ECON306 EXAM 2025 WITH ACCURATE SOLUTIONS

Development economics is the study of the (a) alleviation of absolute poverty (b) transformation of institutions © allocation of resources in developing countries (d) all the above – Answer(d) all the above Which of the following is an important objective of development? (a) increases in per capita income (b) the expansion of available choices © increases in individual and national self-esteem (d) all the above are important objectives of development – Answer(d) all the above are important objectives of development Sen’s “capability to function” implies (a) that you cannot measure economic development by income alone (b) that health and education are important © that social inclusion and empowerment are important (d) all the above – Answer(d) all the above What are the three main indicators that make up the Human Development Index? – AnswerLife expectancy, education, and GDP per capita measured in PPP. One of the components of the human development index is (a) the percentage of the population who are high school graduates (b) the average daily intake of protein © life expectancy at birth (d) the number of doctors per hundred people in the population – Answer© life expectancy at birth Which measure uses a common set of international prices for all goods and services produced? (a) purchasing power parity (b) GNI price deflators © foreign exchange rate conversions to US dollars (d) the exchange rate – Answer(a) purchasing power parity Why is purchasing power parity an important consideration when comparing national incomes? – AnswerPurchasing Power Parity is an important consideration when comparing national incomes because prices can be very different across nations. It may make a significant difference when comparing prices of essential goods and services which tend to be a lot lower in developing countries. Explain why purchasing power parity measures of income levels tend to show a smaller difference between poor and rich countries. – AnswerPPP measures show the number of units of developing country currency required to purchase a basket of goods and services in the developing country market that costs one dollar in the US. Prices for most services tend to be much cheaper in developing countries than in the US. In what way is development economics greater in scope than traditional economics? – AnswerDevelopment economics must encompass the study of institutional, political, and social as well as economic mechanisms for modernising an economy while eliminating absolute poverty and transforming states of mind as well as physical conditions. How is happiness related to development? – AnswerAnswer should include a discussion on happiness index (HI) as well as refer to the correlation between happiness and economic development. The poverty line in the UK is set at ______________ a. 50% of mean income b. 85% of lowest income c. 60% of median income d. 100% of lowest income – Answerc. 60% of median income The single most important variable explaining the number of people in poverty in each country is: a. the literacy rate b. the HDI c. per capita income d. population – Answerc. Per capita income