Exercise 1

 

A) Please decide whether the following statements are correct or not.

 

Q1: Eradicating poverty is one of the most difficult tasks facing the world economy C

Q2: Fortunately, there is a widely shared consensus among economists, public officials, and other scholars over the best methods to achieve the final goal, a world without poverty. (p. 305) I

Q3: Throughout much of the postwar era, a sharp contradiction existed between the proponents of market forces and the proponents of state interventionism. (p. 305) C

Q4: According to the theory of the developmental state, it is the state that should play the central role in economic development. (p. 306) C

Q5: According to the proponents of neoliberalism, the success of newly industrialising countries was due to their reliance on state interventionism. (p. 306) I

Q6: Development economics was the first systematic effort to deal with the challenges that developed nations faced during the postwar era. (p. 306) I

Q7: Development theory as a whole was a collection of general ideas rather than a single coherent theory. (p. 307) C

Q8: According to the proponents of the developmental state, developing countries were locked in a vicious circle. (p. 307) C

Q9: According to the proponents of the developmental state, developing countries could only escape from the above-mentioned vicious circle if the state withdrew substantially from the economy. (p. 307) I

Q10: According to the concept of Myrdal, poor countries had low savings rates, which caused a low investment ratio, which in turn resulted in low productivity. As a consequence, these countries became poor… (and the whole circle repeats itself all over again) (p. 308) C

Q11: Keynes pointed out that there were situations characterised by market failures (such as the Great Depression in the USA). (p. 310) C

Q12: According to the neoliberals, there are two different types of economics: one for the advanced countries and the other one for developing nations. (p. 311) I

Q13: For neoliberals, if LDCs wanted to catch up with industrialised nations, they should maintain market openness, fiscal discipline and noninterventionism. (p. 312) C

Q14: By the early 1950s, neoclassical orthodoxy had triumphed in the economic profession. (p. 312) I

Q15: Neoclassical economists had accepted the idea that the LDCs were trapped in a vicious circle. (p. 312) I

 

Q1: What do we mean by LDCs?

(a) Least Distinguished Cooperation

(b) Less Determined Cooperation

(c) Least Developed Countries

(d) Lending to Domestic Claimants

 

Q2: According to the textbook, what was the primary aim of establishing the IMF, the World Bank and the international regime? (p. 305)

(a) They were established to serve the interests of dominant powers.

(b) They were established to serve the interests of less powerful entities.

(c) They were created in order to provide liquidity for LDCs.

(d) They were created in order to provide security for LDCs.

 

Q3: In which period after the World War II was development economics the prevailing approach in the academic literature? (p. 305)

(a) 1980 to 2000

(b) 1970 to 1980

(c) 1945 to 1970

(d) 1945 to 1980

 

Q4: Which of the following concepts characterised the seventies and the eighties? (p. 306)

(a) state interventionism, guided markets, structural deficiencies

(b) neoliberalism, structural adjustment, free market

(c) neostructuralism, economic adjustment, free market

(d) liberalism, neostructuralism guided markets

 

Q5: Which theory challenged neoliberalism in the late 1980s? (p. 306)

(a) the theory of markets

(b) the theory of developmental state

(c) the theory of development

(d) the theory of market forces

 

Q6: What does the term “NIEs” refer to? (p. 306)

(a) Non-Industrialised Countries

(b) Non-Independent Communities

(c) Newly Industrialising Countries

(d) New Intellectual Commodities

 

Q7: On which continent would you look for the NIEs? (p. 306)

(a) Africa

(b) Europe

(c) Asia

(d) America

 

Q8: Who or what were blamed for the 1997-98 East Asian crisis according to the proponents of the theory of the developmental state? (p. 306)

(a) International economic and political pressures

(b) Shortage of credit

(c) Corrupt governments

(d) Market failures

 

Q9: What did development economics assume in relation with the LDCs? (p. 307)

(a) The LDCs were quite similar to advanced industrialised countries.

(b) The LDCs had a good chance to catch up with industrialised countries because market forces ensured a smooth transition for the LDCs.

(c) The LDCs were too different from each other, therefore no universal recipes could be provided for these countries.

(d) The LDCs were fundamentally different in kind from advanced industrialised countries.

 

 

Q10: According to the proponents of the theory of developmental state, what kind of market failure prevailed in LDCs?

(a) very low savings rate, poor educational system

(b) corrupt government, low rate of population growth

(c) very high savings rate, low investment ratios

(d) high quality educational system, inflexible market structures

 

Q11. The idea of the “Big Push”… (p. 308)

(a) was supposed to enable LDCs to pay back their debts.

(b) was supposed to enable NIEs to export more to industrialised countries

(c) was supposed to enable LDCs to get rid of the state of underdevelopment.

(d) is supposed to enable NIEs to protect themselves against market failures.

 

Q12: According to development economists, what should have the rich countries done in order to help LDCs in their catching up? (p. 309)

(a) Rich nations should have provided more export for instance.

(b) Rich nations should have provided less credit for instance.

(c) Rich nations should have provided massive foreign aid for instance.

(d) Rich nations should have provided more oil for instance.

 

Q13: Among other things, neoliberals stated that … (p. 311)

(a) LDCs’ problems were caused by government failures.

(b) LDCs’ problems were caused by market failures.

(c) LDCs’ problems were caused by the advanced countries.

(d) LDCs did not have a problem at all.

 

Q14: According to Keynesianism, … (p. 311)

(a) the state should play a central role in development.

(b) the market should play a central role in development.

(c) the state should not play a central role in development.

(d) the market should play a central role in capital accumulation and political stability.

 

Q15: What is meant by “getting the prices right”? (p. 312)

(a) To allow market forces (that is the change in demand and supply) to work effectively.

(b) To create a new international economic order.

(c) To eliminate all trade barriers.

(d) To create a new world economy.