Deck 4: Contemporary Models of Development and Underdevelopment

Question 1

The new growth theory attempts to explain
(a)the rate of population growth within a country.
(b)the rate of capital accumulation within a country.
(c)the factors that determine the size of the Solow residual.
(d)why there are diminishing returns to capital.

Answer 1

C

Question 2

Explain the basic idea behind the Big Push model?

Answer 2

What you expect for an answer depends on what you cover in lecture.

Question 3

What is meant by the term technological spillover?

Answer 3

Technological spillovers are present when investment generates external economies.The knowledge component of the firm's capital stock is like a public good that spills over to other firms in the economy.

Question 4

In endogenous growth models,it is assumed that
(a)there are external economies from public or private investments.
(b)there are diminishing marginal returns to capital.
(c)growth is explained by forces outside the model.
(d)the capital-labor ratio is constant.

Question 5

The O-ring theory places emphasis on
(a)education of the labor force.
(b)skill complementarities.
(c)purchases of machinery and equipment by firms.
(d)none of the above.

Question 6

The Solow residual helps explain growth that derives from
(a)increasing the size of the labor force.
(b)increasing the size of the capital stock.
(c)increasing the capital-labor ratio.
(d)anything except increases in the size of the labor force or the capital stock.

Question 7

What three factors distinguish models of endogenous growth from their neoclassical counterparts?

Question 8

Explain how relatively high wages in the modern sector,as compared to the traditional sector,can lead to a coordination failure.

Question 9

In contrast to the earlier neoclassical models of economic growth,in endogenous growth models,there is more emphasis on
(a)human capital.
(b)externalities.
(c)increasing returns to scale.
(d)all of the above.

Question 10

Is a coordination failure a type of market failure? Explain.

Question 11

The S-curve is used to illustrate
(a)the typical path taken by the current account over time.
(b)economic fluctuations in the economy.
(c)the typical growth path of a developing economy.
(d)the existence of multiple equilibria.

Question 12

Explain how the government can help the economy avoid a coordination failure.

Question 13

Explain what is meant by the term coordination failure and provide an example.

Question 14

The big-push theory argues that coordination failures may arise because of
(a)pecuniary externalities.
(b)technological externalities.
(c)lack of human capital.
(d)all of the above.