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Final

# Final Exam- 2012

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University of Guelph

Economics

ECON 2650

Kurt Annen

Fall

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Do not open this exam until told to do so.
Final Exam, ECON*2650, Fall 2012
Department of Economics & Finance
College of Management and Economics
K. Annen, Fall 2012
You have 2 hours to complete this exam. You can use empty scrap
paper and a calculator. Please write short and concise answers
that are straight to the point in the space provided. If you use
more space than provided, points are taken o▯. This exam has
25 questions, for a total of 100 points.
Name and Student ID: ECON*2650
University of Guelph Final Exam, Fall 2012
1. (3 points) Discuss the following claim: \If the PPP measure of a given country increases, then
this country’s GDP expressed in international dollars increases."
2. (3 points) A researcher ▯nds out that any amount expressed in dollars equals one hundred
times that amount when expressed in cents. (Wow, what a ▯nding!) What is the correlation
coe▯cient r between a given set of dollar amounts and its corresponding amounts in cents?
3. (3 points) A researcher ▯nds incomes for a sample of people that belong to two groups. In the
▯rst group, ▯ 1 1200, s =1150, and n = 61. In the second group x ▯2= 1500, s 2 300, and
n 2 81. Test whether incomes are signi▯cantly di▯erent from each other for these two groups
of people by using the rule-of-thumb we learned in class. (In order to get full marks, you need
to show your work!)
4. (3 points) Give ONE example of an ‘input’-measure of education. (Please, one example only!)
5. (3 points) Economists studied a community in an unknown place where there is perfect equality
in the distribution of incomes. What is the standard deviation of incomes in this community?
6. (3 points) Discuss the following claim: \According to the Solow growth model, the growth rate
of incomes per capita is zero for an economy in the steady state."
7. (3 points) The Human Development Index (HDI) is a measure composed of three dimensions.
What are these three dimensions?
8. (3 points) Education can have private and public returns. Give ONE example of a public
return to education. (Please, one example only!)
Page 2 of 8 ECON*2650
University of Guelph Final Exam, Fall 2012
9. (3 points) Discuss the following claim: \Persons with a lower discount rate have stronger
incentives to invest in an education."
10. Consider a data set with the following values: x = 10, x = 12, x = 16,3x = 20, x4= 21, 5
x 6 26, and x =735.
(a) (3 points) Calculate the mean and the median.
(b) (3 points) Plot a histogram where data is divided into two equally sized groups.
11. (5 points) We discussed the table below in class. It looks at the relationship between quantity
and quality of education and income per capita growth. Summarize the ▯ndings related to the
quantity and quality of education reported in Column (1) and (2) in this table. (Focus on the
quantity vs. quality issue of education only!)
Page 3 of 8 ECON*2650
University of Guelph Final Exam, Fall 2012
12. (3 points) Discuss the following claim: \The Income Gap Ratio satis▯es the ‘monotonicity
axiom’ in poverty measurement."
13. (5 points) Robert Solow’s growth model predicts that initially poor countries grow faster than
initially rich countries. Use the evidence reported in the Table included in Question 11 in this
exam to discuss this claim.
14. (3 points) We often use the Gini coe▯cient to measure inequality in a country. Typically, this
measure di▯ers between richer and poorer countries. What is { roughly {the value of the Gini
in a typical rich country? What is { roughly { this value in a typical poor country?
15. (5 points) Consider the following claim: \In poor countries, parents do not send children to
school because of a lack of income." Discuss this claim by using the evidence reported in
Chapter 4 in Banerjee and Du
o’s book ‘Poor Economics,’ which we discussed in class. (You
NEED to use the evidence mentioned in this chapter to answer the question! If you haven’t
read that chapter or you do not remember the discussion about the chapter, please don’t answer
the question.)
16. (3 points) At the beginning of the semester, we discussed a histogram that grouped the average
incomes of countries (PPP adjusted) for 2009 in 20 equally sized groups. Explain the most
striking feature of this histogram.
Page 4 of 8 ECON*2650
University of Guelph Final Exam, Fall 2012
17. An aid agency has a limited budget for poverty reduction. The objective of the

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