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.