Your name: __________________________Economics 151Development EconomicsInstructions The exam consists of 40 short answer questions. For each multiple-choice question, circle the letter of the best option. For True/False questions and others with only two options, circle the best choice. .Your name: __________________________Economics 151Development Economics2 nd Exam Sample QuestionsInstructions The exam consists of 40 short answer questions. For each multiple-choice question, circle the letter of the best option. For True/False questions and others with only two options, circle the best choice. .1. According to the age earnings profile for India shown in Figure 9-1, a typical individual who enters the labor force only after completing middle school forgoes about __ years of labor earnings compared to an illiterate person who never goes to school. At age 40, the middle school completer is expected to earn about ___ rupies per year more than a primary-school leaver (note well the change in what is being compared).a. 10; 50b. 7; 800c. 9; 1,300 a. 3; 402. In 1995, the proportion of students in the relevant age range attending primary school wasa. still under 50% in most developing countriesb. between 60 and 80% in most developing countriesc. over 80% in virtually every developing countryd. over 90% except in countries with GDP per capita (PPP) of less than $10003. What is the present value of a million dollars received 10 years from today if the relevant rate of interest is 8%?a. $463,193b. $2,158,925c. $92,593d. $144,0004. Suppose that a project yields net earnings of ten million dollars 5 years from today and costs 1 million dollars to construct today. What is this project’s net present value (i.e., present value of earnings minus present value of costs) if the relevant rate of interest is 7%?a. - $0.296 millionb. $9.7 millionc. $6.13 milliond. $8.13 million5. Suppose that a project yields net earnings of ten million dollars 5 years from today and costs 6 million dollars to construct today. Which of the following approximates most closely this project’s internal rate of return? a. 5.3%b. 7.5%c. 10.7%d. 13.2%6. In low-income and lower-middle-income countries, the highest estimated returns to education are a. social rates of return to higher educationb. private rates of return to higher educationc. social rates of return to primary educationd. private rates of return to primary education7. Table 10-2 shows male life expectancies at various ages in Bangladesh and Sweden in the mid-1970s. All of the following are implied by the table except:a. life expectancy at birth was about 26 years longer for a baby born in Sweden than for one born in Bangladesh at that time.b. the mortality rate for persons aged 1 to 5 was higher in Bangladesh than inSwedenc. the mortality rate in Bangladesh was lower between birth and age 1 than between age 1 and age 5d. a 65 year old Swede could expect to live 2.3 years longer than a 65 year old Bangladeshi8. Figure 10-2, which shows the relationship between average life expectancy at birth and average per capita income, by country, suggests that between the 1930s and the 1960s life expectancy was becoming less sensitive to country income except among very poor countries (those with incomes below about $500).T F9. In the past four or five decades, the gap in life expectancies between rich and poorcountries has narrowed more than the corresponding gap in incomes.T F10. Because most of the difference in life expectancy between different developing countries is explained by differences in average income, it is very difficult to detect differences in life expectancy among countries that can be attributed to other factors, such as income distribution or the nature of the health countries’ health care systems.T F11. The textbook discusses proposals to make health service delivery more self-supporting by charging cost-recovering user fees. The authors’ position on these proposals isa. they oppose them if they mean restricting access to health services for the poorb. they favor them as a logical extension of the principal of using prices to efficiently allocate resourcesc. they favor them as an evil necessitated by the need to balance governments’ budgetsd. they state that the matter comes down to a moral value judgment that is outside of their professional competence as economists12. Let S = a household’s savings and let Y equal the household’s income. Which of the following is a stylized fact about savings discussed in the text?a. in a given country at a given time, S/Y is largely unrelated to incomeb. in a given country at a given time, S/Y is larger for households with larger per capita incomesc. in a given counry at a given time, S/Y is smaller for households with larger per capita incomesd. in a given country at a given time, S/Y first increases, then decreases, as Y rises13. The stylized fact referred to in question 26 is best explained bya. the Keynesian model of consumption and savingb. the relative income hypothesis of Duesenberryc. the permanent income hypothesis of Friedmand. the class saving hypothesis of Kaldor14. Because S/Y is smaller in a poor country than in a rich country, infusions of capital from abroad (i.e., “foreign savings”) are a sine qua non if a poor country isto begin economic growth.T F15. Because few households can afford to save much, most developing countries depend heavily on corporations for their domestic nongovernmental (i.e., private) savings.T F16. The permanent income hypothesis asserts thata. people save more out of transitory than out of steady incomesb. once a person has attained a higher income, they attempt to sustain the consumption level associated with it even when their income fallsc. the main purpose of saving is to make bequests to one’s heirsd. none of the above17. During the 1990s, foreign direct investment overtook commercial bank loans as a source of foreign private finance (“foreign saving”) flowing into developing countries.T F18. Total net official development assistance given by the U.S. to developing countries in 1997 was approximately __% of U.S. GDP, and net official development assistance received from all sources by Mali and Tanzania was approximately __% of those countries’ GNPs in that year.a. 3, 4 b. 2,45c. 1.8,15d. 0.1,1619. Which is the best definition of a public good as the term is used in economics?a. a positive externality generated by the