Group Exercise #2 Total points: 60 points Due on: October 12, 2012.

A. Multiple Choice. Encircle the letter corresponding to the correct answer. 1. An example of an upper-middle income country is a. India. b. Brazil. c. Indonesia. d. Nigeria. 2. A newly industrialized country is a. the same as a high income country. b. any country that has experienced sustained growth in industry. c. a special classification given to some upper-middle income countries that have achieved relatively advanced manufacturing sectors. d. any country that has moved out of lower income status. 3. Which of the following is not an upper middle-income country? a. Brazil b. South Africa c. Pakistan d. Argentina 4. Which of the following is a low-income country? a. Mexico b. Thailand c. Turkey d. Bangladesh 5. One of the components of the human development index is a. the percentage of the population who are high school graduates. b. the average daily intake of protein. c. life expectancy at birth. d. the number of doctors per hundred people in the population. 6. What percent of the worlds nations have at least five significant ethnic populations? a. 010
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b. c. d. e. 1020 2030 3040 over 40 7. What fraction of developing countries have recently experienced some form of significant interethnic conflict? a. less than one-tenth b. a tenth to one-quarter c. one quarter to one half d. over one half 8. Which of the following African countries has experienced widespread death and destruction due to ethnic or clan based conflict in the previous decade? a. Rwanda b. Sudan c. Somalia d. all of the above 9. Which measure uses a common set of international prices for all goods and services produced? a. purchasing power parity income levels b. GNP price deflators c. foreign exchange rate conversions to U.S. dollars d. the exchange rate 10. The number of units of developing country currency required to purchase a basket of goods and services in a developing country that costs one dollar in the U.S. is given by a. GNP price deflator. b. Human Development Index ranking. c. purchasing power parity. d. the exchange rate. 11. About how many people lack access to basic sanitation? a. 20 million b. 200 million c. 500 million d. 1 billion e. 2 billion 12. About how many people lack access to safe water? a. 20 million b. 200 million c. 500 million d. 1 billion e. 2 billion
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10 Todaro/Smith Economic Development, Eleventh Edition

13. About how many malnourished children under age five are there in the developing world? a. 20 million b. 150 million c. 500 million d. 1 billion e. 2 billion
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14. Neutral technological progress occurs when a. higher output levels are achieved with the same quantity and combinations of factor inputs. b. higher output levels are achieved by more capital intensive methods. d. higher output levels are achieved by more labor intensive methods. e. higher output levels are achieved. 15. Conditions of todays developed countries at the start of their industrialization differ from conditions in the developing world in that a. population growth rates were higher. b. more advanced technology was available. c. there were more opportunities for development assistance. d. none of the above. 16. Most successful examples of modern economic growth have occurred in a country with a. a temperate-zone climate. b. a market economy. c. exports of manufactured goods. d. all of the above. 17. Which of the following is not an indicator that is used by the World Bank in measuring the level of economic development? a. life expectancy at birth. b. adult literacy rate. c. infant mortality rate. d. all of the above are not used by the World Bank. 18. The dependency burden is a. a measure of the degree to which the less developed countries are dependent on the rich industrial countries. b. the average number of children that a woman gives birth to during her lifetime. c. the number of babies born per 1000 persons. d. the percent of the population that is below 15 and above 65 years of age. 19. How many people still live on less than the equivalent of $1.25 per day (new definition of extreme poverty)? a. 100 million. b. 500 million. c. 1.4 billion. d. 2.2 billion. 20. Which of the following is not an indicator that is used to compute the Human Development Index? a. life expectancy at birth. b. real GDP per capita. c. infant mortality rate. d. adult literacy rate.
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12 Todaro/Smith Economic Development, Eleventh Edition

21. The combined GDP of developing countries constitutes approximately a. 5 percent of global GDP. b. 20 percent of global GDP. c. 30 percent of global GDP. d. 40 percent of global GDP. 22. Developing countries are starting to converge with developed countries in the long run in what respect? a. Growth rate b. Income inequality c. Population d. Per capita income 23. Which region in the world has the lowest GNI per capita based on the World Bank Atlas method? a. Sub-Saharan Africa b. East Asia/Pacific c. South Asia d. Latin America/The Caribbean 24. 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 25. 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 26. 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. 27. Which of the following is a criticism of the neoclassical counter-revolution schools 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. 28. Which of the following approaches does not offer an international dependence explanation of underdevelopment? (a) the false paradigm model
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(b) the neoclassical counter-revolution (c) the dualistic development model (d) the neocolonial dependence model 29. The neoclassical counter-revolution school supports (a) trade restrictions. (b) state-owned enterprises. (c) eliminating government regulations. (d) limitations on foreign investors. 30. Implicit assumptions from which theories evolve are known as (a) a paradigm. (b) biases. (c) stylized facts. (d) normative economics. 31. 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 32. 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 33. 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. 34. 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. 35. According to the dependence theory, the developing world is known as the (a) backward areas. (b) periphery.
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14 Todaro/Smith Economic Development, Eleventh Edition

(c) first world. (d) center. 36. The underlying assumption of the Harrod-Domar growth model is that (a) the incremental capital-output ratio is given by k = 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. 37. 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. 38. International dependence theories distinguish between two groups of countries known as (a) rich-poor. (b) developed-developing. (c) center-periphery. (d) independent-dependent. 39. 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. 40. 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. 41. 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. 42. Which of the following are components of economic growth (a) growth in labor force. (b) technological progress. (c) investment. (d) all of the above.
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B. Essay: What type of technology is most appropriate for developing countries, capital intensive
or labor intensive? What are the advantages and disadvantages to the developing country of borrowing technologies from developed countries as opposed to developing their own technologies? (6points)

C. Graphing and Quantitative Exercise: (12 points)

Source: http://wps.aw.com/aw_todarosmit_econdevelp_11/181/46378/11872794.cw/index.html According to the Harrod-Domar model, increases in the national savings rate will lead to more investment and thus to economic growth. Let's examine this issue in a simple way using data from the Penn World Tables on Mexico. First, visit the Penn World Tables at http://datacentre.chass.utoronto.ca/pwt/. Select Alphabetical List of Topics. We are interested in two countries: Argentina and Korea, Republic of. Now, select two series, Investment Share of Real GDP per capita and Growth rate of Real GDP Chain per capita. Then, enter 1997 in the Beginning year box and 2007 in the Terminating year box. Next, in the Output format box choose MS Excel ready. Click Submit. 1. Calculate the average of each indicator for each country 2. Which country has a larger average Investment Share of Real GDP per capita? 3. Which country has a larger average growth rate of Real GDP Chain per capita? 4. Explain your findings 2012 Pearson Education, Inc. Publishing as Addison Wesley