Question

II. True/False Questions (1 point each)

34.   Wealth as a concept is different than that of Income because the former is measured in dollars per unit of time while the latter is measured in dollars at a specific point in time.

35.   The NHDI measure is a geometric mean across indices of health, education and adjusted wealth.

36. Each dimension index used in the NHDI measure is calculated as the ratio that is given by the percent of the distance above the minimum to the maximum levels that a country has attained

37. Despite evidence that economies are not converging unconditionally there is evidence that there is cross-national convergence of economic sectors like the manufacturing sector.

38. Economic institutions are the “rules of the game” that shape the economic interactions among individuals.

39. Todaro and Smith argue that “economic income inequality affects negatively per capita income, schooling and institutional quality according to Easterly”.

Answer 1

34. True. Wealth as a stock variable was measured at a point of time and income is a flow variable was measured over a period of time. Other examples for flow variables are expenditure, saving, interest, export, change in money supply, rent, profit etc. Foreign debts, loan, inventories, opening stock, population etc. are the examples of stock variables.

35. False. NHDI measure the geometric mean of education, health and level of income. It adds the life expectancy with the health level.

36. True. NHDI consist of three indicators of human development like life expectancy, education and per capita income. Each dimension measure the ratio which is the percentage distance between minimum and maximum level attained by each country. Healthy life measures the demographic factors like year of birth and current age. It measured based on the difference between minimum and maximum range.

37. True. Economies are not converging unconditional because of the cross national convergence of the economic sectors like manufacturing sector. This will increase the productivity, otherwise there is huge fluctuations will affect the economic stability.

38. True. Economic institutions are the rules of games in society. The social norm of driving the right side as an actual institution.

39. True. Income distribution affects the well being of people. According to Todaro and Smith, the inequality in income distribution leads to inequality in per capita income also. This will negatively affect the consumption pattern of the people. Per capita income is one of the most important index to measure the level of total GDP.