SET 5

ECONOMIC DEVELOPMENT
Mid-Term Examination

TRUE OR FALSE. Select T if statement is correct and F if statement is wrong and

HIGHLIGHT the correct answer on the answer sheet provided.

1. Colonial era institutions often favored extractors of wealth, rather than creators of wealth,
harming development then and now.
2. Capital goods differ from consumer goods because consumer goods satisfy wants
directly, while capital goods do so indirectly by aiding the production of consumer goods.
3. National income accounting measures the economy’s performance for the whole of the
economy.
4. One group of whole population is made up of people less than 16 years of age and people
who are institutionalized, such people are considered potential members of the labor
force.
5. It is just an accident that most developing country governments have made
industrialization a high national priority.
6. Some markets are highly personal, involving face-to-face contract between demander and
supplier, others are impersonal with buyer and seller never seeing or knowing each other.
7. Gross domestic product is the total market value of all final and intermediate goods and
services produced in a given year which includes those produced by either citizen-
supplied or foreign supplied resources employed within the country.
8. The world as a whole has just crossed the 50% threshold, that for the first time in history,
more people live in cities than in rural areas.
9. We can compare market values of GDP from year to year if the value of money itself
changes in response to inflation and deflation by inflating GDP when price rise and
deflate GDP when prices fall.
10. Those non-production transactions must be excluded from GDP because they have
nothing to do with the generation of final goods.
11. Not only are developing countries characterized by higher rates of population growth, but
they must also contend with greater dependency burdens than the rich nations.
12. National income accountants regard residential construction as investment because
apartment buildings and houses, like factories and stores, earn income when they are
rented of leased.
13. Confronted with the new entrants, the monopolist may create an entry barrier by slashing
its price, stepping up its advertising, ore taking other strategic actions to make it difficult
for the new entrant to succeed.
14. By far the largest share of national income was paid as wages and salaries by business
and government to their employees.
15. In the case of China, productivity gains explained China’s growth in the formative years
and that productivity had overtaken investment by the early 1990’s as the largest source
of growth.
16. Under China’s reforms, local government continued to have responsibility to provide
revenue to central government but local government was not allowed to keep large share
of collections on the margin before local and central revenue was fully separated.
17. With the exception of a very few successful Asian countries, non-oil-exporting
developing countries, faced the formidable difficulties in trying to generate rapid
economic growth on the basis of trade.
18. Technology transfer should enable developing countries to leapfrog over some of the
earlier stages of technological development, moving immediately to high-productivity
techniques of production.
19. The main obstacle to or constraint on development according to Rostow was the
relatively high level of new capital formation in most poor countries.
20. In addition to accumulation of capital, both physical and human, a set of interrelated
changes in the economic structure of the country are required for the transition from a
traditional economic system to modern one.
21. Public choice theory assumes that politicians, bureaucrat citizens, and states act solely
from self-interested perspective, using their power and authority of government for their
own self ends.
22. Raising the income levels of the poor will stimulate an overall increase in the demand for
locally produced necessity products like food and clothing, whereas the rich tend to spend
their additional income on imported luxury goods.
23. Encouraging efficient investment and widespread entrepreneurship plays a prominent role
in accelerating growth and promoting development more broadly.
24. The prospect of ending poverty depends critically on the rate of economic growth and the
level of resources devoted to poverty programs and the quality of those programs.
25. The more the Lorenz curves away from the diagonal line, the greater the degree of
equality represented.
26. It had been observed that the economically most successful countries are located in the
tropical zone.
27. The developing countries also typically enjoyed relatively stronger political stability and
more flexible social institutions with broader access mobility.
28. Development is purely an economic phenomenon that every nation strives to achieve and
economic progress is an essential component.
29. Promoting rapid economic growth and reducing poverty are not mutually conflicting
objectives.
30. Every economy must save and invest, however, in order to grow, new investments
representing net additions to capital stock are necessary.
31. The rich in many contemporary poor countries are generally noted for their frugality or
for their desire to save and invest substantial proportion of their incomes in the local
economy.
32. According to the concept of dualism, the coexistence of modern and traditional methods
of production in urban and rural sector are merely transitional.
33. Functional income distribution attempts to explain the income a factor of production by
the contribution that this factor makes to production.
34. There is underinvestment in training facilities because entrepreneurs knew that the
workers they train maybe enticed away with higher wages offered by rival firms that do
not have to pay these training costs.
35. The personal distribution of income deals with individual persons or households and the
total income they receive taking into consideration where the income was derived.
36. For an upper-middle-income country, poverty has log been resolved in Brazil with an
average per capita income grew by 220% in the high growth years from 1960 to 1980.
37. High income equality facilitates rent seeking, including actions such as lobbying, large
political donations, bribery, and cronyism.
38. Pakistan according to analysts as a leading example of growth without development with
low social indicators for its income and growth.
39. The basic purpose of land reform is to transform tenant cultivators into smallholders who
will then have an incentive to raise production and improved their income.
40. South Korea’s rise over the past generation has been characterized by rapidly increasing
agricultural productivity, shift of agriculture to industry, the steady growth of the capital
stock and of education and skills.
41. The more rapid the population growth rate is the greater the proportion of dependent
children in the total population and the more difficult it is for people who are working to
support those who are not.
42. As fertility had fallen, a preference for boys over girls has developed, particularly in the
Hindi belt in northern India.
43. Cote d’Ivoire’s legal system is based on common law, while Ghana’s legal system is
based on civil law.
44. Whether the realm of directly productive economic investment or in the fields of
education, health, housing and other social services, this urban modern-sector bias in
government expenditures is at the core of many development problems
45. Bangladesh now has the conditions for accelerating economic progress in the coming
years, particularly if continuing problems of governance can be overcome.
46. Progressive tax structures on paper often turn out to be regressive taxes in practice, in that
upper income groups often end up paying proportionally larger share of their income in
taxes than the lower and middle-income groups.
47. Argentina relied to a large extent on exporting primary goods, multinational corporations
played a large role and Argentina was able to create to its own viable manufacturing
export industries.
48. The Portuguese built a fortress on the coast of Cote d’Ivoire, later, the British named the
area the Gold Coast.
49. Foreign investors discovered that India offered very cheap labor with unusually high
skills and work habits for its income level.
50. Two of the world’s fastest growing economies, China and India, also happen to be the
world’s most populous nations.
MULTIPLE CHOICE: Choose letter of correct answer and write XX over the letter of correct
answer on the answer sheet.

1. Defined as the freedom that a person has in terms of choice of functioning given his
personal features and his command over commodities.
a. Capabilities c. happiness
b. Well-being d. none of the above
2. Where the low income leads to low investment in education and health as well as plant
and equipment and infrastructure, which in turn leads to productivity and economic
stagnation.
a. Circular causation c. underdevelopment trap
b. Poverty trap d. economic inertia
3. Also called less developed countries, characterized by low levels of living and other
development deficits.
a. Emerging countries c. traditional countries
b. Developing countries d. newly industrializing countries
4. It is part of well-being which may in itself expand an individual’s capability to function.
a. Capabilities c. growth
b. Happiness d. progress
5. Concerned primarily with the efficient, least-cost allocation of scarce productive
resources with the optimal growth of these resources overtime.
a. Market economy c. command economy
b. Traditional economics d. development economics
6. The number of units of foreign country’s currency required to purchase the identical
quantity of goods and services in the local developing country market.
a. PPP c. GDP
b. GNI d. none of the above
7. The total final output of goods and services produced by the country’s economy, within
the country’s territory, by residents and non-residents.
a. Gross domestic product c. Gross national product
b. Net domestic product d. all of the above
8. It must be conceived as a multidimensional process involving major changes in social
structures, popular attitudes, and national institutions, acceleration of growth, the
reduction of inequality, and the eradication of poverty.
a. Progress c. growth
b. Well-being d. all of the above
9. The ability to meet life-sustaining basic human needs which include food, shelter, health
and protection.
a. Self-esteem c. sustenance
b. Freedom from servitude d. none of the above
10. It is calculated as the total domestic and foreign value added claimed by the country’s
residents without making deductions of depreciation of domestic capital stock.
a. PPP c. GDP
b. GNI d. all of the above
11. Had been called the engine of growth that propelled today’s economically advanced
nations during the 19th and 20th centuries.
a. Research and Development c. Privatization
b. Technological advancement d. free trade
12. A specific minimum level of income needed to satisfy the basic physical needs or food,
clothing and shelter in order to ensure continued survival.
a. Absolute poverty c. subsistence level
b. Minimum wage d. all of the above
13. Where developing nations must rely on the developed world to cease aggravating the
problem and to develop solutions, including mitigation at home assistance.
a. Dependency c. environmental dependence
b. Environmental assistance d. externality
14. Forms of social divisions such as ethnic, linguistic, religious, etc. that are sometimes
associated with civil strife and violent conflict.
a. Discrimination c. diversification
b. Fractionalization d. fragmentation
15. A nation’s supply of usable factors of production, including mineral deposits, raw
materials and labor.
a. Resource endowments c. financial endowments
b. Geographical endowments d. physical endowments
16. Pernicious effects on development created during the colonial period that in many cases
have persisted to the present day.
a. Colonialism c. Colonial mentality
b. Colonial Legacy d. Colonial heritage
17. Reason why developing countries now a days will be catching up by growing faster than
developed countries.
a. Technology transfer c. Factor accumulation
b. Rapid capital accumulation d. all of the above
18. This is defined by health, education and skills acquired
a. Profession c. Human Equality
b. Knowledge d. Human capital
19. It is composed of older people and children that are supported financially by the country’s
labor force.
a. Low income group c. economic support group
b. Dependency burden d. indigenous individuals
20. A loss of valuable human resource which resulted from the emigration of highly educated
and skilled professionals and technicians from developing countries to developed
countries.
a. Migration c. brain drain
b. Economic transfer d. degradation
21. It is associated by high productivity and incomes and has been a hallmark of
modernization and national economic power.
a. Technological advancement c. growth
b. Development d. industrialization
22. The existence and persistence of substantial and even increasing divergences between
rich and poor peoples on various levels.
a. Dominance c. Dualism
b. Dependence d. Autarky
23. A theory of economic development associated with the American historian W. Rostow,
according to which a country passes through sequential stages in achieving development.
a. Harrod-Domar growth model c. stages of growth model
b. Lewis two-sector model d. structural change theory
24. In internal affairs, this is a situation in which the developed countries have much greater
power than the less developed countries in decisions affecting international economic
issues.
a. Dependence c. colonialization
b. Dualism d. dominance
25. A technological relationship between the quantity of goods produced and the quantity of
inputs required to produce it.
a. Production function c. technological transformation
b. Input-output relationship d. structural transformation
26. Economic growth that continues over a long run based on savings, investment and
complementary activities.
a. Sustainability c. modern-sector capital accumulation
b. Self-sustaining growth d. technological progress
27. The approach recognizes that there are many imperfections in developing-country
product and factor markets and that governments do have key role to play in facilitating
the operation of markets through non-selective interventions.
a. Public-choice theory c. new political economy approach
b. Market-friendly approach d. neoclassical growth theory
28. States simply that the rate of growth of GDP is determined jointly by the net national
savings ratio, and the national capital-output ratio.
a. Harrod-Domar theory c. Stages of growth model
b. Lewis two-sector model d. structural change theory
29. Attributes underdevelopment to faulty and inappropriate advice provided by well-
meaning but often uninformed, biased, and ethnocentric international expert advisers
from developed countries.
a. Neoclassical counter revolution c. Dualistic development
b. False-paradigm model d. statist model
30. The increase in total output resulting from the use of one additional unit of variable factor
of production.
a. Marginal product c. total product
b. Average product d. production
31. The structural change which focused on the sequential process through which the
economic, industrial and institutional structure of underdeveloped country is transformed
over time.
a. Empirical structural change analysis c. neocolonial dependence model
b. Patterns-of-development analysis d. none of the above
32. A valuable tool for domestic and international analysts who start with detailed
understanding of a developing country where it can be helpful in identifying binding
constraints on national growth and policy priorities to address them.
a. Growth diagnostics approach c. incumbency approach
b. Complementarities approach d. none of the above
33. An action taken by one firm, worker, or organization that increases the incentives for
other agents to take similar action
a. Complementarity c. binding constraint
b. Coordination d. deep intervention
34. Conditions in which the big push may be necessary beyond those that had been described
previously
a. Intertemporal effects c. Infrastructure effects
b. Urbanization effect d. all of the above
35. Where a region remains stuck in subsistence agriculture because without the middlemen
to whom farmers sell, they will have little incentive to continue producing their staple
crop or range of goods primarily for personal consumption or sale within the village.
a. Middle-income trap c. deep intervention
b. Poverty trap d. underdevelopment trap
36. Government policy that can move the economy to a preferred equilibrium or even to a
higher permanent rate of growth, which can be self-sustaining.
a. Coordination c. deep intervention
b. Market intervention d. binding constraint
37. He is called the father of economics and his definition of economics is called wealth
definition.
a. Alfred Marshall c. Adam Smith
b. John Maynard Keynes d. A. C. Pigou
38. A state of affairs in which agents’ inability to work together with others leads to an
outcome that leaves all agents worse off than in an alternative situation.
a. Coordination failure c. binding constraint
b. Market intervention d. complementarism
39. A model of how the presence of market failures can lead to a need for concerted
economy-wide and probably public-policy led effort to get the long process of
development underway of accelerate it.
a. O-ring model c. multiple equilibrium
b. Big Push d. free-market model
40. Where countries develop to a degree but chronically fail to reach high income status,
often due to lack of innovation capacity.
a. Middle-income trap c. deep intervention
b. Poverty trap d. underdevelopment trap
41. Costs of monitoring managers and designing and implementing schemes to ensure
compliance or provide incentives to follow the wishes of the employer.
a. Overhead costs c. externalities
b. Agency costs d. empirical costs
42. A market model which typically use a great deal of none price competition particularly
with product differentiation.
a. Oligopoly c. monopolistic competition
b. Pure competition d. monopoly
43. To get one thing, you forgo the possibility of getting something else
a. Overhead cost c. external cost
b. Opportunity cost d. all of the above
44. The payments a firm must make, or incomes it must provide, to attract the resources if
needs away from alternative production opportunities
a. Expenditures c. economic cost
b. Opportunity cost d. marginal cost
45. A graph representing a shift in demand, increasing total demand
a. c

b d

46. The point on a graph where both the buyer and seller agree to buy and sell of a product.
a. Break-even point c. merchandizing point
b. Starting point d. equilibrium point
47. Example of these costs are rental payments, interest on firms debts, portion of
depreciation expense and insurance premiums.
a. Marginal Costs c. Variable Costs
b. Fixed Costs d. Opportunity Costs
48. At this level of analysis, the economist observes the details of economic unit, or very
small segment of the economy like individual industry, firm or household.
a. Macroeconomics c. microeconomics
b. Econometrics d. entrepreneurship
49. Maximum legal price a seller may charge of a product or service where they are
established to enable consumers to obtain some essential goods they could not afford at
equilibrium price.
a. Price ceiling c. discount price
b. Price floor d. listed price
50. A schedule or curve showing the amounts of product that producers are willing and able
to make available for sale in the market at each series of possible prices during a specific
period of time.
a. Demand c. supply
b. Stocks for sale d. production
NAME: ____________________________________
SUBJECT CODE & SECTION: _________________
DATE:____________________

SET 5
ANSWER SHEET
ECONOMIC DEVELOPMENT

TRUE OR FALSE MULTIPLE CHOICE

1 T F 26 T F 1 A B C D 2 A B C D
6
2 T F 27 T F 2 A B C D 2 A B C D
7
3 T F 28 T F 3 A B C D 2 A B C D
8
4 T F 29 T F 4 A B C D 2 A B C D
9
5 T F 30 T F 5 A B C D 3 A B C D
0
6 T F 31 T F 6 A B C D 3 A B C D
1
7 T F 32 T F 7 A B C D 3 A B C D
2
8 T F 33 T F 8 A B C D 3 A B C D
3
9 T F 34 T F 9 A B C D 3 A B C D
4
1 T F 35 T F 10 A B C D 3 A B C D
0 5
11 T F 36 T F 11 A B C D 3 A B C D
6
1 T F 37 T F 12 A B C D 3 A B C D
2 7
1 T F 38 T F 13 A B C D 3 A B C D
3 8
1 T F 39 T F 14 A B C D 3 A B C D
4 9
1 T F 40 T F 15 A B C D 4 A B C D
5 0
1 T F 41 T F 16 A B C D 4 A B C D
6 1
1 T F 42 T F 17 A B C D 4 A B C D
7 2
1 T F 43 T F 18 A B C D 4 A B C D
8 3
1 T F 44 T F 19 A B C D 4 A B C D
9 4
2 T F 45 T F 20 A B C D 4 A B C D
0 5
2 T F 46 T F 21 A B C D 4 A B C D
1 6
2 T F 47 T F 22 A B C D 4 A B C D
2 7
2 T F 48 T F 23 A B C D 4 A B C D
3 8
2 T F 49 T F 24 A B C D 4 A B C D
4 9
2 T F 50 T F 25 A B C D 5 A B C D
5 0

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