P3 EXAm With ANS

ECONOMIC DEVELOPMENT
THIRD PERIODICAL EXAMINATION

A.Y. 2022 – 2023
Direction: Shade the letter of your answer on the separate answer sheet provided. You can use
black ink marker or ball pen. Erasure means wrong. Cheating is strictly prohibited.
1. Which of the following is not a possible cost of high fertility rates and rapid population
growth?
a. increasing returns to natural resources, with a direct impact on average food
consumption.
b. increased urbanization and congestion.
c. a higher labor force growth rate and higher unemployment.
d. a working population that must support a larger number of dependents.
2. The total fertility rate (TFR) is

a. the total number of children born in a country in a given year divided by labor force.
b. the number of children born to the average woman during her reproductive years.
c. the number of births in a country divided by total population in a given year.
d. the number of women age 15-45 in a country divided by total population.
3. The two key factors that trigger speculative attacks on emerging market currencies are
a. deterioration in bank balance sheets and severe fiscal imbalances.
b. deterioration in bank balance sheets and low interest rates abroad.
c. low interest rates abroad and severe fiscal imbalances.
d. low interest rates abroad and rising asset prices.
4. Organized family planning programs and the demand for birth control resulting from
urbanization, modernization, economic development, and increased education have
contributed to
a. a decline in fertility.
b. the demographic transition from stage 3 to stage 2.
c. increases in the ratio of labor to capital.
d. an increase in the dependency ratio.
e.
5. Which of the following is not true?
a. Development generally improves the health system, while better health increases
productivity, social cohesion, and economic welfare.
b. Life expectancy is probably the best single indicator of national health levels.
c. Life expectancy in Africa increased steadily from 1994 to 2003 due to better
health care.
d. There are growing inequalities in investment in health worldwide.
6. Which of the following is not a major cause of global financial crisis of 2008?
a. securitization of mortgage backed securities
b. deregulation of financial system
c. high inflation rate
d. high subprime mortgages
e.
7. A global financial services firm whose bankruptcy in 2008 was largely caused by — and
accelerated — the subprime mortgage crisis is ____________________.
a. Bank of America c. Lehman Brothers
b. Bear Stearns d. Fannie Mae and Freddie Mac
8. The last big independent investment banks on Wall Street which voluntarily will transform
themselves into bank holding companies subject to far greater regulation of Fed is/are
known as ______________________.
a. Fannie Mae and Freddie Mac c. Lehman Brothers
b. Morgan Stanley and Goldman Sachs d. Bank of America
1 | Pwas
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A.Y. 2022 – 2023
9. The following were the results of the global recession in 2008 except:
a. stock market crashed
b. unemployment rate rose
c. bankruptcy of financial institutions
d. high percentage of export in terms of GDP
10. A serious consequence of a financial crisis is

a. financial globalization. c. a contraction in economic activity.
b. financial engineering. d. an increase in asset prices.
11. Deregulation may _______ entry into financial markets and thereby_________ competition.
a. slow, decrease. c. enhance, increase.
b. stop, decrease. d. enhance, decrease.
12. Historically, low rate of population growth was maintained because of
a. low fertility rates.
b. high mortality rates.
c. migration out of developing countries.
d. government restrictions on the number of children families can have.
13. If the birth rate is 6% and the death rate is 2%, the natural rate of population increase is
a. 0 .3% c. 4.0%
b. 3.0% d. 8.0%
14. As migration takes place the per capita income of the workers
a. At first rises, then falls c. Falls continuously,
b. At first falls, then rises d. Rises continuously
15. Malthus argued that the poor would always remain poor because
a. population growth tends to outrun growth of food production
b. they do not save enough
c. there are not enough resources to educate them
d. all of the above
16. Compared to the developed countries, the less developed countries (LDCs) have
a. higher birth rates and lower death rates
b. higher birth rates and higher death rates
c. lower birth rates and lower death rates
d. lower birth rates and higher death rates
17. Which of the following would not be considered as an example of industrialization

a. Increase in literacy
b. Replacement of human with mechanical skills
c. Improved economic organization
d. Improved extraction and working of raw materials
18. If a country experiences a rapid increase in per-capita income due to discovery of new oil
reserves, then it is experiencing:
a. growth but not necessarily development.
b. development but not growth
c. both growth and development
d. neither growth nor development
19. All but one of the following elements is a characteristic of the demographic transition.
Which one is the exception?
a. Initially high birth rate and death rate.
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A.Y. 2022 – 2023
b. Initially low rate of natural increase.

c. Rapid increase in the birth rate during the early stages of development.
d. A sharp fall in the death rate followed with a lag by a decline in the birth rate.
20. Which of the following is a direct implication of the view that childbearing is an economic
decision?
a. People will not have additional children unless they can earn a profit from doing so.
b. Social factors have no effect on childbearing decisions.
c. Compulsory education will increase fertility by raising each child's prospective earnings.
d. Fertility should fall with improved opportunities for women to work in jobs
outside the home.
21. Which of the following characteristics are most likely found in developing countries?
a. high population growth rates.
b. large number of people living in poverty.
c. very traditional methods of agricultural production.
d. all of the above
e.
22. _____________is below the income that secures the bare essentials of food, clothing, and shelter.
a. Income inequality c. Sen’s poverty index
b. Absolute poverty d. Purchasing-power poverty
23. Securitization means that

a. assets that are normally not liquid are made liquid by pooling them and re-selling
them as short-term assets.
b. short-term liquid assets are pooled and then converted to long-term high yielding
assets.
c. the purchase of newly issued securities by Investment dealers.
d. describes a situation where securities are sold to the highest bidders.
24. The money market is for the trading of ________ instruments while the capital market is
where ________ instruments are traded.
a. bonds, Treasury-bills. c. cash, tangible
b. long-term, short-term d. short-term, long-term
25. Countries with chronic balance of payments deficits eventually need to borrow abroad,
often from the _______ as the lender of last resort.
a. U.S. c. IMF.
b. OECD. d. OPEC.
26. A portfolio is
a. a collection of personal liabilities
b. a collection of assets.
c. a collection of various debt instruments.
d. the information collected by banks to evaluate a customer's borrowing capacity.
27. When people leave an area to go elsewhere that is called:

a. immigration c. population transfer
b. Migration d. net-migration
28. What is the best early warning sign of a recession?

a. The stock market
b. The index of leading economic indicators
c. Consumer confidence
d. An inverted yield curve
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A.Y. 2022 – 2023
29. Which of the following characterize the early stages of a financial crisis?
a. Excessive euphoria about the future price of certain assets
b. Excessive pessimism about future asset prices
c. Stable house prices
d. Stagnating share prices
30. Effective regulation of financial institutions is required at international level because that
would:
a. Help avoid a credit crunch that would make it difficult for business and consumers to
borrow from the banks
b. Help ensure the stability of the global financial system
c. Regulate banks in their domestic and their foreign operations
d. All of the options above
31. A financial crisis occurs when _____________ from a disruption in the financial system leads to
______________.
a. a decline in economic development; increased poverty and disease.
b. a decrease in the economic growth rate; a higher unemployment rate.
c. an increase in asymmetric information; severe adverse selection and moral
hazard problems in financial markets.
d. a sharp increase in the inflation rate; a sudden reduction in the willingness of banks to
lend.
32. Financial crises

a. only occur in emerging market economies.
b. rarely have any impact on aggregate economic output.
c. tend to be more severe in financially advanced countries.
d. are prevalent in all industrialized countries.
33. One of the key factors that worsened and prolonged the U.S. Great Depression was
_____________________, which resulted in _____________________.
a. a huge decline in the price level; increased debt burdens.
b. a sharp contraction in the real money supply; a sharp rise in interest rates.
c. a sharp drop in real government spending; a sharp drop in real GDP.
d. a sharp increase in inflation; a sharp decrease in the real money supply.
34. A major disruption in financial markets characterized by sharp declines in asset prices and
firm failures is called a
a. free-rider problem
b. fiscal imbalance
c. 'lemons' problem
d. financial crisis
35. A serious consequence of a financial crisis is

a. financial globalization
b. financial engineering
c. a contraction in economic activity
d. an increase in asset prices
36. If uncertainty about banks' health causes depositors to begin to withdraw their funds from
banks, the country experiences a(n)
a. financial recovery
b. banking crisis
c. reduction of the adverse selection and moral hazard problems
4 | Pwas
A.Y. 2022 – 2023
d. increase in information available to investors
37. The ___________ refers to a reduction in the volatility of business cycle fluctuations starting in
the mid-1980s, believed to have been caused by institutional and structural changes in
developed nations in the later part of the twentieth century.
a. Great Depression
b. Great Recession
c. Great Moderation
d. Financial Crisis
38. The growth of the subprime mortgage market led to

a. increased demand for houses and helped fuel the boom in housing prices.
b. decreased demand for houses as the less credit-worthy borrowers could not obtain
residential mortgages.
c. a decrease in home ownership as investors chose other assets over housing.
d. a decline in the housing industry because of higher default risk.
39. Most U.S. financial crises have started during periods of ________ either after the start of a
recession or a stock market crash.
a. low interest rates
b. low asset prices
c. high financial regulation
d. high uncertainty
40. By bundling different mortgages together, the banks were diversifying the risk. The whole
point of ______________ was to reduce the risk by repacking the risk and then lend again and
more.
a. Origination
b. Debt deflation
c. Securitization
d. Distribution
41. The growth of the subprime mortgage market led to

a. increased demand for houses and helped fuel the boom in housing prices.
b. a decline in the housing industry because of higher default risk.
c. a decrease in home ownership as investors chose other assets over housing.
d. decreased demand for houses as the less credit-worthy borrowers could not obtain
residential mortgages.
42. When housing prices began to decline after their peak in 2006, many subprime borrowers
found that their mortgages were ʺunderwater.ʺ This meant that
a. the basement flooded since they could not afford to fix the leaky plumbing.
b. the roof leaked during a rainstorm.
c. the amount that they owed on their mortgage was less than the value of their house.
d. the value of the house fell below the amount of the mortgage.
43. Which investment bank filed for bankruptcy on September 15, 2008 making it the largest
bankruptcy filing in U.S. history?
a. Merrill Lynch
b. Bear Stearns
c. Lehman Brothers
d. Goldman Sachs
5 | Pwas
A.Y. 2022 – 2023
44. In emerging market countries, the deterioration in bank ʹs balance sheets has more ________
effects on lending and economic activity than in advanced countries.
a. Positive
b. negative
c. affirming
d. advancing
45. Infant mortality, life expectancy, and adult literacy rate are the three measure of welfare
indicators which comprise the
a. Purchasing Power Parity.
b. Physical Quality of Life Index.
c. Human Development Index.
d. The Laspeyres index.
46. A period of rapid population growth between a preindustrial, stable population

characterized by high birth and death rates and a later, modern, stable population marked
by low fertility and mortality is known as
a. demographic transition.
b. population maturity.
c. demobilizing population.
d. birth-death transformation.
47. Demand pull inflation results from

a. demand for government spending on public goods goes down due to lack of financial
backup through tax collection.
b. consumer, business, and government demand for goods and services in excess of
an economy's capacity to produce.
c. a shortage of demand for good and services in excess of supply during depression.
d. demand for public goods is greater than demand for consumer goods.
48. The fact that home values had historically always been rising led lenders to add what risky
behaviors into their lending practices?
a. No down payment
b. No proof of income
c. Lending to less responsible people
d. All of the above
49. What happens to the value of people’s homes who are paying their mortgages back on time
to the bank even though many of their neighbors have defaulted?
a. Their homes go up in value since they are one of only a few people making their
payments on time.
b. Their homes value does not change since they already locked in the purchase price.
c. Their home goes down in value because of all the houses for sale.
d. Their home goes up in value since they keep their yard kept up nicely.
50. Which of the following was not a cause of the financial crisis?
a. Speculation
b. Government policies
c. Central Bank policies
d. Increasing interest rates
6 | Pwas
A.Y. 2022 – 2023
e. Credit rating agencies stamp of approval on mortgage-backed securities and

collateralized debt obligations
51. The following statements are false, except

I. Credit default swaps means making loans to people who may have difficulty
maintaining the repayment schedule.
II. Sub-prime loans generated high returns, but at considerably greater risk of default.
III. Deregulation removed many government restrictions on financial institutions in the
United States and other countries
IV. Speculation involves excessive risk taking, excessive optimism, and the development of
the herd mentality
a. I, II and III
b. II, III and IV
c. I, III and IV
d. I, II and IV
e. All of the above
52. The following statements are true, except

I. Glass-Steagall Act of 1933 prohibited commercial banks from underwriting and
marketing securities
II. Credit default swaps used to transfer credit risks away from the banks. Linked to
insurance companies (AIG)
III. Adjustable-Rate Mortgage long term loan without a fixed interest rate
IV. Subprime loans typically have higher interest rates and allow investment banks to
make more money.
a. I, II and III
b. II, III and IV
c. I, III and IV
d. I, II and IV
e. None of the above

I. Population is defined as all nationals present in, or temporarily absent from a country,
and aliens permanently settled in a country
II. Growth rates are the annual changes in population resulting from births, deaths and
net migration during the year
III. The total fertility rate is calculated by totaling the age-specific fertility rates as
defined over ten-year intervals
IV. Net migration rate equals the rate of people moving into a country less the number of
people moving out of the same country
a. I, II and III
b. II, III and IV
c. I, III and IV
d. I, II and IV

I. Crude death rate is the total number of deaths to residents in a specified
geographic area divided by the total population for the same geographic area
and multiplied by 1,000.
II. Zambia is registered with the highest population growth rate in Africa. Uganda,
on the other hand, is registered in terms of lowest population growth rate.
7 | Pwas
A.Y. 2022 – 2023
III. The survival rates of newborn babies and young children are very high in the
poorer regions of the world
IV. Life expectancy in developing countries has risen rapidly as a result of improvements
in public health.
a. I, II and III
b. II, III and IV
c. I, III and IV
d. I, II and IV

I. In development economics, poverty is defined as the inability to access resources to
enjoy minimal or acceptable standard of living.
II. Headcount Ratio is computed by dividing the total number of individuals or
household in the population by the number of individuals below poverty line.
III. Poverty Gap Ratio gives the ratio of total income transfer necessary to eliminate
poverty to gross national income or GNI.
IV. Income Gap Ratio tells the total income needed to remove poverty relative to the total
income of all poor if they are all raised to the point where they escape poverty.
V.
a. I, II and III
b. II, III and IV
c. I, III and IV
d. I, II and IV

I. Economic inequality is the unequal distribution of income and opportunity between
different groups in society.
II. Education, at all levels, enhancing skills, and training policies can be used alongside
social assistance programs to help people out of poverty and to reduce inequality.
III. Extreme poverty is becoming more concentrated in Sub-Saharan Africa
IV. Some people are poor because even if they have physical and some human capital,
their employment opportunities may be blocked because of discrimination.
a. I, II and III
b. II, III and IV
c. I, III and IV
d. I, II and IV
e. All of the above

I. Components of poverty line are evaluated relative to the prevailing socioeconomic
standards.
II. At the subsistence level, poverty means identifying the poor based mainly on a
universally accepted benchmark of physiological, economic and social requirements
for survival
III. Over the last three decades, more than one billion people lifted themselves out of
extreme poverty, and about half of the world’s countries have reduced extreme poverty
to below 3 percent.
IV. In 2015, Sub-Saharan Africa was home to 28 of the world’s 29 poorest countries
and had more extremely poor people than in the rest of the world combined.
a. I, II and III
8 | Pwas
A.Y. 2022 – 2023
b. II, III and IV

c. I, III and IV
d. I, II and IV
e. All of the above

I. Balloon payments are characterized by unusually large payments that are due at or
near the end of a loan period.
II. Adjustable interest rates are rates that changes at relatively low levels for an
initial period and are fixed thereafter.
III. Prime lending represented a lucrative investment for many banks because in
the case of default, banks could repossess the property and sell it for more than
the amount of the original loan.
IV. Mortgage-backed securities, or MBSs, entitles their purchasers to the whole
interest and principal payments on the underlying loans.
a. I, II and III
b. II, III and IV
c. I, III and IV
d. I, II and IV
e. All of the above

I. The long period of global economic stability and growth that immediately
preceded the crisis, beginning in the mid-to-late 1980s is known as the Great
Depression.
II. Mortgage-backed securities refers to the money allocated to governments to
financial institutions and industries to prevent their collapse
III. Deregulation is the reduction or elimination of government power in a particular
industry, usually enacted to create more competition within the industry.
IV. Inflation always places a country in a negative situation.
a. I, II and III
b. II, III and IV
c. I, III and IV
d. I, II and IV
e. All of the above
60. In 2010 Congress adopted the___________________________, which instituted banking regulations

to prevent another financial crisis and created a Consumer Financial Protection Bureau,
which was charged with regulating, among other things, subprime mortgage loans and
other forms of consumer credit.
a. Wall Street Reform and Consumer Protection Act
b. American Recovery and Reinvestment Act
c. Troubled Asset Relief Program
d. Bank Bailout Bill Act
“May the God of hope fill you

with all joy and peace as you trust in him, so that you may overflow with hope
by the power of the Holy Spirit.”
Romans 15:13
9 | Pwas
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ECONOMIC DEVELOPMENT

THIRD PERIODICAL EXAMINATION

2. The total fertility rate (TFR) is

10. A serious consequence of a financial crisis is

17. Which of the following would not be considered as an example of industrialization

b. Initially low rate of natural increase.

23. Securitization means that

27. When people leave an area to go elsewhere that is called:

28. What is the best early warning sign of a recession?

32. Financial crises

35. A serious consequence of a financial crisis is

d. increase in information available to investors

38. The growth of the subprime mortgage market led to

41. The growth of the subprime mortgage market led to

46. A period of rapid population growth between a preindustrial, stable population

47. Demand pull inflation results from

e. Credit rating agencies stamp of approval on mortgage-backed securities and

51. The following statements are false, except

52. The following statements are true, except

53. The following statements are false, except

54. The following statements are true, except

55. The following statements are false, except

56. The following statements are false, except

57. The following statements are false, except

b. II, III and IV

58. The following statements are true, except

59. The following statements are true, except

60. In 2010 Congress adopted the___________________________, which instituted banking regulations

“May the God of hope fill you

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