UGA ECON 4200 Test 1 Questions With
Complete Answers
Development Economics in 1950s/1960s - ANSWER Many developing countries
first became independent. wanted to look at why some countries are growing
faster than others
When did development economics shift from macro to micro?
Why? - ANSWER late 1980s , early 1990
--it was hard to explain countries's behavior with the existing models
--more importance is being place on local contexts (Microeconomic data)
--data began to be more available
--in 2000s onward looking at local contexts. what works in one country might not
work in another due to differences in cultures, traditions, etc
What is Economic Development - ANSWER changes to living conditions
Extreme answer: economic growth rate((GDP2-GDP1))/GDP1
--growth in output (GDP/GNP)
BUT correlation between GNP and other desired features of not automatic
growth in quality of life
--ex: air quality, access to education
--this can be subjective
What has been happening to Cross-country income differences over time -
ANSWER BAD: increasing inequality (rick are getting rich faster while poor stay
poor)
GOOD: average GDP per capita is increasing overall
Exchange Rate Method - ANSWER converts GDP values using the exchange rate
between the two currencies to a single currency, usually the Dollar
adv: quick and easy
Purchasing Power Parity (PPP) Method - ANSWER takes differences in price
levels into account by constructing the price level from a basket of goods a
, typical person consumes (Dollar can buy more in one country than another so
PPP adjusts for this)
adv: more realistic because it considers differences in living conditions
Human Development Index (HDI) - ANSWER ranks countries between 0 and 1 as
a fraction of ultimate development. Closer to 1 the better off a country is.
measured an average of three components:
1. life expectancy at birth (Health)
2. measure of educational attainment (Education)
3. GNI per-capita (Wealth)
Common cutoffs to determine an Least Developed Country - ANSWER 1. lowest
HDI levels
2. living on less than $1 or $1.25 / day
Tied Aid - ANSWER aid given to a country with conditions on what it must be
spent on. Can prevent corrupt governments from pocketing the aid.
What if a country cannot pay back a loan? - ANSWER they can re-negotiate the
loan(extend time to pay back, lower the interest rate)
Forgive loan entirely
White Savior Complex - ANSWER refers to a white person who acts to help non-
white people, with the help in some contexts perceived to be self-serving
"Noble-savage"
How does Inadequate provision of public goods stunt development and growth
for poor countries - ANSWER 1. lack of road infrastructure, power, water and
irrigation, communications, ports, education, healthcare, etc
2. Low tax base and inefficient tax collection systems constrain governments
ability to finance the provision of critical public goods
3. High interest rates in the international capital markets. (riskier investment)
foreign aid - ANSWER financial flows, technical assistance, and commodities
that are designed to promote economic development and welfare as main
objective
provided as grants or subsidized loans
Complete Answers
Development Economics in 1950s/1960s - ANSWER Many developing countries
first became independent. wanted to look at why some countries are growing
faster than others
When did development economics shift from macro to micro?
Why? - ANSWER late 1980s , early 1990
--it was hard to explain countries's behavior with the existing models
--more importance is being place on local contexts (Microeconomic data)
--data began to be more available
--in 2000s onward looking at local contexts. what works in one country might not
work in another due to differences in cultures, traditions, etc
What is Economic Development - ANSWER changes to living conditions
Extreme answer: economic growth rate((GDP2-GDP1))/GDP1
--growth in output (GDP/GNP)
BUT correlation between GNP and other desired features of not automatic
growth in quality of life
--ex: air quality, access to education
--this can be subjective
What has been happening to Cross-country income differences over time -
ANSWER BAD: increasing inequality (rick are getting rich faster while poor stay
poor)
GOOD: average GDP per capita is increasing overall
Exchange Rate Method - ANSWER converts GDP values using the exchange rate
between the two currencies to a single currency, usually the Dollar
adv: quick and easy
Purchasing Power Parity (PPP) Method - ANSWER takes differences in price
levels into account by constructing the price level from a basket of goods a
, typical person consumes (Dollar can buy more in one country than another so
PPP adjusts for this)
adv: more realistic because it considers differences in living conditions
Human Development Index (HDI) - ANSWER ranks countries between 0 and 1 as
a fraction of ultimate development. Closer to 1 the better off a country is.
measured an average of three components:
1. life expectancy at birth (Health)
2. measure of educational attainment (Education)
3. GNI per-capita (Wealth)
Common cutoffs to determine an Least Developed Country - ANSWER 1. lowest
HDI levels
2. living on less than $1 or $1.25 / day
Tied Aid - ANSWER aid given to a country with conditions on what it must be
spent on. Can prevent corrupt governments from pocketing the aid.
What if a country cannot pay back a loan? - ANSWER they can re-negotiate the
loan(extend time to pay back, lower the interest rate)
Forgive loan entirely
White Savior Complex - ANSWER refers to a white person who acts to help non-
white people, with the help in some contexts perceived to be self-serving
"Noble-savage"
How does Inadequate provision of public goods stunt development and growth
for poor countries - ANSWER 1. lack of road infrastructure, power, water and
irrigation, communications, ports, education, healthcare, etc
2. Low tax base and inefficient tax collection systems constrain governments
ability to finance the provision of critical public goods
3. High interest rates in the international capital markets. (riskier investment)
foreign aid - ANSWER financial flows, technical assistance, and commodities
that are designed to promote economic development and welfare as main
objective
provided as grants or subsidized loans
