ECN 211 MIDTERM 1 2026 MIDTERM
ASSESSMENT FINAL PAPER COMPREHENSIVE
QUESTIONS AND SOLUTIONS
◉ Harrod-Domar model
Why did the "financing gap" fail. Answer: HD: Investment is key to
economic growth, to grow you need to invest.
Leads to diminishing rate of returns.
The financing gap failed because there is no clear link between
investment and growth and it was designed for countries able to
borrow to invest, not for developing countries.
Failed bc urged countries to borrow in order to get more capital
◉ Solow Model
Why is capital important in SR but not LR. Answer: SM: Investing in
technology or technological changes are key to long run growth.
,Not important in long run because technology is easy to transfer and
also diminishing rate of returns to capital investment. But important
in SR because it allows for short term growth known as "catching
up."
◉ What is the key to LR growth in Solow model?. Answer: The key to
LR growth is capital, labor, technology and environment.
Variables such as:
- institutional quality
- design of govt institutions
- health status
- human cap (education levels)
◉ Has the application the SL Model to developing countries
worked?. Answer: No it has not, because although tech spreads
quickly it does not spread fast enough in developing countries.
◉ What are the various ways that economic development has been
quantified?. Answer: Traditional Approach: Gross National Income,
with increases in GNI meaning growth and economic development,
annual percent increases.
, GNI per Capita: GNI per capita to see if income growth is keeping up
with population growth. A higher population means a country must
sustain higher levels of growth.
Corrected GDP: GDP is corrected in which income is
added/subtracted depending on willingness to pay for a substitutes
Subjective - Well Being: happiness studies
Capability Approach: measures growth of how many choices a
person has, more choices = more growth
Synthetic Indicators: the Human Development Index, a basket of
indicators that give you a level of development. Indicators include:
life expectancy, mean years of schooling, etc.
◉ How does the early development of food production and early
arrival of animals set up a region to be powerful?. Answer: Food
means more ppl, food to feed animals, animals mean sedentary, a
bigger population that's dense and sedentary means global power
who has guns, who has the steel and metals and eventually germs
◉ Why have we seen a transition from hunting and gathering to food
production?. Answer: There has been a transition from H& G to food
production b/c of the lack of wild foods, the increase availability of
ASSESSMENT FINAL PAPER COMPREHENSIVE
QUESTIONS AND SOLUTIONS
◉ Harrod-Domar model
Why did the "financing gap" fail. Answer: HD: Investment is key to
economic growth, to grow you need to invest.
Leads to diminishing rate of returns.
The financing gap failed because there is no clear link between
investment and growth and it was designed for countries able to
borrow to invest, not for developing countries.
Failed bc urged countries to borrow in order to get more capital
◉ Solow Model
Why is capital important in SR but not LR. Answer: SM: Investing in
technology or technological changes are key to long run growth.
,Not important in long run because technology is easy to transfer and
also diminishing rate of returns to capital investment. But important
in SR because it allows for short term growth known as "catching
up."
◉ What is the key to LR growth in Solow model?. Answer: The key to
LR growth is capital, labor, technology and environment.
Variables such as:
- institutional quality
- design of govt institutions
- health status
- human cap (education levels)
◉ Has the application the SL Model to developing countries
worked?. Answer: No it has not, because although tech spreads
quickly it does not spread fast enough in developing countries.
◉ What are the various ways that economic development has been
quantified?. Answer: Traditional Approach: Gross National Income,
with increases in GNI meaning growth and economic development,
annual percent increases.
, GNI per Capita: GNI per capita to see if income growth is keeping up
with population growth. A higher population means a country must
sustain higher levels of growth.
Corrected GDP: GDP is corrected in which income is
added/subtracted depending on willingness to pay for a substitutes
Subjective - Well Being: happiness studies
Capability Approach: measures growth of how many choices a
person has, more choices = more growth
Synthetic Indicators: the Human Development Index, a basket of
indicators that give you a level of development. Indicators include:
life expectancy, mean years of schooling, etc.
◉ How does the early development of food production and early
arrival of animals set up a region to be powerful?. Answer: Food
means more ppl, food to feed animals, animals mean sedentary, a
bigger population that's dense and sedentary means global power
who has guns, who has the steel and metals and eventually germs
◉ Why have we seen a transition from hunting and gathering to food
production?. Answer: There has been a transition from H& G to food
production b/c of the lack of wild foods, the increase availability of
