ECON115: Utviklingsøkonomi (A)

Eksamensbesvarelse i faget som fikk karakter A.

Oppgave 1:
How do economists determine if an individual is living in absolute economic poverty or not?
b. Official (market) exchange rate between US Dollars and Indian Rupees for 2022 was: US $1 = Rupees 79. However, the Purchasing Power Parity (PPP) exchange rate between the above two currencies for 2022 was: US $1 (PPP) = Rupees 23. Why are the two exchange rates different? Explain.
c. The prices of primary goods (e.g., coffee, bananas) are found to show high degrees of fluctuation in the international market. It is argued that the high fluctuation is mainly due to low price elasticities of both demand for and supply of these goods. Do you agree? Explain.
d. Andvig and Moene (1990) (- as discussed in your textbook -) model corruption in the public sector as a “coordination problem”. They assume first that the probability of getting caught in a corrupt act declines as the proportion of corrupt officials rises. Given this, they obtain two possible coordination equilibria. What are these two equilibria? Explain.

Oppgave 2:
a. What is a “Lorenz curve”?
b. Explain how Lorenz curves can be used to compare income inequalities between
countries.
c. Consider a poor country with high income inequality. Further, the education system in
this country has historically been financed privately. That is, students bear all costs of education. The government has decided that from now onward, education at all levels will be financed by government funds. How will this affect the income inequality of this country in the future?

Oppgave 3:
Below, we write a standard production function:
Y = A.F(K, L),
where Y stands for aggregate output, L (labour) and K (capital stock) are factors of production,
and A is a measure for the level of technology.
The above production function can also be written as:
Y/L = A.f(K/L), or y = A.f(k);
Where y=Y/Landk=K/L.
(i) Assume that the production function, y = A.f(k), shows "diminishing marginal productivity" in
k. Show the production function, y = A.f(k), graphically. (ii) Define marginal productivity of k.
(iii) What happens to the marginal productivity of k if the level of technology, A, rises? Show this using the graph of production function you drew in the answer to part (i) above.
(iv) We write below the Solow growth equation as presented in lecture: ∆k = sy - (d + n)k
Here, ∆ stands for "change over time", s is the rate of saving, d is the rate of capital depreciation, n is the population growth rate.
Explain Solow’s growth equation.
Using the above equation, describe the equilibrium in Solow's growth model. (Note that the
equilibrium in this model is also called the steady state.)
(The symbol ∆ is the Greek letter "delta". If you are unable to write/type this symbol in your
answer, replace this with the word "delta").