Deck 28: The Economics of Developing Countries

Question 1

The vast majority of the labor forces of the low-income DVCs are engaged in agriculture.

Answer 1

True

Question 2

The presence of large and fast-growing populations in developing countries contributes to lower per capita incomes.

Answer 2

True

Question 3

Saving is low in many DVCs primarily because income is very equally distributed.

Answer 3

False

Question 4

In 2017, the IACs (industrially advanced countries)had an average per capita income that was about 50 times as high as that of the low-income nations.

Question 5

China is close to catching up with the United States in its standard of living as measured by per capita income.

Question 6

Reduction of tariff barriers against DVC imports would benefit both the DVCs and the IACs.

Question 7

The capricious universe view is the idea that the IACs are exploiting the DVCs.

Question 8

Most nations of the world are now IACs, not middle- and low-income DVCs.

Question 9

DVCs tend to have permanent shortages of farm labor.

Question 10

The demographic transition view of population growth believes that slower population growth will lead to rising incomes.

Question 11

Because families can afford to have more children, population growth is greater in the IACs than in the DVCs.

Question 12

Capital flight refers to the fact that many DVCs must use their export earnings to pay interest on their outstanding external debts.

Question 13

Most of the DVCs of the world are located in Western Europe.

Question 14

The gap in the standards of living between the IACs (like the U.S., countries of Western Europe, and Japan)and the DVCs of Africa, Latin America, and Asia have been narrowing significantly over the decades.

Question 15

An advantage of direct foreign investment (compared to foreign loans)is that management skill and technological knowledge often accompany such capital flows.

Question 16

The richest 20 percent of the world's population receives more than 75 percent of the world's income, while the poorest 20 percent receives less than 2 percent of the world's income.

Question 17

If the real outputs per capita of a rich nation and a poor nation grow at the same percentage rate, the absolute income gap between the two nations will shrink.

Question 18

The differences in the per capita incomes of the IACs and the DVCs have diminished sharply since the Second World War because of U.S. aid programs.

Question 19

The most important growth obstacle common to all DVCs is the lack of desire to increase their standards of living.

Question 20

Japan is a nation that achieved a high standard of living despite having a very limited supply of natural resources.

Question 21

An example of direct foreign investment would be the building of a motorcycle factory in China by Honda Motors.

Question 22

One recommended policy that IACs could adopt to help DVCs is to recruit and hire skilled workers from DVCs for businesses in IACs.

Question 23

One reason why foreign aid is viewed as harmful is that it promotes dependency.

Question 24

In recent years, a greater proportion of private capital flows to DVCs has been direct foreign investment rather than loans to DVC governments.

Question 25

The World Bank is the organization to which DVCs turn as a "last-resort" lending agency for projects that private institutions will not fund.

Question 26

Without an abundant endowment of natural resources, a nation cannot achieve rapid economic growth.

Question 27

The corruption and poor administration that are common to the public sectors of many DVCs suggest that government may not be very effective in promoting economic growth.

Question 28

One policy recommended by most economists for promoting economic growth in DVCs is the nationalization and protection of domestic industries.

Question 29

When technological advances are of the capital-using kind, it is possible for an economy to increase its productivity without any net investment in capital goods.

Question 30

The vicious circle of poverty is based on the connections between low income, low saving, low investment, and low productivity.

Question 31

The creation of adequate infrastructure in a nation is primarily the responsibility of the public sector.

Question 32

One effective way that IACs can help DVCs is to lower trade barriers on products produced by DVCs.

Question 33

The building of a new factory by a corporation would be an example of increasing the infrastructure in a developing nation.

Question 34

Developing nations tend to have a large entrepreneurial class but not sufficient capital investment.

Question 35

Capital flight from DVCs (developing countries)tends to offset much of the foreign loans and aid that they receive from IACs (industrially advanced countries).

Question 36

Saving is a larger percentage of domestic output in DVCs than in IACs, but the saving is put to poor use.

Question 37

The vicious circle of poverty implies that there is no way to break the circle; the poor nations will always remain poor.

Question 38

Land reform (or the reform of land ownership)is a relatively minor institutional obstacle to economic growth in many developing countries.

Question 39

The World Bank has found that even households living in extreme poverty can provide for basic human needs like safe water and sturdy shelter.

Question 40

The industrially advanced nations can assist developing nations by reducing trade barriers and by providing both private and public capital.

Question 41

Refer to the table. Which of the following might reduce the per capita income gap between countries A and E?

A)faster population growth in country A than in country E
B)greater investment relative to GDP in country E than in country A
C)more rapid improvement in literacy and education in country A than in country E
D)increased capital flight from country A relative to that from country E

Question 42

Which of the following is not inversely related to per capita income?

A)mortality rates for children under five years of age
B)adult illiteracy rates
C)per capita energy consumption
D)population growth rates

Question 43

Assume the total real income of a developing country increases from $8.5 billion to $8.5 billion, while its population expands from 14 to 15 million people from one year to the next. Over the year, per capita income has

A)decreased by about $5 per person.
B)increased by about $1 per person.
C)decreased by about $46 per person.
D)increased by about $500 per person.

Question 44

Which of the given nations would be middle-income developing countries (DVCs), according to the World Bank?

A)country E only
B)countries A, D, and E
C)countries D and E
D)country D only

Question 45

Which of the given nations would be high-income countries (IACs), according to the World Bank?

A)country C only
B)countries B, C, and D
C)countries B, C, D, and E
D)countries B and C

Question 46

If the real output of a DVC increases from $200 billion to $240 billion and its population increases from 100 to 110 million, its real per capita output will have

A)increased by about $182.
B)increased by about $40.
C)decreased by about $120.
D)remained unchanged.

Question 47

Industrially advanced countries can help developing countries by

A)admitting more temporary workers from the DVCs.
B)increasing the amount of aid given directly to government officials.
C)increasing control over DVCs' capital markets.
D)encouraging arms sales to DVCs so they can protect themselves.

Question 48

Which of the given nations would be low-income developing countries (DVCs), according to the World Bank?

A)country A only
B)countries A, D, and E
C)countries A and E
D)countries A, B, D, and E

Question 49

Suppose that the average annual rate of population increase in Econland in recent years was about 7 percent. Based on this rate of growth, the population of Econland will double in about

A)10 years.
B)14 years.
C)7 years.
D)24 years.

Question 50

Assume a DVC has a real per capita output of $1,000 as compared to $20,000 for an IAC. If both nations realize a 2 percent growth of their real per capita outputs, after one year the absolute real per capita output gap will

A)increase by $380.
B)increase by $19,380.
C)decrease by $1,000.
D)remain unchanged at $19,000.

Question 51

An IAC (industrially advanced country)had a per capita income of $28,200, while a DVC (developing country)had a per capita income of $1,200 in a given year. If both countries experience a per-capita-income growth of 2 percent, then the per-capita-income gap one year later will be

A)$27,540.
B)$540.
C)$27,000.
D)$32,400.

Question 52

According to the United Nations, approximately what percentage of the world's income is received by the richest one-fifth of the world's population?

A)24 percent
B)38 percent
C)60 percent
D)75 percent

Question 53

Which of these sets of nations consists of high-income economies?

A)Brazil, Thailand, and South Africa
B)China, India, and Russia
C)Canada, Switzerland, and France
D)United States, South Korea, and Mexico

Question 54

Refer to the table. If per capita income increases by 10 percent over five years in each of the nations shown, the per capita income gap between country C and country A

A)will remain the same.
B)will rise from $30,934 to $34,027.
C)may rise or fall depending on the rate of population growth.
D)will rise from $31,555 to $34,710.

Question 55

Government can play a major positive role in the early stage of economic development by

A)providing adequate infrastructure.
B)establishing price controls for products.
C)promoting exports by subsidizing them.
D)creating marketing boards for export products.

Question 56

Assume that the real output of a developing nation increases from $50 billion to $62 billion, while its population expands from 100 to 115 million. As a result, real income per capita has increased by about

A)$39 per person.
B)$64 per person.
C)$12 per person.
D)$27 per person.

Question 57

At the beginning of the year, one developing country (DVC)has a real income per capita of $1,500. In a developed country (IAC), the real income per capita is $30,000. Both countries experience a 6 percent growth rate for the year. At the end of the year, the absolute income gap between these two countries will have increased from $28,500 to

A)$30,210.
B)$31,800.
C)$30,180.
D)$33,390.

Question 58

Which of these sets of nations consists of low-income developing nations?

A)Brazil, Australia, and South Africa
B)Burundi, Madagascar, and Sierra Leone
C)Canada, Switzerland, and France
D)Germany, South Korea, and Mexico

Question 59

From the years, 1990 to 2015, the extreme poverty rate for the world's population declined from 35.9 percent to 10.0 percent.

Question 60

Approximately what percentage of the world's income is received by the poorest one-fifth of the world's population?

A)2
B)5
C)7
D)10

Question 61

Most of the world's population lives in

A)North America.
B)the DVCs.
C)Western Europe.
D)the IACs.

Question 62

To be classified as a low-income developing country, annual per capita income in 2017 needed to be

A)$995 or less.
B)$628 or less.
C)$2,018 or less.
D)$800 or less.

Question 63

Examples of low-income developing countries are

A)Switzerland, New Zealand, and Australia.
B)Germany, Austria, and Italy.
C)Chad, Bangladesh, and Democratic Republic of the Congo.
D)Mexico, South Korea, and Brazil.

Question 64

The absolute income gap between the IACs and the DVCs has

A)remained constant over time.
B)increased over time.
C)decreased over time.
D)increased in nominal terms but decreased in real terms.

Question 65

Which of the following is typically not a problem for low-income DVCs?

A)capital flight
B)"brain drain"
C)high saving rates that slow aggregate demand growth
D)poor infrastructure

Question 66

In 2017, the United States had about ___ percent of the world's population and produced about ___ percent of the world's output.

A)20; 30
B)3.6; 31
C)10; 28
D)4.4; 24

Question 67

The very poorest low-income DVCs typically have relatively

A)low rates of economic growth and relatively high rates of population growth.
B)high rates of economic growth and relatively low rates of population growth.
C)low rates of both population growth and economic growth.
D)high rates of both population growth and economic growth.

Question 68

If population is expanding at the same rate as real output,

A)real per capita output will increase.
B)real per capita output will decrease.
C)real per capita output will remain unchanged.
D)living standards will increase.

Question 69

If the real GDP of a DVC increases from $600 billion to $630 billion and its population increases from 200 million to 216 million, its real per capita GDP will

A)increase by about $83.
B)decrease by about $83.
C)remained unchanged.
D)decrease by about $19.

Question 70

If two nations have different per capita income levels and their rates of economic growth are identical, then the absolute per capita income differential

A)will remain constant.
B)may either widen or diminish.
C)will diminish.
D)will widen.

Question 71

Which of the following does not correlate positively with economic growth?

A)output per capita
B)life expectancy
C)the percentage of the population engaged in agriculture
D)the literacy rate

Question 72

Assume a DVC has a real per capita output of $1,000 as compared to $20,000 for an IAC. If both nations realize a 4 percent growth of their real per capita outputs, after one year the absolute real per capita output gap will

A)remain unchanged at $19,000.
B)increase by $760.
C)decrease by $1,000.
D)increase by $19,760.

Question 73

In recent decades,

A)all countries classified as DVCs have had little or no economic growth.
B)some nations classified as DVCs have grown rapidly, while others have grown very slowly or not at all.
C)all countries classified as DVCs have experienced rapid economic growth and rising living standards.
D)all countries classified as low-income DVCs have had declining per capita GDPs.

Question 74

Which of the following includes only examples of industrially advanced countries (IACs)?

A)the United States, Canada, and Mexico
B)Pakistan, India, and China
C)Japan, South Korea, and China
D)Canada, Australia, and New Zealand

Question 75

If the real output of a DVC increases from $200 billion to $260 billion and its population increases from 100 to 120 million, its real per capita output will have

A)remained unchanged.
B)increased by about $167.
C)increased by about $55.
D)decreased by about $20.

Question 76

The DVCs are

A)located primarily in Northern Europe.
B)located primarily in Western Europe.
C)located primarily in Africa, Asia, and Latin America.
D)more or less evenly distributed over the various continents.

Question 77

The exports of the DVCs consist largely of

A)high-technology goods.
B)raw materials and farm products.
C)manufactured goods.
D)services and financial capital.

Question 78

In 2017, the GDP of the United States was approximately

A)$9 trillion less than the GDP of the 135 DVCs in that year.
B)$9 trillion more than the GDP of the 135 DVCs in that year.
C)twice the GDP of the 135 DVCs in that year.
D)the same as the GDP of 135 DVCs in that year.

Question 79

Which attitude or custom is the most conducive to long-term economic growth?

A)a focus on group contentment rather than individual achievement
B)the belief that there is little or no correlation between an individual's economic actions and her or his economic fortunes
C)the belief that there is a direct connection between individual efforts (including educational efforts)and economic rewards
D)the use of the majority of resources for religious structures and ceremonies

Question 80

Over the next 15 years, ___ out of every 10 people added to the world's population will be born in developing countries.

A)6
B)7
C)8
D)9