MEcon Master of Economics Development Economics 2

Question 1

Microfinance programs primarily aim to:

Accepted Answer

Provide small loans to low-income borrowers excluded from formal credit markets

Answer

Finance large government infrastructure projects

Answer

Fund central bank reserves in developing economies

Answer

Support multinational corporations entering emerging markets

Question 2

Import substitution industrialization (ISI) seeks to promote development by:

Accepted Answer

Protecting nascent domestic industries from foreign competition to foster industrialization

Answer

Subsidizing domestic producers to increase their exports

Answer

Attracting foreign direct investment to free-trade export zones

Answer

Eliminating all trade barriers to maximize market competition

Question 3

The Washington Consensus package of economic reforms included all of the following EXCEPT:

Accepted Answer

Capital controls to protect domestic financial markets

Answer

Fiscal discipline and deficit reduction

Answer

Trade liberalization

Answer

Privatization of state-owned enterprises

Question 4

Randomized controlled trials (RCTs) are used in development economics primarily to:

Accepted Answer

Identify causal impacts of specific development interventions

Answer

Forecast macroeconomic trends in emerging markets

Answer

Determine optimal tax structures for low-income countries

Answer

Estimate long-run steady-state growth rates

Question 5

Which statement best describes 'poverty traps' in development economics?

Accepted Answer

Self-reinforcing mechanisms where poverty itself creates barriers to escaping poverty

Answer

Government policies that inadvertently increase the poverty headcount

Answer

Geographic regions with structurally high and permanent poverty rates

Answer

Tax systems that penalize income growth among the poor

Question 6

Foreign direct investment (FDI) is valued in developing countries primarily because it:

Accepted Answer

Transfers capital, technology, and managerial skills to host economies

Answer

Reduces government tax revenues by creating profit-shifting opportunities

Answer

Guarantees higher wages for all domestic workers in all sectors

Answer

Automatically eliminates trade deficits in recipient countries

Question 7

The infant industry argument for trade protection holds that:

Accepted Answer

Nascent industries may need temporary protection to achieve scale economies and competitiveness

Answer

All new domestic industries should receive permanent tariff protection

Answer

Agricultural industries always require more protection than manufacturing

Answer

Trade protection is never economically justifiable under any circumstance