Question 1

If a poor country is going to grow rapidly and achieve a high level of per capita income,which of the following is most important?

Accepted Answer

A) abundant natural resources 
B) substantial aid from rich countries 
C) central planning and a high level of government expenditures 
D) institutions and policies that encourage productive activities 
A) abundant natural resources 
B) substantial aid from rich countries 
C) central planning and a high level of government expenditures 
D) institutions and policies that encourage productive activities

Question 2

When institutions and policies provide secure property rights,a fair and balanced judicial system,monetary stability,and effective limits on the power of government,which of the following is most likely to be encouraged?

Accepted Answer

A) rent-seeking 
B) actions that reduce the value of resources 
C) productive activities 
D) destructive activities 
A) rent-seeking 
B) actions that reduce the value of resources 
C) productive activities 
D) destructive activities

Question 3

The historical record indicates that foreign aid has

Accepted Answer

A) played a major role in helping formerly poor countries grow rapidly and achieve high income levels. 
B) re-enforced corrupt governments and policies that stifle productive activities. 
C) helped poor countries escape counterproductive policies imposed by authoritarian political leaders. 
D) promoted economic growth,but slowed the movement toward political democracy. 
A) played a major role in helping formerly poor countries grow rapidly and achieve high income levels. 
B) re-enforced corrupt governments and policies that stifle productive activities. 
C) helped poor countries escape counterproductive policies imposed by authoritarian political leaders. 
D) promoted economic growth,but slowed the movement toward political democracy.

Question 4

Which of the following is most important if a country wants to move from a low-income to a high-income status?

Accepted Answer

A) high rates of monetary growth. 
B) sustained economic growth. 
C) high real interest rates. 
D) high nominal interest rates. 
A) high rates of monetary growth. 
B) sustained economic growth. 
C) high real interest rates. 
D) high nominal interest rates.

Question 5

When regulations interfere with exchange and limit entry into various businesses and occupations,they will

Accepted Answer

A) help a country achieve more rapid economic growth. 
B) promote more efficient use of investment capital by entrepreneurs. 
C) retard economic progress. 
D) increase the profits of business firms. 
A) help a country achieve more rapid economic growth. 
B) promote more efficient use of investment capital by entrepreneurs. 
C) retard economic progress. 
D) increase the profits of business firms.

Question 6

Which of the following will be required for a country to move up the income ladder and achieve high-income status?

Accepted Answer

A) rapid growth of the money supply. 
B) restrictions limiting the import of goods from other nations,particularly low-wage countries. 
C) tax incentives that encourage consumption rather than investment 
D) sustained economic growth 
A) rapid growth of the money supply. 
B) restrictions limiting the import of goods from other nations,particularly low-wage countries. 
C) tax incentives that encourage consumption rather than investment 
D) sustained economic growth

Question 7

Which of the following is true?

Accepted Answer

A) Tax rates do not influence economic growth. 
B) Countries with high marginal tax rates have generally had higher rates of economic growth than those with low tax rates. 
C) Countries with low marginal tax rates have generally had higher rates of economic growth than those with high tax rates. 
D) Countries that impose high marginal tax rates at low-income thresholds generally have high rates of economic growth. 
A) Tax rates do not influence economic growth. 
B) Countries with high marginal tax rates have generally had higher rates of economic growth than those with low tax rates. 
C) Countries with low marginal tax rates have generally had higher rates of economic growth than those with high tax rates. 
D) Countries that impose high marginal tax rates at low-income thresholds generally have high rates of economic growth.

Question 8

An increase in per capita income will generally lead to

Accepted Answer

A) more material goods,but a decline in the quality of the environment. 
B) a reduction in life expectancy because working conditions are less desirable. 
C) an increase in the number of hours worked by residents. 
D) an increase in the living standards of most people. 
A) more material goods,but a decline in the quality of the environment. 
B) a reduction in life expectancy because working conditions are less desirable. 
C) an increase in the number of hours worked by residents. 
D) an increase in the living standards of most people.

Question 9

An open capital market affects a nation's economic growth by

Accepted Answer

A) channeling capital into productive projects and away from wasteful projects. 
B) rewarding investors who find the most productive projects and invest in them. 
C) making the lowest-cost capital available from around the world. 
D) all of the above. 
A) channeling capital into productive projects and away from wasteful projects. 
B) rewarding investors who find the most productive projects and invest in them. 
C) making the lowest-cost capital available from around the world. 
D) all of the above.

Question 10

The rule of 70 is

Accepted Answer

A) a formula used to determine the number of years it takes for something to double at a given growth rate. 
B) a theory explaining why countries tended to grow more rapidly during the 1970s. 
C) the principle,that for growth,a country needs government spending of at least 70 percent of GDP. 
D) a formula to compute the change in GDP that will occur as investment rises. 
A) a formula used to determine the number of years it takes for something to double at a given growth rate. 
B) a theory explaining why countries tended to grow more rapidly during the 1970s. 
C) the principle,that for growth,a country needs government spending of at least 70 percent of GDP. 
D) a formula to compute the change in GDP that will occur as investment rises.

Question 11

Individuals are more likely to engage in productive activities when institutions and policies

Accepted Answer

A) create a fair and unbiased judicial system. 
B) provide for monetary stability. 
C) restrict the ability of government to transfer wealth through taxation and regulation. 
D) All of the above. 
A) create a fair and unbiased judicial system. 
B) provide for monetary stability. 
C) restrict the ability of government to transfer wealth through taxation and regulation. 
D) All of the above.

Question 12

If real GDP is increasing more rapidly than population,

Accepted Answer

A) population must be declining. 
B) the country will have to export more than it imports. 
C) the general level of prices must be increasing. 
D) per capita real GDP will be increasing. 
A) population must be declining. 
B) the country will have to export more than it imports. 
C) the general level of prices must be increasing. 
D) per capita real GDP will be increasing.

Question 13

Which of the following is true of sub-Saharan Africa?

Accepted Answer

A) The poverty rate in the region is low. 
B) Most of the sub-Saharan African countries rank among the freest economies in the world. 
C) The poverty rate in sub-Saharan Africa is the highest of any region in the world,and the reduction in the rate during the past quarter of a century has been modest. 
D) The poverty rate in sub-Saharan Africa is the lowest of any region in the world,and the rate has declined sharply during the past quarter of a century. 
A) The poverty rate in the region is low. 
B) Most of the sub-Saharan African countries rank among the freest economies in the world. 
C) The poverty rate in sub-Saharan Africa is the highest of any region in the world,and the reduction in the rate during the past quarter of a century has been modest. 
D) The poverty rate in sub-Saharan Africa is the lowest of any region in the world,and the rate has declined sharply during the past quarter of a century.

Question 14

To move up the income ladder and achieve high-income status,countries must

Accepted Answer

A) have sustained economic growth. 
B) restrict international trade. 
C) encourage the production of consumption goods rather than investment goods. 
D) maintain high inflation. 
A) have sustained economic growth. 
B) restrict international trade. 
C) encourage the production of consumption goods rather than investment goods. 
D) maintain high inflation.

Question 15

Which of the following would be most likely to encourage capital formation in a less-developed country?

Accepted Answer

A) the expectation of sustained high inflation 
B) the expectation that property rights will be highly secure in the years ahead 
C) the imposition of high tariffs and other restraints limiting imports 
D) higher personal and corporate tax rates 
A) the expectation of sustained high inflation 
B) the expectation that property rights will be highly secure in the years ahead 
C) the imposition of high tariffs and other restraints limiting imports 
D) higher personal and corporate tax rates

Question 16

A legal system that protects private property and enforces contracts in an even-handed manner helps promote economic growth because it

Accepted Answer

A) makes it possible for individuals to generate large incomes and get ahead without cooperating with others. 
B) provides people with a strong incentive to supply others with things that they value at an economical price. 
C) encourages people to use resources now rather than conserving them for the future. 
D) keeps the real wages of workers low and thereby makes it possible for business firms to supply goods and services economically. 
A) makes it possible for individuals to generate large incomes and get ahead without cooperating with others. 
B) provides people with a strong incentive to supply others with things that they value at an economical price. 
C) encourages people to use resources now rather than conserving them for the future. 
D) keeps the real wages of workers low and thereby makes it possible for business firms to supply goods and services economically.

Question 17

(I)In a competitive capital market,private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return.
(II)Profitable projects will tend to increase both the wealth of the investor and of the nation.

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. 
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 18

How do high marginal tax rates affect the economic prosperity of a nation?

Accepted Answer

A) They reduce the incentive of individuals to earn reported income. 
B) They encourage the nation's most productive citizens to emigrate to countries where taxes are lower. 
C) They discourage foreigners from investing in the country. 
D) All of the above are correct. 
A) They reduce the incentive of individuals to earn reported income. 
B) They encourage the nation's most productive citizens to emigrate to countries where taxes are lower. 
C) They discourage foreigners from investing in the country. 
D) All of the above are correct.

Question 19

The historical record indicates that foreign aid has

Accepted Answer

A) played a major role in helping formerly poor countries grow rapidly and achieve high income levels. 
B) re-enforced corrupt governments and policies that stifle productive activities. 
C) helped poor countries escape counterproductive policies imposed by authoritarian political leaders. 
D) promoted economic growth,but slowed the movement toward political democracy. 
A) played a major role in helping formerly poor countries grow rapidly and achieve high income levels. 
B) re-enforced corrupt governments and policies that stifle productive activities. 
C) helped poor countries escape counterproductive policies imposed by authoritarian political leaders. 
D) promoted economic growth,but slowed the movement toward political democracy.

Question 20

Which of the following would be most likely to cause the per capita income of less-developed countries to rise?

Accepted Answer

A) development of strong labor unions 
B) more rapid population growth 
C) investment expenditures that enhance the human capital of labor force participants 
D) an international minimum wage law 
A) development of strong labor unions 
B) more rapid population growth 
C) investment expenditures that enhance the human capital of labor force participants 
D) an international minimum wage law

Exam 16: Creating an Environment for Growth and Prosperity

If a poor country is going to grow rapidly and achieve a high level of per capita income,which of the following is most important?

When institutions and policies provide secure property rights,a fair and balanced judicial system,monetary stability,and effective limits on the power of government,which of the following is most likely to be encouraged?

The historical record indicates that foreign aid has

Which of the following is most important if a country wants to move from a low-income to a high-income status?

When regulations interfere with exchange and limit entry into various businesses and occupations,they will

Which of the following will be required for a country to move up the income ladder and achieve high-income status?

Which of the following is true?

An increase in per capita income will generally lead to

An open capital market affects a nation's economic growth by

The rule of 70 is

Individuals are more likely to engage in productive activities when institutions and policies

If real GDP is increasing more rapidly than population,

Which of the following is true of sub-Saharan Africa?

To move up the income ladder and achieve high-income status,countries must

Which of the following would be most likely to encourage capital formation in a less-developed country?

A legal system that protects private property and enforces contracts in an even-handed manner helps promote economic growth because it

(I)In a competitive capital market,private investors have a strong incentive to evaluate projects carefully and allocate their funds toward those projects expected to yield the highest rates of return. (II)Profitable projects will tend to increase both the wealth of the investor and of the nation.

How do high marginal tax rates affect the economic prosperity of a nation?

The historical record indicates that foreign aid has

Which of the following would be most likely to cause the per capita income of less-developed countries to rise?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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