ECON4 Midterm Exam

Masters Technological Institute of Mindanao
ECON 4: Fundamentals of Economic Development

Midterm Exam (September 26, 2024)
Name: Section: Date: Score:
Instructions: Please print this file on LONG BONDPAPER. Answer the following questions with clear, handwritten
responses. Follow the instructions for each question (not following instruction will have deduction of points). For questions
involving problem-solving, please show your solution. No solution means wrong.
1. (5 points). How is productivity measured in Economics, and what are the key differences among its determinants? Please
limit your answer to not more than 4 sentences or 100 words.
2. (3 points). Suppose that capital’s share is 0.30. Meanwhile, the growth rates of the capital stock, labor, and technological
progress are all 1%. What is the output growth rate, and which of these factors contributes the most to the output growth rate?
Which factor has the lowest contribution?
3. (3 points). A developing country, Arcadia, has been experiencing slow economic growth over the past decade. The main
issues identified by the government include low productivity, high unemployment, and rapid population growth. Arcadia has
limited domestic savings and is heavily reliant on foreign aid and remittances to sustain its economy. Public investment in
education, healthcare, and infrastructure has been inadequate, and the country’s trade policies have been protectionist, limiting
foreign competition and innovation. Given these challenges, which public policy should the government prioritize to
promote long-term economic growth and improve living standards, and why? Please limit your answer to no more than 3
sentences.
4. (3 points). Consider a hypothetical country with the following statistics for its working-age population. The total working-
age population (ages 16 and over) is 1,200,000 people. Out of this working-age population, 800,000 people are in the labor
force, which means they are either employed or actively seeking employment. The number of employed individuals is 720,000.
Among the employed individuals, 100,000 are underemployed. Compute the labor force participation rate, unemployment
rate, and the underemployment rate.
5. In the country of Technovia, an economic recession has led to reduced consumer spending and widespread layoffs,
particularly in retail and hospitality. As the economy slows, unemployment has increased across multiple sectors, with
businesses hesitant to rehire until conditions improve. At the same time, Technovia’s shift toward renewable energy has
reduced coal mining jobs. Many former coal miners lack the skills required for green energy jobs and remain unemployed
despite available opportunities in this growing sector.
a. (3 points). Which types of unemployment are BEST illustrated in this scenario, and why? List no more than two
types of unemployment.
b. (3 points).Which unemployment program (based on our discussion) would be most effective in addressing these
issues, and why? Please answer not more than 3 sentences.
6. (4 points). In the modern country of Ferros, the government issues paper banknotes whose value is backed solely by its
authority, making them widely accepted nationwide. These banknotes are used for everyday transactions, such as purchasing
food and paying rent, and are also saved in bank accounts as a way for people to preserve their wealth for future needs.
Which two functions of money and which motives for holding money, based on John Maynard Keynes, are illustrated
in this scenario, and why?
7. (3 points). In the coastal country of Marina, people use small, polished seashells as a form of money. These seashells are
valuable because they are rare, durable, and easy to carry, and each one looks distinct, making them easy to recognize. People
can use these shells to buy goods at the market, pay for services, and save them for future use since they do not degrade over
time. Which characteristics of money are illustrated in this scenario, and why? What type of monetary system does
country of Marina use, and why?
8. (3 points). Would it be beneficial for the Philippine government to print unlimited money to address unemployment and
poverty? Why or why not? Justify your answer using the Quantity Theory of Money in no more than three sentences.

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Masters Technological Institute of Mindanao

ECON 4: Fundamentals of Economic Development

Name: Section: Date: Score:

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