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Tutorial Kit (Economics-300 L)-Vol. 2.Pdf COVENANT UNIVERSITY ALPHA SEMESTER TUTORIAL KIT (VOL. 2) PROGRAMME: ECONOMICS 300 LEVEL DISCLAIMER The contents of this document are intended for practice and learning purposes at the undergraduate level. The materials are from different sources including the internet and the contributors do not in any way claim authorship or ownership of them. The materials are also not to be used for any commercial purpose. 1 LIST OF COURSES *ECN311: Intermediate Microeconomics I *ECN312: Intermediate Macroeconomics I ECN313: Theories of Growth and Development I ECN314: History of Economic Thought *ECN315: Public Sector Economics I ECN316: International Economics I ECN317: Project Evaluation ECN318: Introductory Econometrics I *ECN319: Operations Research I *ECN331: Monetary Economics *ECN334: Statistical Theory *Not included 2 COVENANT UNIVERSITY CANNAN LAND, KM. 10, IDIROKO ROAD P.M.B 1023, OTA, OGUN STATE, NIGERIA. TITLE OF EXAMINATION: B.Sc. DEGREE EXAMINATION COLLEGE: CDS DEPARTMENT: ECONOMICS & DEVPT. STUDIES SESSION: 2014/2015 SEMESTER: ALPHA COURSE CODE: ECN 313 COURSE TITLE: THEORIES OF ECONOMIC GROWTH & DEVELOPMENT INSTRUCTION: ANSWER ALL QUESTIONS IN SECTION ‘A’ AND ONE (1) QUESTION EACH FROM SECTIONS ‘B’ AND ‘C’ TIME ALLOWED: 2 HOURS SECTION A QUESTION 1 i) . What do economic theories and models seek to explain? (3 marks) a) .............................. b) ......................... c) ....................... ii) HDI is based on 3 indicators; (3 marks) a) ........................... b) ...................................... c) ........................ iii) . According to Dudley Seers, the issue of economic development centres on; (3 marks) a) .................................. b) ................................ c) .................... iv) State Kindleberger’s (1965) definition of economic development. (1 mark) v) Highlight the various classifications of the world economies by (3 marks) a) International Monetary Fund, b) The World Bank, c) United Nations Organization 3 vi) State the four elements of the concept of dualism. (2 marks) a) b) c) d) vii) State six indicators that have been used to measure economic development. (3 marks) a)......... b) ............. c) ........... d) ............. e) .............. f) ............... SECTION B QUESTION 2 (a) Explain the balanced and unbalanced growth theories including their various assumptions and criticisms. (10 marks) (b) Discuss the key points of the “Big Push” theory and its defects. (10 marks) TOTAL (20 marks) QUESTION 3 (a) Highlight the assumptions of the Solow growth model. Derive the determinants of change in capital per worker. (15 marks) (b) State and explain briefly ten characteristics of developing countries. (5 marks) TOTAL (20 marks) 4 SECTION C QUESTION 4 Present and critically evaluate the relevance of the following models of economic development to today’s developing countries; a) Rostow’s stages of growth model. (10 marks) b) Lewis’ ‘two – sector surplus labour’ theoretical model. (10 marks) TOTAL (20 marks) QUESTION 5 Write short notes on any four of the following: a) The concept of economic development; (5 marks) b) Economic dualism; (5 marks) c) Vicious cycle of poverty; (5 marks) d) Sustainable economic growth; and (5 marks) e) Inclusive growth (5 marks) TOTAL (20 marks) 5 COVENANT UNIVERSITY CANAAN LAND, KM. 10, IDIROKO ROAD P.M.B. 1023, OTA, OGUN STATE, NIGERIA ECN313 MARKING GUIDE2014 / 2015 1i) How economies develop or not over time. ........................................(1mk) How barriers to growth can be identified and overcome. ................ (1mk) How government can induce, sustain and accelerate growth with appropriate development policies. ...................................................(1mk) ii) Longevity. ....................................................................................... (1mk) Knowledge. .................................................................................... (1mk) Standard of living. ...........................................................................(1mk) iii) Poverty. ...........................................................................................(1mk) Unemployment. ............................................................................... (1mk) Inequality. ........................................................................................(1mk) iv) Economic development implies both more output and changes in the technology and institutional arrangements by which it is produced and distributed. ........................................................................................ (1mk) v) a) Industrial countries; Developing countries; Transitional economies. (1mk) b) High income, middle income and low income. (1mk) c) HDI, HPI and MPI. (1mk) vi) Different sets of conditions coexist in a given state. (1/2 mk) The coexistence is chronic . (1/2 mk) 6 The degree of inferiority or superiority show no sign of diminishing. (1/2 mk) The interrelationship does not improve the inferior element. (1/2 mk) vii) GDP, GNP/CAPITA, WELFARE, SOCIAL INDICATORS, HDI, HPI AND MPI. (3 mks) viii) Describe the state of economic development of developing countries over a given period of time. (3 mks) Identify economic growth theories / models you know. (2 mks) High experiences of countries that have benefited from these theories / models. (3 mks) Identify reasons why these theories and models have not worked for some countries. (2 mks) Suggest the way forward. (2 mks) SECTION B QUESTION 2 a. Explain the balanced and unbalanced growth theories including their various assumptions and criticisms. Solution Theory of Balanced Growth Balanced growth doctrine has been described differently.To some, it is investing in a laggard industry to bring it to speed with other industries.To others, it is investment taking place simultaneously in all industries at once.It also means balanced development of the manufacturing and agriculture industries.Jhingan (2012) stated that balanced 7 growth requires balance between different consumer and capital goods industries.It implies balance between domestic and export sector.It further entails balance between social and economic overheads, directly productive investments and verticals and horizontal external economies.This theory is advocated by Paul Rosenstein-Rodan, RagnarNurkse and Arthur Lewis.Rosenstein-Rodan was the first economist that propounded the theory in his 1943 article, though did not use these words. The theory states that “there should be simultaneous development in all inter-related sectors which help in increasing the supply of goods”.It includes the simultaneous and harmonious development of intermediate goods, raw materials, power, agriculture, irrigation, transport, etc, including all industries producing goods.The theory proposes that the government of any underdeveloped country needs to make large investments in a number of industries simultaneously.This is expected to enlarge the market size, increase productivity, and provide an incentive for the private sector to invest.It is the systematic and equal prioritization for all sectors and regions of the economy. It focuses on balanced type of investment and capital mobilization to make the growth more balanced and distributed.Thus, the main objectives of balanced growth are to make the growth of all sectors in a balanced way at the same time. Criticisms 1. Rise in costs; simultaneous establishment of industries is likely to raise production costs. 2. No attention to reducing costs; no possibility of reducing cost in existing industries. 3. It is likely to create other problems. New industries can reduce demand for existing industries and make them unprofitable. 4. It fails as a theory of development according to Hirschman. 5. It is beyond the capabilities of underdeveloped countries. This is also according to Hirschman. 6. Disproportionality in factors; the difference in abundance or otherwise of factors of production in underdeveloped countries is another problem. (5marks for discussing the assumptions and criticisms) Theory of Unbalanced Growth The unbalanced growth approaches seems to be the alternative of balanced growth approaches.Economists such as Hirschman, Dr. Singer, Paul Streeten, Rostow, Kindleberger, etc, are associated with this theory.Hirschman’s argument is often popularized.His contention is that deliberately unbalancing the economy as a pre- designed strategy is the best way to achieve economic growth in an underdeveloped country. 8 Assumptions The theory state that investment should be made in selected sectors rather than simultaneously in all sectors.With this, the economy gradually moves from path of unbalanced to that of balanced growth.The best way to achieve development in developing countries is the unbalanced growth. This means that unbalancing the economy makes the growth faster and easier.The unbalance of economy is made by the unequal investment patterns. This means the investment is concentrated at the potential and selective sector only. Another version is that Hirschman does not believe the issue with underdeveloped economies is lack of capital but lack of entrepreneurial abilities.According to Hirschman, not a balanced growth should be aimed at, but rather existing imbalances must be maintained.Investments should not be spread evenly but concentrated in such projects in which they cause additional investments because of their backward and forward linkages without being too demanding on entrepreneurial abilities.Manufacturing industries and import
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