Ch28 Planning And Appraising Development Test Bank + Answers

CHAPTER 28

Planning and Appraising Development Projects

Multiple Choice Questions

1. In the context of development, what is associated with the concept of a project?
   1. A governmental agency
   2. An investment
   3. A group of concerned citizens
   4. All of the above
   5. None of the above
2. What should development projects make a contribution towards?
   1. Civil society building
   2. Structural adjustment
   3. Institutional capacity
   4. Human security
   5. Poverty reduction
3. In the 1960s and 1970s there was growing discontent with what form of planning?
   1. Macroeconomic
   2. Microeconomic
   3. Capacity building
   4. Institution building
   5. Decentralized building
4. Which of the following encouraged recipient states to reduce the role of the state in the 1980s?
   1. Pressure from regional partners
   2. Declining external competition in trade
   3. The declining influence of the Soviet Union
   4. Western hegemony
   5. The end of the Bretton Woods system
5. How did the percentage of World Bank spending on social projects shift between 1975–79 and 2003–07?
   1. Increased
   2. Decreased
   3. Remained the same
   4. Increased and then decreased
   5. Decreased and then increased
6. What did the 2005 Paris Declaration recommend?
   1. Individual donor-planned projects
   2. Greater grassroots accountability for project approval and implementation
   3. Co-ordinated programmes which align with national development strategies
   4. Stand-alone development projects led by institutional actors
   5. A 50/50 funding model
7. What are SWAPs?
   1. Syndicated Women Approved Partnerships
   2. Sector Wide Approaches
   3. Seasonal Worker Applications
   4. Southern Water Appendices
   5. Special Work Approvals
8. Which of the following is a criticism of the World Bank’s project cycle?
   1. Restriction on the number of agents involved
   2. Linear in orientation
   3. No option for “abandonment”
   4. No accounting of external influences
   5. An under appreciation of policy evaluation
9. Which of the following is an alternative visualization of the “project cycle”?
   1. Iterated Project Cycle
   2. Project Oval
   3. Inverted Project Cycle
   4. Three-Dimensional Project Analysis
   5. Project Spiral
10. What is the first step of policy planning?
    1. Feasibility studies
    2. Agenda setting
    3. Stakeholder assessment
    4. Project identification
    5. Issue assessment
11. What is the proper basis of a project?
    1. A problem
    2. Funding availability
    3. Institutional support
    4. An opportunity
    5. A donor proposal
12. What planning tool can visualize the cause and effect of proposed projects?
    1. A mind map
    2. A brainstorm tree
    3. A timeline
    4. A project map
    5. A problem tree
13. What is the first stage in objective oriented project planning?
    1. Problem analysis
    2. Identification of relevant stakeholders
    3. Objectives analysis
    4. Assessment of strategies
    5. Project development
14. What term expresses the replacement of negative situations with positive outcomes in project planning?
    1. Objectives analysis
    2. Inverting the decision matrix
    3. Logic model
    4. ZOOG
    5. Linear association
15. What planning tool is composed of four columns and four rows?
    1. Policy matrix
    2. If this/then that
    3. Objective orientated project planning
    4. Logical framework
    5. Policy objective analysis
16. What does the “means of verification” column represent in the logical framework of project planning?
    1. Location of important information
    2. Underlying assumptions
    3. Funding sources
    4. Guidance on reporting system
    5. Obstacles to project completion
17. What is an important criticism of the logical framework of project planning?
    1. It is too complicated
    2. It is too simple
    3. It does not account for vested interests
    4. It creates too much paperwork
    5. It restricts creative thinking
18. What is an important consideration not taken into account in the logical framework of project planning?
    1. Whether it is logical
    2. Whether it is the best option
    3. Whether it is the most cost-effective option
    4. Whether it is the most efficient option
    5. Whether it is the least disruptive option
19. What tool is often used in financial and economic analysis?
    1. Cost-benefit analysis
    2. Regression analysis
    3. Inverted cost analysis
    4. ZOOP
    5. Quantitative back analysis
20. What two types of cost can be associated with running a project?
    1. Present and future
    2. Fixed and variable
    3. Direct and indirect
    4. Economic and distributional
    5. Actual and adjusted
21. What is the most reliable indicator of the value of a project?
    1. Cost-benefit analysis
    2. Social utility measurements
    3. Double ledger accounting
    4. Net present value
    5. Quantitative depreciation
22. Which of the following is necessary for a financial analysis?
    1. Cost-benefit analysis
    2. Depreciation schedule
    3. Net present value
    4. Internal rate of return
    5. Funding requests
23. How are things like negative environmental impacts accounted for in a project proposal?
    1. Mark downs
    2. Regulatory accounting
    3. Process tracing
    4. Externalities
    5. Depreciation schedule
24. Adjusting all foreign exchange costs and benefits upward to take account of the relative scarcity of foreign exchange is an example of what?
    1. Redundancy planning
    2. Shadow pricing
    3. Internal rate of return
    4. Measuring project stability
    5. External benefit analysis
25. What type of analysis is most appropriate for sectors such as health care?
    1. Cost-benefit analysis
    2. Internal external differential analysis
    3. Sensitivity analysis
    4. Efficiency quotients
    5. Cost-effectiveness analysis
26. Why should development projects be planned carefully?
    1. To overcome poverty
    2. To end a cycle and start a new one
    3. To utilize scarce resources effectively
    4. To report benefits to stakeholders
    5. To be appraised in the short term
27. Why should development projects have specific boundaries?
    1. To be effective geographically
    2. To be cost-effective
    3. To be able to be evaluated
    4. So that we know what is included in the project and what is not
    5. So it can go through all the processes and stages of project planning
28. What often happens after a development project ends?
    1. New projects are planned
    2. Poverty lines are newly estimated
    3. They become part of the routine operation of the organization responsible for the project
    4. A new basis for future debate in terms of development project planning is determined
    5. The economic viability of productive-sector projects is estimated
29. What is one of the methods used to appraise development projects?
    1. Logical framework
    2. Cost-benefit analysis
    3. Cost-effectiveness analysis
    4. OOPP
    5. ZOPP
30. What is a cost-benefit analysis characterized by?
    1. Project benefits can be measured fairly easily
    2. Project benefits cannot be measured easily
    3. It is extremely difficult to project costs
    4. It is extremely difficult to project net costs
    5. It is extremely difficult to project net benefits
31. What is a cost-effectiveness analysis characterized by?
    1. Benefits in the health and education sectors
    2. Costs in the health and education sectors
    3. Valuation of net benefits is more difficult, particularly in the private sectors of the economy
    4. Valuation of cost is more difficult, particularly in the health and education sectors
    5. Valuation of benefits is more difficult, particularly in the health and education sectors
32. What does the concept of development imply?
    1. The improvement of economic growth on a sustainable basis
    2. The success of a capitalist way to understand the world
    3. The reduction of extreme poverty
    4. The improvement of the level and distribution of income and the physical and human resource basis
    5. The redistribution of resources in a sustainable way
33. What is the most important schedule for financial analysis?
    1. Resource statement
    2. Net present value (NPV)
    3. Internal rate of return (IRR)
    4. Depreciation schedule
    5. Cash flow

True or False Questions

It is important to disassociate projects from investments.

The role of projects in development has been an issue for over 50 years.

In the 1970s and 1980s, it became standard for agricultural and industrial projects to be funded by the private sector.

The OECD’s Paris Declaration suggested opting for individual donor-planned projects.

The “Project Cycle” can account for all eventualities.

The logical framework approach (LFA) to project planning combines the logical framework with the objective oriented project planning (OOPP).

The first step in planning a project is “problem analysis.”

A problem tree attempts to account for the cause and effect implications of a project.

If the problem analysis identifies a need for specific investments, a project approach is appropriate.

Project activities lead to project results which lead to development outcomes and development impact.

There is some controversy as to whether a logical framework should have only one objective.

The logical framework accounts for both the logic and relative strength of a project.

A basic principal of cost-benefit analysis is that costs should be larger than benefits.

Pareto optimality stipulates a welfare improvement is only certain if everybody is better off.

The Hicks-Kaldor criterion posits welfare improvement occurs if gainers always compensate losers.

It is useful to distinguish between three categories of costs, namely, investment costs, operating costs, and working capital when doing a cost-benefit analysis.

Net present value is the sum of the net benefits in each year multiplied by the costs of externalities.

The internal rate of return is where the net present value is above zero.

The most important schedule for a financial analysis is the cash flow.

The use of family labour represents an opportunity cost.

Financial analysis of projects is concerned with the overall impact of the project on the national economy.

Environmental externalities are of particular importance to the resource sector.

The shadow wage rate is based on the black-market economy.

Cost-effectiveness analysis is particularly important for the resource sector.

The two main approaches of cost-benefit analysis are the “efficiency approach” and the “economy approach.”

A development project must be financially sustainable, or it will not work.

Project planning for development uses resources to prioritize enhancement of the profitability of those groups that execute them.

Development projects should contribute to poverty reduction.

The design of development projects includes determining objectives and the means to achieve them.

The appraisal of the value of development projects should ensure that benefits are not greater than costs for the economy as a whole.

In the 1990s, development funding from aid donors and development banks placed greater emphasis on ensuring the viability of specific projects rather than their contribution to wider programs.

By the late 1980s, the legitimacy of donor influence on recipient country policies was more widely accepted by those countries, partly because they had little alternative.

The most widely known model of project development is the “Project Cycle,” originally developed by Baum.

In a project cycle, a project goes through the processes of identification, preparation, appraisal, implementation, and evaluation.

Short Answer Questions

1. What is a project?
2. What is specific about “development” projects compared to those undertaken by other types of organizations?
3. In the 1980s, what was the impact of the changing orientation of the US/UK and the decline of the USSR?
4. What was the recommendation of the OECD Paris Declaration regarding “project” versus “sector wide” approaches to development?
5. What two reasons explain the decline in the use of cost-benefit analysis at the World Bank?
6. Why are sector strategies important in project planning?
7. Why does the objective oriented project planning (OOPP) model make stakeholder identification the first step?
8. According to the OOPP model, after the project tree has been constructed, what is the next step?
9. Under what circumstances might a project not be the best way to solve a problem?
10. In project planning, how can the logical framework be constructed as a matrix?
11. What is an important limitation of the logical framework in project planning?
12. What are the four considerations to be evaluated in the project appraisal stage?
13. Why are time and cost two key considerations in doing a cost-benefit analysis?
14. In project planning, what are investment costs?
15. What is the best indicator to use to account for the timing of costs and benefits, if the discount rate is known?
16. In financial analysis, how can the return to shareholders be estimated?
17. Why is the “return labour per day” an important indicator for small farm projects?
18. What is the purpose of a project’s “economic analysis”?
19. What four questions should be asked to evaluate the benefit of a going ahead with a project?
20. Why are externalities an import consideration in project assessment?
21. How is a cost-benefit analysis applied to projects?
22. Explain why CBA is not feasible for all projects.
23. What is a benefit-cost ratio?

Essay Questions

1. What are shadow prices and why are they a significant factor in project planning?
2. In project planning, what are the net present value (NPV) and the internal rate of return (IRR)? What is the utility in using both estimates?
3. What three categories of costs are useful when undertaking cost-benefit analysis?
4. Explain the process for constructing a financial analysis for development projects.
5. Analyze the historical evolution of development projects. What have been some advances and innovations? What have been some of the challenges?