Question 1

One-third of the world's population live in China and India. How did the growth rate of these two countries compare with the growth of high income industrial countries during 1980-2009?

Accepted Answer

A)  Per capita GDP increased less rapidly in China and India than in the high income industrial countries.
B)  Per capita GDP increased more rapidly in China and India than in the high income industrial countries.
C)  China grew more rapidly than the high income industrial countries, but India grew less rapidly.
D)  India grew more rapidly than the high income industrial countries, but China grew less. B

Question 2

Which of the following will increase economic freedom?

Accepted Answer

A)  low rates of inflation and easy access to money that maintains its purchasing power
B)  high tariff rates
C)  government spending that comprises a large share of the economy
D)  rapid and unpredictable inflation A

Question 3

The Economic Freedom of the World index is a measure of the consistency of a nation's institutions and policies with

Accepted Answer

A)  political democracy.
B)  economic freedom.
C)  an Egalitarian distribution of income.
D)  economic nationalism. B

Question 4

What are some of the key economic factors that characterize countries with poor growth records?

Accepted Answer

The answer of What are some of the key economic...

Question 5

Which of the following is one of the reasons to believe that institutional change is more likely now than in the past?

Accepted Answer

A)  The colonial era is over and countries are in the position to make their own institutional choices.
B)  The collapse of communism has expanded the opportunity for institutional change.
C)  Reductions in transportation and communication costs have increased the importance of institutions and policies.
D)  All of the above are true.

Question 6

(I) Other things constant, countries that invest more will grow more rapidly. (II) The private investment rate of the most economically free countries is nearly twice as much as that of the least free countries.

Accepted Answer

A)  I is true; II is false.
B)  I is false, II is true.
C)  Both I and II are true.
D)  Both I and II are false.

Question 7

Which of the following is true regarding the growth record of less-developed countries (LDC's) during the past quarter of a century?

Accepted Answer

A)  Some are among the fastest growing countries in the world.
B)  Some are among the slowest growing countries in the world.
C)  The most populous, less-developed countries have experienced declining per capita income levels.
D)  All of the above are true.

Question 8

Researchers have found that countries that were settled by Europeans who planned on staying permanently were

Accepted Answer

A)  more likely to protect private ownership rights and limit the power of the government.
B)  less likely to protect private ownership rights and limit the power of the government.
C)  more likely to protect private ownership, but less likely to limit the power of the government.
D)  less likely to protect private ownership, but more likely to limit the power of the government.

Question 9

According to the Economic Freedom of the World measure, between 2000 and 2010 the economic freedom of the United States

Accepted Answer

A)  declined and its rank fell from third to tenth during this period.
B)  increased, and the U.S.became the freest economy in the world during this decade.
C)  was largely unchanged and the U.S.remained the third freest economy in the world, behind only Hong Kong and Singapore.
D)  decreased, but the U.S.was still the freest economy in the world in 2010.

Question 10

Which of the following economies have the highest degree of economic freedom?

Accepted Answer

A)  Hong Kong and Singapore
B)  Argentina and Brazil
C)  Germany and Italy
D)  Russia and Nigeria

Question 11

If a country's political leaders wanted to promote economic growth, which of the following policy alternatives would be most effective?

Accepted Answer

A)  imposition of price controls on agricultural products in an effort to keep food cheap.
B)  imposition of high marginal tax rates designed to reduce income inequality.
C)  imposition of tariffs and other trade restraints limiting international trade.
D)  monetary policy consistent with long-run price stability

Question 12

When competition is present and private ownership rights are clearly defined and securely enforced,

Accepted Answer

A)  production and trade are encouraged and plunder (taking from others)  is discouraged.
B)  people get ahead by helping others in exchange for income.
C)  employers will have to provide prospective employees with at least as good a deal as they could get elsewhere.
D)  all of the above are correct.

Question 13

The adoption of modern technologies and business methods have the possibility to improve economic performance in a nation with low per capita income and low growth, but only if

Accepted Answer

A)  its natural resources are sufficient.
B)  its workers become educated rapidly enough.
C)  it improves its institutions, making them sound enough to attract capital and entrepreneurial activity.
D)  its government has enough skilled planners to properly deploy new capital.

Question 14

Compared to high-income developed countries, the per person income levels of poorer less developed countries are somewhat understated because

Accepted Answer

A)  the GDP figures omit the production within the household sector, which is generally larger in the high-income countries.
B)  the GDP figures omit the production within the household sector, which is generally larger in the poorer countries.
C)  the GDP figures omit net exports, which are generally larger in the high income countries.
D)  the GDP figures omit net exports, which are generally larger in the poorer countries.

Question 15

Which of the following is a key characteristic of economic freedom?

Accepted Answer

A)  institutions and policies supportive of voluntary exchange
B)  freedom to compete
C)  protection of people and their property from aggressors
D)  all of the above

Question 16

Government policies that heavily tax some activities while subsidizing others and that fix or control interest rates will result in

Accepted Answer

A)  higher productivity of investment.
B)  lower productivity of investment.
C)  no change in the productivity of investment.
D)  a greater level of investment.

Question 17

The income per person in the quartile of countries with the most economic freedom was approximately ____ times the figure for the least free group of countries.

Accepted Answer

A)  2
B)  4
C)  5
D)  8

Question 18

Democracy tends to best promote freedom when there is

Accepted Answer

A)  unrestrained executive and legislative majority power.
B)  constitutional protection of private property rights.
C)  a large and centralized government sector.
D)  all of the above.

Question 19

During 1980-2009, the countries achieving the most rapid growth of real GDP were nearly all

Accepted Answer

A)  high-income developed economies.
B)  low-income less developed economies at the beginning of the period.
C)  South American economies.
D)  European economies.
E)  African economies.

Question 20

Stable money and prices are a key source of economic growth because

Accepted Answer

A)  they allow activist policymakers to fine tune the economy.
B)  uncertainty and instability in prices will attract investors and business decision makers.
C)  price instability increases capital formation.
D)  price stability reduces the risks that accompany investment and other long-term commitments.

Exam 17: Institutions, Policies, and Cross-Country Differences in Income and Growth