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Consider an economy that produces and consumes Bread and Automobile. Data for two different years 2005 and 2010 is given in the following table.
Year. 2005. 2010
Price of Automobiles. 5000$. 6000$
Price of a loaf of
Bread. 10$. 20$
Number of Automobiles
Produced 100$. 120$
Number of loaves
Of bread produced. 500000$. 400000$
* Using the year 2005 as a base year ,
a. Calculate the nominal and real GDP of
2010
b. Find the value of GDP Deflator for the
year 2010 and interpret your result.
c. Calculate the inflation rate in 2010.
Chose the best answer to each question
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 non-
selective interventions can
promote economic development.
For an economy's output function »- {k)-VE
where y=(Y/L) and k = (K/L), which of the following
statements is correct?
(a) In this economy, the average productivity of
capital is constant for all k.
(b) The output function is subject to constant returns
to scale.
(c) In this economy, labor and capital are not
substitutable.
(d) The economy's total factor productivity is equal to
O.
In a steady-state economy with no population
growth, capital per worker is 80, the saving rate is
25 percent, and the depreciation rate is 12.5
percent. The level of output per worker is
(a) 195
(b) 38
(c) 40
(d) 47
Choose the best answer to each question
The underlying assumption of the Harrod-Domar
growth model is that
(a) growth potential is affected by employment of
labor input relative to
capital.
(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.
The diagram on the y
right represents
the
Harrod-Domar
production
functions for Countries
A and B.
Which of the following correctly
compares the two countries?
(a) Capital is subject to the law of
diminishing returns in both
countries.
(b) Country A has lower ICOR than
Country B.
(c) Country A has lower capital productivity
than Country B.
(d) If the saving rate is the same in the two
countries, then Country B will have a higher
output growth rate.
.
Choose the best answer to each
question.
Consider a country with an ICOR of 8.0 in which
GDP rises by 4% per annum to prevent a decline
in per-capita income. This requires a saving rate of
(a) 12%
(6) 32%
(c) 28%
(d) 2%
On which of the following does the
neoclassical counter-revolution school most blame
underdevelopment?
(a) misquided government policies (b) relatively
rigid cultural traditions
(c) the legacy of colonialism
(d) unfair trade practices on the part of developed
countries
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.
Dependency theory suggests that countries should become more inward-looking and less entangled with developed countries, trading only with
other developing countries. True/False
If the production function is given as Y = L∙K, then it follows constant returns to scale. True/False
When the output stays the same after the use of each input has been doubled, then the economy’s production function follows a constant returns to scale. True/False
While capital dilution lowers the value of k, capital widening raises the value of k in the Solow model. True/False
At the steady state, the economy’s growth rate is always equal to zero. True/False
In the Solow model with technological progress, the growth rate of GDP is the same as the population growth rate and the savings rate. True/False
If the economy’s output function is given as , where y=(Y/L) and k = (K/L), the average productivity of capital diminishes as k increases. True/False
Other things the same, in the Solow model in the steady state, a higher rate of population growth leads to an increase in the level of output per worker True/False
The neocolonial dependence model is closely aligned with Marxism. True/False
The false paradigm model attributes lack of development to inadequate attention to price incentives. True/False
If depreciation is less than investment, stock of capital decreases. True/False
A major conclusion from empirical studies of the “sources of growth” is that productivity and efficiency are far less important for LDCs than capital accumulation. True/False
Chenery and his colleagues found that there are more differences than similarities in the way economies go through the process of development. True/False
Public choice theory argues that from an economic development perspective, the best government is a small government. True/False
When the vertical axis measures changes in real wage rate, the labor demand curve is represented by the marginal product of labour. True/False
