Module Contact: Dr Paul Clist, DEV Copyright of the University of East Anglia Version 1

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1 UNIVERSITY OF EAST ANGLIA School of International Development Main Series UG Examination INTRODUCTION TO ECONOMICS OF DEVELOPMENT DEV-4003B Time allowed: 2 hours Answer ALL Questions Section A accounts for 30% of the marks Section B accounts for 70% of the marks Notes or calculators are not permitted in this examination Do not turn over the page until you are told to do so by the Invigilator DEV-4003B Module Contact: Dr Paul Clist, DEV Copyright of the University of East Anglia Version 1

2 Page 2 SECTION A (30%) There are 15 multiple-choice questions in this section. All questions are compulsory. All questions receive equal weight. For each question in this section please select the best answer from the options given. 1. The absolute Gini index does not increase if a) absolute poverty increases b) absolute poverty decreases c) all incomes are multiplied by 5 d) all incomes increase by 5 2. If we were to alleviate poverty through direct transfers to the poor, according to the Squared Poverty Gap, we should allocate resources a) targetting the poor who are closest to the poverty line b) simply randomly among the poor c) targetting the poorest of the poor d) targetting the poor with income equal to half of the poverty line 3. The Labour Surplus Model explains a) the low rates of growth in traditional economies b) structural change from agricultural to manufacturing economy c) why the agricultural sector is more productive than the manufacturing sector d) none of the above 4. In the Solow model, in the steady state: a) output and capital increase at the rate of population growth but output per worker, capital per worker stay constant b) output and capital increase at the rate of immigration growth but output per worker, capital per worker stay constant c) output and capital increase at the rate of export growth but output per worker, capital per worker stay constant d) all of output, capital, output per worker, capital per worker stay constant 5. The Growth Report departs from the so-called Washington Consensus in that it: a) puts more emphasis on liberalisation and privatisation b) advocates a more substantial role for the state alongside markets c) calls for a stronger fiscal discipline d) gives more importance to economic growth and international trade

3 Page 3 6. Members of Greenpeace have in the past held a plea for a decrease in fertility in order to save the planet. This is an example of a policy that is often proposed by a: a) population feminist b) population pessimist c) population nihilist d) population optimist 7. The sum of education, health and on-the-job training is called a) human resources b) human capabilities c) human capital d) human capacity 8. The dictator game we played in class provides a lab experimental way to measure a) social capital b) reciprocity c) altruism d) trust 9. HIV/AIDS can be: a) cured with a special natural mixture of lemon, beet root and garlic b) cured with antiretroviral therapy c) treated with a special natural mixture of lemon, beet root and garlic d) treated with antiretroviral therapy 10. Amartya Sen has argued that famine a) is caused by limited food availability b) is caused by floods more than droughts c) is very different for different regions and continents d) is caused by a lack of access to food for some groups 11. prices are domestic prices without trade. a) autarky b) absolute c) commodity d) national 12. Raul Prebisch, Hans Singer, and other economists argued that, over the long run, prices for primary commodity exports on the world markets tend to fall relative to prices of manufactured goods. This concept is known as: a) export pessimism b) export cynicism c) import optimism d) trade confidence TURN OVER

4 Page The best prevention for Dutch disease effects is to avoid or reverse the initial real of the currency. a) appreciation b) devaluation c) depreciation d) purchasing power 14. What effect do high import tariffs have on a country s export industries? a) tariffs reduce the demand for foreign exchange, so the home currency appreciates; this hurts exports b) tariffs reduce the demand for foreign exchange, so the home currency depreciates; this boosts exports c) tariffs reduce the demand for foreign exchange, so the home currency appreciates; this boosts exports d) tariffs do not affect exports, just imports 15. Most aid (not including remittances) has been given: a) bilaterally b) through private organizations c) multilaterally d) through individuals

5 Page 5 SECTION B (70%) There are 10 questions in this section. All questions are compulsory. All questions receive equal weight. Keep your answers brief and to the point: answers are expected to each be about a quarter of a page and should not exceed half a page. 16. Explain and graphically illustrate the Lorenz Curve and the so-called Line of Equality. 17. How do neoclassical and endogenous growth models differ? 18. Explain the concept of market failure and give some examples. 19. What is the difference between FGT poverty indices for alpha=0, alpha=1 and alpha=2? (Foster, Greer and Thorbecke, 1984). 20. Does education have economic returns? If so, why? Discuss using an example. 21. Societies typically go through a demographic transition. Discuss two common reasons why birth rates decline. 22. Some scholars argue that international migration from low to high income countries leads to brain drain, others argue that it leads to brain gain. Explain these two views. Can they be reconciled? 23. Explain briefly what aid selectivity is, and discuss its possible merits. 24. Discuss the Dutch disease and why it is relevant for countries that are endowed with a lot of natural resource wealth. 25. What is learning by doing and what relevance does it have for the exports of developing countries? END OF PAPER