Question 1

When the IMF provides loans to developing countries, it often requires these countries to adopt:

Accepted Answer

A) contractionary monetary and fiscal policies. 
B) a contractionary monetary policy and an expansionary fiscal policy. 
C) a contractionary fiscal policy and an expansionary monetary policy. 
D) expansionary monetary and fiscal policies. 
A) contractionary monetary and fiscal policies. 
B) a contractionary monetary policy and an expansionary fiscal policy. 
C) a contractionary fiscal policy and an expansionary monetary policy. 
D) expansionary monetary and fiscal policies. A

Question 2

It is possible to purchase diplomas from diploma mills.The situation in which the degrees are more important than the knowledge they are supposed to represent is called:

Accepted Answer

A) accreditation. 
B) diplomacy. 
C) credentialism. 
D) cretinism. 
A) accreditation. 
B) diplomacy. 
C) credentialism. 
D) cretinism. C

Question 3

Since its independence in 1957, Ghana has experienced more than 12 coups d'etats that have led to the overthrow of presidents and ministers and in various cases the change of political regimes.The textbook calls this situation an example of:

Accepted Answer

A) corruption. 
B) lack of appropriate institutions. 
C) political instability. 
D) overpopulation. 
A) corruption. 
B) lack of appropriate institutions. 
C) political instability. 
D) overpopulation. C

Question 4

Using exchange rates based on purchasing power parity to compare per capita incomes in developing and developed countries might lead one to conclude that people in developing countries:

Accepted Answer

A) are no worse off than if market exchange rates are used. 
B) are worse off than if market exchange rates are used. 
C) are better off than if market exchange rates are used. 
D) do not use markets enough to make such a comparison feasible. 
A) are no worse off than if market exchange rates are used. 
B) are worse off than if market exchange rates are used. 
C) are better off than if market exchange rates are used. 
D) do not use markets enough to make such a comparison feasible.

Question 5

The lack of investment in developing countries is at least in part attributable to:

Accepted Answer

A) overpopulation. 
B) low levels of domestic savings. 
C) inappropriate education. 
D) high levels of foreign aid. 
A) overpopulation. 
B) low levels of domestic savings. 
C) inappropriate education. 
D) high levels of foreign aid.

Question 6

Central banks in most developing countries:

Accepted Answer

A) do not recognize the link between money creation and inflation. 
B) recognize the link between money creation and inflation but don't care about inflation. 
C) recognize the link between money creation and inflation and exploit this link to reduce their budget deficit. 
D) recognize the link between money creation and inflation but often have no other means of financing government expenditures than increasing the money supply. 
A) do not recognize the link between money creation and inflation. 
B) recognize the link between money creation and inflation but don't care about inflation. 
C) recognize the link between money creation and inflation and exploit this link to reduce their budget deficit. 
D) recognize the link between money creation and inflation but often have no other means of financing government expenditures than increasing the money supply.

Question 7

When governments in developing countries run budget deficits, central banks in these countries typically:

Accepted Answer

A) buy the bonds issued by the government and increase the money supply in the process. 
B) buy the bonds issued by the government and decrease the money supply in the process. 
C) sell the bonds issued by the government and increase the money supply in the process. 
D) sell the bonds issued by the government and decrease the money supply in the process. 
A) buy the bonds issued by the government and increase the money supply in the process. 
B) buy the bonds issued by the government and decrease the money supply in the process. 
C) sell the bonds issued by the government and increase the money supply in the process. 
D) sell the bonds issued by the government and decrease the money supply in the process.

Question 8

Economic takeoff:

Accepted Answer

A) will eventually occur in all developing countries. 
B) occurs when development becomes self-sustaining. 
C) typically occurs in the absence of foreign investment. 
D) has yet to occur in any developing country. 
A) will eventually occur in all developing countries. 
B) occurs when development becomes self-sustaining. 
C) typically occurs in the absence of foreign investment. 
D) has yet to occur in any developing country.

Question 9

Infant mortality rates in developing countries:

Accepted Answer

A) are substantially higher than in developed countries. 
B) are about the same as in developed countries. 
C) are substantially lower than in developed countries. 
D) cannot be computed because the data are not available. 
A) are substantially higher than in developed countries. 
B) are about the same as in developed countries. 
C) are substantially lower than in developed countries. 
D) cannot be computed because the data are not available.

Question 10

The purpose of limited capital account convertibility is to:

Accepted Answer

A) eliminate trade in goods and services. 
B) limit trade in certain types of goods and services. 
C) eliminate trade in assets. 
D) limit trade in certain types of assets. 
A) eliminate trade in goods and services. 
B) limit trade in certain types of goods and services. 
C) eliminate trade in assets. 
D) limit trade in certain types of assets.

Question 11

In contrast to development, growth refers to an increase in:

Accepted Answer

A) productive capacity with no change in output. 
B) output with no change in productive capacity. 
C) output brought about by an increase in inputs. 
D) output brought about by a change in the production function. 
A) productive capacity with no change in output. 
B) output with no change in productive capacity. 
C) output brought about by an increase in inputs. 
D) output brought about by a change in the production function.

Question 12

In the early 2000s, Ecuador replaced its currency, the sucre, with the U.S.dollar as its official currency.What would prompt a country to abandon its own currency and adopt the currency of the United States?

Accepted Answer

A) With dollars, monetary policy will be better able to offset shock to the economy. 
B) Adopting the dollar will bring inflation under control, which will aid economic growth. 
C) In making the transition to dollars, corrupt government officials are able to amass tremendous fortunes. 
D) Adopting the dollar will result in the elimination of U.S.tariffs on exports from Ecuador to the United States. 
A) With dollars, monetary policy will be better able to offset shock to the economy. 
B) Adopting the dollar will bring inflation under control, which will aid economic growth. 
C) In making the transition to dollars, corrupt government officials are able to amass tremendous fortunes. 
D) Adopting the dollar will result in the elimination of U.S.tariffs on exports from Ecuador to the United States.

Question 13

Developing economies:

Accepted Answer

A) generally allow their citizens to buy and sell foreign currency freely. 
B) are generally committed to full exchange rate convertibility. 
C) generally oppose full exchange rate convertibility but are required by the IMF to implement it anyway. 
D) generally do not have fully convertible currencies. 
A) generally allow their citizens to buy and sell foreign currency freely. 
B) are generally committed to full exchange rate convertibility. 
C) generally oppose full exchange rate convertibility but are required by the IMF to implement it anyway. 
D) generally do not have fully convertible currencies.

Question 14

Development refers to an increase in:

Accepted Answer

A) productive capacity with no change in output. 
B) output with no change in productive capacity. 
C) output brought about by an increase in inputs. 
D) output brought about by a change in the production function. 
A) productive capacity with no change in output. 
B) output with no change in productive capacity. 
C) output brought about by an increase in inputs. 
D) output brought about by a change in the production function.

Question 15

Opponents of using the inflation tax to finance government budget deficits argue that:

Accepted Answer

A) the government can raise taxes to eliminate any budget deficit. 
B) inflation is ultimately beneficial in the long run. 
C) the inflation tax is a temporary solution that requires ever higher levels of inflation to remain effective. 
D) the economic slowdown produced by the inflation tax is more damaging than the hyperinflation that would occur in the absence of the inflation tax. 
A) the government can raise taxes to eliminate any budget deficit. 
B) inflation is ultimately beneficial in the long run. 
C) the inflation tax is a temporary solution that requires ever higher levels of inflation to remain effective. 
D) the economic slowdown produced by the inflation tax is more damaging than the hyperinflation that would occur in the absence of the inflation tax.

Question 16

If a developing country has sufficient reserves, the buying and selling of foreign currency by the central bank is:

Accepted Answer

A) likely to have roughly the same impact on the exchange rate as in developed countries. 
B) likely to have a much greater impact on the exchange rate than in developed countries. 
C) likely to have a much smaller impact on the exchange rate than in developed countries. 
D) completely ineffective on the exchange rate. 
A) likely to have roughly the same impact on the exchange rate as in developed countries. 
B) likely to have a much greater impact on the exchange rate than in developed countries. 
C) likely to have a much smaller impact on the exchange rate than in developed countries. 
D) completely ineffective on the exchange rate.

Question 17

In 1991, El Salvador ended a fifteen-year civil war, and the new government in place introduced a number of liberalization policies that included privatization, exchange rate liberalization, tariff reductions, tax exemptions to foreign direct investment, and a more market- oriented economy.These economic reforms are examples of:

Accepted Answer

A) a fiscal and monetary policy change. 
B) a policy change. 
C) a regime change. 
D) both a policy change and a regime change. 
A) a fiscal and monetary policy change. 
B) a policy change. 
C) a regime change. 
D) both a policy change and a regime change.

Question 18

If a developing country makes its currency fully convertible, it runs the risk of having too:

Accepted Answer

A) low levels of domestic saving and investment. 
B) high levels of domestic saving and investment. 
C) much domestic saving and not enough domestic investment. 
D) little foreign investment. 
A) low levels of domestic saving and investment. 
B) high levels of domestic saving and investment. 
C) much domestic saving and not enough domestic investment. 
D) little foreign investment.

Question 19

Because the political institutions of many developing countries are weak:

Accepted Answer

A) it is easier for them to conduct activist economic policies that foster development. 
B) it is harder for them to conduct activist economic policies that foster development. 
C) it is no more difficult for them to adopt activist economic policies than it is for developed countries. 
D) a laissez-faire policy is counterproductive. 
A) it is easier for them to conduct activist economic policies that foster development. 
B) it is harder for them to conduct activist economic policies that foster development. 
C) it is no more difficult for them to adopt activist economic policies than it is for developed countries. 
D) a laissez-faire policy is counterproductive.

Question 20

The balance of payments constraint refers to the limits on:

Accepted Answer

A) domestic macroeconomic policy arising from a shortage of international reserves. 
B) currency convertibility observed in most developing countries. 
C) macroeconomic policy resulting from IMF conditionality. 
D) exchange rate policy imposed by flexible exchange rates. 
A) domestic macroeconomic policy arising from a shortage of international reserves. 
B) currency convertibility observed in most developing countries. 
C) macroeconomic policy resulting from IMF conditionality. 
D) exchange rate policy imposed by flexible exchange rates.

Exam 38: Macro Policy in Developing Countries

When the IMF provides loans to developing countries, it often requires these countries to adopt:

It is possible to purchase diplomas from diploma mills.The situation in which the degrees are more important than the knowledge they are supposed to represent is called:

Since its independence in 1957, Ghana has experienced more than 12 coups d'etats that have led to the overthrow of presidents and ministers and in various cases the change of political regimes.The textbook calls this situation an example of:

Using exchange rates based on purchasing power parity to compare per capita incomes in developing and developed countries might lead one to conclude that people in developing countries:

The lack of investment in developing countries is at least in part attributable to:

Central banks in most developing countries:

When governments in developing countries run budget deficits, central banks in these countries typically:

Economic takeoff:

Infant mortality rates in developing countries:

The purpose of limited capital account convertibility is to:

In contrast to development, growth refers to an increase in:

In the early 2000s, Ecuador replaced its currency, the sucre, with the U.S.dollar as its official currency.What would prompt a country to abandon its own currency and adopt the currency of the United States?

Developing economies:

Development refers to an increase in:

Opponents of using the inflation tax to finance government budget deficits argue that:

If a developing country has sufficient reserves, the buying and selling of foreign currency by the central bank is:

If a developing country makes its currency fully convertible, it runs the risk of having too:

Because the political institutions of many developing countries are weak:

The balance of payments constraint refers to the limits on:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

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