Question 1

If the level of aggregate real Gross Domestic Product (GDP) remains constant, a reduction in the population

Accepted Answer

A)  directly increases per capita real GDP. 
B)  directly reduces per capita real GDP. 
C)  indirectly reduces per capita real GDP. 
D)  has no effect on real per capita real GDP. 
A)  directly increases per capita real GDP. 
B)  directly reduces per capita real GDP. 
C)  indirectly reduces per capita real GDP. 
D)  has no effect on real per capita real GDP.

Question 2

All of the following are examples of institutions that promote real economic growth EXCEPT

Accepted Answer

A)  an efficient judicial system used to enforce contracts. 
B)  patent laws that protect innovation. 
C)  complex rules associated with business licensing used to promote careful business growth. 
D)  strong law enforcement used to protect business interests. 
A)  an efficient judicial system used to enforce contracts. 
B)  patent laws that protect innovation. 
C)  complex rules associated with business licensing used to promote careful business growth. 
D)  strong law enforcement used to protect business interests.

Question 3

The World Bank

Accepted Answer

A)  determines the price level in each of its member nations. 
B)  determines the labor force participation rate in each of its member nations. 
C)  mediates contracts regarding minimum prices for various globally-traded commodities. 
D)  extends long-term loans for capital investment projects to developing nations. 
A)  determines the price level in each of its member nations. 
B)  determines the labor force participation rate in each of its member nations. 
C)  mediates contracts regarding minimum prices for various globally-traded commodities. 
D)  extends long-term loans for capital investment projects to developing nations.

Question 4

The general set of rights to own private property and exchange goods, services, and financial assets with minimal government interference is defined as

Accepted Answer

A)  capitalism. 
B)  market socialism. 
C)  economic freedom. 
D)  economic privilege. 
A)  capitalism. 
B)  market socialism. 
C)  economic freedom. 
D)  economic privilege.

Question 5

A reduction in the rate of population growth

Accepted Answer

A)  always causes an increase in economic growth. 
B)  never causes an increase in economic growth. 
C)  may or may not cause an increase in economic growth. 
D)  will cause a reduction in economic growth if accompanied by an increase in the rate of growth of real GDP. 
A)  always causes an increase in economic growth. 
B)  never causes an increase in economic growth. 
C)  may or may not cause an increase in economic growth. 
D)  will cause a reduction in economic growth if accompanied by an increase in the rate of growth of real GDP.

Question 6

The World Bank was formed in

Accepted Answer

A)  1919. 
B)  1945. 
C)  1960. 
D)  1980. 
A)  1919. 
B)  1945. 
C)  1960. 
D)  1980.

Question 7

In general, a country that adheres to the rule of law has

Accepted Answer

A)  a higher level of real GDP per capita. 
B)  a lower level of real GDP per capita. 
C)  no relationship to the level of real GDP per capita. 
D)  an inverse relationship to the level of real GDP per capita. 
A)  a higher level of real GDP per capita. 
B)  a lower level of real GDP per capita. 
C)  no relationship to the level of real GDP per capita. 
D)  an inverse relationship to the level of real GDP per capita.

Question 8

A multinational agency that specializes in making loans to a larger number of developing nations to promote long-term development and growth is

Accepted Answer

A)  the International Bank. 
B)  the World Bank. 
C)  the International Monetary Fund. 
D)  the World Monetary Fund. 
A)  the International Bank. 
B)  the World Bank. 
C)  the International Monetary Fund. 
D)  the World Monetary Fund.

Question 9

The potential for recipients of a loan to engage in riskier behavior after receiving the financing is called

Accepted Answer

A)  adverse selection. 
B)  moral hazard. 
C)  moral selection. 
D)  adverse hazard. 
A)  adverse selection. 
B)  moral hazard. 
C)  moral selection. 
D)  adverse hazard.

Question 10

Foreign direct investment is defined as

Accepted Answer

A)  the acquisition of more than 10 percent of the shares of ownership in a company in another nation. 
B)  funds allocated into a foreign stock market that represent an ownership share of firms less than 5 percent. 
C)  purchasing both capital equipment and government bonds abroad. 
D)  purchasing government bonds. 
A)  the acquisition of more than 10 percent of the shares of ownership in a company in another nation. 
B)  funds allocated into a foreign stock market that represent an ownership share of firms less than 5 percent. 
C)  purchasing both capital equipment and government bonds abroad. 
D)  purchasing government bonds.

Question 11

For foreign direct investment to occur, the purchase has to be more than

Accepted Answer

A)  2 percent but less than 5 percent of shares in a business located abroad. 
B)  5 percent but less than 10 percent of shares in a business located abroad. 
C)  8 percent but less than 10 percent of shares in a business located abroad. 
D)  10 percent of shares in a business located abroad. 
A)  2 percent but less than 5 percent of shares in a business located abroad. 
B)  5 percent but less than 10 percent of shares in a business located abroad. 
C)  8 percent but less than 10 percent of shares in a business located abroad. 
D)  10 percent of shares in a business located abroad.

Question 12

The percentage change in per capita real GDP measures economic growth because it takes into account all of the following variables EXCEPT

Accepted Answer

A)  the percentage change in population. 
B)  the percentage change in the inflation rates. 
C)  the percentage change in nominal GDP. 
D)  the percentage change in the quality of life. 
A)  the percentage change in population. 
B)  the percentage change in the inflation rates. 
C)  the percentage change in nominal GDP. 
D)  the percentage change in the quality of life.

Question 13

The World Bank makes loans primarily to

Accepted Answer

A)  nations without free markets, such as North Korea. 
B)  developing nations. 
C)  the United States. 
D)  highly developed nations. 
A)  nations without free markets, such as North Korea. 
B)  developing nations. 
C)  the United States. 
D)  highly developed nations.

Question 14

Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary Fund

Accepted Answer

A)  make loans to the riskiest nations so that private investors will not be tempted to take a risk. 
B)  loan only to countries that have free elections. 
C)  not make loans to risky nations because there is a high demand for funds from safer nations. 
D)  impose tougher preconditions on borrowers. 
A)  make loans to the riskiest nations so that private investors will not be tempted to take a risk. 
B)  loan only to countries that have free elections. 
C)  not make loans to risky nations because there is a high demand for funds from safer nations. 
D)  impose tougher preconditions on borrowers.

Question 15

Suppose a nation's rate of growth of per capita real Gross Domestic Product (GDP) is 3 percent and its rate of growth in real GDP is 4 percent. Given this information, the nation's population growth rate is approximately equal to

Accepted Answer

A)  1 percent 
B)  2 percent 
C)  3 percent 
D)  7 percent 
A)  1 percent 
B)  2 percent 
C)  3 percent 
D)  7 percent

Question 16

When a country has a large amount of dead capital,

Accepted Answer

A)  there is too much political freedom. 
B)  there is a large amount of economic growth. 
C)  large amounts of capital will be inefficiently employed. 
D)  a country's exports increase. 
A)  there is too much political freedom. 
B)  there is a large amount of economic growth. 
C)  large amounts of capital will be inefficiently employed. 
D)  a country's exports increase.

Question 17

According to the text, population growth in many poor countries does not generally result in increased labor resources because

Accepted Answer

A)  many people do not join the labor force. 
B)  many people join the labor force. 
C)  many people work two jobs. 
D)  most jobs are for middle-age workers. 
A)  many people do not join the labor force. 
B)  many people join the labor force. 
C)  many people work two jobs. 
D)  most jobs are for middle-age workers.

Question 18

Which statement is true about a comparison of economic freedom with political freedom?

Accepted Answer

A)  Economic freedom cannot exist without political freedom. 
B)  Economic freedom leads to positive economic growth while political freedom leads to negative economic growth. 
C)  Political freedom is more important than economic freedom when considering positive economic growth. 
D)  Economic freedom is more important than political freedom when considering positive economic growth. 
A)  Economic freedom cannot exist without political freedom. 
B)  Economic freedom leads to positive economic growth while political freedom leads to negative economic growth. 
C)  Political freedom is more important than economic freedom when considering positive economic growth. 
D)  Economic freedom is more important than political freedom when considering positive economic growth.

Question 19

The three sources of private direct investment in developing nations are

Accepted Answer

A)  bank loans, government loans, and Eurobond issues. 
B)  bank loans, portfolio investments, and foreign direct investments. 
C)  portfolio loans, IMF loans, and government loans. 
D)  foreign direct investment, government loans, and Eurobond issues. 
A)  bank loans, government loans, and Eurobond issues. 
B)  bank loans, portfolio investments, and foreign direct investments. 
C)  portfolio loans, IMF loans, and government loans. 
D)  foreign direct investment, government loans, and Eurobond issues.

Question 20

The primary function of the International Monetary Fund is

Accepted Answer

A)  to provide loans only to private firms in developing countries. 
B)  to make direct, irrevocable transfers of funds from wealthy nations to poor nations. 
C)  to lend solely on the basis of a nation's relative poverty. 
D)  to make loans aimed at promoting global stability and hence growth. 
A)  to provide loans only to private firms in developing countries. 
B)  to make direct, irrevocable transfers of funds from wealthy nations to poor nations. 
C)  to lend solely on the basis of a nation's relative poverty. 
D)  to make loans aimed at promoting global stability and hence growth.

Exam 18: Policies and Prospects for Global Economic Growth

If the level of aggregate real Gross Domestic Product (GDP) remains constant, a reduction in the population

All of the following are examples of institutions that promote real economic growth EXCEPT

The World Bank

The general set of rights to own private property and exchange goods, services, and financial assets with minimal government interference is defined as

A reduction in the rate of population growth

The World Bank was formed in

In general, a country that adheres to the rule of law has

A multinational agency that specializes in making loans to a larger number of developing nations to promote long-term development and growth is

The potential for recipients of a loan to engage in riskier behavior after receiving the financing is called

Foreign direct investment is defined as

For foreign direct investment to occur, the purchase has to be more than

The percentage change in per capita real GDP measures economic growth because it takes into account all of the following variables EXCEPT

The World Bank makes loans primarily to

Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary Fund

Suppose a nation's rate of growth of per capita real Gross Domestic Product (GDP) is 3 percent and its rate of growth in real GDP is 4 percent. Given this information, the nation's population growth rate is approximately equal to

When a country has a large amount of dead capital,

According to the text, population growth in many poor countries does not generally result in increased labor resources because

Which statement is true about a comparison of economic freedom with political freedom?

The three sources of private direct investment in developing nations are

The primary function of the International Monetary Fund is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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