Question 1

Why is the fear of expropriation an obstacle to economic growth?

Accepted Answer

A)  Without research and development, no technological advances can be made. 
B)  Large government spending causes negative externalities. 
C)  Powerful special interest groups have too much control. 
D)  Because of the lack of guarantees, no foreign investment comes to the country. 
E)  Because of this fear, too many resources are devoted to military spending which is a highly unproductive sector. 
A)  Without research and development, no technological advances can be made. 
B)  Large government spending causes negative externalities. 
C)  Powerful special interest groups have too much control. 
D)  Because of the lack of guarantees, no foreign investment comes to the country. 
E)  Because of this fear, too many resources are devoted to military spending which is a highly unproductive sector. D

Question 2

What is the main reason why import-substitution strategies fail to generate rapid economic growth?

Accepted Answer

A)  Deteriorating terms of trade 
B)  Scarce natural resources 
C)  Inefficient allocation of resources 
D)  Lack of self-interested behavior by entrepreneurs 
E)  Insufficient subsidies to domestic producers 
A)  Deteriorating terms of trade 
B)  Scarce natural resources 
C)  Inefficient allocation of resources 
D)  Lack of self-interested behavior by entrepreneurs 
E)  Insufficient subsidies to domestic producers C

Question 3

For domestic saving to occur, it is necessary to have:

Accepted Answer

A)  a laissez faire economy. 
B)  a balanced fiscal budget. 
C)  a large number of government subsidies. 
D)  a stable system of property rights. 
E)  a highly developed banking system. 
A)  a laissez faire economy. 
B)  a balanced fiscal budget. 
C)  a large number of government subsidies. 
D)  a stable system of property rights. 
E)  a highly developed banking system. D

Question 4

Generally speaking, the more competitive a country's markets are, the greater are the opportunities for corruption.

Accepted Answer

A) True 
 B)False

Question 5

Foreign direct investment includes portfolio investment.

Accepted Answer

A) True 
 B)False

Question 6

A key reason for low foreign direct investment in developing nations is:

Accepted Answer

A)  the presence of tariff and non tariff barriers on imports. 
B)  the fear of nationalization of private assets. 
C)  the lack of government-operated enterprises. 
D)  the high interest rate charged on loans. 
E)  the fear of falling inflation rates. 
A)  the presence of tariff and non tariff barriers on imports. 
B)  the fear of nationalization of private assets. 
C)  the lack of government-operated enterprises. 
D)  the high interest rate charged on loans. 
E)  the fear of falling inflation rates.

Question 7

As of 2010, the World Bank classified a country as a low-income economy when its domestic per capita GDP fell below _____.

Accepted Answer

A)  $1000 
B)  $995 
C)  $675 
D)  $530 
E)  $475 
A)  $1000 
B)  $995 
C)  $675 
D)  $530 
E)  $475

Question 8

Which of the following can be categorized as multilateral aid?

Accepted Answer

A)  The U.S. providing funds to Haiti 
B)  World Bank providing financial assistance in the form of flood relief funds to Brazil 
C)  Pakistan requesting financial assistance for earthquake relief from the developed world 
D)  France promising funds to the Philippines against duty-free imports of French products 
E)  USAID relieving Nepal of the outstanding debt the latter owes to the organization 
A)  The U.S. providing funds to Haiti 
B)  World Bank providing financial assistance in the form of flood relief funds to Brazil 
C)  Pakistan requesting financial assistance for earthquake relief from the developed world 
D)  France promising funds to the Philippines against duty-free imports of French products 
E)  USAID relieving Nepal of the outstanding debt the latter owes to the organization

Question 9

Which of the following is an argument in favor of outward-oriented strategy?

Accepted Answer

A)  Government deficit spending tend to fall. 
B)  Domestic prices of imported goods tend to fall. 
C)  The economy grows more rapidly through exports. 
D)  The price of exported goods increase in the foreign markets. 
E)  The supply of goods and services increase in the domestic market. 
A)  Government deficit spending tend to fall. 
B)  Domestic prices of imported goods tend to fall. 
C)  The economy grows more rapidly through exports. 
D)  The price of exported goods increase in the foreign markets. 
E)  The supply of goods and services increase in the domestic market.

Question 10

If foreign firms send profits back to their industrial countries from the developing countries, developing countries will have a larger deficit on their balance of payments accounts.

Accepted Answer

A) True 
 B)False

Question 11

Bilateral aid is foreign aid that:

Accepted Answer

A)  goes to both communist and noncommunist developing countries. 
B)  affects two foreign markets. 
C)  is a joint aid package from two industrial countries that benefits a developing country. 
D)  flows from one country to another. 
E)  is paid in two parts. 
A)  goes to both communist and noncommunist developing countries. 
B)  affects two foreign markets. 
C)  is a joint aid package from two industrial countries that benefits a developing country. 
D)  flows from one country to another. 
E)  is paid in two parts.

Question 12

Generally, there is a strong positive correlation between per capita GNP and other measures of human development.

Accepted Answer

A) True 
 B)False

Question 13

A dual economy is characterized by:

Accepted Answer

A)  rapid productivity growth in both the agricultural sector and the manufacturing sector. 
B)  uneven development trends in two economic sectors. 
C)  drastic differences in regional work ethics. 
D)  the nonexistence of the government and foreign trade sectors. 
E)  a manufacturing sector that does not depend on natural resource supplies for production. 
A)  rapid productivity growth in both the agricultural sector and the manufacturing sector. 
B)  uneven development trends in two economic sectors. 
C)  drastic differences in regional work ethics. 
D)  the nonexistence of the government and foreign trade sectors. 
E)  a manufacturing sector that does not depend on natural resource supplies for production.

Question 14

Foreign direct investment occurs when a company:

Accepted Answer

A)  purchases foreign securities such as stocks and bonds. 
B)  establishes foreign operating units. 
C)  enters into a contractual agreement involving exchange of services and payments. 
D)  engages in international trade. 
E)  gives aid to a Third World country. 
A)  purchases foreign securities such as stocks and bonds. 
B)  establishes foreign operating units. 
C)  enters into a contractual agreement involving exchange of services and payments. 
D)  engages in international trade. 
E)  gives aid to a Third World country.

Question 15

Which of the following is a reason for the slow economic growth in former colonial nations?

Accepted Answer

A)  Inadequate foreign aid 
B)  A communist system of government 
C)  Lack of skilled officials 
D)  Religious extremism 
E)  Rapid population growth 
A)  Inadequate foreign aid 
B)  A communist system of government 
C)  Lack of skilled officials 
D)  Religious extremism 
E)  Rapid population growth

Question 16

What is a trade credit?

Accepted Answer

A)  A credit card purchase 
B)  A government loan for exporters 
C)  The extension of a period of time before which an importer must pay for goods and services purchased 
D)  An IMF loan to meet trade deficit and liabilities for hard currencies 
E)  The time it takes for franchisees to pay for the products they obtain from the main franchiser 
A)  A credit card purchase 
B)  A government loan for exporters 
C)  The extension of a period of time before which an importer must pay for goods and services purchased 
D)  An IMF loan to meet trade deficit and liabilities for hard currencies 
E)  The time it takes for franchisees to pay for the products they obtain from the main franchiser

Question 17

A quality-of-life index measures absolute poverty levels.

Accepted Answer

A) True 
 B)False

Question 18

Investment diversion is considered an obstacle to economic growth because:

Accepted Answer

A)  it would be better to increase the mortality rate of the country, and thus have a higher per capita real GDP. 
B)  investment in health care is highly appreciated by the international community. 
C)  capital infrastructure automatically eliminates population problems. 
D)  the investments in health care affect only the poorest, the least productive inhabitants of a country. 
E)  with no investment in infrastructure, there is no way for a country to build its industries. 
A)  it would be better to increase the mortality rate of the country, and thus have a higher per capita real GDP. 
B)  investment in health care is highly appreciated by the international community. 
C)  capital infrastructure automatically eliminates population problems. 
D)  the investments in health care affect only the poorest, the least productive inhabitants of a country. 
E)  with no investment in infrastructure, there is no way for a country to build its industries.

Question 19

The First World is made up of communist nations.

Accepted Answer

A) True 
 B)False

Question 20

Per capita GNP and quality-of-life are the only ways to determine a country's level of economic development.

Accepted Answer

A) True 
 B)False

Exam 17: Development Economics

Why is the fear of expropriation an obstacle to economic growth?

What is the main reason why import-substitution strategies fail to generate rapid economic growth?

For domestic saving to occur, it is necessary to have:

Generally speaking, the more competitive a country's markets are, the greater are the opportunities for corruption.

Foreign direct investment includes portfolio investment.

A key reason for low foreign direct investment in developing nations is:

As of 2010, the World Bank classified a country as a low-income economy when its domestic per capita GDP fell below _____.

Which of the following can be categorized as multilateral aid?

Which of the following is an argument in favor of outward-oriented strategy?

If foreign firms send profits back to their industrial countries from the developing countries, developing countries will have a larger deficit on their balance of payments accounts.

Bilateral aid is foreign aid that:

Generally, there is a strong positive correlation between per capita GNP and other measures of human development.

A dual economy is characterized by:

Foreign direct investment occurs when a company:

Which of the following is a reason for the slow economic growth in former colonial nations?

What is a trade credit?

A quality-of-life index measures absolute poverty levels.

Investment diversion is considered an obstacle to economic growth because:

The First World is made up of communist nations.

Per capita GNP and quality-of-life are the only ways to determine a country's level of economic development.

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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