[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

6. What are some of the roles that government can play in
promoting economic development and growth?
7. How were resources allocated under the former Soviet
(communist) system?
8. What were some of the problems with the communist
system, and why was the switch to a market economy
expected to lead to increased incomes?
9. What were two of the different strategies for moving
from communism to a market economy?
10. How have different countries fared in the transition?
How do you explain the different performances?
PROBLEMS
1. In the United States, the economy grew by 2.6 percent
per year (in real terms) during the 1980s. In India,
the economy grew by 5.3 percent during the 1980s.
However, population growth in the United States was
0.8 percent annually, while population growth in India
was 2.1 percent annually. Which country increased its
standard of living faster for the average citizen? By
how much?
2. Nominal GNP in Kenya was 9 billion shillings in 1967
and 135 billion shillings in 1987. The price level in Kenya
(using 1980 as a base year) rose from 40 in 1967 to 200
in 1987, and the population of Kenya increased from
10 million to 22 million in those twenty years. What was
the total percentage change in real GNP per capita in
Kenya from 1967 to 1987?
3. True or false: “LDCs do not have much capital because
their rates of saving are low. If they saved more or
received more foreign aid, they could rapidly expand
their economic growth.” Discuss.
4. How might each of the following hinder entrepreneurs in
LDCs?
(a) Lack of functioning capital markets
(b) Pervasive government control of the economy
(c) Lack of companies that offer business services
(d) A tradition of substantial foreign control of large
enterprises
5. What is the economist’s case for having the government
be responsible for providing infrastructure?
6. If many LDCs simultaneously attempted to pursue
export-led growth, what would be the effect in world
markets on the quantities and prices of products sold
mainly by LDCs, such as minerals, agricultural goods,
and textiles? What effect might these quantities and
prices have on the success of such export-led growth
policies?
7. Explain how the idea of import substitution conflicts in the
short run with the idea of comparative advantage. Need
the two ideas conflict in the long run? Why or why not?
8. Why might a family in an LDC face a lower opportunity
cost of having more children than a family in a
developed country?
REVIEW AND PRACTICE ∂ 815