Global 130

Spring 2014
Final Review Questions

This sheet only covers questions covered in the last three lectures. All previous material was covered in
the review sheets from the first few exams.
The Neoclassical Counterrevolution
1. What was the Latin American debt crisis? What effect did it have in the developing world?
2. What are the ten policy instruments whose appropriate deployment Williamson felt Washington
agreed upon? You need not be able to list them all by memory, but you should understand
what each one was, what it was proposed in response to, and why it was considered a good idea
by many economists.
3. What are the ways, according to Easterly, that governments can kill growth? Again you need
not memorize the list, but you should be able explain why he believes that doing these things
can kill growth.

The Trade Policy Debate
1. Why have developing economies been keen to avoid specializing in commodities?
2. What is Import Substituting Industrialization?
3. What is Export Oriented Industrialization?
4. In what ways are ISI and EOI similar? In what ways are they different?
5. What were the ramifications of the debt crisis for most western economists views on industrial
policy? In what way might the results we discussed on product space suggest that this view is
wrong?
6. Is it possible to reconcile the view that what you produce matters for growth, with the view that
governments should forswear industrial policy? Link this to the reading from the Atlas of
Economic Complexity.

The Financial Sector (Levine)
7. What is financial depth?
8. What does Levine suggest about the relationship between financial depth and economic
growth?
9. What functions should a healthy financial sector perform? How do they perform these
functions? Why would these functions contribute to growth?

Financial Crisis

10. What is the circular flow?
11. What was the USs trade balance at the end of 2006? Was the amount of US assets foreigners
were buying more or less than the amount of foreign assets that US persons were buying?
12. What is leverage? Why do companies and households become overleveraged?
13. What is securitization? What were the consequences of securitization?
14. The crisis was the result of excess borrowing by US entities. Which entities in the US were doing
the borrowing? Who were they borrowing from?
15. What is a fiscal stimulus package? What is the relationship between fiscal stimulus and the
fiscal deficit?
16. What is austerity? Why do governments (e.g. the UK) sometimes attempt austerity even while
their economies are undergoing recessions?
17. How can a central bank stimulate an economy?
18. What was the governments role in creating the conditions for the financial crisis?
19. What is a credit default swap? How is a CDS different from insurance?
20. What has the effect of the crisis been on public debt in Northern countries?

Externalities and Climate Change
21. What is a negative externality? Will markets produce efficient outcomes when there is a
negative externality? Why or why not?
22. What are the potential private solutions to externalities?
23. What are the potential public solutions to externalities? How do they work? Which of them
attempt to change behavior through economic incentives?
24. Why might public solutions to negative externalities that involve economic incentives be
preferable to command and control strategies?
25. Why do many economists think that a carbon tax is a smarter idea than regulations?
26. What is the prisoners dilemma? What does it tell us about why climate change negotiations
have been so difficult? What reasons do we have to hope that it can be overcome?


Readings / movies: Williamson, T&S 3, 12 and 13 selections, Easterly 2, 11; Levine; Seuss; K&W Ch. 19.;
Rajan; Stiglitz; Inside Job; Quants; Arturo Bris video; two NYT articles on climate negotiations.