Question 1

In Ecuador, as a share of a firm's revenue, the cost of bribes is highest for

Accepted Answer

Micro enterprises have limited financial resources and may have to resort to paying bribes to overcome bureaucratic hurdles or secure contracts. As a percentage of their revenue, the cost of bribes could be higher for micro enterprises compared to larger firms with more established reputation and bargaining power.

Question 2

If the population growth rate is 2%, the incremental capital output ratio is 3, the saving ratio is 24%, and the depreciation rate is 5%, the rate of growth of income is

Accepted Answer

The Solow Growth Model equation for the rate of growth of income is given by:

g = (sY - δK) / Y

where,
g = rate of growth of income
s = saving ratio (0.24)
Y = income
δ = depreciation rate (0.05)

We need to find the value of Y in order to calculate g. The Solow Growth Model equation for steady state income is given by:

Y* = (s / (δ + n + g)) * K*

where,
n = population growth rate (0.02)
K* = steady state capital

We know that g = n in the steady state. So, we can calculate K* as:

K* = (s / (δ + n + g))^(1/ (1-α)) * A

where,
α = capital share (assume 0.3)
A = total factor productivity (assume 1)

K* = (0.24 / (0.05 + 0.02 + 0.03))^(1/ 0.7)
K* = 2.385

Now, we can calculate the steady state income as:

Y* = K*^α * A * N^(1-α)
Y* = 2.385^0.3 * 1 * N^0.7
Y* = 1.5017 * N^0.7

In order to calculate the rate of growth of income, we can use the Solow Growth Model equation in conjunction with the steady state equations:

g = (sY - δK) / Y
g = (0.24 * Y - 0.05 * 2.385) / Y
g = (0.24 * Y - 0.11925) / Y

At steady state g = n = 0.02. So, we can equate g and n to solve for Y:

0.02 = (0.24 * Y - 0.11925) / Y
0.02Y = 0.24Y - 0.11925
0.22Y = 0.11925
Y = 0.542045

Therefore, the rate of growth of income is:

g = (0.24 * Y - 0.05 * 2.385) / Y
g = (0.24 * 0.542045 - 0.05 * 2.385) / 0.542045
g = 0.03 or 3%

Hence, the answer is (C) 3%.

Question 3

A plan that sets targets to cover all major aspects of the national economy is known as a/an _____ plan:

Accepted Answer

A comprehensive plan is a plan that covers all major aspects of the national economy. It takes into account all industries and sectors, and sets targets for each one. This type of plan is often used by governments to guide economic development and ensure that all areas of the economy are growing and contributing to overall progress.

Question 4

Which of the following is not a rationale for development planning?

Accepted Answer

The answer of Which of the following is not a...

Question 5

If the population growth rate is 2%, the incremental capital output ratio is 3, the saving ratio is 24% and the depreciation rate is 5%, the rate of growth of income per person is

Accepted Answer

The rate of growth of income per person can be calculated using the modified Harrod-Domar model, which is given by the formula: (s/v) - (n + d), where s is the saving ratio, v is the incremental capital output ratio, n is the population growth rate, and d is the depreciation rate. Plugging in the given values: (0.24 / 3) - (0.02 + 0.05) = 0.08 - 0.07 = 0.01 or 1%.

Question 6

A shadow price is:

Accepted Answer

A shadow price is the value placed on a good or service that is not directly reflected in its market price, but rather represents its social or economic importance.

Question 7

Which of the following is a rationale for development planning?

Accepted Answer

Market failure is a rationale for development planning, as it refers to situations where the free market is unable to efficiently allocate resources to meet societal needs. Government failure and the failure of consumers to understand their preferences may also lead to a need for development planning, but these are not as directly related to economic development as market failure. Therefore, option D is incorrect, and option E is incorrect as no rationales for development planning have been omitted.

Question 8

Which of the following is a reason for the failure of development plans?

Accepted Answer

All three options (unreliable data, unanticipated economic disturbances, and lack of political will) are valid reasons for the failure of development plans. Unreliable data can lead to inaccurate planning, unanticipated economic disturbances can disrupt the implementation of the plan, and lack of political will can prevent necessary actions from being taken. Therefore, all options are correct.

Question 9

If the incremental capital output ratio is 3 and the ratio of saving to national income is 9%, according to the Harrod-Domar model the growth rate of income is

Accepted Answer

According to the Harrod-Domar model, the growth rate of income (g) is equal to the ratio of saving to national income (s) divided by the incremental capital output ratio (ICOR). 
So, g = s/ICOR = 0.09/3 = 0.03 or 3%. Therefore, the best choice is B.

Quiz 11: Development Policymaking and the Roles of Market, State, and Civil Society