Question 1

A country experiencing an international financial crisis will likely

Accepted Answer

A)  see an increase in portfolio investment. 
B)  see an increase in foreign direct investment. 
C)  experience a decrease in its economic growth rate. 
D)  be able to maintain growth and prosperity in its domestic economy, but its export sector will suffer. 
A)  see an increase in portfolio investment. 
B)  see an increase in foreign direct investment. 
C)  experience a decrease in its economic growth rate. 
D)  be able to maintain growth and prosperity in its domestic economy, but its export sector will suffer.

Question 2

Which of the following statements about the International Monetary Fund (IMF) is TRUE?

Accepted Answer

A)  The IMF was created to finance long-term economic development projects in poor countries. 
B)  The IMF was created to reduce tariff barriers between nations. 
C)  The IMF functions as a central bank that conducts monetary policy for the world economy. 
D)  The IMF obtains funds from quota subscriptions charged to member countries. 
A)  The IMF was created to finance long-term economic development projects in poor countries. 
B)  The IMF was created to reduce tariff barriers between nations. 
C)  The IMF functions as a central bank that conducts monetary policy for the world economy. 
D)  The IMF obtains funds from quota subscriptions charged to member countries.

Question 3

Suppose that the real Gross Domestic Product (GDP) growth rate for a country was 5 percent and the population growth rate was 3 percent. What would the per capital real Gross Domestic Product (GDP) growth rate be for this country?

Accepted Answer

A)  -8 percent 
B)  -2 percent 
C)  2 percent 
D)  8 percent 
A)  -8 percent 
B)  -2 percent 
C)  2 percent 
D)  8 percent

Question 4

After the financial crisis in the 1990s many economists criticized the IMF and the World Bank. Some suggestions for reform are to

Accepted Answer

A)  create a board of directors made up of finance ministers for the IMF. 
B)  eliminate both the institutions. 
C)  increase private-sector lending by governments providing tax breaks to lenders. 
D)  all of the above. 
A)  create a board of directors made up of finance ministers for the IMF. 
B)  eliminate both the institutions. 
C)  increase private-sector lending by governments providing tax breaks to lenders. 
D)  all of the above.

Question 5

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 6

The multinational organization that aims to promote world economic growth by fostering financial stability is the

Accepted Answer

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

Question 7

One of the major criticisms of the World Bank is that it lends funds

Accepted Answer

A)  to impoverished nations. 
B)  to countries which could easily borrow funds from other sources. 
C)  to industrialized nations. 
D)  to terrorist groups not affiliated with any country. 
A)  to impoverished nations. 
B)  to countries which could easily borrow funds from other sources. 
C)  to industrialized nations. 
D)  to terrorist groups not affiliated with any country.

Question 8

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 9

If high level of corruption in a country deters foreign investment in worthy projects, this is known as

Accepted Answer

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

Question 10

The rapid withdrawal of foreign investment funds from a nation creates

Accepted Answer

A)  an international financial crisis. 
B)  an international funding crisis. 
C)  an international fiscal crisis. 
D)  an international fiduciary crisis. 
A)  an international financial crisis. 
B)  an international funding crisis. 
C)  an international fiscal crisis. 
D)  an international fiduciary crisis.

Question 11

The World Bank is

Accepted Answer

A)  composed of five separate institutions. 
B)  composed of large private banks among developed nations. 
C)  the official name of the International Monetary Fund. 
D)  the central bank of the United Nations. 
A)  composed of five separate institutions. 
B)  composed of large private banks among developed nations. 
C)  the official name of the International Monetary Fund. 
D)  the central bank of the United Nations.

Question 12

If the government of a developing country is having difficulty selling bonds to build an irrigation system, it could go to the

Accepted Answer

A)  World Bank. 
B)  Federal Reserve Bank. 
C)  United Nations International Bank. 
D)  International Monetary Organization. 
A)  World Bank. 
B)  Federal Reserve Bank. 
C)  United Nations International Bank. 
D)  International Monetary Organization.

Question 13

The term "economic freedom" means

Accepted Answer

A)  the right to own private property. 
B)  the right to trade goods and services. 
C)  the right to own financial assets. 
D)  all the above. 
A)  the right to own private property. 
B)  the right to trade goods and services. 
C)  the right to own financial assets. 
D)  all the above.

Question 14

All of the following are major factors limiting economic growth in developing countries EXCEPT

Accepted Answer

A)  dead capital. 
B)  deregulation. 
C)  inefficient government regulation. 
D)  corruption. 
A)  dead capital. 
B)  deregulation. 
C)  inefficient government regulation. 
D)  corruption.

Question 15

Discuss why the World Bank has been criticized for making loans to nations that can attract private funds.

Accepted Answer

Loans given to nations that ca

Question 16

The World Bank

Accepted Answer

A)  is a central bank like the Federal Reserve System. 
B)  is the bank that causes international financial crisis when the reserves are too high. 
C)  is a multinational agency that specializes in making loans to promote long-term development and growth in developing countries. 
D)  is a multinational organization that aims to promote world economic growth through more financial stability. 
A)  is a central bank like the Federal Reserve System. 
B)  is the bank that causes international financial crisis when the reserves are too high. 
C)  is a multinational agency that specializes in making loans to promote long-term development and growth in developing countries. 
D)  is a multinational organization that aims to promote world economic growth through more financial stability.

Question 17

When a nation joins the IMF, it deposits funds into an account. These funds have a value based on a weighted average of

Accepted Answer

A)  the euro, the British pound sterling, the Japanese yen, and the U.S. dollar. 
B)  the euro, the British pound sterling, the Chinese yuan, and the U.S. dollar. 
C)  the Russian ruble, the British pound sterling, the Japanese yen, and the U.S. dollar. 
D)  the Russian ruble, the British pound sterling, the Chinese yuan, and the U.S. dollar. 
A)  the euro, the British pound sterling, the Japanese yen, and the U.S. dollar. 
B)  the euro, the British pound sterling, the Chinese yuan, and the U.S. dollar. 
C)  the Russian ruble, the British pound sterling, the Japanese yen, and the U.S. dollar. 
D)  the Russian ruble, the British pound sterling, the Chinese yuan, and the U.S. dollar.

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

Laws that make it difficult to start a new business lead to a

Accepted Answer

A)  high rate of economic growth. 
B)  low rate of economic growth. 
C)  more political freedom. 
D)  laissez-faire. 
A)  high rate of economic growth. 
B)  low rate of economic growth. 
C)  more political freedom. 
D)  laissez-faire.

Question 20

When lenders are unable to get good information about the worthiness of a project the lender has the problem of

Accepted Answer

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

Exam 18: Policies and Prospects for Global Economic Growth

A country experiencing an international financial crisis will likely

Which of the following statements about the International Monetary Fund (IMF) is TRUE?

Suppose that the real Gross Domestic Product (GDP) growth rate for a country was 5 percent and the population growth rate was 3 percent. What would the per capital real Gross Domestic Product (GDP) growth rate be for this country?

After the financial crisis in the 1990s many economists criticized the IMF and the World Bank. Some suggestions for reform are to

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

The multinational organization that aims to promote world economic growth by fostering financial stability is the

One of the major criticisms of the World Bank is that it lends funds

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

If high level of corruption in a country deters foreign investment in worthy projects, this is known as

The rapid withdrawal of foreign investment funds from a nation creates

The World Bank is

If the government of a developing country is having difficulty selling bonds to build an irrigation system, it could go to the

The term "economic freedom" means

All of the following are major factors limiting economic growth in developing countries EXCEPT

Discuss why the World Bank has been criticized for making loans to nations that can attract private funds.

The World Bank

When a nation joins the IMF, it deposits funds into an account. These funds have a value based on a weighted average of

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

Laws that make it difficult to start a new business lead to a

When lenders are unable to get good information about the worthiness of a project the lender has the problem of

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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