Chapter 3

Question 1

political economy

Answer 1

interdisciplinary study of interactions or relationships between production and trade and power and politics

Question 2

comparative advantage

Answer 2

each nation has an economic advantage relative to other nations for the production of some goods

Question 3

economic nationalism

Answer 3

philosophy of economic development that privileges the protection of the national economy from foreign competition

Question 4

keynesian economics

Answer 4

policies to stimulate economic growth through state intervention in market processes, based on the idea that capitalist markets require state regulation to correct problems that emerge from the operation of free markets

Question 5

cold war

Answer 5

period of geopolitical tension between the soviet union and the united states and their respective allies 1947 until 1991

Question 6

development economics

Answer 6

new branch of economics that emerged after WW2 that is specifically concerned with the challenges of developing countries

Question 7

big push

Answer 7

a theory of economic development in which large investments are made in critical industries

Question 7

infrastructure investments

Answer 7

large infrastructure investments were seen as necessary part of “big push” theories of development

Question 8

linkages

Answer 8

strategic industry can stimulate the development of other industries

Question 9

superfluous consumption

Answer 9

consumption of luxury imported goods in developing countries contributed little to development

Question 10

theory of surplus labor

Answer 10

economic theory that argued that development would imply the movement of under-employed from rural areas to cities

Question 11

income elasticity of demand

Answer 11

measures the responsiveness of the demand for a good or service to a change in the buyers income, calculated as the ratio of percentage change in quantity demanded to the percentage change in income

Question 12

declining terms of trade

Answer 12

value of exported commodities declines relative to the value of imported manufactured goods over time, key argument for industrialization

Question 13

stop and go pattern

Answer 13

repeated contraction and expansion of economic growth in developing countries caused by balance of payment crisis

Question 14

individual initiative

Answer 14

individuals acting on their own initiative and in response to price signals economic growth

Question 15

trade protectionism

Answer 15

use of tariff barriers and other instruments to protect domestic economies from international competition

Question 16

dirigiste dogma

Answer 16

dismissive term to characterize the then accepted wisdom of development economists that the state should lead development

Question 17

rent-seeking

Answer 17

theory which suggests that state intervention distorts the incentives for private enterprise by encouraging them to lobby for protection from governments instead of investing in becoming a more competitive business

Question 18

washington consensus

Answer 18

A tacit agreement between the International Monetary Fund, the World Bank, and the US
executive branch over the development policies that developing countries should follow. This
neoliberal orthodoxy formed around the key issues of macroeconomic prudence, exportoriented growth, and economic liberalization.

Question 19

developmental state

Answer 19

state that was successfully able to push development forward, professionalized bureaucracies that were autonomous from social and political pressures

Question 20

new institutional economics (nie)

Answer 20

subfield of economics that examines how institutions affect economic outcomes

Question 21

institutional economics

Answer 21

recognizes important role of institutions in underwriting markets

Question 22

transaction costs

Answer 22

economic costs of performing a market transaction

Question 23

path dependence

Answer 23

some institutions (formal or informal) continue to operate over a long period of time

Question 24

free-ride

Answer 24

an individual may not pay the costs of benefitting from a good