Energy Engineering - Development Economics

First partial exam

Politecnico di Milano – Academic Year 2020-2021 Development Economics - Intermediate test 1 20 April 2021 (9.30 - 10.30 a.m) Prof. Piscitello and Hoxha Please choose ONLY ONE response by circling the correct answer. There are 45 questions. You have 45 minutes to answer. During the test, you cannot access personal notes or books, or any other sources of information. Hi Zain, when you submit this form, the owner will be able to see your name and email address. 1 19. In the equation sf(k*)= (������+n)k* of the Solow model, k* represents: (1 Point) The steady state from which the country will never depart The steady state without technological change One of the possible multiple equilibria The amount of foreign aids needed to reach the best equilibrium 2 Coordination failure is: (1 Point) A state of affairs in which complementarities do not exist A state of affairs in which complementarities are exploited only by some agents A state of affairs in which agents’ inability to coordinate their choices leads them to a state of non-equilibrium. A state of affairs in which agents’ inability to coordinate their choices leads to an equilibrium that leaves all agents worse off than in alternative situation that is also an equilibrium. 3 The main stakeholder(s) involved in SEZ regimes is/are: (1 Point) Government Zone operator All the answers are correct SEZ authority Zone user Zone developer 4 According to Moses Abramovitz’s analyses: (1 Point) Catching up could not be observed as countries diverge over time Underdeveloped countries have only to follow a certain set of rules of development to take off into self-sustaining growth Catching up occurs through “leapfrogging” Catching up could be observed over long periods and depends on technological congruence and social capabilities 5 In the S-shaped graph of the privately rational decision: (1 Point) Equilibria correspond to all the intersections between the 45° line and the privately rational decision curve Two equilibria are unstable, and all the others are stable equilibria Only the lowest equilibrium (the so-called poverty trap) is stable? Only the highest equilibrium is stable 6 In the Lewis theory of economic development: (1 Point) Agriculture has a role as it provides labor and food to the industry Growth will converge to a stable equilibrium Growth occurs both in the agriculture and in the industry sectors Agriculture does not play any role as it suffers from labor surplus 7 The “terms of trade” refers to: (1 Point) The ratio between the total amount of imported goods and the total amount of exported goods The ratio between the export price index and the import price index The ratio between the import price index and the export price index The ratio between the exported manufactured goods and the imported agricultural goods 8 The Multidimensional Poverty identifies deprivation(s) across: (1 Point) None of the answers is correct All the answers are correct Wealth Health Education 9 In the dual-economy model (Lewis), the turning point: (1 Point) Requires a change in the division of labour Refer to the need of increasing the ICOR Requires more savings in the agricultural sector Refer to the situation where there is no more surplus in the agriculture sector 10 Studies on the Asian catch-up after the IIWW suggest: (1 Point) The importance of the free market The role of the state in fostering entrepreneurship in infant industries The important role of a development state (fostering structural change) The role of informal institutions 11 The inverted Kuznets Curve illustrates: (1 Point) The relationship between convergence and technological change The relationship between inequality and economic development The relationship between the Gini coefficient and the institutional quality The relationship between income growth and economic development 12 The expression Δy/y = (s/k) – δ means: (1 Point) Technological change occurs exogenously Economic growth depends on population growth rate None of the answers is correct Economic growth depends on capital depreciation 13 The endogenous growth theory assumes that: (1 Point) Returns to scale in production are increasing due to knowledge spillovers Returns to scale in production are decreasing due to knowledge spillovers Returns to scale in production are constant irrespectively of the saving rate Returns to scale in production are always zero as knowledge is a public good 14 The Prebisch-Singer hypothesis states that: (1 Point) Income elasticity and price elasticity always favour manufacturers goods rather than primary goods Over time the relative price of primary goods decreases more that the relative price of manufactured goods The relative price of primary goods has always higher elasticity than the relative price of manufactured goods Over time the amount of exports and imports of less developed countries will converge 15 In the model of Development as a Self-Discovery: (1 Point) Less developed countries and developed countries should coordinate their production and trade Less developed countries should produce according with their absolute advantage Less developed countries know their comparative advantage but they lack resources and competencies Less developed countries do not know their comparative advantage 16 The Stage of Growth Model (Rostow): (1 Point) Describes the less developed world during the colonialism period Describes development through a deterministic sequence of steps Describes convergence and divergence for less developed countries Describes the Marshall plan 17 In the structural-change model: (1 Point) Employers in the industrial sector attract workers from the agriculture sector by offering them their opportunity cost in agriculture plus their migration cost Agricultural workers increasingly substitute industrial workers Employers in the industrial sector need to reduce their investment to make profits Marginal productivity of agricultural workers is always zero 18 Suppose there are two high-quality workers and two low-quality workers and two possible ways of organization. The O-Ring Model implies that high-quality workers should be matched with: (1 Point) High quality workers It depends on the technology adopted Either high or low quality workers Low quality workers 19 In the AK model: (1 Point) Labour supply is always the limited factor Labour surplus allows development irrespectively of the technology adopted Return to scale for labour is constant while return to scale for capital is decreasing Return to scale is constant for both labour and capital 20 In the model of Big Push: (1 Point) Production decisions by firms are mutually reinforcing Production decisions are driven by the State Investment decisions are driven by external demand Production decisions do not require investments and savings 21 An approach based on market fundamentalism: (1 Point) Denies efficiency of policy intervention All the answers are correct Stresses government failures Points up state owned enterprise failures 22 In the Lewis model, the existence of labour surplus in the agriculture sector means that: (1 Point) Labour can be drawn from the agricultural sector without any loss of output d. None of the answers is correct Development can occur only when the agriculture sector is entirely replaced by the industrial sector Labour cannot be drawn from the agricultural sector without any loss of output 23 Gross National Income of a country refers to: (1 Point) Incomes earned by foreign residents (under the form of repatriated profits) plus income earned in the domestic economy by non residents GDP minus repatriated profits and remittances sent by migrants Total domestic and foreign value added claimed by a country’s residents Total final output of goods and services produced by the country’s economy within the country’s territory by residents and non residents 24 According to the Solow model, you can argue that: (1 Point) The higher the saving rate the higher the production needed to face the demand Irrespective of the saving rate, the system never reaches a stable equilibrium The higher the saving rate the higher the steady state of equilibrium Irrespective of the saving rate, the system reaches always the same steady state 25 The false-paradigm model claims that: (1 Point) Underdevelopment is a result of internal constraints (insufficient savings, investment or lack of infrastructure, skill or education) Underdevelopment is due to the historical evolution of a highly unequal international capitalist system of rich country-poor country relationships Underdevelopment could be represented by an inverted Kuznets curve. Underdevelopment is due to inappropriate advices by expert advisers from developed countries to developing nations. 26 According to the inverted U hypothesis of Simon Kuznets, as economies develop: (1 Point) Income inequality first rises and later falls The population growth rate first rises and later falls None of the answers is correct Average household incomes first fall and later rise Industry’s share of GNP first rises and later falls 27 The Harrod-Domar (HD) equation Δy/y = s/c means that: (1 Point) A country’s GDP growth positively depends on the saving rate (s) of the country A country’s GDP growth positively depends on the K/Y ratio of the country A country’s GDP growth will never converge to a stable equilibrium A country’s GDP growth converges to a stable equilibrium 28 In the Linear Stage Growth Model: (1 Point) Growth requires policy intervention Growth derives from technological change that is endogenous Growth depends on the role of formal and informal institutions Growth depends on domestic and foreign savings 29 According to the Solow Growth model: (1 Point) Economies will never converge because of increasing returns Economies will conditionally converge to the same level of income in the long run Developed economies will converge but developing economies will diverge Economies will always converge to the same level of income 30 The Lewis turning point refers to: (1 Point) The end of the development path The need of policy intervention The take off stage of development All the surplus rural labor is absorbed in the industrial sector 31 The concept of Purchasing Power Parity: (1 Point) Is based upon the market exchange rate Is based upon the nominal exchange rate None of the answers is correct Is based upon the cost of hamburgers around the world Is based upon the cost of the same market basket of goods in different countries 32 Reform on the Margin – quotas for buyers and sellers at fixed planned prices was introduced in: (1 Point) All the answers are correct South Korea and Argentina Pakistan and Bangladesh None of the answers is correct China 33 The outcome of the endogenous growth theory is that: (1 Point) Foreign aids is always a necessary condition to grow Countries reach the same steady state (stable equilibrium) in different periods Sustained long term growth lead to convergence of countries Sustained long term growth lead to divergence of countries 34 Examine the following diagram: The Gini Coefficient is: (1 Point) A/B None of the answers is correct (A+B)/A A/(A+B) B(B+A) 35 In a traditional Cobb-Douglas production function (Y = AKα Lβ) (1 Point) α> β when returns to scale are constant α+β = 0 when returns to scale are constant None of the answers is correct α+β = 1 when returns to scale are constant 36 According to Gerschenkron (1962), less developed countries should benefit from the so-called “advantage of backwardness”. This would imply: (1 Point) Convergence among developing countries but divergence with developed countries Catching up and divergence with developed countries Technological convergence but higher inequality Catching up and convergence with developed countries 37 The import substitution strategy (IS) adopted by a less developed country: (1 Point) Is always a prerequisite for the country’s subsequent outward looking strategy Allows the country to improve its balance of payment Allows the country to increase import of all the needed manufactured goods Allows all the industries of the country to develop equally 38 According to the Prebish-Singer hypothesis: (1 Point) Less developed countries should increase exports of goods in which they have comparative advantages Both developed countries and less developed countries should increase exports of goods in which they have comparative advantages Reasons explaining underdevelopment refer to international trade and multinational enterprises Less developed countries should avoid dependence on exports of primary goods 39 In the O-ring model, the strong complementarities among inputs imply: (1 Point) Production requires zero return to scale Production requires decreasing return to scale Production is modeled as the product of the inputs Production is modeled as the sum of the inputs 40 China got a more favorable deal(s) than many other developing countries because: (1 Point) Government played off investors who wanted to access to China’s consumers – demanding and getting extensive technology transfer, public and private Chinese business partnerships, and other concessions in exchange for the right to sell to Chinese citizens None of the answers is correct All the answers are correct Government played a major role on negotiations of licenses and other business agreements Has used its centralized authority to coordinate investments across industries 41 In the Harrod-Domar model, the incremental capital-output ratio (ICOR): (1 Point) Corresponds to technological change (i.e. Solow residual) The inverse of labour productivity Labour productivity Total factor productivity 42 Adopting the log transformation of the growth equation (γT = γ0(1+g)T), you can say that the time needed to double the initial income (γ0) is: (1 Point) 70/g 70*g T/2 T/g 43 The Headcount Index tells us: (1 Point) None of the answers is correct The intensity of poverty (or depth of poverty) The population proportion that lives below the poverty threshold (or incidence of poverty) All the answers are correct The weight of poverty gap as a square (or severity of poverty) 44 In the following equation (Romer’s model): g-n = β N/(1-α-β), β refers to: (1 Point) The existence of multiple equilibria Knowledge spillovers among actors/sectors The role of institutions Endogenous growth 45 The Prisoners’ dilemma is: (1 Point) A situation in which all parties would be better off cooperating than competing but once cooperation has been achieved, each party would gain the most by cheating, provided that others stick to cooperative agreements A situation in which all parties should never cheat, provided that others stick to cooperative agreements A situation in which all parties would be better off cooperating than competing even when cooperation has been achieved A situation in which all parties would be better off competing than cooperating as competition always lead to higher payoffs 46 In the O-ring theory of economic development: (1 Point) Production and savings are complementary Production is modeled with strong complementarities among inputs Production and investments are complementary Production is modeled with no complementarities among inputs 47 Which of the concept(s)/definition(s) measure(s) the Absolute Income Poverty: (1 Point) The Headcount Index None of the answers is correct The Total Poverty Gap Index The Average Poverty Gap Index All the answers are correct 48 The Lewis model is based on the following hypotheses: (1 Point) Industry uses capital and labour All the answers are correct Capital accumulation only happens in industry Submit Agriculture uses land and labour in production 49 Income growth is the most widely adopted measure of development because: (1 Point) All the answers are correct Without growth, raising the wellbeing of selected segments of the population would imply redistribution Without growth there cannot be convergence Growth reduces inequality between segments of population 50 The middle-income trap is when countries that have achieved middle-income status often experience growth of slowdown and stagnation in the growth of real per capita incomes – causes for this include(s): (1 Point) All the answers are correct Institutions may not support an adaptive and creative economy and society Productivity growth slows down Maintaining macro-economic stability Rising wages/unit labor costs This content is created by the owner of the form. 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