Question 1

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 2

Political freedom can sometimes moderately reduce economic growth because

Accepted Answer

A)  special interest groups may gain at the expense of the overall economy. 
B)  campaign contributions lead to reductions in investment. 
C)  most jobs are in unions that are politically connected. 
D)  all of the above. 
A)  special interest groups may gain at the expense of the overall economy. 
B)  campaign contributions lead to reductions in investment. 
C)  most jobs are in unions that are politically connected. 
D)  all of the above.

Question 3

All of the following are sources of funding for capital goods in developing countries EXCEPT

Accepted Answer

A)  loans from banks. 
B)  foreign direct investment. 
C)  taxation. 
D)  portfolio investment. 
A)  loans from banks. 
B)  foreign direct investment. 
C)  taxation. 
D)  portfolio investment.

Question 4

Dead capital is most likely to exist when

Accepted Answer

A)  there are restrictions on imports. 
B)  there are restrictions on exports. 
C)  property rights are well-defined. 
D)  residents of a country face barriers to establishing legal ownership of resources. 
A)  there are restrictions on imports. 
B)  there are restrictions on exports. 
C)  property rights are well-defined. 
D)  residents of a country face barriers to establishing legal ownership of resources.

Question 5

The purchase of less than 10 percent of the shares of ownership in a company in another country is known as

Accepted Answer

A)  a hostile takeover. 
B)  dead capital investment. 
C)  foreign direct investment. 
D)  portfolio investment. 
A)  a hostile takeover. 
B)  dead capital investment. 
C)  foreign direct investment. 
D)  portfolio investment.

Question 6

Each country's IMF quota subscription is determined by

Accepted Answer

A)  the relative size of its national income. 
B)  the size of its population. 
C)  the size of world trade. 
D)  how much a country wants to contribute. 
A)  the relative size of its national income. 
B)  the size of its population. 
C)  the size of world trade. 
D)  how much a country wants to contribute.

Question 7

Which of the following best represents economic growth?

Accepted Answer

A)  an increase in nominal GDP 
B)  an increase in real GDP 
C)  an increase in the per capita nominal GDP 
D)  an increase in the per capita real GDP 
A)  an increase in nominal GDP 
B)  an increase in real GDP 
C)  an increase in the per capita nominal GDP 
D)  an increase in the per capita real GDP

Question 8

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 9

With respect to economic freedom, which of the following is TRUE?

Accepted Answer

A)  Three out of four people live in nations with governments that grant residents high degrees of economic freedom. 
B)  Where governments do not grant residents a high degree of economic freedom, economic growth rates tend to be above the annual average for the world's nations. 
C)  About three dozen nations with governments unwilling to grant much in the way of economic freedom are home to two-thirds of the world's population. Even so, these countries produce over 50 percent of the world's output. 
D)  As economic freedom increases, so does a nation's prospects for economic growth. 
A)  Three out of four people live in nations with governments that grant residents high degrees of economic freedom. 
B)  Where governments do not grant residents a high degree of economic freedom, economic growth rates tend to be above the annual average for the world's nations. 
C)  About three dozen nations with governments unwilling to grant much in the way of economic freedom are home to two-thirds of the world's population. Even so, these countries produce over 50 percent of the world's output. 
D)  As economic freedom increases, so does a nation's prospects for economic growth.

Question 10

The largest form of international investment funds for developing countries has been

Accepted Answer

A)  bank loans. 
B)  portfolio investments. 
C)  foreign direct investments. 
D)  loans from the World Bank. 
A)  bank loans. 
B)  portfolio investments. 
C)  foreign direct investments. 
D)  loans from the World Bank.

Question 11

Each nation's International Monetary Fund (IMF) quota subscription is based on

Accepted Answer

A)  its national income. 
B)  its share in world trade. 
C)  its public debt. 
D)  its trade surplus. 
A)  its national income. 
B)  its share in world trade. 
C)  its public debt. 
D)  its trade surplus.

Question 12

When investment occurs in developing nations

Accepted Answer

A)  investors hope to gain significant returns on their investment and residents gain higher rates of economic growth. 
B)  higher rates of economic growth are usually not achieved. 
C)  significant levels of pollution usually occur. 
D)  government politicians usually benefit from the illegal payments made to secure the investment. 
A)  investors hope to gain significant returns on their investment and residents gain higher rates of economic growth. 
B)  higher rates of economic growth are usually not achieved. 
C)  significant levels of pollution usually occur. 
D)  government politicians usually benefit from the illegal payments made to secure the investment.

Question 13

A multinational organization that aims to promote world economic growth through more financial stability is

Accepted Answer

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

Question 14

Foreign direct investment implies that the investor obtains ________ share in a foreign company's ownership.

Accepted Answer

A)  less than 1 percent 
B)  less than 5 percent 
C)  less than 10 percent 
D)  none of the above 
A)  less than 1 percent 
B)  less than 5 percent 
C)  less than 10 percent 
D)  none of the above

Question 15

If real per capita Gross Domestic Product (GDP) grows at a constant annual rate of 5 percent and the annual population growth rate increases from 2 percent to 3 percent, the annual rate of growth of per capita real GDP will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  increase or decrease depending. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  increase or decrease depending.

Question 16

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 17

The ________ specializes in making long-term loans for capital investment projects that do NOT have private financial support.

Accepted Answer

A)  International Monetary Fund 
B)  European Central Bank 
C)  World Bank 
D)  Federal Reserve Bank 
A)  International Monetary Fund 
B)  European Central Bank 
C)  World Bank 
D)  Federal Reserve Bank

Question 18

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 19

A rapid withdrawal of foreign investments and loans from a nation is

Accepted Answer

A)  dead capital. 
B)  an international financial crisis. 
C)  foreign direct capital. 
D)  portfolio investment. 
A)  dead capital. 
B)  an international financial crisis. 
C)  foreign direct capital. 
D)  portfolio investment.

Question 20

Why are international investors who have invested in developing nations favoring foreign direct investment and portfolio investment over loans?

Accepted Answer

A)  The process of making loans is usually more difficult for investors to do than foreign direct and portfolio investment. 
B)  The interest rate charged on the loans is usually lower than what can be earned in the U.S. 
C)  It is illegal for banks to make loans to foreign firms. 
D)  Investors have an aversion to owning dead capital and want to make sure that the resources they own do not become dead capital. 
A)  The process of making loans is usually more difficult for investors to do than foreign direct and portfolio investment. 
B)  The interest rate charged on the loans is usually lower than what can be earned in the U.S. 
C)  It is illegal for banks to make loans to foreign firms. 
D)  Investors have an aversion to owning dead capital and want to make sure that the resources they own do not become dead capital.

Exam 18: Policies and Prospects for Global Economic Growth

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

Political freedom can sometimes moderately reduce economic growth because

All of the following are sources of funding for capital goods in developing countries EXCEPT

Dead capital is most likely to exist when

The purchase of less than 10 percent of the shares of ownership in a company in another country is known as

Each country's IMF quota subscription is determined by

Which of the following best represents economic growth?

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

With respect to economic freedom, which of the following is TRUE?

The largest form of international investment funds for developing countries has been

Each nation's International Monetary Fund (IMF) quota subscription is based on

When investment occurs in developing nations

A multinational organization that aims to promote world economic growth through more financial stability is

Foreign direct investment implies that the investor obtains ________ share in a foreign company's ownership.

If real per capita Gross Domestic Product (GDP) grows at a constant annual rate of 5 percent and the annual population growth rate increases from 2 percent to 3 percent, the annual rate of growth of per capita real GDP will

Special drawing rights are

The ________ specializes in making long-term loans for capital investment projects that do NOT have private financial support.

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

A rapid withdrawal of foreign investments and loans from a nation is

Why are international investors who have invested in developing nations favoring foreign direct investment and portfolio investment over loans?

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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