Recent

  • Show all results for ""

🎧 New: AI-Generated Podcasts Turn your study notes into engaging audio conversations. Learn more

Classic Theories of Economic Development
45 Questions
0 Views

Classic Theories of Economic Development

Created by
@SolidLaboradite

Podcast Beta

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What does a lower capital-output ratio indicate about investment efficiency?

  • Investment leads to lower growth rates.
  • Investment is more efficient. (correct)
  • Investment is less efficient.
  • Investment requires more capital.

    • How is a high capital-output ratio viewed in terms of investment?

  • It reflects high saving rates.
  • It indicates strong economic growth.
  • It signals efficient use of resources.
  • It suggests inefficient investment. (correct)

    • What is necessary to boost economic growth rates in developing countries?

  • Increase in foreign investment only.
  • Reduction in capital output ratios.
  • Decrease in workforce education.
  • Higher savings levels, either domestically or from abroad. (correct)

    • What does Rostow argue is necessary for countries transitioning from underdevelopment to development?

    <p>Mobilization of domestic and foreign savings</p> Signup and view all the answers

    What factor contributes to a 'vicious cycle' of low growth in developing countries?

    <p>Low rates of saving and investment.</p> Signup and view all the answers

    According to the Harrod-Domar growth model, what is the impact of the capital-output ratio on GDP growth?

    <p>Higher capital-output ratio decreases GDP growth</p> Signup and view all the answers

    What additional components of economic growth does the Harrod-Domar model include besides investment?

    <p>Labor force growth and technological progress</p> Signup and view all the answers

    What facilitated the success of the Marshall Plan for Europe?

    <p>The presence of necessary structural, institutional, and attitudinal conditions.</p> Signup and view all the answers

    Which of the following is considered a necessary condition for accelerated rates of economic growth according to Harrod-Domar model?

    <p>Increased savings.</p> Signup and view all the answers

    For the Harrod-Domar model, what is the assumed relationship between savings and investment?

    <p>Higher savings enable higher investments</p> Signup and view all the answers

    Which of the following is a common misconception regarding the Rostow and Harrod-Domar models?

    <p>They apply the same conditions to all nations without consideration.</p> Signup and view all the answers

    How does technological progress affect the Harrod-Domar framework?

    <p>It reduces the capital-output ratio</p> Signup and view all the answers

    What complementary factors are often lacking in underdeveloped nations that hinder economic growth?

    <p>Managerial competence and skilled labor.</p> Signup and view all the answers

    What is the capital-output ratio if $3 of capital is necessary to produce an annual $1 stream of GDP?

    <p>3 to 1</p> Signup and view all the answers

    What assumption does the Harrod-Domar model make regarding labor in developing economies?

    <p>Labor can be hired at will in proportion to capital</p> Signup and view all the answers

    Which statement correctly reflects the relationship between the savings ratio and growth rate of national income according to the Harrod-Domar model?

    <p>An increase in the savings ratio increases the growth rate</p> Signup and view all the answers

    Which of the following is NOT a key component identified in the Harrod-Domar model for economic growth?

    <p>Government spending</p> Signup and view all the answers

    What does the term 'anti-developmental' economic growth imply?

    <p>Income and output growth are concentrated among a few capital owners.</p> Signup and view all the answers

    Which criticism relates to the existence of surplus labor in rural areas according to the Lewis model?

    <p>Most contemporary research refutes the idea of surplus labor in rural locations.</p> Signup and view all the answers

    What is a common feature of urban labor markets in developing countries before the 1980s?

    <p>Wages tended to rise even with high levels of unemployment.</p> Signup and view all the answers

    Which institutional factor is mentioned as influencing wage determination in the modern sector?

    <p>Union bargaining power</p> Signup and view all the answers

    What assumption regarding returns in the modern industrial sector is criticized in the Lewis model?

    <p>That diminishing returns are expected.</p> Signup and view all the answers

    Why is the Lewis model still relevant to recent experiences in China?

    <p>Labor has transitioned from farming to manufacturing.</p> Signup and view all the answers

    What is identified as the 'Lewis turning point'?

    <p>The point at which wages in manufacturing begin to rise.</p> Signup and view all the answers

    What aspect of technological transfer is mentioned regarding labor use?

    <p>It saves labor in many modern processes.</p> Signup and view all the answers

    What is the implication of MPLA being zero in the rural labor market?

    <p>Rural workers share the output equally.</p> Signup and view all the answers

    How does the Lewis model suggest that profits in the modern sector translate to employment growth?

    <p>Profits are reinvested, causing labor demand to increase.</p> Signup and view all the answers

    What happens to the marginal product of rural labor as the labor-to-land ratio declines?

    <p>It is no longer zero.</p> Signup and view all the answers

    What is the Lewis turning point?

    <p>When all surplus labor is absorbed in the modern sector.</p> Signup and view all the answers

    What does the demand curve for labor in the modern sector reflect according to the Lewis model?

    <p>The declining marginal product of labor.</p> Signup and view all the answers

    What does the upward shift of total product curves in the modern sector indicate?

    <p>An increase in labor productivity.</p> Signup and view all the answers

    What assumption does the Lewis model make about labor market competition in the modern sector?

    <p>Labor markets are perfectly competitive.</p> Signup and view all the answers

    What is a criticism of the Lewis model concerning capital accumulation?

    <p>It assumes profits are reinvested in labor-saving technology only.</p> Signup and view all the answers

    Which of the following statements reflects the concept of the average product of labor in the rural sector?

    <p>Output is determined by the total labor input divided by the number of workers.</p> Signup and view all the answers

    In the context of the Lewis model, what does perfectly elastic labor supply imply for rural workers?

    <p>There is always enough labor available for the urban sector.</p> Signup and view all the answers

    What was the primary focus of the linear-stages-of-growth model?

    <p>Correct quantity of saving and investment</p> Signup and view all the answers

    Which approach emerged in the 1970s focusing on internal processes of change?

    <p>Theories of structural change</p> Signup and view all the answers

    What major concern did the international-dependence revolution address?

    <p>Internal rigidities and power relationships</p> Signup and view all the answers

    What did the neoclassical counterrevolution emphasize as the cause of economic failure?

    <p>Excessive regulation and government intervention</p> Signup and view all the answers

    Which theory emphasized achieving egalitarian objectives within a growing economy?

    <p>International-dependence revolution</p> Signup and view all the answers

    What was the main critique of the linear-stages-of-growth model by other economic theories?

    <p>It did not address political factors</p> Signup and view all the answers

    Which of the following concepts is mainly addressed in theories of structural change?

    <p>Internal structural economic shifts</p> Signup and view all the answers

    What was a significant shift in thought during the 1980s and 1990s regarding economic development?

    <p>Focus on privatization and free markets</p> Signup and view all the answers

    What common element did all four classic theories of economic development share?

    <p>Belief in rapid economic growth as essential</p> Signup and view all the answers

    In the context of economic development, what did dependence theorists emphasize?

    <p>The impact of external forces</p> Signup and view all the answers

    Study Notes

    Classic Theories of Economic Development

    • Post-World War II literature on economic development has four competing strands of thought
    • The linear-stages-of-growth model was a dominant theory in the 1950s and 1960s where development was seen as a series of stages all countries must pass
    • The theory and patterns of structural change emerged in the 1970s and focused on the internal process of structural changes needed for successful economic growth
    • The international-dependence revolution emphasized external and internal constraints on economic development and focused on power relationships and their impact on economic growth
    • The neoclassical, free market counterrevolution emphasized the role of free markets, open economies, and privatization in economic development

    Rostow’s Stages of Growth

    • This model assumes that a country can transition from underdevelopment to development through a series of stages
    • The theory argues that all countries must pass through a period of take-off into self-sustaining growth, following a set of specific developmental rules

    Harrod-Domar Growth Model

    • Economic growth is directly related to the savings ratio and negatively related to the capital-output ratio
    • To grow, economies must save and invest a certain proportion of their GDP
    • The model highlights two key components of economic growth: savings and the capital-output ratio
    • Developed countries with low saving rates often experience low economic growth rates
    • Increasing savings through domestic or foreign investment can help boost economic growth and create a virtuous cycle of self-sustaining growth

    Criticisms of Rostow’s and Harrod-Domar Models

    • The models don't fully account for the necessary structural, institutional, and attitudinal conditions for development
    • Missing factors include managerial competence, a skilled workforce, well-integrated markets, and efficient government bureaucracy

    Lewis Two-Sector Model

    • This model demonstrates the process of economic growth from a traditional agricultural sector to a modern industrial sector.
    • The model assumes unlimited surplus labor in rural areas, with wages in the modern sector remaining constant until surplus labor is fully absorbed.
    • This absorption leads to a structural transformation where the balance of economic activity shifts from agriculture to industry.
    • The Lewis turning point occurs when wages in the modern sector start to rise and surplus labor is exhausted.

    Criticisms of Lewis Two-Sector Model

    • The model oversimplifies the relationship between labor transfer, capital accumulation, and employment creation, potentially leading to anti-developmental growth.
    • The assumption of surplus labor in rural areas is often inaccurate.
    • The model doesn't account for institutional factors that affect urban labor markets and wage determination, often resulting in wage increases despite unemployment.
    • The assumption of diminishing returns in the industrial sector is often contradicted by evidence of increasing returns in reality.

    What Next?

    • The Lewis model is relevant to countries like China that have experienced substantial labor absorption from agriculture to manufacturing.
    • The model helps understand the context of technological transfer and its impact on capital accumulation and employment in developing countries.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Related Documents

    Development Economics PDF

    Description

    Explore the major theories of economic development, including Rostow's stages, structural change, and the international-dependence revolution. Understand how these theories evolved post-World War II and the debates surrounding them. This quiz will help you grasp foundational concepts in economic theory and development.

    More Quizzes Like This

    Economic Development Theories and Growth Models Quiz
    5 questions

    Economic Development Theories and Growth Models Quiz

    EasedLight avatar
    EasedLight
    Understanding Economic Development Quiz
    5 questions

    Understanding Economic Development Quiz

    GorgeousThulium avatar
    GorgeousThulium
    Economic Development Theories
    10 questions

    Economic Development Theories

    DistinctiveManganese avatar
    DistinctiveManganese
    Economic Development Theories by Celso Furtado
    24 questions

    Economic Development Theories by Celso Furtado

    LuckierRetinalite7213 avatar
    LuckierRetinalite7213
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser