 True or False Question

 Choose Question
 Essay Question
1. Economic Development has an export value for both the aid- T
giving and aid-receiving countries.

2. Poor countries need an accelerating rate of development. T

3. A study of the poverty of nations and the methods of removing T

poverty cannot be based on the experience of the rich nations.

4. The real national income is the country’s total output of final T

goods and services in real (# Nominal) term.

5. National income is always measured in money. T

6. When deduct capital depreciation from GNP, the resulting T

measure is NNP.
7. An underdeveloped country which has no prospects of F
development.
8. An undeveloped which has no potentialities of development. F
9. Poverty is the low level of per capita income. T

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1- According to………….Economic growth means more output.
a) Madison. b) Mrs Hicks. c) Kindle Berger. d) Friedman.
2- Friedman defined development as:
a) An expansion of the system in one or more dimensions without a change in its
structure.
b) An innovative process leading to the structural transformation of social systems.
c) Raising of income levels in rich country.
d) Raising of income levels in poor country.
3- Which of the following is measurement of economic development?
a) GNP. b) GNP per capita. c) Welfare. d) All of the above.
4- The GNP figure do not reveal the costs to society of:
a) Environmental pollution, urbanization. b) Industrialization and population growth.
c) Both (a) & (b). d) Neither (a) nor (b).
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5- All inventory changes whether………….are included in the GNP.
a) Negative. b) Positive. c) Negative or Positive. d) None of the above.
6- The expansion of real national output might have raised………..in the economy.
a) The real costs. b) The social costs. c) Both (a) & (b). d) Neither (a) nor (b).
7- Social indicators are concerned with:
a) Current welfare. b) Future welfare. c) Both (a) & (b). d) Only (a).
8- The majority of social indicators are:
a) Inputs. b) Outputs. c) Both (a) & (b). d) Only (a).
9- Which of the following is not from different criteria of underdevelopment?
a) Ratio of population to land area.
b) Ratio of industrial population to total population.
c) Low ratio of capital to per head of population.
d) High per capita real income.

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10- National income estimates fail to measure adequately changes in output due to:
a) Changes in the price level. b) Exchange rate conversion.
c) Unreliable and erroneous population figures. d) None of the above.
11- International comparisons of national income are inaccurate due to:
a) Changes in the price level. b) Exchange rate conversion.
c) Unreliable and erroneous population figures. d) None of the above.
12- The calculation of per capita income in an underdeveloped country is likely to be
understated or overstated due to:
a) Changes in the price level. b) Exchange rate conversion.
c) Unreliable and erroneous population figures. d) None of the above.

1 2 3 4 5 6 7 8 9 10 11 12
c b d c c c d d d a b c

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1. In developed nations, general levels of living tend to be very low. F

2. There are four times as many people occupied in agriculture in T

some underdeveloped countries as there are in advanced countries.

3. Agriculture, as the main occupation, is mostly unproductive. T

4. Almost all underdeveloped countries have a dualistic economy. T

5. When output increases due to improved technology and capital T

formulation, it is swallowed up by increased population.

6. The unemployment is spreading with urbanization and the spread T

of education.
7. The basic cause of economic backwardness is to be high labor F
productivity.
8. Another reasons to why the saving ratio does not rise with the
increased level of incomes in the long run is the “demonstration T
effect”.

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1- All of the following is from characteristics of underdeveloped
countries, except:
a) Lack of enterprise and initiative.
b) Insufficient capital equipment.
c) Exploited Natural resources.
d) Foreign trade orientation.
2- Underdeveloped countries differ greatly in demographic:
a) Position. b) Trends. c) Both (a) & (b). d) Neither (a) Nor (b).
3- In underdeveloped countries particular manifestations of
economic backwardness are:
a) Low labor efficiency. b) Factor immobility.
c) Limited specialization. d) All of the above.
4- All of the following from economic backwardness, except:

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a) Economic ignorance. b) Low labor efficiency.
c) Low incentives for economic change. d) Unlimited specialization.
5- Technological backwardness reflected in:
a) High average cost of population.
b) High labor-output and low capital- output ratios.
c) Predominance of unskilled and untrained workers.
d) All of the above.
6- All of the following from technological backwardness, except:
a) Large amount of capital equipment.
b) Predominance of skilled and trained workers.
c) High average cost of population.
d) High labor-output and low capital- output ratios.
1 2 3 4 5 6
c c d d d b

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In underdeveloped countries two-thirds or more of the people live in rural areas and
their main occupation is agriculture.

Agriculture is mostly unproductive.

Although an underdeveloped country is a:

Primary Sector; it specialized in primary production such as:

Fishing Farming Mining Energy extraction.

,There is the underdeveloped

Secondary Sector; with a few simple, light and small consumer goods industries and an
equally underdeveloped Tertiary Sector; such as:

Transport commerce banking and insurance services.

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Almost all underdeveloped countries have a dualistic economy.

One is the market economy:

Near the towns, developed, ultra-modern with all the amenities of life (such
as: schools and colleges), and have advanced industrial system that uses
capital-intensive techniques.

Other is the subsistence economy:

In the rural areas, less developed, backward and is mainly agricultural system
that uses traditional techniques.

Financial dualism: 

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Underdeveloped countries are either suffering from scarcity of raw
materials or from unexploited natural resources of its own.

In LDCs, natural resources are unutilized, underutilized or mutualized. This

is one of the reasons for their backwardness.

The reasons are underutilized or unexploited due to various difficulties:-

Inaccessibility Small extent

of the region of the market

Shortage of Transport
capital bottlenecks
Lack of proper Primitive
attention technology 10

 Development of natural resources is dependent upon the productive capacity of the people in the country.
 How do underdeveloped countries differ greatly in demographic position
and trends?

Underdeveloped countries differ greatly in demographic position and

trends.

Almost underdeveloped countries possess high population growth potential

characterized by high birth-rate.

A large percentage of children in the population entails a heavy burden

on the economy.

A large number of dependents who do not produce at all but do

consume.

It becomes difficult for the works to save for purposes of investment in
capital equipment and to provide their children with the education and
necessities of life.

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 Distinguish between unemployment and disguised unemployment?

In underdeveloped countries there is vast open unemployment and disguised

unemployment.

The unemployment is spreading with A person is said to be disguised

urbanization and the spread of education. unemployment if his contribution
But, the industrial sector has failed to
to output is less than what he
expand along with the growth of labor
force thereby increasing urban can produce by working for
unemployment. normal hours per day.
The education unemployed who fail to
Marginal productivity is nil or
get jobs due to structural rigidities and
the lack of manpower planning.
negligible.

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 Why the saving ratio does not rise with the increased level of incomes in
LDCs?
 Insufficiency of capital equipment is another general characteristic of such countries.

 Underdeveloped countries are characterized by as “Capital-poor or low-saving and low-

investing” economies.

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 Underdeveloped economics are generally foreign trade oriented. Explain?

Underdeveloped economies depend on exports of primary products and

imports of consumer goods and machinery.

The dependence of LDCs on exports of primary products leads to serious

repercussions on their economies.

 , Neglect of the other sectors of the economy.

 , the economy becomes particularly susceptible to fluctuations in

the international prices of the exports commodities.

 , neglect of other consumption goods has made these economies highly

dependent on imports.

 Imports generally consist of: Fuel, primary commodities, and even food.

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1. Development of natural resources is dependent upon the productive T
capacity of the people in the country.

2. the most pertinent obstacle to economic development is the shortage of T

capital.
3. There are elements of social resistance to economic change in T
underdeveloped countries.

4. undeveloped human resources are an important obstacle to economic T

development in LDCs.
5. The gains from trade have gone mainly to the developing countries. F

6. During a depression, the terms of trade become adverse and foreign T

exchange earnings fall steeply.

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1. All of the following from the obstacles to economic development, except:
a) Socio-cultural Constraint. b) Agricultural Constraint.
c) Foreign Exchange Constraint. d) High Rate of Capital Formulation.
2. Underdeveloped human resources are manifest in, except:
a) Low labor productivity. b) Factor mobility.
c) Unlimited specialization in occupation. d) Both (b) & (c).
3. All of the following from the main reasons for the lack of incentives to save and
invest in LDCs, except:
a) Imperfect maintenance of law and order. b) Political instability.
c) Settled monetary conditions. d) Lack of continuity in economic life.

1 2 3
d d c

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 - The vicious circle of poverty stems from the fact “A country is poor
because it is poor”. Explain this statement using figures?
- Explain “why a poor country is poor”?
 There are circular relationships known as the vicious circles of poverty that tend to
perpetuate the low level of development in LDCs.

 “Nurkse” Explain that: it implies a circular constellation of forces tending to act and
react upon one another a way as to keep a poor country in a state of poverty.

For example: “a poor man may not have enough to eat; being underfed, his health
may be weak; his working capacity is low, which means that he is poor, which in turn
means that he will not have enough to eat; and so on...”

The basic vicious circle stems from the fact that in LDCs total productivity is low due to:

1- Deficiency of capital, 2- Market imperfections,

3- Economic backwardness, and 4- underdevelopment.

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The demand side of the vicious circle is that: the low level of real income leads to a
low level of demand which, in turn, leads to a low rate of investment and hence
back to capital deficiency, low productivity and low income.

DEMAND SIDE
FIGURE

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Low productivity is reflected in low real income. The low level of real income means
low saving. The low level of saving leads to a low investment and to capital
deficiency. Which leads to a low productivity and back to low income.

SUPPLY SIDE
FIGURE

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If the people are backward and illiterate, lack in technical skill,
knowledge and entrepreneurial activity, the natural resources will tend to
remain unutilized, underutilized or even mutulizized.
People are economically backward in a country due to underdeveloped
natural resources.
Underdeveloped natural resources are both consequence and cause of
the backward people.

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Explain the main obstacles to economic development?

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 1
Underdeveloped countries possess social institutions and display such
attitudes as are not conductive to economic development.

According to the UN: “there are elements of social resistance to

economic change in underdeveloped countries” which include:-

(a) Institutional Factors characterized by: Rigid stratification of

occupations reinforced by traditional beliefs and values.

(b) Attitudes involving: Inferior valuation attached to business roles and

their incompatibility with the patterns of living.
Factionalism: defined
(c) Concepts of social dignity as the tendency of
the society to be
Upheld the high status groups and “factionalism”.
divided by caste and
(d) Family Attitudes: are responsible for class, ethnic or
religious etc.
population pressures and attachment to land.

(e) There develops a natural distaste for practical work and training that
leads to technological backwardness.
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 2
 The majority of LDCs are predominantly agricultural.

 Agricultural Production constitutes a large share of their GDP and

agricultural commodities form a considerable part of the value of their
total exports.
This Constraint Represented in:-

The Available The Provision of

technology irrigation
Climate

The Availability and The Incentives for

price of inputs production and
investment

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 3

 LDCs lack in people possessing critical skills and knowledge required for
all-round development of economy.

 The Existence of surplus labor in them is to a considerable extent due

to the shortage of critical skills.

Underdeveloped Human Resources are manifest in:-

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 4

Economists like “Lewis” and “Myrdal” explain that:

“The gains from trade have gone mainly to the developed countries”.
 Dependence of underdeveloped economies on exports leads to neglect the
other sectors of the economy.
 Dependence on exports has exposed these economies to international
fluctuations in the demand for and prices of their products.

 During a depression, the terms of trade become adverse and foreign

exchange earnings fall steeply.
 They are unable to take advantage of a fall in the prices of their products due
to the inelastic nature of supply for their export goods.

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