Issues and Topics in Economic Development (EC 390)

Issues and Topics in Economic Development (EC 390)
Homework 1
Section 1: Multiple choice. Select the choice that best answer
s
the prompt.
1.
Of the following, which is the best measure of standard of living with
in
a country?
a.
Real GDP
b.
Nominal GDP
c.
Real GDP
per capita
d.
Nominal GDP per capita
2.
Jeffrey Sachs would support which of the following policies?
a.
Providing fertilizer to poor farmers.
b.
Subsidizing bed nets to prevent malaria.
c.
Making vaccines available at low or no cost.
d.
All of the above.
3.
Geographically, p
overty is especially prevalent in
a.
Sub

Saharan Africa
b.
Latin America
c.
South and East Asia
d.
Eastern Europe
e.
Both a and c
4.
For many development issues, Sub

Saharan Africa is the
most concerning
. However, for
other
Millennium
Development goals like providing acce
ss to
clean water _________
lag(s)
further behind.
a.
Latin America
b.
Eastern Europe
c.
The Middle East
d.
South and East Asia
5.
Over the past 50 years, child mortality has
generally
a.
Increased.
b.
Decreased.
c.
Remained unchanged.
d.
Increased in some areas but decreased in others.
6.
A randomized experiment is one in which
a.
Participants randomly receive the treatment (like getting a new type of fertilizer).
b.
There is a natural experiment that does not require any human intervention.
c.
Par
ticipants receive the treatment if they meet certain income requirements.
d.
The results are inconclusive (i.e. appearing random).
7.
Suppose that Tylandia has a Gini coefficient of 1. This implies
a.
There was a calculation error because the Gini coefficient
mus
t be less than 1
.
b.
There is perfect equality in Tylandia.
c.
There is extreme inequality in Tylandia.
d.
More information is needed. Gini coefficients are only useful for comparing
across countries.
8.
Suppose that an individual is considered below the poverty line if he/she makes less than
$1.25 a day. According to a head count measure of poverty if this person goes from
making $1.24 a day to $1.26, the head count measure will ____________ while poverty
will practically
________________.
a.
Decrease; increase
b.
Decrease; remain unchanged
c.
Increase; increase
d.
Remain unchanged; increase
9.
Where does inequality occur?
a.
Only in the developing world.
b.
Only in the developed world.
c.
Mostly in Asia.
d.
Throughout the world.
10.
William Easterly, in
The Elusive Quest for Growth
, focuses on ___________ rather than
direct
aid.
a.
Economics incentives
b.
The existence of poverty traps
c.
Providing subsidies
d.
Providing ways to stop malaria to people in developing countries.
4.
GDP Calculations (5
points
)
Using the tabl
e below,
answer the following questions:
Good
US
Thailand
P($)
Q
P(baht)
Q
Computers
1000
100
18000
10
Haircuts
20
50
400
40
Iced Teas
2
100
50
200
a.
Find U.S. GDP and Thai GDP in local currencies (do not worry about the
distinction between real and
nominal).
b.
What is Thai real GDP in U.S. dollars using the market exchange rate of 1 U.S.
dollar is worth 30 Thai baht?
c.
Calculate Thai real GDP in U.S. dollars using the purchasing power parity method
from class.
d.
What is the implied PPP exchange rate?
5.
Inequality and Growth (5 points)
a.
Discuss the main channel through which inequality may increase growth.
b.
State, briefly, the four reasons why inequality may decrease growth.

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