4
Person 5
Person 6
Person 7
Person 8
Person 9
Person 10
Person 11
Person 12
Person 13
Person 14
Person 15
Person 16
Person 17
Person 18
Person 19
Person 20
Income
0.80
1.00
1.40
1.80
1.90
2.00
2.40
2.70
2.80
3.00
3.40
3.80
4.20
4.80
5.90
7.10
10.50
12.00
13.50
15.00
GDP
(National
Income)
$100.00
2. Using the data from the above distribution, please calculate the following:
a. The income share of the bottom quartile of the population
b. The income share of the 2nd quartile of the population
c. The income share of the 3rd quartile of the population
d. The income share of the top quartile of the population
e. Draw a Lorenz curve using the information only from parts(a) to (d). I.E.
the curve will have only 4 points off of the origin.
3. Why is economic growth a necessary condition for economic development –
improving the lot of all of the masses?
4. Why is economic growth not a sufficient condition for economic development –
improving the lot of all of the masses?
5. If a country currently has a labor surplus, what is likely to happen to income
inequality in that country as it begins the process of industrialization?
6. Describe how industrial (modern sector) wages are determined in a country with a
labor surplus.
7. What is the Gini coefficient for a country with this distribution of income
{0,0,0,0,100}?
8. Describe why comparing two countries on changes in relative inequality statistics
and absolute poverty statistics may lead to differing conclusions about which is
developing “better.” You may want to illustrate with an example.
9. In thinking about the two-sector labor surplus model, explain why increases in the
size of the population may be disastrous for a country.
10. The 2000-2001 World Development Report described extensively that one of the
“basic needs” in addition to food, shelter and health is security. Does this mean
that developing countries need to focus most of their resources on national
defense and intra-country policing? Explain.
11. The two-sector labor surplus model implicitly assumes that growth is selfsustaining once the process of industrialization begins. Critics of the model cite
two reasons why this might not occur in practice. Please describe one of these
criticisms.
12. In, “The Other Path,” what does Hernando DeSoto believe to be the most
important tool used to begin economic development? In other words, what does
he describe as the reason why the “Shining Path” movement was largely defeated
in Peru?
13. In an ideal world, we would measure poverty and inequality by calculating our
measures on consumption data. For a variety of reasons this is not possible, so
economists are forced to use income data obtained from household surveys.
Describe two difficulties with using income as reported from household surveys
as a measure of well-being in a given LDC.
14. One way to get development started is by using an unbalanced growth strategy
that promotes backward linkages.
a. What do we mean by a backward linkage?
b. If investing in industries where strong backward linkages exist does not
result in the immediate creation of factories in industries that supply
materials to the initial industry that is being invested in, what does a
country usually do to supply factors to this industry?
c. (Extra credit – very difficult) If the goal of a country is to promote
economic efficiency, why might this be a poor choice for a development
strategy?
15. You are told that the income distribution in two countries have the same Gini
coefficient. Is this information sufficient to conclude that the middle-class is
equally well off in both countries? Explain why or why not.
16. Describe what we mean when we say that positive externalities exist?
a. What problems might the existence of these externalities create for
developing countries?
b. Provide two examples of externalities in developing countries and address
the problems they create.
17. Anti-neoliberals believe that economic growth is “immiserating.” Neoliberals
believe that economic growth will “trickle-down” throughout a society. Briefly
describe what these two conflicting schools of thought are arguing and tell me
which is right. Providing a short historical perspective as to where the neoliberal
school emanated from may be a good way to answer this question.
18. What did the classroom experiment we did have to do with economic growth?
a. Externalities
b. Multiple equilibria
c. Coordination
19. Think of how some of the things we discussed with Professor HartmanMahmud’s apply to the concepts we learned in class. I may ask you a question
that relies on an example we used in class that day.
20. (Extra-credit) Why should we care about relative inequality if the goal is to
eliminate absolute poverty? I can think of 6 examples that illustrate why.
Describe as many as you can.