PS 241 Week 8

According to Roodman (2012), what do economists mean by "consumption smoothing"? Select one: a. "Consumption smoothing" involves making sure that people can consume at a steady rate regardless of current income. b. "Consumption smoothing" involves making sure that people are able to limit their consumption to the most basic and necessary purchases rather than using credit cards to buy superfluous items like electronics etc. c. "Consumption smoothing" involves making sure that people are able to prioritize their consumption so that they first purchase all basic and necessary items (like food, housing, etc.) and move on to superfluous items only if they have extra money. d. "Consumption smoothing" involves making sure that people stop consuming all the time but are able to save for important purchases only once every month or two.

a. "Consumption smoothing" involves making sure that people can consume at a steady rate regardless of current income.

If foreign aid means that governments need to collect fewer taxes from their citizens, what is a consequence of this? Select one: a. A broken fiscal contract b. Dutch disease c. Enclave economies d. Myopic politicians

a. A broken fiscal contract

Why do poor people in developing countries accept the fees charged by wandering deposit collectors? Select one: a. Because there is so much temptation to spend, people are wiling to pay in order to save money. b. Governments require people to use wandering deposit collectors in order to collect taxes. c. They believe that paying to save is how formal financial institutions work in wealthy countries. d. Wandering deposit collectors are often a part of organized crime and force people to use their services.

a. Because there is so much temptation to spend, people are wiling to pay in order to save money.

In poor countries, a financing gap exists because economic activity is devoted primarily to what? Select one: a. Consumption b. Physical capital c. Savings d. Taxes

a. Consumption

If there is a Dutch Disease dynamic in aid-receiving countries, which of the following will be true? Select one: a. Countries receiving more aid should have less manufacturing. b. Countries receiving more aid should have more manufacturing. c. Countries receiving more aid should have a more stable GDP per capita over time. d. Countries receiving more aid should have a more volatile GDP per capita over time.

a. Countries receiving more aid should have less manufacturing.

How does Easterly's (2006a,b) point of view compare to that of Jeffrey Sachs (2005) and Wolfgang Sachs (2000, Week 1 reading)? Select one: a. Easterly disagrees with Jeffrey Sachs; Easterly's point of view is closer to that of Wolfgang Sachs, as they both criticize the Development Era approach in which people in wealthy countries (i) assume that they know how poor countries can develop, and (ii) impose their model of development on all countries alike. b. Easterly disagrees with both Jeffrey Sachs and Wolfgang Sachs because both are strong proponents of the "big push" approach to lift developing countries out of the poverty trap. c. Easterly agrees with both Jeffrey Sachs and Wolfgang Sachs because all three scholars are strong proponents of the "big push" approach to lift developing countries out of the poverty trap. d. Easterly disagrees with Wolfgang Sachs and agrees with Jeffrey Sachs because Easterly does not believe that imposing the same western model of development on all countries is problematic.

a. Easterly disagrees with Jeffrey Sachs; Easterly's point of view is closer to that of Wolfgang Sachs, as they both criticize the Development Era approach in which people in wealthy countries (i) assume that they know how poor countries can develop, and (ii) impose their model of development on all countries alike.

Which of the following is the most famous microlending institution in the world? Select one: a. Grameen Bank b. International Monetary Fund (IMF) c. United States Agency for International Development (USAID) d. World Bank

a. Grameen Bank

What question, which is investigated in Planet Money Episode #494, arises from GiveDirectly's operations? Select one: a. If you give money to poor people, will they use it wisely? b. If you give money to poor people with entrepreneurial aspirations, will they be successful? c. If you give money to poor women with entrepreneurial aspirations, will they use it to pay dowry? d. If you give money to poor people, will they pay taxes?

a. If you give money to poor people, will they use it wisely?

Planet Money Episode #494 discusses Chris Blattman's study in Liberia. How did this study differ from the study about GiveDirectly in Kenya? Select one: a. In Kenya, GiveDirectly gives money to poor people in the countryside; in Blattman's study, researchers targeted the lowest strata of urban society and sought out people like thieves and drug addicts. b. In Kenya, the cash grants given by GiveDirectly seemed to have a positive impact on people's lives; in Blattman's study, researchers found that the money was used mostly to buy drugs, cigarettes, and alcohol. c. Both the study in Kenya and the study in Liberia led to discouraging findings about giving cash to the poor. d. Both A and B

a. In Kenya, GiveDirectly gives money to poor people in the countryside; in Blattman's study, researchers targeted the lowest strata of urban society and sought out people like thieves and drug addicts.

Which of the following was a major development justification for foreign aid in the immediate post-WWII era? Select one: a. The financing gap b. The Millennium Development Goals c. Natural resource extraction d. Structural adjustment

a. The financing gap

What is the main argument proposed by Eubank (2012)? Select one: a. The government in Somaliland became inclusive, representative, and accountable to its citizens because of its dependency on local tax revenues. b. The government in Somaliland has achieved great levels of economic growth because of the foreign aid it receives. c. The government in Somaliland would be even more successful and effective had it been able to receive foreign aid. d. Foreign aid reduces economic growth.

a. The government in Somaliland became inclusive, representative, and accountable to its citizens because of its dependency on local tax revenues.

According to Blattman and Niehaus (2014), what does the majority of the evidence on cash transfers tell us? Select one: a. The majority of the evidence is positive and seems to suggest that simply giving money to the poor can have positive effects on their lives. b. The majority of the evidence is negative and discourages the continuation of "money to the poor" programs. c. The evidence is somewhat mixed; it has been found that very often poor people end up wasting the money that they are given. d. The evidence is somewhat mixed; it has been found that poor people very often lack entrepreneurial aspirations to really put the money to good use.

a. The majority of the evidence is positive and seems to suggest that simply giving money to the poor can have positive effects on their lives.

According to Easterly (2006b), what would evidence of the poverty trap look like? Select one: a. The poorest countries do not show signs of growth, while other countries grow at significantly higher rates. b. The poorest countries grow at significantly higher rates than the developed countries. c. The poorest countries grow but not fast enough to catch up to the most developed countries. d. Middle-tier countries are the ones who grow the fastest.

a. The poorest countries do not show signs of growth, while other countries grow at significantly higher rates.

How does the idea of "revenue bargaining" described by Eubank (2012) compare to the idea of "fiscal contract" discussed during the week on the "natural resource curse"? Select one: a. They refer to the same concept; taxpayers demand responsiveness from the government because they are paying taxes. b. They refer to opposite concepts; "revenue bargaining" refers to citizens demanding tax reductions, while "fiscal contract" refers to the fact that taxes are good for governance and therefore should be higher. c. They are similar but refer to slightly different concepts; "revenue bargaining" mostly has to do with aid received from foreign donors, while the "fiscal contract" focuses only on domestic fiscal revenues. d. Neither of the two concepts are relevant when talking about Somaliland because it is not a real state, and therefore, its government cannot collect taxes.

a. They refer to the same concept; taxpayers demand responsiveness from the government because they are paying taxes.

What does William Easterly mean when he talks about a "structural adjustment treadmill"? Select one: a. Countries participating in structural adjustment programs were not able to catch up with the rich countries. b. Countries that started participating in structural adjustment programs were unlikely to stop participating in them. c. The economies of countries participating in structural adjustment programs sped up quickly. d. Structural adjustment programs required countries to undertake the same reforms over and over again.

b. Countries that started participating in structural adjustment programs were unlikely to stop participating in them.

Does Easterly (2006b) find evidence of the poverty trap and/or of convergence? Select one: a. Easterly finds consistent evidence of a poverty trap that prevents convergence. b. Easterly finds some evidence of a poverty trap for the 1985-2001 period, and he does not find evidence of absolute convergence. c. Easterly finds no evidence of a poverty trap, but he does find evidence of absolute convergence. d. Easterly finds no evidence of a poverty trap, and he finds no evidence of convergence.

b. Easterly finds some evidence of a poverty trap for the 1985-2001 period, and he does not find evidence of absolute convergence.

What does it mean for Eubank (2012) to "impute" the levels of foreign aid for Somaliland? Select one: a. Eubank is estimating how much foreign aid Somaliland receives in order to assess the effects of that aid on the development of the government of Somaliland. b. Eubank is estimating how much foreign aid Somaliland would have received if it were an internationally recognized country in order to show that the lack of aid to Somaliland is what promoted the development of its government. c. Eubank is estimating how much more foreign aid Somaliland would need to develop enough in order to become an internationally recognized country. d. Eubank is estimating the difference in aid received by Somaliland and Somalia in order to show that the government that received more aid was able to develop faster.

b. Eubank is estimating how much foreign aid Somaliland would have received if it were an internationally recognized country in order to show that the lack of aid to Somaliland is what promoted the development of its government.

What did Burnside and Dollar's background paper for the Assessing Aid volume conclude about aid effectiveness? Select one: a. Foreign aid always positively affects economic growth, but it becomes more efficient when economic management is better. b. Foreign aid is good for growth when economic management is good and bad for growth when economic management is bad. c. Foreign aid is good for growth when economic management is good but has no effect on growth when economic management is bad. d. Foreign aid is bad for growth when economic management is already good and is good for growth when economic management is bad.

b. Foreign aid is good for growth when economic management is good and bad for growth when economic management is bad.

Historically, in which of the following countries or regions have cash transfer programs been most popular? Select one: a. China b. Latin America c. Southeast Asia d. Sub-Saharan Africa

b. Latin America

According to Eubank (2012), how is Somaliland similar to medieval Europe? Select one: a. Somaliland is similar to medieval Europe because its government is not internationally recognized, and therefore, it has to depend on foreign revenues. b. Somaliland is similar to medieval Europe because its government is highly dependent on local revenues, which gives local elites significant power over the decision-making of the Somaliland government. c. Somaliland is similar to medieval Europe because its government is highly centralized and is able to make decisions without taking the will of the local population into account. d. All of the above

b. Somaliland is similar to medieval Europe because its government is highly dependent on local revenues, which gives local elites significant power over the decision-making of the Somaliland government.

What is the main argument proposed by Eubank (2012) about Somaliland? Select one: a. The government in Somaliland has achieved great levels of economic growth because of the foreign aid it receives. b. The government in Somaliland became inclusive, representative, and accountable to its citizens because of its dependency on local tax revenues. c. The government in Somaliland would be even more successful and effective had it been able to receive foreign aid. d. Foreign aid has reduced economic growth in Somaliland.

b. The government in Somaliland became inclusive, representative, and accountable to its citizens because of its dependency on local tax revenues.

According to Easterly (2006b), what would evidence of convergence look like? Select one: a. The poorest countries do not show signs of growth, while other countries grow at significantly higher rates. b. The poorest countries grow at significantly higher rates than the developed countries. c. The poorest countries grow but not fast enough to catch up to the most developed countries. d. Middle-tier countries are the ones who grow the fastest.

b. The poorest countries grow at significantly higher rates than the developed countries.

According to Burnside and Dollar (1998), aid leads to growth under what conditions? Select one: a. When it is big enough in total amount b. When it is given in a good policy environment c. When it is programmatic d. When it is tied

b. When it is given in a good policy environment

Structural adjustment had a disproportionately _______ effect on ____________ groups. Select one: a. negative, ethnically homogenous b. negative, marginalized c. positive, ethnically homogenous d. positive, marginalized

b. negative, marginalized

Which of the following best describes what the Washington Consensus was/is? Select one: a. A commitment by the rich countries of the world to give 0.7 percent of GNI as ODA b. A formal agreement between the U.S. and the World Bank to coordinate project lending c. A list of economic reforms that became incorporated into aid programs in the 1980s and 1990s d. A U.S. program to support democratization around the world after the Cold War

c. A list of economic reforms that became incorporated into aid programs in the 1980s and 1990s

What is Easterly's (2006a) opinion of the Millennium Development Goals (MDGs)? Select one: a. Easterly supports the MDGs because he believes that an additional push on the part of donor countries is what is needed in order to fill the "financing gap" and help developing countries escape the "poverty trap." b. Easterly is neutral toward the MDGs because he believes that they might be beneficial if carried out thoroughly, but he is unsure about whether they will be. c. Easterly is critical of the MDGs because he sees them as a utopian plan that makes donors feel good about themselves and doubts that they will actually foster development because of the lack of accountability mechanisms to insure that they are carried out effectively. d. Easterly does not express a position with regard to the MDGs.

c. Easterly is critical of the MDGs because he sees them as a utopian plan that makes donors feel good about themselves and doubts that they will actually foster development because of the lack of accountability mechanisms to insure that they are carried out effectively.

How is foreign aid supposed to fill the financing gap? Select one: a. It helps countries to reform their bad policies. b. It improves human productivity, which leads to economic growth. c. It replaces savings by supplying money for capital investment. d. It supplies new technology which leads to economic growth

c. It replaces savings by supplying money for capital investment.

According to Easterly (2006b), what does the data from the eight countries that experienced a takeoff in the period 1950-1975 say about the relationship between foreign aid and takeoffs? Select one: a. All of the eight countries that experienced a takeoff received above-average levels of aid, thus showing that aid facilitated takeoffs. b. A majority of the eight countries that experienced a takeoff received above-average levels of aid, thus providing evidence that aid facilitated takeoffs. c. Only three out of eight countries that experienced a takeoff received above-average levels of aid, thus providing little evidence that aid facilitated takeoffs. d. None of the eight countries that experienced a takeoff received above-average levels of aid, thus showing that aid did not facilitate takeoffs.

c. Only three out of eight countries that experienced a takeoff received above-average levels of aid, thus providing little evidence that aid facilitated takeoffs.

Which of the following is part of the Washington Consensus? Select one: a. Large, protectionist tariffs b. Massive increases in social welfare spending c. Privatization of state-owned enterprises d. All of the above

c. Privatization of state-owned enterprises

What is the most believable solution to the fundamental problem of causal inference? Select one: a. Cross-country data b. Household surveys c. Randomized Control Trials d. Regression analyses

c. Randomized Control Trials

According to Eubank (2012), there is an international norm against recognizing new states. What effect does this have on the state-like entity forming in Somaliland? Select one: a. Since the international community does not recognize Somaliland, Somaliland does not receive foreign aid; this has prevented Somaliland from developing as much as it could have had it been receiving foreign aid. b. Even though the international community does not recognize Somaliland, Somaliland still receives foreign aid; this has allowed Somaliland to develop much like a state and to reinforce its independent government. c. Since the international community does not recognize Somaliland, Somaliland does not receive foreign aid; this has forced the government of Somaliland to support itself through local revenues. d. Even though the international community does not recognize Somaliland, Somaliland still receives foreign aid; this has prevented Somaliland from developing as much as it could have because its government has been relying on foreign aid rather than supporting itself through local revenues.

c. Since the international community does not recognize Somaliland, Somaliland does not receive foreign aid; this has forced the government of Somaliland to support itself through local revenues.

Which of the following seem to be Blattman's and Niehaus' (2014) concerns about cash grants, if any? Select one: a. The authors are concerned that poor people will waste the cash they are given. b. The authors are concerned that cash grants are not as effective as traditional foreign aid when it comes to reducing poverty. c. The authors are concerned about the feasibility and effectiveness of cash grants when implemented on a large scale. d. None of the above

c. The authors are concerned about the feasibility and effectiveness of cash grants when implemented on a large scale.

What does Helen Todd's (1996) data — as reproduced by Roodman (2012) in Table 2 — tell us about how people use microloans? Select one: a. The data shows that most women said that they wanted to use the money for entrepreneurial activities and that the majority of them in fact did start their own business. b. The data shows that women lied to the microfinance institution in saying that they would use the money for entrepreneurial activities while truly they wanted the money to buy alcohol. c. The data shows that women said and perhaps wanted to use the money for entrepreneurial activities; however, they then used it for a wider variety of purposes (including but not limited to business activities). d. The data shows that women said they would not use the loans to pay dowry and that they all followed through with this vow.

c. The data shows that women said and perhaps wanted to use the money for entrepreneurial activities; however, they then used it for a wider variety of purposes (including but not limited to business activities).

According to Blattman and Niehaus (2014), what do these results indicate about the role that traditional foreign aid should have? Select one: a. The negative evidence on cash transfers indicates that donors should continue with more traditional foreign aid programs. b. The positive evidence on cash transfers indicates that donors should discontinue the more traditional foreign aid programs and focus mostly on microfinance and "money to the poor" programs. c. The positive evidence on cash transfers does not eliminate the fact that public goods tend to be underprovided in developing countries; therefore, traditional foreign aid programs can still play a role in helping countries strengthen their provision of education, healthcare, security, etc. d. Both A and C

c. The positive evidence on cash transfers does not eliminate the fact that public goods tend to be underprovided in developing countries; therefore, traditional foreign aid programs can still play a role in helping countries strengthen their provision of education, healthcare, security, etc.

How did the study described in Planet Money Episode #494 identify counterfactual cases? Select one: a. The study surveyed both men and women who received a cash grant so that they could compare whether the entrepreneurial aspirations of men or women were more fruitful. b. The study surveyed the people who received a cash grant both before and after having received it so that they could compare their lives before the grant (counterfactual) to their lives after the grant (treated group). c. The study surveyed and compared two groups of people that were similar in most ways so that it is plausible that the only difference between the two groups is that people in one received a cash grant (treated group) while people in the other did not (counterfactual). d. The study surveyed the children of the people who received a cash grant both before and after having received it so that they could compare whether they were going to school before the grant (counterfactual) to after the grant (treated group).

c. The study surveyed and compared two groups of people that were similar in most ways so that it is plausible that the only difference between the two groups is that people in one received a cash grant (treated group) while people in the other did not (counterfactual).

How do randomized control trials help solve the fundamental problem of causal inference? Select one: a. Experiments consistently operationalize variables in the same way. b. They allow us to observe a unit under treatment for a long period of time. c. The units in the treatment and control groups look the same on average because random selection - rather than some other variable - has determined who receives the treatment. d. We can observe the unit before treatment to be sure the treatment preceded the effect of interest

c. The units in the treatment and control groups look the same on average because random selection - rather than some other variable - has determined who receives the treatment.

Muhammad Yunus was inspired by the financial needs of a female entrepreneur making bamboo stools to develop what? Select one: a. A conditional cash transfer program b. A foreign aid project c. An insurance company for the poor d. A microcredit program

d. A microcredit program

What do financial services accomplish? Select one: a. Make transactions easier/possible b. Provide ownership c. Facilitate consumption smoothing d. All of the above

d. All of the above

Which of the following are financial services that are available in some developed countries? Select one: a. PayPal b. Credit Card c. Renters insurance d. All of the above

d. All of the above

Which of the following is microfinance supposed to accomplish? Select one: a. Allow for consumption smoothing b. Create entrepreneurs c. Help the overall financial system develop d. All of the above

d. All of the above

According to Planet Money Episode #494, how did people spend the money that was distributed to them by researchers (i.e. by GiveDirectly and/or the researchers at Columbia University)? Select one: a. They invested in their health. b. They bought products that they could resell. c. They spent it on cigarettes and alcohol. d. Both A and B

d. Both A and B

According to Roodman (2012), what are "commitment savings accounts"? Select one: a. Roodman describes these as a situation in which people pay to save. b. Roodman describes these as a situation in which people allow a wandering money collector to hold on to their money and then give them back the total amount minus a fee. c. Roodman describes these as a situation in which people earn interest on their savings. d. Both A and B

d. Both A and B

According to Jeffrey Sachs (2005), as cited in Easterly (2006a,b), what is the "poverty trap"? Select one: a. Poor countries are destined to remain underdeveloped because of their geographic and demographic characteristics, and no amount of foreign aid is able to change that. b. People in developing countries are generally too poor to be able to save money, which means they are less able to fund investment in physical capital investment. c. Poverty itself is one of the factors that keep poor countries from developing. d. Both B and C

d. Both B and C

If a country is caught in a poverty trap, how can it get out of it according to economic theory? Select one: a. By become more democratic b. By exploiting more natural resources c. By fixing its exchange rate d. By increasing its level of investment

d. By increasing its level of investment

How does the charity described in Planet Money Episode #494, GiveDirectly, operate? Select one: a. GiveDirectly gives microloans to poor people with entrepreneurial aspirations. b. GiveDirectly gives cash grants to poor people with entrepreneurial aspirations. c. GiveDirectly gives microloans to poor people to use however they wish. d. GiveDirectly gives cash grants to poor people to use however they wish.

d. GiveDirectly gives cash grants to poor people to use however they wish.

According to Blattman and Niehaus (2014), what research questions are asked to assess the effectiveness of cash transfers? Select one: a. What is the effect of cash transfers on democratization? b. What is the effect of cash transfers on economic development? c. What is the effect of cash transfers on levels of educational attainment? d. How do recipients of cash transfers spend their money?

d. How do recipients of cash transfers spend their money?

According to Eubank (2012), is Somaliland's economy prone to falling prey to resource curse dynamics? Select one: a. Yes: since Somaliland's economy is based upon natural resources it is definitely prone to falling prey to resource curse dynamics. b. Yes: even though Somaliland's economy is not based upon natural resources, it is still prone to falling prey to resource curse dynamics because of the amounts of foreign aid it receives. c. No; even though Somaliland's economy is based upon natural resources, its governments has the necessary safeguards in place to prevent it from falling prey to resource curse dynamics. d. No: Somaliland's economy is not based upon natural resources, and foreign aid does not make up a large part of Somaliland's revenues, both of which helped the Somaliland avoid resource curse dynamics

d. No: Somaliland's economy is not based upon natural resources, and foreign aid does not make up a large part of Somaliland's revenues, both of which helped the Somaliland avoid resource curse dynamics

What is an example of an informal financial instrument that the poor may use? Select one: a. Checking account b. Credit cards c. PayPal account d. Taking out credit at shops

d. Taking out credit at shops

Thinking about the Solow growth model, which of the following is a reason why filling the finance gap might not be sufficient to bring about economic growth? Select one: a. Building human capital is more important for economic growth. b. Capital investment is more important for economic growth. c. Strengthening the fiscal contract is more important for economic growth. d. Technological advances are more important for economic growth.

d. Technological advances are more important for economic growth.