Deck 3: Classic Theories of Economic Growth and Development  

Question 1

Patterns of development or structural change analysis stress internal change in a developing country's economic, industrial, and institutional structure. What are some of the most important changes?

Answer 1

Discussed in the text.

Question 2

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

A)Promoting free trade
B)Privatizing state-owned enterprises
C)Welcoming multinational corporations
D) Promoting trade unions

Answer 2

D

Question 3

Dependency theory characterizes countries as being either in the center or on the periphery. Explain these two concepts. If this theory is correct, what are the implications for development strategy?

Answer 3

Grading would depend on what is covered in lecture, but an answer might include inward looking trade policies, regional economic integration, collective action to increase bargaining power in relation to multinational corporations, as well as creation of state-owned enterprises.

Question 4

Which of the following is a criticism of the neoclassical counter-revolution school's approach?

A)Markets are not competitive in developing countries.
B)Externalities are common in developing countries.
C)Inequality may worsen when interventions are removed in developing countries.
D) All of the above.

Question 5

Why is the debate between the international dependence and the neoclassical counter-revolution schools referred to as "finger pointing?"

Question 6

What are the key assumptions of the Lewis model that give rise to its conclusions? How would the theory's conclusions differ if these assumptions do not hold?

Question 7

Which of the following approaches does not offer an international dependence explanation of underdevelopment?

A)The false paradigm model
B)The neoclassical counter-revolution
C)The dualistic development model
D) The neocolonial dependence model

Question 8

Which of the following is an assumption of the Lewis two-sector model?

A)Surplus labor in the rural sector
B)High unemployment in the urban modern sector
C)Rising real urban wages
D) Rising marginal product of labor in the rural sector

Question 9

On which of the following does the neoclassical counter-revolution school most blame underdevelopment?

A)Misguided government policies
B)Relatively rigid cultural traditions
C)The legacy of colonialism
D) Unfair trade practices on the part of developed countries

Question 10

Explain the concept of the "idea gap" in development economics.

Question 11

Describe one important criticism of Rostow's stages of economic growth theory.

Question 12

Apply what you have learned about development and development theories to speculate on the following thought experiment: What if anything might be different about today's international economic order if the Spanish had colonized North America and the English had colonized ?South America?

Question 13

During the past decade, India has invested about 22% of its GDP while China's investment rate has been double that of India's. India's annual growth rate has been about 6% while that of China has been about 9%. What conclusions can you draw?

Question 14

What are the main differences between the linear stages and international dependency models?of development?

Question 15

Describe some of the advantages and disadvantages of each of the following schools: linear stages, structural change, dependence, and neoclassical.

Question 16

The false paradigm model attributes lack of development to

A)Inadequate attention to price incentives.
B)Inappropriate advice from rich country economists.
C)Low levels of savings and investment.
D) A lack of government regulation.

Question 17

Assume a closed economy, perfectly elastic labor supply, and linear technology. Suppose the incremental capital-output ratio (ICOR) is 3, the depreciation rate is 3%, and the gross savings ?rate is 10%. Use the Harrod-Domar growth equation to determine the rate of growth. What would ?the gross savings rate have to be to achieve 5% growth? Assuming a perfectly elastic labor supply, state one criticism of this model from an exogenous growth theory viewpoint and another criticism ?of this model from an endogenous growth theory viewpoint.

Question 18

The neoclassical counter-revolution school supports

A)Trade restrictions.
B)State-owned enterprises.
C)Eliminating government regulations.
D) Limitations on foreign investors.

Question 19

Does it follow from the false paradigm model that World Bank economists are intentionally trying to keep developing countries from realizing genuine development? Why or why not?

Question 20

Implicit assumptions from which theories evolve are known as

A)A paradigm.
B)Biases.
C)Stylized facts.
D) Normative economics.

Question 21

The underlying assumption of the Harrod-Domar growth model is that

A)the incremental capital-output ratio is given b₌y Y/K.
B)growth is mainly determined by capital accumulation.
C)growth can be sustained only if agricultural productivity rises.
D) developing countries save too much and invest too little.

Question 22

The market-friendly approach to development emphasizes

A)self-interested behavior of public officials in LDCs.
B)the dependence of LDCs on former colonial powers.
C)the inherent efficiency of markets in developing countries.
D) that markets in LDCs fail sometimes and selective interventions can promote economic development.

Question 23

Which of the following is an assumption of the Lewis two-sector model?

A)Surplus labor in industry
B)Positive marginal product of labor in agriculture
C)An upward sloping labor supply curve in industry
D) None of the above

Question 24

According to the dependence theory, the developing world is known as the

A)backward areas.
B)periphery.
C)first world.
D) center.

Question 25

International dependence theories distinguish between two groups of countries known as

A)rich-poor.
B)developed-developing.
C)center-periphery.
D) independent-dependent.

Question 26

Which of the following are components of economic growth?

A)Growth in labor force
B)Technological progress
C)Investment
D) All of the above

Question 27

A situation in which government intervention in the economy worsens the economic outcome is termed

A)neoclassical failure.
B)socialism.
C)government failure.
D) dependency revolution.

Question 28

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.

Question 29

According to the theory of structural patterns of development, which of the following tends to occur as a country develops?

A)A shift from agriculture to industry and services
B)An increase in the percentage of income spent on food
C)Growth of the rural sector
D) A decline in trade as a share of GNP

Question 30

In the public choice (or new political economy) approach to development the emphasis is on

A)growth in the rural sector.
B)the self-interested behavior of public officials.
C)the dependence of LDCs on former colonial powers.
D) the inherent efficiency of developing country markets.

Question 31

The linear stages theory of economic growth fails to recognize that increased investment is

A)both a necessary and a sufficient condition.
B)a necessary but not a sufficient condition.
C)a sufficient but not a necessary condition.
D) neither a necessary nor a sufficient condition.