Human capital lead to an increase in GDP

1. How can an increase in human capital lead to an increase in GDP? Why might it
   not lead to an increase in GDP? What are the differences between human capital and
   physical capital?
2. What is educational inequality and how is it measured? Why is it important to
   measure the degree of educational inequality in a country?
3. Explain what information is contained in the poverty rate statistic. Are there
   problems in using an absolute scale to measure poverty? If so, explain them.
4. According to the Environmental Kuznets Curves, what’s is the relationship
   between income and pollution?
5. What are the costs of “Big Cities”? What is the Urban Giantism Problem?
6. What are the benefits of promoting the urban informal sector? What is the role is
   women in the informal sector?
7. What are the main assumptions of the Harris-Todaro model of rural-urban
   migration? Suppose the rural wage is $5 per day. Urban modern sector employment
   can be obtained with 0.6 probability and pays $10 per day. Will there be any ruralurban migration? Explain your reasoning for people with different risk preference,
   stating explicitly any simplifying assumptions, and show all work.
8. What are the differences between The Lewis Model and The Harris-Todaro
   Model?
9. How to measure the private and social rates of return for primary and university
   education?
10. Game theory of Trade War. Two Players: China and the United States:
    Two choices: Raise tariff by 25% or leave tariffs alone.
    If both countries raise tariffs, each country’s GDP decreases by $200 billion.
    If neither country raises tariffs, each country’s GDP remains the same.
    If only one country raise its tariff, its GDP increases by $600 million and the other
    country’s GDP decreases by $400 billion. Draw the payoff matrix and find the Nash
    equilibrium.
11. What’s the difference between the nominal tariff and the effective tariff? Assume
    25% Tariff has been imposed on the imported Chinese TV. The U.S. TV is $150 and
    the Chinese TV is $100 before tariff. The cost of non-labor inputs for both U.S TV and
    Chinese TV is $80. What is the Effective Tariff Protection?
12. What are three general forms of market failure? List one specific example and
    the solution.
13. Using a supply and demand diagram, demonstrate how a negative externality
    such as pollution leads to market inefficiency. How might the government help to
    eliminate this inefficiency? What are the environmental policy options in Developing
    Countries?
14. Provide a short definition of sustainable development. How to set up a system of
    national accounts that includes the value of environmental capital and its loss.
15. What is Coase Theorem? Why does private solution often fail in developing
    countries?
16. Explain the concept of diminishing marginal utility, and describe the role that it
    plays in the utilitarian argument for the redistribution of income.
    The following income distribution data are for a country called New Land. Can you
    design a tax to redistribute the income to achieve a equal income distribution?
    Quintile Percent Share
    Lowest 20% 5%
    Second quintile 10%
    Third quintile 15%
    Fourth quintile 30%
    Highest 20% 40%
17. What is Net capital outflow (NCO) what is the equality of Net Exports (NX) and
    Net Capital Outflow?
18. What is Basic transfer (BT), why do the accumulations of debts happen in
    developing countries?
19. Why does international trade make poor countries better off?
20. What are the important requirements to be a well-functioning market economy?

Sample Solution