Deck 3: Theories of Development Economics

Question 1

Until the early 1700s, most people ___________.

A) worked in subsistence farming
B) manufactured goods only at a small scale
C) rarely engaged in international trade
D) All of the above
E) None of the above

Answer 1

D

Question 2

International trade prior to the Industrial Revolution consisted mostly of trade in niche products like _____________.

A) spices
B) precious metals and luxury goods
C) fish and other agricultural products
D) A & B but not C
E) All of the above

Answer 2

D

Question 3

The Industrial Revolution accelerated the production of manufactured goods due to the development of _____________.

A) better railway links
B) more modern management techniques
C) the steam engine
D) None of the above

Answer 3

C

Question 4

In the immediate aftermath of the Industrial Revolution, subsistence farmers were forced off their lands because _________________.

A) they preferred high-paying manufacturing jobs in the cities
B) agricultural land was bought into large mechanised farms and so the small subsistence farmers were no longer needed
C) farms were being destroyed to make room for urban growth
D) None of the above

Question 5

Who of the following was NOT considered leading thinkers on political economy following the Industrial Revolution?

A) Adam Smith
B) David Ricardo
C) Karl Marx
D) John Maynard Keynes
E) Friedrich List

Question 6

David Ricardo made the case that countries should specialize in the production of goods they were comparatively better at, given available land, labour, and capital. This was known as the _________.

A) theory of comparative advantage
B) theory of competitive advantage
C) theory of the invisible hand
D) capability theory
E) economic nationalism

Question 7

Early theorists like Adam Smith and David Ricardo laid the foundation for today's capitalist economy based on:

A) individual self-interest
B) free market rules governing the use of labour, land, and capital
C) free trade among nations
D) following the invisible hand of the market via supply and demand
E) All of the above

Question 8

Alexander Gerschenkron's theory of economic development did NOT include the _______________.

A) production of capital
B) production of industrial goods
C) provision of physical infrastructure (such as railroads and electricity)
D) production of consumer goods improvements in agricultural output
E) collaboration of governments and private businesses to foment rapid industrialization

Question 9

John Maynard Keynes, in trying to end the Great Depression of the 1930s, argued that ____________.

A) supply and demand did not automatically balance in market economies
B) private investors could not be relied upon to make the right investment decisions to help a society achieve its full economic potential
C) communism was a better system than capitalism
D) national economies should be guided by state actions to attain sustained rates of growth
E) All of the above except C

Question 10

Walt W. Rostow, an American economist, proposed a five-stage model for economic development. This model did not include____________.

A) traditional
B) transition
C) transitory
D) take off
E) drive to maturity

Question 11

Walt W. Rostow's transition stage of economic development argued that:

A) the development of internal and external markets allowed the sale of agricultural surpluses and the import of new goods with foreign technology
B) this was the moment when developing countries switched to large-scale agriculture and industry
C) this was a period of rapid urbanization and industrialization
D) the economies of developing countries were mostly agricultural and focused on subsistence
E) countries would become more economically diversified and less reliant on imports to cover necessities

Question 12

Walt W. Rostow's take-off stage included which of the following characteristics:

A) switching to large-scale agriculture and industry
B) rapid urbanization and social change
C) significant investments in basic services such as electrification, roads, and seaports
D) improvements in education systems
E) All of the above

Question 13

Theories of development after World War II became known collectively as modernization theories. These theories initially did not include variants from _______________.

A) sociology
B) economics
C) political science
D) psychology
E) All of the above

Question 14

Early models of economic development argued that Western governments had to help developing countries out of their traditional stage by:

A) offering foreign aid
B) offering bank loans
C) increasing trade
D) encouraging foreign investment
E) All of the above

Question 15

Neoliberalism believed that solutions to economic development were ______________.

A) state regulations to guide market competition, export promotion, and protectionism
B) absorption of Western values and institutions, controls on trade, and democratization
C) free markets, financial deregulation, and globalized markets
D) urbanization, industrialization, and controls on trade
E) labour specialization, mechanization, and free trade

Question 16

As a practice, neoliberalism was challenged in the 1980s and 1990s by the success of ______________.

A) the United States of America as a global superpower
B) East Asian interventionist economies that achieved economic success
C) the fall of the Berlin Wall and the end of the Cold War
D) the independence of Zimbabwe
E) greater pragmatism in how to stimulate economic development in the Global South

Question 17

Talcott Parsons elaborated on the work of Emile Durkheim and Max Weber to argue ________________. borrowed notions from ________________ to argue that Western societies were more evolved than the rest of the world.

A) non-Western societies were more rational and individualistic than Western societies
B) non-Western societies could only become industrialized if their values and identities transformed to be similar to Western cultural and social norms
C) societies were value systems in which individuals followed a common set of beliefs, practices, and norms
D) rapid economic growth could lead to political instability
E) a collectivist social identity enhanced individual entrepreneurship, innovations, and technological and economic changes

Question 18

Modernization theorists such as Talcott Parsons believed certain non-Western countries needed Western guidance in developing from "traditional" societies because ___________.

A) they were collectivist societies
B) they were emotional ("non-rational") societies
C) they were individualistic societies
D) A & B
E) None of the above

Question 19

During the traditional stage of development, Western countries offered developing nations foreign aid and bank loans to _____________.

A) accelerate the South's consumption of Northern technology
B) develop their own agricultural markets
C) to help developing nations trade with each other
D) minimize the negative impacts of industrialization and urbanization
E) to accelerate the South's progression to later stages of development

Question 20

Paul Rosenstein-Rodan argued for "big push" projects in development. This meant that:

A) developing nations had to reach certain levels of development quickly or Western countries would stop helping them
B) developing nations had to overhaul their political systems to include liberal democracies
C) development projects would consist of big infrastructure projects such as building highways and seaports, so the economic benefits would ripple down to the rest of the economy
D) developing nations would fund infrastructure projects to increase economic development
E) Both A & D

Question 21

Albert Hirschman's concept of "linkages" was the idea that ____________________.

A) in order to be successful, developing countries need economic and political ties to Western countries
B) a strategic industry can stimulate the development of other industries and jumpstart underdeveloped economies
C) development agencies like USAID and the World Bank need to communicate with each other in order to not duplicate effort
D) development ideas must begin at the grassroots level and only then be communicated through linkages to funding agencies
E) large infrastructure investments would not trigger economic modernization

Question 22

Arthur Lewis's theory of surplus labour was the idea that __________________.

A) there were too many labourers in developing countries and people should be encouraged to start their own businesses
B) industry in developing countries relied too heavily on "people power" and they needed to automate and mechanise
C) there was a surplus of agricultural labour and this labour needed to move to urban areas to work in industry
D) there was not enough labour, and people had to move into more vocational settings
E) raising wages would decrease the amount of surplus labour in developing nations

Question 23

Hans Singer and Raul Prebisch observed that __________________.

A) developing countries usually exported agricultural and mineral commodities while importing manufactured goods
B) developing countries usually exported manufacturing goods and exploited other developing countries for agricultural and mineral commodities
C) developing countries exported finished manufactured goods to developed countries
D) industrialization in developing countries could achieve large profits in its early stages
E) developing countries should reinvest profits from industrialization in technology adaptation and innovation to make economic development self-sustaining

Question 24

Hans Singer and Raul Prebisch showed that an imbalance of trade between developing and developed countries led to declining national income due to ___________________.

A) income elasticity of demand
B) declining terms of trade
C) income volatility
D) All of the above
E) None of the above

Question 25

As incomes rise, people allocate a growing share of their money to buying manufactured goods and services, the value of which depends on the knowledge or technology applied to them. This is known as _____________________.

A) declining terms of trade
B) income volatility
C) income elasticity of demand
D) purchasing power parity
E) stop-and-go patterns

Question 26

Sometimes developing countries that export simple commodities but are trying to industrialize need to import growing and costlier manufactured goods and technologies, which rise in value faster than commodities. This is known as ___________________.

A) declining terms of trade
B) income volatility
C) income elasticity of demand
D) purchasing power parity
E) stop-and-go patterns

Question 27

When commodity exports suffer from highly variable prices that rise or fall significantly on a yearly basis, making it very difficult for developing countries to plan infrastructure projects, social services, or industrialization. This is a situation known as ___________________.

A) declining terms of trade
B) income volatility
C) income elasticity of demand
D) purchasing power parity
E) stop-and-go patterns

Question 28

The premise of import substitution industrialization (ISI) was __________________.

A) that by importing foreign technology, developing nations could grow their economies faster
B) that by using local technologies and materials, developing nations could avoid foreign debt
C) that by protecting infant industries they could grow shielded from foreign competition
D) that by removing tariffs on imported materials and manufactured goods, it would increase competition and encourage economic growth
E) that encouraging imports would accelerate industrialization in developing nations

Question 29

Import substitution industrialization (ISI) did not work in the long term in Latin America because:

A) Latin American countries were already so far behind economically they could not catch up
B) Latin American countries were already so far ahead economically that there was no need for the ISI strategies
C) It was impossible for Latin American countries to export locally made goods to other markets because they were generally of low quality due to the lack of competition in the home market.
D) A & C
E) None of the above

Question 30

By the 1970s, it was clear that state-led capitalism for economic development was only partially successful world-wide. This was because of the _____________.

A) growing frequency of economic crises world-wide
B) increasing levels of political violence in Latin America, the Middle East, and sub-Saharan Africa
C) increasing number of developing countries undergoing populist regimes and military suppression that was supported by foreign powers
D) increasing fiscal and trade deficits that sent many Western economies into recessions
E) All of the above

Question 31

Neoliberalism (or laissez-faire economics) is characterised by __________________.

A) minimal state intervention in the economy
B) an increase in the size and scope of the welfare state
C) collective initiatives guided by market-determined prices that naturally balanced demand and supply for all goods and services
D) development through state-led initiatives
E) cross-cultural economic development through loans and aid

Question 32

Under neoliberal philosophy, foreign investment required developing nations to adopt policy positions that included ______________________.

A) privatizing many previously public services like education and health care
B) engaging in economic and trade deregulation
C) beginning financial liberalization
D) All of the above
E) None of the above

Question 33

The "Washington Consensus" outlined what developing countries needed to do in order to succeed in terms of growth and development. This included:

A) balance government budgets and keep inflation as low as possible
B) privatize all state enterprises, assets, and public services
C) deregulate all aspects of the economy such as contracting, labour, finance, and banking
D) liberalize international trade
E) All of the above

Question 34

The initial group of Asian economies that did extremely well in the 1970s and 1980s were _________________.

A) Thailand, Japan, South Korea, and Hong Kong
B) South Korea, Taiwan, Hong Kong, and Singapore
C) China, Indonesia, Taiwan, and Thailand
D) Malaysia, Thailand, Vietnam, and China
E) China, South Korea, Taiwan, and Japan

Question 35

The metaphor of the "flying geese formation" refers to _______________.

A) a Japanese idea that other Asian economies would follow the "bird" ahead that was leading the group towards economic growth and development
B) a Chinese idea that other Asian economies would follow the "bird" ahead that was leading the group towards economic growth and development
C) a mid-nineteenth century concept for economic development in Western Europe
D) an economic development perspective that was popularized by John Maynard Keynes
E) None of the above

Question 36

Ronald Coase departed from the neoclassical tradition of economic thought by arguing that ______________.

A) the existence of firms proved that market relationships were not truly frictionless
B) markets are characterized by transaction costs
C) firms were vehicles to reduce the frictions of transaction costs
D) All of the above
E) B & C

Question 37

New institutional economics (NIE) reshaped contemporary understandings of economic development by ______________.

A) solidifying neo-liberal economic theory as the dominant theory in development economics
B) solidifying Keynesian economic theory as the dominant theory in development economics
C) underlining the relationship between political and economic institutions and developmental outcomes
D) being the most accepted economic policies in the Global South
E) None of the above

Question 38

Until the mid-1700s most people lived in cities.

Question 39

The Industrial Revolution began in the eighteenth century in the United States.

Question 40

Adam Smith argued that a society of free individuals should use their personal abilities to pursue their individual self-interest without interference from the state, and that societies should follow the invisible hand of the market via supply and demand.

Question 41

The theory of comparative advantage suggested that market rules benefitted employers or owners of land and capital while work?ers benefitted least.

Question 42

Franz List, a German political economist writing in the 1840s, called for trade protectionism to help develop domestic industry and scientific knowledge in order to catch-up and compete with other "more advanced" European nations.

Question 43

Alexander Gerschenkron is credited with developing the first theory of economic development, which advocated using imported technology and private business to accelerate industrialization.

Question 44

As a result of Keynesian economics and the aftermath of World War II, many people believed that markets could in fact be suspended or drastically curtailed by government actions for the common good.

Question 45

Walt W. Rostow's transition stage of economic development posited that developing nations were switching to large-scale agriculture and industry, which created rapid urbanization and social change.

Question 46

Walt W. Rostow's stages of growth are seen as largely successful as all of the developing countries from the 1950s or 1960s have achieved the last stage: mass consumption society.

Question 47

The policy goals of Western industrialized nations during the Cold War were largely to spread Western-style economic development and strengthen economic and political linkages within the capitalist bloc.

Question 48

American sociologist Talcott Parsons argued that non-Western societies could become industrialized even if their values and identities remained traditional and "pre-modern."

Question 49

In early models of development economics, Western aid aimed to build close relationships with key figures in developing societies in order to first alter their social values, and then usher in change to economic and political structures.

Question 50

By the middle of the twentieth century, political theorists and Western governments expected to see development in poor countries in the form of political evolution from authoritarianism to democracy, especially as populations became more formally educated, urbanized, and able to defend their rights.

Question 51

Samuel Huntington believed that rapid economic growth would to political stability and strong states.

Question 52

Much of the American, Canadian, and Western European political and military aid during the Cold War years, from the 1950s to the 1980s, was contradictory. Aid during these years simultaneously supported market-friendly and modernizing authoritarian governments, while often admonishing them to provide political rights and move toward democracy.

Question 53

Dani Rodrik argued that institutions were important for economic development and could be simply copied from Western examples.

Question 54

Development economics, as a discipline, began after World War II and the development of Keynesian economics.

Question 55

Neo-liberalism is a new form of government that replaced communism.

Question 56

In development, linkages can be both forward (output producing) and backward (input producing).

Question 57

The theory of surplus labour implied that industrialization could achieve large profits in its early stages, which could later be reinvested in technology adaptation or endogenous innovations, making economic development a self-sustaining project.

Question 58

The idea that as gross domestic product (GDP) per capita grows, the amount people dedicate to buying agricultural goods, oil, and minerals decreases as a percentage of their total expenditure even if it grows in absolute terms is known as income volatility.

Question 59

The word "declining" when used as part of the term "declining terms of trade" implies that the prices of commodity exports fall over time in comparison to the prices of manufactured imports.

Question 60

If budgets and expenses are stable over time but income from exports is unpredictable, developing governments can face unexpected surpluses or deficits. This is known as purchasing power parity.

Question 61

Import substitution industrialization (ISI) required trade protection of new "infant industries" by using tariffs or taxes on cheaper or higher-quality imported manufactures, access to easy financing, and copying foreign technologies.

Question 62

Neo-liberalism is a modern version of the old idea that economic markets should function with little to no interference from governments and regulators.

Question 63

Neo-liberal economists believed that Keynesian economics failed because foreign aid and loans had only increased indebtedness, produced infrastructure that was not truly needed, and created inefficient industries that could only survive foreign competition due to protectionism.

Question 64

Under the neo-liberal philosophy, developing governments were expected to have a large role in steering the economy.

Question 65

South Korea and Taiwan went from poverty and postwar devastation in the 1950s to very high levels of industrial development and per capita income in just 50 years through neo-liberal policies.

Question 66

The new institutional economics (NIE) is an alternative theory to Keynesian and neo-liberal economics and posits that the state can and should have some role to play in steering market conditions.

Question 67

Path dependence is part of neo-liberal theory and posits that, once created, institutions become resistant to change and locked-in a set of incentives for human behaviour.

Question 68

The "commons problem" posited that groups of people find it difficult to self-organize to pursue a collective good because it is in each individual's self-interest to free-ride, which results in the undersupply of public goods.

Question 69

Daron Acemoglu and James Robinson argued that the political institutions of a society influenced whether its economic institutions were "inclusive" or "exclusive."

Question 70

Douglass C. North argued that institutions did not provide key functions and created uncertainty about the economic decisions of private actors.

Question 71

Elinor Ostrom rejected the state versus market duality and argued that people can create self-governing institutions to manage common resources.

Question 72

Japan's development in the early twentieth century was named the "flying geese formation," as a metaphor that promoted the idea that other Asian economies would follow the Japanese economic model.

Question 73

Define and describe Arthur Lewis's theory of surplus labour.

Question 74

Describe the concerns expressed by Karl Marx about political economy that took shape after the Industrial Revolution.

Question 75

Define and describe Paul Rosenstein-Rodan's theory of the "big push" and infrastructure investments.

Question 76

Define and describe economic nationalism and provide examples of theorists who explored this viewpoint.

Question 77

Define and describe Alexander Gerschenkron's theory of economic development.

Question 78

Define and describe Keynesian economics.

Question 79

How successful has Walt W. Rostow's stages of growth and development model been?

Question 80

What socio-political events influenced the creation of modernization theories?