Exam 2

Question 1

The Solow Model and its production function finds that the marginal productivity of capital (MPK) is higher in ____________ compared to _________________

Answer 1

LDCs; DCs

Question 2

One of the implications of the Solow Model and its production function is that capital should flow from __________ to ___________.

Answer 2

DCs to LDCs

Question 3

If the settler mortality rate was high, the institutions tended to be

Answer 3

worse

Question 4

If the settler mortality rate was low, the institutions tended to be

Answer 4

Better

Question 5

A market legitimizing institution would be

Answer 5

unemployment insurance

Question 6

A market creating institution would be

Answer 6

legal systems

Question 7

A country’s labor force grows 2.4% but its capital stock grows 3 %, assume that capital share of output is 1/3. If the economy grows 4.21 %, by what percentage does TFP (total factor productivity) grow (all the numbers in percentages below) ?

Answer 7

1.61

Question 8

A country’s labor force grows 2.4% but its capital stock grows 3 %, assume that capital share of output is 1/3. If the economy grows 3.6 %, by what percentage does TFP (total factor productivity) grow (all the numbers in percentages below) ?

Answer 8

1

Question 9

Diamond believes that the advantage of Europe was that the continent

Answer 9

runs east-west

Question 10

Diamond believes that a disadvantage of the African continent was that it

Answer 10

runs north south

Question 11

Krugman believes that the East Asian countries grew because of

Answer 11

Increase in use of factors

Question 12

Krugman believes the East Asian countries grew because of all the following reasons except for

Answer 12

Increase in productivity

Question 13

The “Solow Residual” represents

Answer 13

Total Factor Productivity (TFP)

Question 14

The Solow Model finds that if the savings rate (s) increases then
(y = Y/L)

Answer 14

y goes up but no effect on long run growth

Question 15

Overall, why did Diamond believe Europeans or “the West” were the first ones to rise economically ?

Answer 15

A lucky coincidence of different factors

Question 16

Jared Diamond argues that the reasons why the colonial powers
dominated was due to guns, germs, and steel because

Answer 16

Run east to west

Question 17

Which of the following is the correct combination of bodies of
information used to answer the question of guns, germs and steel?

Answer 17

b. Social science, botany, zoology and microbiology

Question 18

Which development was not required to build emerging technology, writing, centralized government structures, economic specialization, and social stratification?
a. Sedentary populous societies
b. Storable food surpluses
c. Ability to feed producers and others with full-time roles
d. A chief and preliminary social structure

Answer 18

d. A chief and preliminary social structure

Question 19

What is the geographic pattern Diamond discovered in regard to
diffusion of the 9 regions?

Answer 19

Rapid spread along east/west axes and slower spread among
north/south axes

Question 20

The higher the settler mortality rate

Answer 20

more extractive the colonial state

Question 21

Which variable does the Colonial Origin theory use to determine current performance?

Answer 21

Settler Mortality Rate

Question 22

If a country had a high settler mortality rate, what is the outcome?

Answer 22

Extractive States and Worse Current Institutions

Question 23

Examples of “Neo-Europes” include all of the following EXCEPT
A. Congo
b. New Zealand
c. Canada
d. Australia

Answer 23

A. Congo

Question 24

A market creating institution would be
a. property rights
b. unemployment insurance
c. The Federal Reserve
d. The Anti-Monopoly Government Institutions

Answer 24

A. property rights

Question 25

Which of the following factors is a core determinant of growth? a. Capital accumulation b. Labor accumulation c. Productivity growth d. All of the above

Answer 25

D. All of the above

Question 26

Economists think that economic growth depends fundamentally on all of the following EXCEPT: a. factor accumulation b. inequality c. efficiency d. technological change

Answer 26

b. inequality

Question 27

In the “the miracle of sausage makers, Krugman believes that for the East Asian tigers to grow in the long run they must increase

Answer 27

Total Factor Productivity (TFP)

Question 28

There was some pushback about Krugman's observation on how the East Asian countries grew. These included: A. All of these answers are true B.TFP is not actually measured well, it is a residual so there are inaccuracies c. Early on mobilization of K and L occurs in development, efficiency concerns loom later on d. One cannot compare Singapore to Soviet Union, Singapore produces much more diversified set of goods.

Answer 28

A. All of these answers are true

Question 29

The central idea of Engel’s Law is that rising family incomes cause

Answer 29

A decline in the proportion of the budget spent on food.

Question 30

Which of the following is the MOST likely to be a backward linkage for books ? a. e-books b. the plastic sector c. bookstores d. paper industry

Answer 30

D. paper industry

Question 31

Is the “export” sector a good sector for government intervention ?

Answer 31

No because the private sector would enter on its own here

Question 32

An unbalanced growth strategy is justified because:

Answer 32

LDCs have limited resources

Question 33

Lewis believes that ____________ moves from ______________ to _____________

Answer 33

labor; rural; urban

Question 34

Surplus labor would mean all of the following except a. diminishing returns to labor b. flat portion on the production function c. remove laborers without reducing output d. marginal product of labor is zero

Answer 34

a. diminishing returns to labor

Question 35

Lewis assumes that all labor that moves

Answer 35

Is employed

Question 36

In the end, Lewis model prediction value lies in

Answer 36

that after a point wages will rise in the agricultural sector

Question 37

A backward linkage for a shoe factory is ____________________ because its’ inputs reaches back to other industries

Answer 37

Leather

Question 38

Engel’s Law explains in part why as economies grow, the agricultural contribution falls because Engel’s Law

Answer 38

states that because Engel’s Law states that as incomes grow, the proportion of income spent on food falls.

Question 39

Sectors in which the government should intervene, according to the linkages-balanced growth literature are all the export sectors. True or false?

Answer 39

False

Question 40

The unbalanced growth argument views that the government should intervene in only a few sectors and focus on those. True or False?

Answer 40

True

Question 41

As predicted by Lewis, many cities in LDCs have successfully absorbed the surplus labor of rural areas. True or False?

Answer 41

False

Question 42

In terms of urbanization, the fewest number of LDCs wanted to

Answer 42

Maintain Migration

Question 43

A forward linkage for timber is

Answer 43

furniture from IKEA

Question 44

In the first turning point (or the Lewis Turning Point) in the Lewis model

Answer 44

Wages rise in the agricultural sector

Question 45

In the Rosenstein-Rodan shoe factory model, the market failure may occur because

Answer 45

all industries may not simultaneously grow

Question 46

All of the following predict or find non-convergence (i.e. divergence) except for: a. New growth theories b. The test of absolute convergence c. Solow’s growth model d. Actually all predict non-convergence

Answer 46

Solow's Growth Model

Question 47

The largest contributor to the growth rate in many developing countries like China and Pakistan is (are)

Answer 47

c. sectoral shifts from agriculture to nonagriculture

Question 48

At the second turning point in the Lewis Model, countries would increase

Answer 48

Outsourcing

Question 49

When developing countries were asked about migration from rural to urban areas, the majority wanted to

Answer 49

Lower Migration