Question 1

An institutional change that is needed in most developing nations is

Accepted Answer

A)  the will to develop. 
B)  reduced foreign aid. 
C)  birth control. 
D)  land reform. 
A)  the will to develop. 
B)  reduced foreign aid. 
C)  birth control. 
D)  land reform.

Question 2

In recent years, a greater proportion of private capital flows to DVCs has been direct foreign investment rather than loans to DVC governments.

Accepted Answer

A) True 
 B)False

Question 3

A large portion of foreign aid from IACs to DVCs is provided on the basis of

Accepted Answer

A)  economic considerations. 
B)  geographical considerations. 
C)  humanitarian considerations. 
D)  politico-military considerations. 
A)  economic considerations. 
B)  geographical considerations. 
C)  humanitarian considerations. 
D)  politico-military considerations.

Question 4

The World Bank seeks to

Accepted Answer

A)  provide financial backing for the work of the International Monetary Fund. 
B)  maintain stable exchange rates in the currencies of developing countries. 
C)  assist developing countries in achieving economic growth. 
D)  maximize its profits for its worldwide shareholders. 
A)  provide financial backing for the work of the International Monetary Fund. 
B)  maintain stable exchange rates in the currencies of developing countries. 
C)  assist developing countries in achieving economic growth. 
D)  maximize its profits for its worldwide shareholders.

Question 5

If a local leader in a developing nation claims that there is little or no correlation between a person's efforts and the economic rewards that are given to that person, this leader is most likely expressing a

Accepted Answer

A)  description of the vicious cycle of poverty. 
B)  theory of exploitation and dependence. 
C)  capricious view of the universe. 
D)  rationale for neocolonialism. 
A)  description of the vicious cycle of poverty. 
B)  theory of exploitation and dependence. 
C)  capricious view of the universe. 
D)  rationale for neocolonialism.

Question 6

Which of the following describes the vicious circle of poverty?

Accepted Answer

A)  Government spending for public goods is inflationary, and this undermines incentives to save and invest. 
B)  Higher incomes increase consumption at the expense of capital accumulation, which causes income to fall. 
C)  Low per capita incomes cause low levels of saving and investment, which mean low productivity and therefore low incomes. 
D)  A growing national income increases the demand for money, which increases the interest rate and reduces investment. 
A)  Government spending for public goods is inflationary, and this undermines incentives to save and invest. 
B)  Higher incomes increase consumption at the expense of capital accumulation, which causes income to fall. 
C)  Low per capita incomes cause low levels of saving and investment, which mean low productivity and therefore low incomes. 
D)  A growing national income increases the demand for money, which increases the interest rate and reduces investment.

Question 7

When technological advances are of the capital-using kind, it is possible for an economy to increase its productivity without any net investment in capital goods.

Accepted Answer

A) True 
 B)False

Question 8

Foreign aid to the DVCs has been criticized

Accepted Answer

A)  because it may generate economic dependence on the IACs. 
B)  because it encourages the centralization of government power over the economy. 
C)  because government corruption in the DVCs causes aid to be misused. 
D)  for all of these reasons. 
A)  because it may generate economic dependence on the IACs. 
B)  because it encourages the centralization of government power over the economy. 
C)  because government corruption in the DVCs causes aid to be misused. 
D)  for all of these reasons.

Question 9

DVCs tend to have permanent shortages of farm labor.

Accepted Answer

A) True 
 B)False

Question 10

In recent years, many DVCs have come to realize that

Accepted Answer

A)  expanded international trade is harmful to DVCs. 
B)  private capital investment is essential for economic growth in DVCs. 
C)  the International Monetary Fund is the major institutional barrier to economic growth. 
D)  government involvement in economic development is the only avenue for economic growth. 
A)  expanded international trade is harmful to DVCs. 
B)  private capital investment is essential for economic growth in DVCs. 
C)  the International Monetary Fund is the major institutional barrier to economic growth. 
D)  government involvement in economic development is the only avenue for economic growth.

Question 11

Land reform (or the reform of land ownership) is a relatively minor institutional obstacle to economic growth in many developing countries.

Accepted Answer

A) True 
 B)False

Question 12

What is needed to aid capital formation in developing countries?

Accepted Answer

A)  more capital flight 
B)  more oil resources 
C)  more entrepreneurship 
D)  higher price supports for products 
A)  more capital flight 
B)  more oil resources 
C)  more entrepreneurship 
D)  higher price supports for products

Question 13

If the real output of a DVC increases from $200 billion to $260 billion and its population increases from 100 to 120 million, its real per capita output will have

Accepted Answer

A)  remained unchanged. 
B)  increased by about $167. 
C)  increased by about $55. 
D)  decreased by about $20. 
A)  remained unchanged. 
B)  increased by about $167. 
C)  increased by about $55. 
D)  decreased by about $20.

Question 14

The low per capita outputs of the DVCs are explained by

Accepted Answer

A)  insufficient saving and investment. 
B)  overinvestment in human capital. 
C)  slow population growth. 
D)  excessively rapid technological advance. 
A)  insufficient saving and investment. 
B)  overinvestment in human capital. 
C)  slow population growth. 
D)  excessively rapid technological advance.

Question 15

The international agency that lends money to DVCs for economic development projects is the

Accepted Answer

A)  World Bank. 
B)  International Monetary Fund (IMF). 
C)  World Trade Organization (WTO). 
D)  World Credit Union. 
A)  World Bank. 
B)  International Monetary Fund (IMF). 
C)  World Trade Organization (WTO). 
D)  World Credit Union.

Question 16

The government of a DVC may purposely cause inflation because

Accepted Answer

A)  a rapid rate of inflation attracts private foreign capital into a DVC. 
B)  there is conclusive evidence that inflation discourages people from having large families. 
C)  this will strengthen the nation's position in international markets. 
D)  inflation works like taxation in that it may release resources from consumption so that they can be invested. 
A)  a rapid rate of inflation attracts private foreign capital into a DVC. 
B)  there is conclusive evidence that inflation discourages people from having large families. 
C)  this will strengthen the nation's position in international markets. 
D)  inflation works like taxation in that it may release resources from consumption so that they can be invested.

Question 17

If a technological advance expands output and requires a smaller investment in capital goods, this technological advance

Accepted Answer

A)  is capital-using. 
B)  must involve nonfinancial investment. 
C)  is capital-saving. 
D)  must pertain to the infrastructure. 
A)  is capital-using. 
B)  must involve nonfinancial investment. 
C)  is capital-saving. 
D)  must pertain to the infrastructure.

Question 18

When economists refer to capital flight, they are speaking of an

Accepted Answer

A)  outflow of financial capital from a certain country. 
B)  outflow of real capital from a certain country. 
C)  outflow of financial and real capital from a certain country. 
D)  outflow of human capital from a certain country. 
A)  outflow of financial capital from a certain country. 
B)  outflow of real capital from a certain country. 
C)  outflow of financial and real capital from a certain country. 
D)  outflow of human capital from a certain country.

Question 19

The primary function of the International Finance Corporation (IFC) is to

Accepted Answer

A)  provide U.S. surplus food to low-income countries. 
B)  provide short-term loans to poor countries to finance international trade deficits. 
C)  make infrastructure loans, that is, loans for highways, schools, communication facilities, and so forth. 
D)  make loans to private enterprises in the DVCs. 
A)  provide U.S. surplus food to low-income countries. 
B)  provide short-term loans to poor countries to finance international trade deficits. 
C)  make infrastructure loans, that is, loans for highways, schools, communication facilities, and so forth. 
D)  make loans to private enterprises in the DVCs.

Question 20

Japan is a nation that achieved a high standard of living despite having a very limited supply of natural resources.

Accepted Answer

A) True 
 B)False

Exam 28: The Economics of Developing Countries

An institutional change that is needed in most developing nations is

In recent years, a greater proportion of private capital flows to DVCs has been direct foreign investment rather than loans to DVC governments.

A large portion of foreign aid from IACs to DVCs is provided on the basis of

The World Bank seeks to

If a local leader in a developing nation claims that there is little or no correlation between a person's efforts and the economic rewards that are given to that person, this leader is most likely expressing a

Which of the following describes the vicious circle of poverty?

When technological advances are of the capital-using kind, it is possible for an economy to increase its productivity without any net investment in capital goods.

Foreign aid to the DVCs has been criticized

DVCs tend to have permanent shortages of farm labor.

In recent years, many DVCs have come to realize that

Land reform (or the reform of land ownership) is a relatively minor institutional obstacle to economic growth in many developing countries.

What is needed to aid capital formation in developing countries?

If the real output of a DVC increases from $200 billion to $260 billion and its population increases from 100 to 120 million, its real per capita output will have

The low per capita outputs of the DVCs are explained by

The international agency that lends money to DVCs for economic development projects is the

The government of a DVC may purposely cause inflation because

If a technological advance expands output and requires a smaller investment in capital goods, this technological advance

When economists refer to capital flight, they are speaking of an

The primary function of the International Finance Corporation (IFC) is to

Japan is a nation that achieved a high standard of living despite having a very limited supply of natural resources.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

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