Appendix
Additional Exam Questions
◼ Exam Questions Part I
1. The change in GDP over time is the most common measure of growth and development. Discuss
the pros and cons of this method. Is there an alternative way to decide which of two countries is
more developed? Explain briefly.
2. You are given the assignment of comparing GDP between Country A and Country B. Suppose each
country produces two goods. The following table lists the quantities produced and the prices in each
3. List and explain four common barriers to growth among less developed countries. Do you think
today’s developed countries had to overcome these same barriers in their earlier stage of economic
development? Comment to the best of your knowledge.
4. What is the primary difference between economic growth and development? Is it possible to achieve
6. What are the major differences between the new Human Development Indicator (HDI) and the
original HDI?
7. In this question, you will compare the Lewis model and dependency theory.
130 Todaro/Smith • Economic Development, Twelfth Edition
8.Prices of Big Macs in various countries have been used to illustrate purchasing power parity exchange
rates between countries.
a. Suppose the price of a Big Mac in Moscow is 11,000 rubles, and in the U.S., the price is $2.50.
What would be the purchasing-power-parity exchange rate according to Big Mac prices?
10. This is a four-part question:
a. The Harrod-Domar model is part of the linear stages of growth theories. What are the three
common features of these models as far as explaining how growth occurs?
12. Explain what is meant by the term surplus labor. What is the significance of surplus labor in
explaining growth in an economy described by the Lewis model?
Appendix Additional Exam Questions 131
3. This is a four-part question relating to factor markets and unemployment in LDCs:
4. Certain growth strategies or patterns of growth may result in greater income inequality within
the country. You are asked to advise on policies to increase economic growth while at the same
7. Should developing countries attempt to limit population growth? Why or why not?
8. This is a three-part question:
a. Subsidizing wages in the urban area, so that a firm receives a certain payment per worker hired,
is a good policy if the goal is to decrease urban unemployment. Explain.
9. How does a shift from emphasizing economic growth to economic development alter the choice of
132 Todaro/Smith • Economic Development, Twelfth Edition
13. Explain how population growth or migration can be viewed as a common property or open access
resource problem. Is there a market failure in this case?
14. Why do the poorest countries tend to cause significant environmental damage?
20. What are the primary objectives of Microfinance institutions such as the Grameen Bank, and how do
they operate in contrast to traditional banks?
21. What is the Multidimensional Poverty Index and how is it a more improved measure of poverty?
23. How can differences in earlier institutions and the policies pursued by nations play an important role
4. This is a three-part question:
a. Briefly describe the import substitution strategy as a means towards economic growth.
Appendix Additional Exam Questions 133
5. Suppose you are given the following information about the production of bananas and shoes in
Country X and Country Y.
Country X
Country Y
Labor days per ton of bananas
2
3
8. Some of the most successful less developed countries have pursued both import substitution and export
promotion at the same time. Explain why growth in the economy may tend to be highest when both
strategies are followed at the same time. Does this present any challenges in terms of the policies
13. Why is it optimal for a country to specialize in the production of those goods that use its most
abundant factor?
14. Explain “export promotion policies” and “import substitution policies” with examples of countries
that successfully or unsuccessfully pursued these policies. Why was one policy successful but not
the other? In your opinion, could all LDCs possibly thrive had they followed the successful strategy
between the two? Why or why not?
134 Todaro/Smith • Economic Development, Twelfth Edition
15. The global financial crisis has impacted almost all nations of the world, some more adversely than
others. Why are many economists concerned about the recovery from the global financial crisis?
16. In the past several decades the world had witnessed several armed conflicts. What are the primary
reasons for armed conflict in developing countries and what factors increases the risks of such
conflicts?
17. East Asia is often cited as a shining example of development done right. How did active government
industrialization strategy and industrial policies, including the collaboration can between private and
public sectors contribute to its success?
18. In your opinion, what are the three most serious obstacles to development faced by most LDCs in the
21st century? Explain.
19. In your opinion, what are the three most serious socioeconomic problems faced by a majority of
developing nations in the 21st century? Explain.