Dr. Don J. DeVoretz Feb. 26, 1997

Dept. of Economics

Simon Fraser University Name__________________

ID # __________________

Instructions: Do both questions. Note question 1 is worth 50 marks and the second only 25 marks. You have exactly two hours.

(50 pts)

1. There exists no general theory of economic development. We have discussed several economic theories which emphasize certain aspects of the development process. These paradigms include:

a. Kuznets historical or inductive approach

b. Demographic Transition theory

c. Capital accumulation or Neo Classical theory

d. Trade as an engine of growth

e. Household investment or human capital model.

From each of the above theories select at least two key conclusions which if followed by your country of choice would possibly hasten the development process.

Now, for each conclusion chosen please support with facts how your country is performing.

Finally, what one element or conclusion in each of the above paradigms does your country not meet or fulfil. Again, support your choice of a missing ingredient with facts drawn from your country.

(25 points)

2.Outline the balance of payments history of your country from the 1980's until the present. Include the current and capital accounts in your review. Explain the various commercial policies open to your country to improve its trade balance including the IMF package, export diversification, defaulting or rescheduling of debt, and debt buyback schemes. Explain why these policies are often ineffective given the J shaped currency depreciation curve, developed countries' high effective tariffs and supply and demand characteristics in developed countries for LDC products.