Question 1

Which of the following has contributed to developing countries' poor economic performance?

Accepted Answer

A)  Low population growth 
B)  Corruption 
C)  High capital investment 
D)  Foreign direct investment 
A)  Low population growth 
B)  Corruption 
C)  High capital investment 
D)  Foreign direct investment

Question 2

The World Bank was formed in

Accepted Answer

A)  1930. 
B)  1960. 
C)  1945. 
D)  1918. 
A)  1930. 
B)  1960. 
C)  1945. 
D)  1918.

Question 3

The goal of the World Bank is to

Accepted Answer

A)  supervise exchange rate stability. 
B)  supervise the activities of the central banks of member nations. 
C)  sell the government securities of member nations on the open market. 
D)  help finance economic development. 
A)  supervise exchange rate stability. 
B)  supervise the activities of the central banks of member nations. 
C)  sell the government securities of member nations on the open market. 
D)  help finance economic development.

Question 4

Which of the following is NOT a function of the International Monetary Fund?

Accepted Answer

A)  serve as lender of last resort for national governments 
B)  administer an international foreign exchange system 
C)  establish the SDR system nations utilize to settle international payment obligations 
D)  establish and administer each nation's fiscal and monetary policies 
A)  serve as lender of last resort for national governments 
B)  administer an international foreign exchange system 
C)  establish the SDR system nations utilize to settle international payment obligations 
D)  establish and administer each nation's fiscal and monetary policies

Question 5

Portfolio investment and foreign direct investment are methods through which

Accepted Answer

A)  ownership in assets are acquired in countries other than one's home country. 
B)  U.S. residents invest funds in companies that export goods. 
C)  U.S. residents invest funds in companies that import goods. 
D)  short-term investments are converted to long-term ones. 
A)  ownership in assets are acquired in countries other than one's home country. 
B)  U.S. residents invest funds in companies that export goods. 
C)  U.S. residents invest funds in companies that import goods. 
D)  short-term investments are converted to long-term ones.

Question 6

The acquisition of more than 10 percent of the outstanding shares in a company in another country is

Accepted Answer

A)  foreign direct investment. 
B)  foreign direct acquisition. 
C)  portfolio investment. 
D)  portfolio acquisition. 
A)  foreign direct investment. 
B)  foreign direct acquisition. 
C)  portfolio investment. 
D)  portfolio acquisition.

Question 7

Define what dead capital is and why economists are concerned with its existence.

Accepted Answer

Dead capital is when capital resources l

Question 8

Most international investment finance today comes from

Accepted Answer

A)  portfolio and foreign direct investment. 
B)  the sale of antiques. 
C)  government financing. 
D)  tax collections. 
A)  portfolio and foreign direct investment. 
B)  the sale of antiques. 
C)  government financing. 
D)  tax collections.

Question 9

Which of the following is NOT one of the three primary sources of private investment funds flowing into developing nations?

Accepted Answer

A)  Bank loans 
B)  Foreign direct investment 
C)  World Bank and IMF loans 
D)  Portfolio investment 
A)  Bank loans 
B)  Foreign direct investment 
C)  World Bank and IMF loans 
D)  Portfolio investment

Question 10

An international financial crisis is most often caused by

Accepted Answer

A)  a nation's central bank lowering domestic interest rates. 
B)  a government refusing to pay its dues to the United Nations. 
C)  foreign investments and loans being withdrawn from a nation. 
D)  a drop in the value of the U.S. dollar. 
A)  a nation's central bank lowering domestic interest rates. 
B)  a government refusing to pay its dues to the United Nations. 
C)  foreign investments and loans being withdrawn from a nation. 
D)  a drop in the value of the U.S. dollar.

Question 11

According to your text, is there any relationship between bureaucratic inefficiency and economic growth?

Accepted Answer

A)  Yes-the two are positively related. 
B)  Yes, but only in the most economically developed nations. 
C)  Yes-the two are inversely related. 
D)  No. Some nations' economies thrive in spite of their inefficient governments while others collapse under the weight of stifling bureaucracies. 
A)  Yes-the two are positively related. 
B)  Yes, but only in the most economically developed nations. 
C)  Yes-the two are inversely related. 
D)  No. Some nations' economies thrive in spite of their inefficient governments while others collapse under the weight of stifling bureaucracies.

Question 12

A nation's account with the International Monetary Fund denominated in special drawing rights is

Accepted Answer

A)  the quota subscription. 
B)  the account at the World Bank. 
C)  portfolio investment. 
D)  the account at the Fed. 
A)  the quota subscription. 
B)  the account at the World Bank. 
C)  portfolio investment. 
D)  the account at the Fed.

Question 13

Economic growth is measured by

Accepted Answer

A)  the annual percentage change in nominal GDP. 
B)  the annual percentage change in the unemployment rate. 
C)  the annual percentage change in per capita nominal GDP. 
D)  the annual percentage change in per capita real GDP. 
A)  the annual percentage change in nominal GDP. 
B)  the annual percentage change in the unemployment rate. 
C)  the annual percentage change in per capita nominal GDP. 
D)  the annual percentage change in per capita real GDP.

Question 14

The funds that nation's have on account at the International Monetary Fund is measured in

Accepted Answer

A)  U.S. dollars. 
B)  the currency of the nation that has deposited the funds. 
C)  a quota subscription. 
D)  an international unit of accounting called special drawing rights. 
A)  U.S. dollars. 
B)  the currency of the nation that has deposited the funds. 
C)  a quota subscription. 
D)  an international unit of accounting called special drawing rights.

Question 15

An example of the moral hazard problem in international investment would be that

Accepted Answer

A)  those seeking funds for the riskiest projects are amongst those most actively seeking the funds. 
B)  the recipients of the funds may use the funds for riskier projects than the approved project. 
C)  government officials may demand higher than the usual amount of bribes. 
D)  those seeking the funds are dishonest. 
A)  those seeking funds for the riskiest projects are amongst those most actively seeking the funds. 
B)  the recipients of the funds may use the funds for riskier projects than the approved project. 
C)  government officials may demand higher than the usual amount of bribes. 
D)  those seeking the funds are dishonest.

Question 16

Portfolio investment means buying

Accepted Answer

A)  less than 10 percent ownership in a foreign company. 
B)  more than 50 percent ownership in a foreign company. 
C)  a life insurance policy when traveling abroad. 
D)  livestock. 
A)  less than 10 percent ownership in a foreign company. 
B)  more than 50 percent ownership in a foreign company. 
C)  a life insurance policy when traveling abroad. 
D)  livestock.

Question 17

Over the past decade, a nation's real Gross Domestic Product (GDP) grew at a constant rate of 10 percent per year while its population grew 8 percent annually. Forecasters predict that during the coming decade, real GDP will continue to grow 10 percent annually, but the population growth rate is expected to drop to 6 percent annually. If the forecasters are correct, which of the following will be true?

Accepted Answer

A)  The annual rate of growth of per capita real GDP will decline from 4 percent to 2 percent. 
B)  The annual rate of growth of per capita real GDP will decline from 2 percent to 1 percent. 
C)  The annual rate of growth of per capita real GDP will increase from 2 percent to 4 percent. 
D)  The annual rate of growth of per capita real GDP will increase from 2 percent to 6 percent. 
A)  The annual rate of growth of per capita real GDP will decline from 4 percent to 2 percent. 
B)  The annual rate of growth of per capita real GDP will decline from 2 percent to 1 percent. 
C)  The annual rate of growth of per capita real GDP will increase from 2 percent to 4 percent. 
D)  The annual rate of growth of per capita real GDP will increase from 2 percent to 6 percent.

Question 18

If you invest in a foreign company by buying 28 percent of its shares of stock, you have engaged in

Accepted Answer

A)  portfolio investment. 
B)  moral hazard. 
C)  foreign direct investment. 
D)  adverse selection. 
A)  portfolio investment. 
B)  moral hazard. 
C)  foreign direct investment. 
D)  adverse selection.

Question 19

Special drawing rights are

Accepted Answer

A)  the reserves held by members of the European Union to back their accounts with the European Central Bank. 
B)  credit accounts held by individual stockholders with portfolio investments in other countries. 
C)  international units of account held by the International Monetary Fund for member countries. 
D)  the estimated level of oil reserves remaining in OPEC countries. 
A)  the reserves held by members of the European Union to back their accounts with the European Central Bank. 
B)  credit accounts held by individual stockholders with portfolio investments in other countries. 
C)  international units of account held by the International Monetary Fund for member countries. 
D)  the estimated level of oil reserves remaining in OPEC countries.

Question 20

Moral hazard is a barrier to financing global growth because

Accepted Answer

A)  firms sometimes have trouble determining whether they need funds or not. 
B)  if investors have trouble identifying high-risk firms they may be unwilling to give money to creditworthy firms. 
C)  there is the possibility that the funds are used for riskier behavior than the lender agreed to. 
D)  of the differences between financing using loans, portfolio investment and foreign direct investment. 
A)  firms sometimes have trouble determining whether they need funds or not. 
B)  if investors have trouble identifying high-risk firms they may be unwilling to give money to creditworthy firms. 
C)  there is the possibility that the funds are used for riskier behavior than the lender agreed to. 
D)  of the differences between financing using loans, portfolio investment and foreign direct investment.

Exam 18: Policies and Prospects for Global Economic Growth

Which of the following has contributed to developing countries' poor economic performance?

The World Bank was formed in

The goal of the World Bank is to

Which of the following is NOT a function of the International Monetary Fund?

Portfolio investment and foreign direct investment are methods through which

The acquisition of more than 10 percent of the outstanding shares in a company in another country is

Define what dead capital is and why economists are concerned with its existence.

Most international investment finance today comes from

Which of the following is NOT one of the three primary sources of private investment funds flowing into developing nations?

An international financial crisis is most often caused by

According to your text, is there any relationship between bureaucratic inefficiency and economic growth?

A nation's account with the International Monetary Fund denominated in special drawing rights is

Economic growth is measured by

The funds that nation's have on account at the International Monetary Fund is measured in

An example of the moral hazard problem in international investment would be that

Portfolio investment means buying

If you invest in a foreign company by buying 28 percent of its shares of stock, you have engaged in

Special drawing rights are

Moral hazard is a barrier to financing global growth because

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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