Economic Development: Concepts and Theories MCQs 2026

Economic growth primarily refers to

1. A only a rise in inequality ✓
2. B only a fall in population ✓
3. C an increase in real output (real GDP) over time ✓
4. D only a change in culture ✓

Economic development is broader than growth because it also emphasizes

1. A structural change, living standards, health, education and poverty reduction ✓
2. B only nominal GDP spikes ✓
3. C only military spending ✓
4. D only stock indices ✓

Per capita income is often used as a crude indicator of

1. A average material living standards ✓
2. B exact happiness of every person ✓
3. C only forest biodiversity ✓
4. D only exchange-rate pegs ✓

The Human Development Index (HDI) combines dimensions of

1. A only inflation, tariffs and quotas ✓
2. B health, education and standard of living ✓
3. C only FDI, remittances and reserves ✓
4. D only money supply components ✓

Absolute poverty refers to

1. A only feeling poorer than neighbors ✓
2. B only temporary unemployment ✓
3. C inability to meet a fixed minimum living standard (e.g., basic calorie/needs line) ✓
4. D only lack of luxury brands ✓

Relative poverty refers to

1. A being poor relative to the society's average or median living standard ✓
2. B having zero calories always ✓
3. C identical to absolute poverty always ✓
4. D only rural landlessness by definition ✓

The basic needs approach stresses

1. A only maximizing stock prices ✓
2. B only maximizing tariffs ✓
3. C access to food, shelter, health, education and essential services ✓
4. D only maximizing money growth ✓

Sustainable development means

1. A maximizing pollution for growth ✓
2. B ignoring natural resources ✓
3. C meeting present needs without compromising future generations' ability to meet theirs ✓
4. D growth without any environment concern ✓

Rostow's stages of growth include

1. A only feudalism and socialism ✓
2. B traditional society, preconditions, take-off, drive to maturity, high mass consumption ✓
3. C only inflation and deflation ✓
4. D only fixed and floating rates ✓

In Rostow, the take-off stage is characterized by

1. A complete stagnation forever ✓
2. B zero savings always ✓
3. C abolition of industry ✓
4. D a rise in productive investment and leading sectors driving sustained growth ✓

The Lewis dual-economy model emphasizes

1. A only floating exchange rates ✓
2. B only central-bank independence ✓
3. C transfer of surplus labor from traditional agriculture to modern industry ✓
4. D only HDI formula weights ✓

In the Lewis model, surplus labor in agriculture implies

1. A agriculture has no workers ✓
2. B industry cannot hire anyone ✓
3. C wages must be infinite ✓
4. D labor can move to industry with little loss of agricultural output initially ✓

Todaro's migration model highlights that rural-urban migration depends on

1. A only rural rainfall ✓
2. B expected urban income (wage × employment probability), not just the wage gap ✓
3. C only passport fees ✓
4. D only tariff schedules ✓

Dependency theory argues that

1. A poor countries develop only by isolation forever ✓
2. B underdevelopment is linked to unequal center-periphery relations in the world economy ✓
3. C trade never matters ✓
4. D HDI is the only cause of poverty ✓

The vicious circle of poverty suggests that

1. A poverty automatically ends in one year ✓
2. B low income → low saving/investment → low productivity → low income ✓
3. C saving is always high in poor countries ✓
4. D investment never needs capital ✓

Big Push theory (Rosenstein-Rodan) argues for

1. A tiny isolated projects only ✓
2. B zero public investment ✓
3. C only agricultural taxes ✓
4. D coordinated large-scale investment across sectors to overcome indivisibilities ✓

Unbalanced growth strategy (Hirschman) emphasizes

1. A perfect balance in every sector always ✓
2. B no industrial policy ever ✓
3. C only floating currencies ✓
4. D inducing investment via linkages from leading sectors ✓

Harrod-Domar growth focuses on the relation among

1. A only HDI components ✓
2. B only tariff elasticities ✓
3. C saving rate, capital-output ratio and growth rate ✓
4. D only remittance seasons ✓

Solow neoclassical growth highlights

1. A capital accumulation, labor and exogenous technical progress (with diminishing returns) ✓
2. B unlimited returns to capital forever without tech ✓
3. C only dual labor markets ✓
4. D only dependency trade ✓

Endogenous growth theories stress that

1. A technology is always fully exogenous ✓
2. B capital never matters ✓
3. C technological progress can be driven by investment in ideas, human capital and R&D ✓
4. D trade is irrelevant ✓

Human capital refers to

1. A skills, education and health embodied in people that raise productivity ✓
2. B only physical machines ✓
3. C only foreign reserves ✓
4. D only land area ✓

Physical capital includes

1. A machinery, buildings and infrastructure used in production ✓
2. B only years of schooling ✓
3. C only life expectancy ✓
4. D only literacy rates ✓

Income inequality is commonly measured by the

1. A Gini coefficient ✓
2. B only HDI education index ✓
3. C only current account balance ✓
4. D only reserve months of imports ✓

A Gini coefficient closer to 1 indicates

1. A perfect equality ✓
2. B zero poverty always ✓
3. C higher literacy always ✓
4. D higher inequality ✓

The Kuznets hypothesis suggested that inequality may

1. A first rise then fall with development (inverted-U) ✓
2. B always fall monotonically from day one ✓
3. C never change ✓
4. D depend only on exchange rates ✓

Inclusive growth means

1. A growth only for the top 1% ✓
2. B growth that broadly shares benefits across society, including the poor ✓
3. C growth without jobs by definition ✓
4. D growth that raises only asset prices ✓

Pro-poor growth is growth that

1. A raises only luxury imports ✓
2. B reduces poverty (raises incomes of the poor) ✓
3. C increases absolute poverty by definition ✓
4. D ignores the poor entirely ✓

Multidimensional poverty includes deprivations in

1. A health, education and living standards (beyond income alone) ✓
2. B only stock ownership ✓
3. C only FX reserves ✓
4. D only tariff lines ✓

Demographic transition refers to

1. A shift from high birth/death rates to low birth/death rates with development ✓
2. B only migration to cities ✓
3. C only currency devaluation ✓
4. D only land reforms ✓

Population growth can affect development by

1. A having no economic effects ever ✓
2. B only changing the exchange rate peg ✓
3. C only setting IMF quotas ✓
4. D influencing dependency ratios, saving, investment needs and labor supply ✓

Gender inequality can hinder development because it

1. A always raises HDI automatically ✓
2. B underutilizes women's human capital and limits welfare gains ✓
3. C has no link to education ✓
4. D only affects stock markets ✓

Environmental Kuznets curve (idea) suggests pollution may

1. A rise forever with no peak ✓
2. B be unrelated to income always ✓
3. C rise then fall with income as societies regulate and shift structure ✓
4. D depend only on remittances ✓

Import-substitution industrialization (ISI) aims to

1. A replace imports with domestic production behind protective barriers ✓
2. B maximize free imports always ✓
3. C ban all industry ✓
4. D float the currency only ✓

Export-led growth strategy emphasizes

1. A closing the economy completely ✓
2. B expanding exports as an engine of growth and learning ✓
3. C taxing exports heavily always ✓
4. D ignoring competitiveness ✓

Structural transformation typically means

1. A keeping all labor in farming forever ✓
2. B shift of employment and output from agriculture toward industry and services ✓
3. C abolishing services ✓
4. D fixing only money supply ✓

The informal sector is characterized by

1. A only multinational FDI plants ✓
2. B only central-bank operations ✓
3. C small-scale, often unregistered activities with limited regulation and social protection ✓
4. D only IMF programs ✓

Capability approach (Sen) focuses on

1. A only GDP maximization ✓
2. B only money supply targets ✓
3. C people's freedoms and capabilities to lead lives they value ✓
4. D only tariff revenue ✓

Millennium/Sustainable Development Goals are

1. A only bilateral trade deals ✓
2. B only central-bank charters ✓
3. C only stock-index rules ✓
4. D global development agendas with targets on poverty, health, education, environment, etc. ✓

Foreign aid can support development if it

1. A always guarantees growth regardless of use ✓
2. B never affects the budget ✓
3. C replaces all domestic saving forever optimally ✓
4. D finances productive investment and reforms without creating dependency ✓

Brain drain refers to

1. A inflow of unskilled tourists only ✓
2. B import of machines only ✓
3. C rise in literacy only ✓
4. D emigration of skilled workers from developing countries ✓

Technology transfer in development means

1. A adoption and adaptation of productive knowledge and techniques from abroad ✓
2. B only sending remittances ✓
3. C only devaluing currency ✓
4. D only raising tariffs ✓

Institutions matter for development because they

1. A have no economic role ✓
2. B only set weather patterns ✓
3. C only determine rainfall ✓
4. D shape incentives for investment, property rights and governance ✓

Corruption typically harms development by

1. A raising productivity always ✓
2. B lowering inequality always ✓
3. C distorting incentives, raising costs and undermining public goods ✓
4. D increasing trust always ✓

Microfinance aims to

1. A replace all commercial banks overnight ✓
2. B provide small-scale financial services to the poor and microenterprises ✓
3. C fund only mega dams ✓
4. D set exchange rates ✓

Rural development strategies often combine

1. A only urban stock markets ✓
2. B only FX intervention ✓
3. C agriculture productivity, infrastructure, education, health and non-farm jobs ✓
4. D only tariff hikes ✓

Food security means

1. A only exporting all grain ✓
2. B reliable access to sufficient, safe and nutritious food ✓
3. C only maximizing cash crops for luxury ✓
4. D only urban restaurants ✓

Inequality of opportunity refers to

1. A unequal chances due to circumstances beyond individual control ✓
2. B only unequal lottery tickets ✓
3. C only different exchange rates ✓
4. D only different tax forms ✓

Green growth emphasizes

1. A growth via maximum deforestation ✓
2. B growth that is resource-efficient and environmentally sustainable ✓
3. C ignoring climate risks ✓
4. D banning all renewable energy ✓

The poverty line is

1. A the exchange rate peg ✓
2. B the fiscal deficit limit ✓
3. C the HDI maximum score ✓
4. D a threshold income/consumption below which a person is counted as poor ✓

Trickle-down economics claims that

1. A redistribution is the only growth source ✓
2. B poverty cannot fall with growth ✓
3. C aid never matters ✓
4. D benefits of growth for the rich eventually spread to the poor ✓