Question 1

An international organization formed with the aim of promoting world economic growth through financial stability is called

Accepted Answer

A)  the World Bank. 
B)  the International Development Association. 
C)  the International Finance Corporation. 
D)  the International Monetary Fund (IMF). 
A)  the World Bank. 
B)  the International Development Association. 
C)  the International Finance Corporation. 
D)  the International Monetary Fund (IMF).

Question 2

The multinational agency that specializes in making loans to developing nations in an effort to promote long-term development and growth is the

Accepted Answer

A)  International Monetary Fund. 
B)  World Trade Organization. 
C)  United Nations Development Program. 
D)  World Bank. 
A)  International Monetary Fund. 
B)  World Trade Organization. 
C)  United Nations Development Program. 
D)  World Bank.

Question 3

The right to private property and ability to exchange goods and services freely is known as

Accepted Answer

A)  political freedom. 
B)  economic freedom. 
C)  constitutional freedom. 
D)  external freedom. 
A)  political freedom. 
B)  economic freedom. 
C)  constitutional freedom. 
D)  external freedom.

Question 4

The purchase of less than 10 percent of the shares of ownership in a foreign company is referred to as a

Accepted Answer

A)  portfolio investment. 
B)  foreign direct investment. 
C)  foreign indirect investment. 
D)  negligible investment. 
A)  portfolio investment. 
B)  foreign direct investment. 
C)  foreign indirect investment. 
D)  negligible investment.

Question 5

Portfolio investment is defined as

Accepted Answer

A)  the purchase of less than 40 percent of the shares of ownership in a company in another country. 
B)  the acquisition of more than 40 percent of the shares of ownership in a company in another country. 
C)  the diversification of purchasing shares in many companies in one country so that risk is kept to a minimum. 
D)  none of the above 
A)  the purchase of less than 40 percent of the shares of ownership in a company in another country. 
B)  the acquisition of more than 40 percent of the shares of ownership in a company in another country. 
C)  the diversification of purchasing shares in many companies in one country so that risk is kept to a minimum. 
D)  none of the above

Question 6

What is the mission of the International Monetary Fund (IMF)?

Accepted Answer

The IMF was established after World War

Question 7

According to the text, a typical resident born in an emerging country in 2000 would

Accepted Answer

A)  experience a lower level of per capital real GDP by 2017. 
B)  experience two times larger in per capital real GDP by 2017. 
C)  experience three times larger in per capital real GDP by 2017. 
D)  experience almost the same per capital real GDP by 2017. 
A)  experience a lower level of per capital real GDP by 2017. 
B)  experience two times larger in per capital real GDP by 2017. 
C)  experience three times larger in per capital real GDP by 2017. 
D)  experience almost the same per capital real GDP by 2017.

Question 8

Explain the role of economic freedom in economic development.

Accepted Answer

Economic freedom is a measurement of the

Question 9

Suppose a nation's rate of growth of per capita real Gross Domestic Product (GDP) is 4 percent and its rate of growth in real GDP is 5 percent. Given this information, the nation's population growth rate is approximately equal to

Accepted Answer

A)  1 percent. 
B)  -1 percent. 
C)  9 percent. 
D)  None of the above: Cannot be determined with the information. 
A)  1 percent. 
B)  -1 percent. 
C)  9 percent. 
D)  None of the above: Cannot be determined with the information.

Question 10

Which of the following is NOT commonly regarded as an emerging nation?

Accepted Answer

A)  Bangladesh 
B)  India 
C)  China 
D)  Mexico 
A)  Bangladesh 
B)  India 
C)  China 
D)  Mexico

Question 11

Voting power in the IMF is determined by

Accepted Answer

A)  the population size of member states. 
B)  the quota subscription size. 
C)  the length of membership. 
D)  the size of the member nation's trade surplus. 
A)  the population size of member states. 
B)  the quota subscription size. 
C)  the length of membership. 
D)  the size of the member nation's trade surplus.

Question 12

The relationship of dead capital to inefficient production is

Accepted Answer

A)  without clear ownership it is not possible to sell or transfer a resource so that it can be used efficiently. 
B)  that outdated equipment will lead to inefficient production. 
C)  nonexistent since the capital is already dead. 
D)  that when the dead capital is replaced by more technologically advanced capital, economic growth occurs. 
A)  without clear ownership it is not possible to sell or transfer a resource so that it can be used efficiently. 
B)  that outdated equipment will lead to inefficient production. 
C)  nonexistent since the capital is already dead. 
D)  that when the dead capital is replaced by more technologically advanced capital, economic growth occurs.

Question 13

All the following would be a possible loan that the International Monetary Fund might make EXCEPT

Accepted Answer

A)  a loan to a private firm. 
B)  long-term loans to a nation's government which support growth promoting projects. 
C)  short-term loans to a nation's government. 
D)  long-term loans to countries which are having problems in repaying existing debts. 
A)  a loan to a private firm. 
B)  long-term loans to a nation's government which support growth promoting projects. 
C)  short-term loans to a nation's government. 
D)  long-term loans to countries which are having problems in repaying existing debts.

Question 14

Adverse selection 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 lend funds 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 lend funds 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.

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

Both the International Monetary Fund and the World Bank were established

Accepted Answer

A)  at the end of World War I. 
B)  at the end of World War II. 
C)  at the end of Korean War. 
D)  in the 1970s. 
A)  at the end of World War I. 
B)  at the end of World War II. 
C)  at the end of Korean War. 
D)  in the 1970s.

Question 17

According to the text, the 17 countries with high degrees of economic freedom

Accepted Answer

A)  account for 80 percent of total world output. 
B)  account for less than 20 percent of total world output. 
C)  have the weakest economies. 
D)  have low productivity. 
A)  account for 80 percent of total world output. 
B)  account for less than 20 percent of total world output. 
C)  have the weakest economies. 
D)  have low productivity.

Question 18

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 19

If there is a major problem in a country that leads to the rapid withdrawal of foreign investment, this is known as

Accepted Answer

A)  moral hazard. 
B)  adverse selection crisis. 
C)  an international leakage. 
D)  international financial crisis. 
A)  moral hazard. 
B)  adverse selection crisis. 
C)  an international leakage. 
D)  international financial crisis.

Question 20

What are some of the criticisms that have been levied on the World Bank and the International Monetary Fund concerning adverse selection and moral hazard?

Accepted Answer

The World Bank and International Monetar

Exam 18: Policies and Prospects for Global Economic Growth

An international organization formed with the aim of promoting world economic growth through financial stability is called

The multinational agency that specializes in making loans to developing nations in an effort to promote long-term development and growth is the

The right to private property and ability to exchange goods and services freely is known as

The purchase of less than 10 percent of the shares of ownership in a foreign company is referred to as a

Portfolio investment is defined as

What is the mission of the International Monetary Fund (IMF)?

According to the text, a typical resident born in an emerging country in 2000 would

Explain the role of economic freedom in economic development.

Suppose a nation's rate of growth of per capita real Gross Domestic Product (GDP) is 4 percent and its rate of growth in real GDP is 5 percent. Given this information, the nation's population growth rate is approximately equal to

Which of the following is NOT commonly regarded as an emerging nation?

Voting power in the IMF is determined by

The relationship of dead capital to inefficient production is

All the following would be a possible loan that the International Monetary Fund might make EXCEPT

Adverse selection is a barrier to financing global growth because

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

Both the International Monetary Fund and the World Bank were established

According to the text, the 17 countries with high degrees of economic freedom

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

If there is a major problem in a country that leads to the rapid withdrawal of foreign investment, this is known as

What are some of the criticisms that have been levied on the World Bank and the International Monetary Fund concerning adverse selection and moral hazard?

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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