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Does Foreign Aid Increase Growth? - Practice Questions

1. The idea of “the big push” is that countries which reach a certain point in economic development will “take off.” In general, those countries which have received a great deal of aid _______________. *

did not take off as the “big push” predicted

grew much faster than countries which did not receive aid

saw a similar amount of economic growth as countries which did not receive aid

2. An increase in foreign aid often drives an increase a country’s capital stock. The Solow Model predicts that in increase in capital stock past its steady-state holding all other factors constant *

will permanently increase the growth rate of the economy

will eventually cause the growth rate of capital to fall as depreciation exceeds investment

offers no prediction on the impact of foreign aid

3. Econometric studies have found that once one controls for other factors, large amounts of foreign aid: *

have a positive effect on economic growth

have a negative effect on economic growth

both a. and b. depending on the study and underlying assumptions

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Does Foreign Aid Increase Growth? - Practice Questions