Based on Nafziger and Auvinen's study, high unemployment rates

Based on Nafziger and Auvinen's study, high unemployment rates

I represent a vast underutilization of human resources.
II are a potential source of social unrest and political discontent.
III are uncorrelated with poverty and inequality in LDCs.
IV are associated with middle age, rural, uneducated males.


a. I and II only.
b. III and IV only.
c. I, II and III only.
d. I, II and IV only.


Answer: A

Policies to reduce factor price distortion include

Policies to reduce factor price distortion include

I. Encouraging small scale industry.
II Decreasing subsidies to capital investors.
III Reducing social security programs and payroll taxation.
IV Setting market clearing exchange rates.


a. I and II only.
b. II and III only.
c. I, II and III only.
d. I, II, III and IV.


Answer: D

The simplest explanation based on Lewis's model for rural urban migration is

The simplest explanation based on Lewis's model for rural urban migration is

a. that people migrate when urban wages exceed rural wages.
b. a higher expected income in urban areas.
c. better infrastructure in urban areas.
d. the availability of labor-intensive jobs in urban areas.


Answer: A

The Keynesian remedy for unemployment is to

The Keynesian remedy for unemployment is to

a. decrease aggregate demand.
b. reduce tax rates or lower interest rates.
c. decrease government spending.
d. decrease private consumption and investment.


Answer: B

According to Harris and Todaro, creating urban jobs by expanding industrial output

According to Harris and Todaro, creating urban jobs by expanding industrial output

a. is insufficient for solving the urban unemployment problem.
b. will generate capital intensive technologies.
c. will generate more government revenue through urban wages.
d. induces government to increase minimum wages.


Answer: A

Which of the following is not TRUE about rural-urban migration?

Which of the following is not TRUE about rural-urban migration?

a. Migration to the cities is a larger contributor than natural population growth to urban labor growth in sub Saharan Africa.
b. In Latin America natural population increase is the major source of urban growth.
c. From 1975 to 2000, the number of cities in LDCs with populations over 1 million increased from 20 to 50.
d. The urban share of total LDC population grew from 27 percent in 1975 and 35 percent in 1992 to 40 percent in 2003.


Answer: C

Disguised unemployment is

Disguised unemployment is

a. when marginal revenue productivity of labor is zero.
b. the same as seasonal unemployment of LDC agricultural.
c. the rigid factor proportions in LDC agriculture and industry.


Answer: A

The theoretical basis for zero marginal productivity of labor was the concept of

The theoretical basis for zero marginal productivity of labor was the concept of

a. marginal rate of substitution.
b. labor force literacy.
c. substitution of leisure and work among labor.
d. limited technical substitutability of factors.


Answer: D

During the Great Depression workers in DCs who took inferior jobs as a result of being laid off were known as

During the Great Depression workers in DCs who took inferior jobs as a result of being laid off were known as

a. disguised unemployed.
b. cyclical unemployed.
c. seasonally unemployed.
d. voluntarily unemployed.


Answer: A

The invisibly underemployed

The invisibly underemployed

a. are workers who are compelled to work short hours.
b. result from an inadequate use of workers' capacities.
c. are part-time workers who voluntarily work short hours.
d. none of the above is correct.


Answer: B

Which of the following is not TRUE about unemployment in LDCs?

Which of the following is not TRUE about unemployment in LDCs?

a. The unemployment rate for youths is twice that of people over 24.
b. Unemployment in rural areas is twice that of urban areas.
c. World-wide there are fewer unemployed females than males, but the rate is higher for women.
d. The unemployed are relatively well educated.


Answer: C

Labor skills are a major component of

Labor skills are a major component of

a. fertility.
b. population quality.
c. mortality.
d. morbidity.


Answer: B

In a production function Y = F(L,K,N,E,T), Y is

In a production function Y = F(L,K,N,E,T), Y is

a. national product.
b. capital.
c. natural resources.
d. prevailing technology.


Answer: A

Entrepreneurship is the

Entrepreneurship is the

a. technique to manage raw materials efficiently.
b. residual of a production function.
c. resource coordinating other productive resources.
d. blueprint on how to manage the labor force.


Answer: C

The informal sector exhibits

The informal sector exhibits

(a) free entry
(b) labor intensive methods
(c) small, competitive firms
(d) all of the above


Answer: D

Rural-urban migrants differ from the rest of the rural population in that they are more likely to be

Rural-urban migrants differ from the rest of the rural population in that they are more likely to be

(a) well educated
(b) poor
(c) female
(d) all of the above


Answer: A

The goal of integrated pest management (IPT) is to

The goal of integrated pest management (IPT) is to

a. reduce yield losses by pests while minimizing the negative effects of pest control.
b. have year-round plantings of a single crop.
c. undertake monoculture pest planning.
d. encompass biological control through fertilizers.


Answer: A

Economists in India, Pakistan, the Philippines, and Mexico argue that food grain growth would not have kept up with population growth in the last four decades without

Economists in India, Pakistan, the Philippines, and Mexico argue that food grain growth would not have kept up with population growth in the last four decades without

I the improved packages of high-yielding seed varieties.
II fertilizers, pesticides and irrigation.
III improved transportation.
IV better extension service.


a. I and II only.
b. II and III only.
c. I, II and III only.
d. I, II, III and IV.


Answer: D

Prototypes of international agricultural research centers are the

Prototypes of international agricultural research centers are the

I International Center for the Improvement of Maize and Wheat (CIMMYT).
II International Rice Research Institute (IRRI).
III Synthetic Rubber Research Institute (SRRI).
IV Center for International Agricultural Production Control (CIAPC).


a. I only.
b. I and II only.
c. III and IV only.
d. IV only.


Answer: B

Which of the following is not an example of a global public good?

Which of the following is not an example of a global public good?

a. high yielding varieties (HYVs) of grains.
b. polio and small-pox vaccinations.
c. the campaign against river blindness.
d. the drilling of oil in the Arctic.


Answer: D

Which of the following is NOT true about children in a peasant society?

Which of the following is NOT true about children in a peasant society?

a. Boys as young as 8 years old tend or herd animals, weed, pick, and sell produce.
b. Children place more economic demands on a peasant family than an urban family.
c. Major financial security is usually provided by sons.
d. The cost of education, entertainment, and travel is low.


Answer: B

In 2000, China and India constituted about__________ of the world's population.

In 2000, China and India constituted about__________ of the world's population.

a. 40%.
b. 10%.
c. 80%.
d. 0.10%.


Answer: A

The development of high yielding varieties (HYVs) of wheat and rice is known as

The development of high yielding varieties (HYVs) of wheat and rice is known as

a. the agribusiness revolution.
b. farming system theory.
c. the Green Revolution.
d. agri-R&D.


Answer: C

Simon's model is consistent with

Simon's model is consistent with

a. population self sufficiency and constant economic growth.
b. low fertility and mortality.
c. a laissez faire population policy.
d. a constant returns to scale production function.


Answer: C

The Essay on the Principle of Population was written by

The Essay on the Principle of Population was written by

a. The World Bank.
b. Thomas Robert Malthus.
c. Julian Simon.
d. Abraham Lincoln.


Answer: B

Which of the following is not a possible cost of high fertility rates and rapid population growth?

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.


Answer: A

Throughout most of humankind's existence, population grew at a rate of _________ per year.

Throughout most of humankind's existence, population grew at a rate of _________ per year.

a. 10%.
b. 0.002%.
c. 2%.
d. 0.5%.


Answer: B

Approximately how many women were estimated to be "missing" in China?

Approximately how many women were estimated to be "missing" in China?

(a) 20-30 million
(b) 35-48 million
(c) 44-50 million
(d) 52-58 million


Answer: C

Which of the following geographic regions is expected to experience the largest percentage increase in its population between 2003 and 2050?

Which of the following geographic regions is expected to experience the largest percentage increase in its population between 2003 and 2050?

(a) Asia and Oceania.
(b) Latin America.
(c) North America.
(d) Africa.


Answer: D

Which of the following will cause the largest reduction in the birthrate?

Which of the following will cause the largest reduction in the birthrate?

(a) the population becomes less religious
(b) public healthcare improves
(c) education becomes more available
(d) an increase in the opportunity cost of a woman's time


Answer: D

Which of the following would most likely reduce the birthrate?

Which of the following would most likely reduce the birthrate?

(a) public health improvements
(b) an increase in child mortality
(c) a decline in the availability of secondary education
(d) a reduction in the opportunity cost of a woman's time
(e) all of the above.


Answer: A

The Malthusian population trap assumes that

The Malthusian population trap assumes that

(a) contraception is unavailable.
(b) technological progress may be rapid.
(c) fertility increases with per capita income.
(d) all of the above.


Answer: C

The world rate of population growth is closest to

The world rate of population growth is closest to

(a) 1%.
(b) 2%.
(c) 3%.
(d) 4%.


Answer: A

Children under the age of 15 represent about __________ percent of the population of developing countries.

Children under the age of 15 represent about __________ percent of the population of developing countries.

(a) 25
(b) 29
(c) 30
(d) 61
(e) 75


Answer: C

Consider the following data on income shares:

Consider the following data on income shares:

Percentage of income received by
Lowest 40% Highest 20%
Bangladesh 17.3 45.3
Indonesia 14.4 49.4

What conclusion can we reach?

a. Absolute poverty is more widespread in Bangladesh.
b. The size distribution of income is more unequal in Indonesia.
c. Bangladesh had adopted a strategy of redistribution with growth.
d. Growth in Bangladesh is calculated using poverty weights rather than income weights.


Answer: B

According to Kuznets, in the process of development inequality in an economy will normally

According to Kuznets, in the process of development inequality in an economy will normally

a. first rise and then fall.
b. first fall and then rise.
c. remain about the same.
d. show no definite pattern.


Answer: A

Which statement on poverty, inequality and growth is true?

Which statement on poverty, inequality and growth is true?

a. Growth always benefits the poor whatever the characteristics of the growth process.
b. Poverty tends to decline in countries with positive economic growth.
c. Inequality systematically to decline in countries with positive economic growth.
d. How economic growth benefits the poor does not depend on inequality.


Answer: B

"Peer borrowing groups of five or so people with joint liability approve loans to other members as a substitute for the bank's screening process". The above statement applies to

"Peer borrowing groups of five or so people with joint liability approve loans to other members as a substitute for the bank's screening process".

The above statement applies to

a. Indonesia's Badan Kredit Kecamatan (BKK).
b. the Association for Development of Microenterprise.
c. Bangladesh's Grameen Bank.
d. the Enterprise Credit Program in Kolkata.


Answer: C

Which of the following statements are true about income inequality in developed and developing countries.

Which of the following statements are true about income inequality in developed and developing countries.

I 27 percent of the developing countries have low inequality.
II The majority of developed (high-income) countries have high income inequality.
III The income shares of the poor are lower and their variance higher in DCs than in LDCs.


a. I only
b. II only
c. I and II only
d. I, II and III


Answer: A

In 2003, the UN Development Program estimated that a 1-percent LDC per capita consumption growth, with income inequality unchanging, would reduce the poverty percentage by _________ percent yearly.

In 2003, the UN Development Program estimated that a 1-percent LDC per capita consumption growth, with income inequality unchanging, would reduce the poverty percentage by _________ percent yearly.

a. 0.
b. 2.
c. 6.


Answer: B

The elasticity of pro poor growth is

The elasticity of pro poor growth is

a. the percentage increase in the consumption growth of the poor divided by percentage increase in the consumption growth of the nonpoor.
b. the percentage increase in the poor times percentage increase in the nonpoor.
c. the percentage increase in the poverty of the poor divided by percentage increase in the poverty of the nonpoor.
d. the percentage increase in the poor people in the urban divided by percentage increase in the nonpoor in the urban.


Answer: A

A value of 1 in Gini index represents

A value of 1 in Gini index represents

a. low inequality.
b. maximum inequality.
c. 10/10, 000% inequality.
d. 1% inequality.


Answer: B

Indices of income distribution measure

Indices of income distribution measure

a. absolute poverty.
b. economic growth.
c. relative poverty.
d. standard of living.


Answer: C

Sen's welfare theory relies on

Sen's welfare theory relies on

a. individuals' accomplishments.
b. individuals' capabilities.
c. individuals' wealth.
d. individuals' education.


Answer: B

According to Human Development Report 2003, about_______ countries were poorer in 2003 than in 1990.

According to Human Development Report 2003, about_______ countries were poorer in 2003 than in 1990.

a. 50.
b. 100.
c. 1000.
d. 5.


Answer: A

The Human Development Report 2003, which assumes that poverty is multidimensional, calculates a human poverty index based on which of the following measures of deprivation:

The Human Development Report 2003, which assumes that poverty is multidimensional, calculates a human poverty index based on which of the following measures of deprivation:

I probability at birth of not surviving to age 40.
II adult illiteracy rate.
III negative economic growth.
IV lack of a decent standard of living.


a. I and II only
b. III and IV only
c. I, II and III only
d. I, II and IV.


Answer: D

Assuming that the Gini coefficient for Egypt is 0.403 and the Gini coefficient for Australia is 0.404, it is possible to conclude that both Egypt and Australia have

Assuming that the Gini coefficient for Egypt is 0.403 and the Gini coefficient for Australia is 0.404, it is possible to conclude that both Egypt and Australia have

(a) virtually the same number of households in absolute poverty.
(b) virtually the same percentage of households in absolute poverty.
(c) virtually the same level of the Human Development Index.
(d) none of the above.


Answer: D

Which of the following groups is(are) more likely to be poor?

Which of the following groups is(are) more likely to be poor?

(a) minorities
(b) indigenous people
(c) women
(d) all of the above.


Answer: D

About how many girls and women are said to be "missing" in LDCs?

About how many girls and women are said to be "missing" in LDCs?

(a) 2 million
(b) 20 million
(c) 100 million
(d) 2 billion


Answer: C

Which of the following policies might increase labor intensity in industry?

Which of the following policies might increase labor intensity in industry?

(a) a decline in the cost of credit
(b) a decline in the minimum wage rate
(c) a decline in the elasticity of substitution
(d) all of the above.


Answer: B

The headcount index is the percentage of

The headcount index is the percentage of

a. individuals who are poor
b. the percentage of households who are the poor.
c. Both are true.
d. None of true.


Answer: A

Which of the following would be a better match for standard of living criteria for The Multidimensional Poverty Index (MPI)?

Which of the following would be a better match for standard of living criteria for The Multidimensional Poverty Index (MPI)?

a. Standard of Living, equal weight on 6 deprivations (each counts as 1/18 toward the maximum): lack of electricity; insufficiently safe drinking water; inadequate sanitation; inadequate flooring; unimproved cooking fuel; lack of more than one of 5 assets - smart phone, cars, TV, bicycle, and motorbike.
b. Standard of Living, equal weight on 6 deprivations (each counts as 1/18 toward the maximum): lack of electricity; insufficiently safe drinking water; inadequate sanitation; inadequate flooring; unimproved cooking fuel; lack of more than one of 5 assets - telephone, radio, TV, bicycle, and motorbike.
c. Standard of Living, equal weight on 6 deprivations (each counts as 1/18 toward the maximum): lack of electricity; insufficiently safe drinking water; inadequate sanitation; inadequate flooring; unimproved cooking uel; lack of more than one of 5 assets - telephone, air conditioning, cable TV, car, and motorbike.
d. None of the above.


Answer: B

Which of the following is true?

Which of the following is true?

a. Traditional poverty index measures the % of people falling below a poverty line for example $1.25 per day, while MPI focuses on deprivations in health, education, and standard of living; and each receives equal (that is one-third of the overall total) weight.
b. Traditional poverty index measures the % of people falling below a poverty line for example $100 per day, while MPI focuses on deprivations in health, education, and standard of living; and each receives equal (that is one-third of the overall total) weight.
c. Traditional poverty index measures the % of people falling below a poverty line for example $1.25 per day, while MPI focuses on deprivations in health, education, and standard of living; one half going to standard of living and a quarter to health and a quarter to education.
d. None of the above.


Answer: A

Which of the following are true?

Which of the following are true?

a. Poor health, nutrition, and education lowers economic productivity of people in poverty, leading directly and indirectly to slower growth.
b. Social exclusion/injustice associated with poverty also leads to bad government policies that can reduce growth.
c. Both are true.
d. none are true.


Answer: C

One of the characteristics of the poor is that they are

One of the characteristics of the poor is that they are

(a) more likely to be employed in the modern industrial sector.
(b) more likely to come from small families.
(c) more likely to be well educated.
(d) more likely to live in a rural area.


Answer: D

With modern sector enrichment growth, inequality will

With modern sector enrichment growth, inequality will

(a) first rise and then fall.
(b) first fall and then rise.
(c) remain about the same.
(d) rises


Answer: D

The squared poverty gap index (sometimes referred to as the poverty severity index) is obtained by computing the square of the poverty gap index, which puts more weight on the very poor.

The squared poverty gap index (sometimes referred to as the poverty severity index) is obtained by computing the square of the poverty gap index, which puts more weight on the very poor.

a. True
b. False


Answer: A

A society consists of four individuals with the following incomes: 200, 220, 300, and 320. The poverty line is 250. The poverty gap index is then

A society consists of four individuals with the following incomes: 200, 220, 300, and 320. The poverty line is 250. The poverty gap index is then

A. 0.5.
B. 0.08.
C. 0.16.
D. 20.


Answer: C

In a sample of 5,000 households, 800 households have expenditure levels below the poverty line. This means that the headcount poverty rate

In a sample of 5,000 households, 800 households have expenditure levels below the poverty line. This means that the headcount poverty rate

A. Was 16 percent.
B. Was 0.0625.
C. Cannot be computed from these numbers.
D. Is too small to be computed accurately


Answer: A

A more realistic and appropriate way of measuring poverty line and poverty gap is to use:

A more realistic and appropriate way of measuring poverty line and poverty gap is to use:

a. Current exchange rates for comparing poverty across countries.
b. Purchasing Power Parity rates for comparing poverty across countries.
c. the current local currencies for comparing poverty across countries.
d. All of the above.


Answer: B

Consider 2 distributions of consumption for 4 persons. Poverty line = 3.01

Consider 2 distributions of consumption for 4 persons. Poverty line = 3.01

- A distribution is (1,2,3,4)
- B distribution is (2,2,2,4)

By a transfer from the least poor person (individual with '3' in A) to the poorest.


a. The poverty gap will be reduced by such a transfer.
b. The poverty gap will be unaffected by such a transfer.
c. The poverty gap will be unaffected, but the poverty gap index will be reduced.
d. The poverty gap will be unaffected but the poverty gap index will be increased.
e. but the poverty gap index will be reduced.


Answer: B

Consider 2 distributions of consumption for 4 persons. Poverty line = 3.01

Consider 2 distributions of consumption for 4 persons. Poverty line = 3.01

- A distribution is (1,2,3,4)
- B distribution is (2,2,2,4)


a. headcount index is 0.75 (H/N = ¾ = 0.75) and the poverty gap index is 0.25 in both cases.
b. headcount index is 0.75 (H/N = 1/2 = 0.50) and the poverty gap index is 0.25 in both cases.
c. headcount index is 0.75 (H/N = ¾ = 0.75) and the poverty gap index is 0.25 for A and (H/N = 0.50) and the poverty gap index is 0.50 for B.
d. None of the above


Answer: A

How much is the minimum cost of eliminating poverty?

How much is the minimum cost of eliminating poverty?

a. is the sum of all the poverty gaps in a population
b. is the sum of all gaps for extreme poverty in a population
c. is all the expenses paid for the social welfare of the society
d. None of the above


Answer: A

In measuring poverty, we are assuming

In measuring poverty, we are assuming

a. all members of the nation enjoy the same level of well-being
b. all members of the community enjoy the same level of well-being
c. all members of the household enjoy the same level of well-being
d. None of the above


Answer: C

The headcount index of poverty measures

The headcount index of poverty measures

a. The percentage of individuals who are poor.
b. The percentage of households who are poor
c. The percentage of the adults who are poor.
d. None of the above.


Answer: A

Over time, the index does not change if individuals below the poverty line become poorer or richer, as long as they remain below the line.

Over time, the index does not change if individuals below the poverty line become poorer or richer, as long as they remain below the line.

a. True.
b. False


Answer: A

Which of the following are true?

Which of the following are true?

a. The headcount index ignores differences in well-being between different poor households. It assumes all poor are in the same situation.
b. The headcount index does not take the intensity of poverty into account - insensitive to differences in the depth of poverty of the poor.
c. Over time, the index does not change if individuals below the poverty line become poorer or richer, as long as they remain below the line.
d. All are true
e. None is true.


Answer: D

Poverty is better studied with size distribution measures than those based on factor distribution because

Poverty is better studied with size distribution measures than those based on factor distribution because

(a) labor income may be highly concentrated in well-paid modern sector workers.
(b) some poor farmers may receive a sizable share of income in rent.
(c) income from nonmarket activities such as foraging may be important.
(d) all of the above.


Answer: D

The absolute poverty line

The absolute poverty line

(a) decreases as real income grows.
(b) shows the average income of the lowest income group.
(c) can be measured with the Lorenz curve.
(d) none of the above.


Answer: D

The S-curve is used to illustrate

The S-curve is used to illustrate

(a) the typical path taken by the current account over time.
(b) economic fluctuations in the economy.
(c) the typical growth path of a developing economy.
(d) the existence of multiple equilibria.


Answer: D

Based on the HRV growth diagnostic framework, the principle to be followed is simple: go for the reforms that alleviate the most binding constraints and, hence, produce the biggest bang for the reform buck.

Based on the HRV growth diagnostic framework, the principle to be followed is simple: go for the reforms that alleviate the most binding constraints and, hence, produce the biggest bang for the reform buck.

a. True
b. False


Answer: A

In Garett Jones model,

In Garett Jones model,

a. within a country, firms will pay high-skill workers more than their low-skill counterparts, but not dramatically so.
b. their wage differential is determined by the difference in their outputs in the foolproof sector.
c. Both are true.
d. None are true.


Answer: C

The key feature of the foolproof sector is that being of low skill,

The key feature of the foolproof sector is that being of low skill,

a. does not necessarily destroy the final product.
b. is highly costly for the final product.


Answer: A

Garett Jones considers two sectors:

Garett Jones considers two sectors:

a. O-ring Sector
b. Foolproof Sector
c. both are true
d. none are true.


Answer: C

Secretaries at high productivity firms are paid more than secretaries at low productivity firms, because

Secretaries at high productivity firms are paid more than secretaries at low productivity firms, because

a. They work harder at high productivity firms
b. High productivity firms are richer.
c. High productivity firms are more generous.
d. making a mistake is so costly at the high productivity firms that those companies are willing to pay a very high salary to someone who is even slightly better at their secretary job.


Answer: D

Large differences in wages might also be observed, because

Large differences in wages might also be observed, because

a. the high-skilled workers are scarce.
b. the high-skilled workers paired together being much more productive than the low-skilled.
c the low-skilled workers do not work hard.
d. the high-skilled workers are coming from other countries with high wages.


Answer: B

In Michael Kremer's O-Ring Theory, a firm employing a production process with 10 tasks and workers who complete their step with 95 per cent probability produces

In Michael Kremer's O-Ring Theory, a firm employing a production process with 10 tasks and workers who complete their step with 95 per cent probability produces

a. only 60 percent (0.9510) of the output of a firm with perfectly competent workers.
b. 95 percent of the output of a firm with perfectly competent workers.
c. only 80 percent of the output of a firm with perfectly competent workers.
d. only 40 percent of the output of a firm with perfectly competent workers.


Answer: A

Two barriers for the application of Big Push policy are

Two barriers for the application of Big Push policy are

a. massive investment: country may not be able to do it on its own
b. hard information requirements to make sure all sectors operate efficiently (each sector starting with different F values)
c. All of the above.
d. None of the above.


Answer: C

The complementary that causes the multiple equilibrium here is due

The complementary that causes the multiple equilibrium here is due

a. to the demand externality.
b. to rising imports.
c. to rising taxes.
d. to a cut back in budget deficit.


Answer: A

Consider the motivation of farmers for the modernization of agriculture. Which of the following equilibrium is possible?

Consider the motivation of farmers for the modernization of agriculture. Which of the following equilibrium is possible?

(a) Subsistence agriculture - every farmer grows crops that enable them to be self-sufficient
(b) specialization in a single (cash) crop - requires good access to markets; contract enforcement; quality control
(c) Both are possible.
(d) None are possible.


Answer: C

Suppose that firms need specialized skills and workers who are acquiring those skills. Which of the following is true?

Suppose that firms need specialized skills and workers who are acquiring those skills. Which of the following is true?

(a) firms will not move into regions/countries where there's no suitable workers
(b) workers will not acquire such skills if there's no demand for them
(c) Both are true
(d) None are true


Answer: C

The Traditional Methodology is based on:

The Traditional Methodology is based on:

(a) 1 unit of output is produced using 1 worker; Qt = Lt
(b) Marginal product of labor (MPL) in the traditional sector is 1 (lower than in the modern)
(c) Both are true.
(d) None is true.


Answer: C

Explain the role of the Modern Methodology in the Big Push Model:

Explain the role of the Modern Methodology in the Big Push Model:

(a) no output can be produced unless a minimum of F workers are hired (fixed cost you need to pay);
(b) the total demand for workers is Lm = F + cQ where c<1. Q is output.
(c) production function: Qm = (Lm - F) / c for Lm >F and 0 if Lm <F.
(d) MPL is >1
(e) All are true.


Answer: E

The S-curve is used to illustrate

The S-curve is used to illustrate

(a) the typical path taken by the current account over time.
(b) economic fluctuations in the economy.
(c) the typical growth path of a developing economy.
(d) the existence of multiple equilibria.


Answer: D