Deck 8: Why Isn't the Whole World Developed?

Question 1

Geographical conditions,such as good climate,availability of natural resources,and fertile soil,are examples of ________.

A) implicit causes of prosperity
B) explicit causes of prosperity
C) proximate causes of prosperity
D) fundamental causes of prosperity

Answer 1

fundamental causes of prosperity

Question 2

The availability of vast stocks of natural resources is an example of a(n)________.

A) implicit cause of prosperity
B) explicit cause of prosperity
C) proximate cause of prosperity
D) fundamental cause of prosperity

Answer 2

fundamental cause of prosperity

Question 3

What are proximate causes of prosperity? How are they related to fundamental causes of prosperity?

Answer 3

Proximate causes of prosperity are factors such as physical capital,human capital,and technology.They are referred to as proximate causes of prosperity because they link high levels of prosperity to high levels of the inputs of production,but without providing an explanation as to why the levels of those inputs are high.Proximate causes of prosperity arise out of fundamental causes of prosperity.Fundamental causes of prosperity are factors that are at the root of the differences in the proximate causes of prosperity.

Question 4

A group of economists argue that the lack of agricultural land is a key reason for the slow economic growth of Lithasia.According to this argument,________.

A) geography is the proximate cause of slow economic growth in Lithasia
B) geography is the fundamental cause of slow economic growth in Lithasia
C) a high level of physical capital is the fundamental cause of slow economic growth in Lithasia
D) a low level of human capital is the proximate cause of slow economic growth in Lithasia

Question 5

One morning,while working on an assignment,you realize that your computer is functioning very slowly because of a new virus.Hence,you decide to get your computer serviced.Using this scenario,distinguish between the proximate cause and fundamental cause of getting your computer serviced.

Question 6

The presence of navigable rivers and fertile soil is seen as a source of economic prosperity under the ________.

A) geography hypothesis
B) culture hypothesis
C) institutions hypothesis
D) location hypothesis

Question 7

If the geography hypothesis holds,what will be its implication for poorer nations that have unfavorable geographic conditions?

Question 8

The ________ hypothesis claims that differences in natural environment,such as climate and ecology,are ultimately responsible for the major differences in prosperity observed around the world.

A) location
B) geography
C) climate
D) ecology

Question 9

A researcher claims that the slow economic growth of countries located in Africa can be attributed to the geography hypothesis.If the researcher is correct,it implies that the economic growth of countries in Africa is greatly affected by ________.

A) natural factors, such as climate and the quality of soil available
B) cultural factors, such as the work ethics of indigenous residents
C) institutional factors, such as the availability of credit and finance
D) religious factors

Question 10

Those factors that lead to differences in the proximate causes of prosperity between nations are referred to as ________.

A) fundamental causes of prosperity
B) endogenous causes of prosperity
C) explicit causes of prosperity
D) implicit causes of prosperity

Question 11

Consider two economies: Economy A and Economy B.Economy A is located close to the equator and is characterized by an extreme climate.The terrain in Economy A is inhospitable,and it lacks rivers or other bodies of water in its territory.In contrast,Economy B is located in the temperate zone with a pleasant climate,fertile soil,and navigable rivers.Suppose the geography hypothesis of economic growth holds true for these economies.
a)Which of the two economies is likely to be more prosperous?
b)Is the difference in prosperity between the two economies likely to be sustained in the long run?

Question 12

Countries in sub-Saharan Africa are economically disadvantaged because infectious diseases spread in these countries relatively easily.This statement reflects the ________.

A) culture hypothesis
B) geography hypothesis
C) institutions hypothesis
D) location hypothesis

Question 13

Differences in the stock of technology between nations are an example of a(n)________.

A) implicit cause of prosperity
B) explicit cause of prosperity
C) proximate cause of prosperity
D) fundamental cause of prosperity

Question 14

Differences in the stock of human capital between nations are an example of a(n)________.

A) implicit cause of prosperity
B) explicit cause of prosperity
C) proximate cause of prosperity
D) fundamental cause of prosperity

Question 15

Differences in the stock of physical capital between nations are an example of a(n)________.

A) implicit cause of prosperity
B) explicit cause of prosperity
C) proximate cause of prosperity
D) fundamental cause of prosperity

Question 16

Which of the following statements is true?

A) The stock of human capital and the geography of a nation can be considered proximate causes of prosperity.
B) The stock of human capital and the geography of a nation can be considered fundamental causes of prosperity.
C) The stock of human capital and the physical capital available to a nation can be considered proximate causes of prosperity.
D) Cultural and geographical conditions of a nation can be considered proximate causes of prosperity.

Question 17

If the geography hypothesis holds,then ________.

A) poorer countries are permanently disadvantaged
B) poorer countries are likely to catch up with richer countries very fast
C) living standards in poorer countries can be substantially improved
D) cultural beliefs can be considered an important source of economic prosperity

Question 18

Which of the following may partially reduce the geographical disadvantages faced by poorer countries?

A) Restricting the immigration of skilled workers from rich countries to the poorer countries
B) Transferring technology from richer to poorer countries
C) Limiting the use of natural resources so that they can be preserved for future use
D) Limiting the participation of poorer countries in international trade

Question 19

The causes of prosperity that link high levels of prosperity to high levels of inputs used in production,without explaining why the levels of those inputs are high,are referred to as ________.

A) implicit causes of prosperity
B) explicit causes of prosperity
C) proximate causes of prosperity
D) fundamental causes of prosperity

Question 20

Which of the following statements is true?

A) The fundamental causes of prosperity are effective only in the short run.
B) The proximate causes of prosperity are effective only in the short run.
C) The proximate causes of prosperity are shaped by the fundamental causes of prosperity.
D) The fundamental causes of prosperity are shaped by the proximate causes of prosperity.

Question 21

What is meant by the geography hypothesis? How does it differ from the culture hypothesis?

Question 22

Certain countries remain backward because they nurture superstition and are suspicious of new technology.This argument is based on the ________.

A) culture hypothesis
B) geography hypothesis
C) capital hypothesis
D) location hypothesis

Question 23

A hypothesis states that religious teachings,family ties,and/or social norms are the causes of economic prosperity.According to this hypothesis,________.

A) culture is a proximate cause of prosperity
B) culture is a fundamental cause of prosperity
C) geography is a fundamental cause of prosperity
D) institutions are a fundamental cause of prosperity

Question 24

The ________ claims that the way societies have organized themselves and shaped the incentives of individuals and businesses are at the root of the differences in prosperity across the world.

A) institutions hypothesis
B) culture hypothesis
C) geography hypothesis
D) location hypothesis

Question 25

A researcher claims that the standards of law and order are the basis of the economic prosperity of a certain country.This argument is based on the ________.

A) culture hypothesis
B) geography hypothesis
C) institutions hypothesis
D) location hypothesis

Question 26

Which of the following statements is true?

A) The geography and culture of a nation are under human control, while the institutions of a nation are beyond human control.
B) The geography of a nation is not always under human control, while the institutions of a nation are created by humans.
C) Most of the geography of a nation can be changed over time.
D) Geography refers to human-made factors, and in particular to the organization of society determined by the members of that society.

Question 27

Which of the following is a characteristic of an institution?

A) Institutions are determined by individual opinions without considering the government's preferences.
B) Institutions place constraints on the behavior of economic agents.
C) Institutions have very little influence on a nation's economic prosperity.
D) The institutions of a nation are permanent and cannot be changed over time.

Question 28

One of the methods of reducing the geographical disadvantage faced by poorer countries is to ________.

A) undertake large-scale disease eradication programs
B) adopt a socialist economic system
C) borrow financial resources at market interest rates
D) reduce participation in international trade

Question 29

Suppose we claim that the rapid economic growth in Barylia can be attributed to the culture hypothesis.Which of the following can most likely be concluded from this claim?

A) Barylia must have large stocks of productive natural resources.
B) The citizens of Barylia must be socially inclined to work hard.
C) Institutions in Barylia must be inclusive.
D) Barylia must have a huge stock of physical capital.

Question 30

What is the main reason for the disparity in the growth rates of South Korea and North Korea over the past 60 years?

Question 31

The cultural hypothesis of economic growth claims that ________.

A) most ancient cultures of the world have been almost forgotten post-globalization
B) a common global culture is automatically created through liberal trade practices
C) different values and cultural beliefs cause differences in prosperity around the world
D) values and cultural beliefs are proximate causes for differences in prosperity around the world

Question 32

The formal and informal rules governing the organization of a society on the whole,including its laws and regulations,are referred to as ________.

A) institutions
B) organizational structure
C) cultural scenario
D) religious norms

Question 33

The reason differences in the growth stories of North Korea and South Korea can be viewed approximately as a natural experiment or an experiment of history is that ________.

A) the culture in both countries was changing radically, while geography and institutions remained largely unchanged
B) the geography in both countries was changing radically, while culture and institutions remained largely unchanged
C) institutions in both countries were changing radically, while geography and culture remained largely unchanged
D) institutions, geography, and culture in both countries were changing radically

Question 34

Which of the following is not true of institutions?

A) Institutions affect incentives.
B) Institutions are permanent and cannot be changed over time.
C) Institutions act as constraints on the behavior of economic agents.
D) Institutions are determined by individuals as members of society.

Question 35

According to Samuel Huntington,South Korea's economy experienced rapid economic growth because South Koreans valued thrift,investment,education,and discipline.In contrast,Ghana's economy did not grow as fast because the country had different social values.This argument claims that ________.

A) culture is a fundamental cause of prosperity
B) institutions are a fundamental cause of prosperity
C) institutions are a proximate cause of prosperity
D) geographical location is a fundamental cause of prosperity

Question 36

Consider two economies: Economy A and Economy B.In Economy A,the work culture is such that people do not mind working 12 hours a day.On the contrary,in Economy B,people work a maximum of 6 hours a day.If the culture hypothesis holds,then ________.

A) both economies are likely to grow at the same rate
B) Economy A is likely to grow faster than Economy B
C) Economy B is likely to grow faster than Economy A
D) the growth rates in both economies are likely to fluctuate randomly

Question 37

Adam Smith supported the view that the ________ of a nation greatly influenced its economic growth.

A) location
B) culture
C) geography
D) institutions

Question 38

Institutions ________.

A) are mostly beyond human control
B) do not affect incentives
C) cannot be changed over time
D) place constraints on human behavior, and these constraints may not be absolute

Question 39

According to Max Weber,the Protestant world view that encouraged hard work and saving was crucial to industrialization and the development of capitalism.Which hypothesis is this view based on?

A) The culture hypothesis
B) The geography hypothesis
C) The institutions hypothesis
D) The location hypothesis

Question 40

What are institutions? What is the institutions hypothesis of economic growth?

Question 41

Which of the following statements is true?

A) All market economies have inclusive institutions.
B) Inclusive institutions privilege a few at the expense of many.
C) Countries with extractive institutions encourage entrepreneurship and private ownership of property.
D) The economic institutions of a country are interlinked with the political institutions in that country.

Question 42

Barylia is an economy with extractive institutions,such as the absence of private property rights and high tax rates.Is it guaranteed that Barylia will always experience no growth or negative growth? Why or why not?

Question 43

Which of the following statements is true?

A) The institutions governing a nation are considered proximate causes of prosperity.
B) Societal religious beliefs and existing social norms are key proximate causes of economic prosperity.
C) Cultural and geographical factors that affect economic prosperity can be changed faster than the institutional factors that affect it.
D) Institutions determine the degree to which society accumulates factors of production and adopts new technology.

Question 44

When institutions do not protect private property rights,do not uphold contracts,interfere with the working of markets,and erect significant barriers to businesses and occupations,they are referred to as ________.

A) inclusive economic institutions
B) exclusive economic institutions
C) extractive economic institutions
D) transitive economic institutions

Question 45

Extractive institutions control political power to ________.

A) allow new businesses to enter and compete in a market
B) enforce property rights and an equitable legal system
C) transfer resources from the ruling party to society
D) transfer resources from society to the ruling party

Question 46

When a society's economic institutions provide secure property rights,set up a judicial system that enforces contracts and upholds the law,allow private parties to sign contracts for economic and financial transactions,and maintain relatively free entry into different businesses and occupations,the institutions in the society are said to be ________.

A) inclusive
B) extractive
C) exclusive
D) exogenous

Question 47

What are private property rights? Does enforcement of property rights promote economic growth and prosperity?

Question 48

Trends in the economic growth of South Korea have been significantly different from those of North Korea.This is primarily because ________.

A) the quality of agricultural land is better in North Korea than in South Korea
B) the quality of agricultural land is better in South Korea than in North Korea
C) North Korea has inclusive institutions, while South Korea has extractive institutions
D) South Korea has inclusive institutions, while North Korea has extractive institutions

Question 49

Which of the following statements is true?

A) It is possible for an economy to change both its political and economic institutions.
B) Neither the political institutions nor the economic institutions of a nation can be changed.
C) It is possible for an economy to change its political institutions but not its economic institutions.
D) It is possible for an economy to change its economic institutions but not its political institutions.

Question 50

Consider two countries: Country A and Country B.Both countries are identical in all aspects except one.There are well-defined property rights in Country A,while there are no property rights in Country B.Given this information,which of the following statements is likely to be true?

A) Country A is likely to grow faster than Country B.
B) Country B is likely to grow faster than Country A.
C) Both countries are likely to grow at the same rate.
D) Neither of the countries is likely to experience any growth in GDP.

Question 51

Which of the following statements is true of economic growth?

A) Compared to countries with extractive institutions, economic growth in countries with inclusive institutions is more likely to stagnate in the long run.
B) Countries with extractive institutions are likely to grow at the same rate as countries with inclusive institutions.
C) Countries with extractive institutions are likely to grow faster than countries with inclusive institutions.
D) Countries with inclusive institutions are likely to grow faster than countries with extractive institutions.

Question 52

Consider two countries: Country A and Country B.Both countries are identical in all aspects except one.In Country B,it is possible for entrepreneurs to borrow money from banks and financial markets,while in Country A,no loans are given for entrepreneurship.Given this information,which of the following statements is likely to be true?

A) Country A is likely to grow faster than Country B.
B) Country B is likely to grow faster than Country A.
C) Both countries are likely to grow at the same rate.
D) Resources are likely to be overconsumed in Country A and underconsumed in Country B.

Question 53

Which of the following statements is true?

A) The government plays absolutely no role in economies characterized by communism.
B) The government plays absolutely no role in economies characterized by market economies.
C) Competition among firms is likely to be higher in communist economies than in market economies.
D) Competition among firms is likely to be higher in market economies than in communist economies.

Question 54

Extractive institutions ________.

A) are restricted to command economies
B) are restricted to market economies
C) privilege many at the expense of a few
D) privilege a few at the expense of many

Question 55

Consider two countries: Country A and Country B.Both countries are identical in all aspects except one.The institutions in Country A are inclusive,while the institutions in Country B are extractive.Given this information,which of the following statements is likely to be true?

A) Country A is likely to have well-defined property rights, while Country B is likely to lack well-defined property rights.
B) Country B is likely to have well-defined property rights, while Country A is likely to lack well-defined property rights.
C) Both countries are likely to be totalitarian.
D) Both countries are likely to be capitalistic.

Question 56

Consider two economies: Economy A and Economy B.Economy A is a command economy,while Economy B is a market economy.Given this information,which of the following statements is likely to be true?

A) Institutions in Economy A are likely to be more inclusive than institutions in Economy B.
B) Institutions in Economy B are likely to be more inclusive than institutions in Economy A.
C) Both economies are likely to grow at the same rate.
D) Both economies are likely to stagnate without any increase in GDP.

Question 57

The aspects of the society's rules that concern economic transactions are referred to as ________.

A) economic ideals
B) economic principles
C) economic institutions
D) financial regulations

Question 58

Consider two countries: Country A and Country B.In Country A,there are well-defined private property rights,and in Country B,there are no private property rights.
a)If the institutions hypothesis holds,which of the two countries is likely to grow faster?
b)Is the slower growing economy permanently disadvantaged?

Question 59

Explain the differences between inclusive and extractive economic institutions.

Question 60

Private property rights mean that ________.

A) individuals can own businesses and assets, and their ownership is secure
B) individuals have a right to elect their representatives in the government
C) the government does not own any resources used in production in an economy
D) individuals cannot be excluded from the consumption of goods and services regardless of whether they pay for them

Question 61

Which of the following statements correctly highlights a difference between countries with extractive economic institutions and countries with inclusive economic institutions?

A) Entry barriers for new businesses are likely to be higher in countries with extractive economic institutions than in countries with inclusive economic institutions.
B) Entry barriers for new businesses are likely to be lower in countries with extractive economic institutions than in countries with inclusive economic institutions.
C) Countries with extractive economic institutions typically have worse geographical conditions compared to countries with inclusive economic institutions.
D) Countries with extractive economic institutions typically have better geographical conditions compared to countries with inclusive economic institutions.

Question 62

The return-to-entrepreneurship curve is ________.

A) perpendicular to the x-axis
B) parallel to the x-axis
C) upward-sloping
D) downward-sloping

Question 63

If institutions in an economy change from being extractive to inclusive,the return-to-entrepreneurship schedule in the economy will ________.

A) become vertical
B) become horizontal
C) shift leftward
D) shift rightward

Question 64

If an individual is indifferent about being an entrepreneur,her ________ her opportunity cost of entrepreneurship.

A) returns to entrepreneurship are likely to be equal to
B) returns to entrepreneurship are likely to be greater than
C) losses from entrepreneurship are likely to be equal to
D) losses from entrepreneurship are likely to be greater than

Question 65

An implication of the return-to-entrepreneurship curve is that ________.

A) for a relatively lower return, there will be fewer entrepreneurs with at least that return
B) for a relatively lower return, there will be more entrepreneurs with at least that return
C) all entrepreneurs in an economy with inclusive institutions have exactly the same return
D) all entrepreneurs in an economy with extractive institutions have exactly the same return

Question 66

Which of the following statements is true of extractive economic institutions?

A) They protect private property rights of economic agents.
B) They do not uphold contracts and interfere with the workings of the market.
C) They allow free entry into new lines of business.
D) They encourage trade among nations.

Question 67

Which of the following statements is true?

A) Extractive institutions are congenial to entrepreneurship.
B) Inclusive institutions are likely to support inefficient firms.
C) Inclusive institutions are more commonly found in command economies than in market economies.
D) Extractive institutions may prevent workers from working in occupations to which their skills are best suited.

Question 68

Compared to an economy with extractive institutions,an economy with inclusive institutions will be characterized by ________.

A) higher output and fewer entrepreneurs
B) lower output and more entrepreneurs
C) higher output and more entrepreneurs
D) lower output and fewer entrepreneurs

Question 69

Which of the following statements correctly highlights a difference between countries with extractive economic institutions and countries with inclusive economic institutions?

A) Innovation is more likely in countries with inclusive economic institutions than in countries with extractive economic institutions.
B) Innovation is less likely in countries with inclusive economic institutions than in countries with extractive economic institutions.
C) Countries with extractive economic institutions typically have worse climatic conditions than countries with inclusive economic institutions.
D) Countries with extractive economic institutions typically have better climatic conditions than countries with inclusive economic institutions.

Question 70

Extractive economic institutions are ________.

A) found only in command economies
B) found only in market economies
C) likely to prevent entrepreneurs with new ideas from entering into the right line of business
D) likely to encourage entrepreneurs with new ideas to enter into the right line of business

Question 71

Which of the following statements is true?

A) Inclusive institutions do not support the provision of property rights to society and hence foster economic prosperity.
B) The productivity of individuals is likely to be independent of the availability of property rights.
C) An individual with property rights is likely to be less productive than an individual without property rights.
D) An individual with property rights is likely to be more productive than an individual without property rights.

Question 72

Which of the following statements is true?

A) Output is likely to be lower in a market economy than in a command economy.
B) Output is likely to be the same in a command economy and in a market economy.
C) Output is likely to be lower in an economy with extractive institutions than in an economy with inclusive institutions.
D) Output is likely to be the same in an economy with extractive institutions and in an economy with inclusive institutions.

Question 73

If institutions in an economy change from being extractive to inclusive,then the ________ in the economy.

A) returns to entrepreneurship will increase
B) returns to education will decrease
C) geographical conditions will improve
D) geographical conditions will deteriorate

Question 74

Which of the following statements is true?

A) Both extractive and inclusive institutions fail to foster economic activity, productivity growth, and economic activity.
B) Both extractive and inclusive institutions foster economic activity, productivity growth, and economic activity.
C) Extractive economic institutions foster economic activity, productivity growth, and economic prosperity, while inclusive institutions fail to do so.
D) Inclusive economic institutions foster economic activity, productivity growth, and economic prosperity, while extractive institutions fail to do so.

Question 75

If institutions in an economy change from being inclusive to extractive,the return-to-entrepreneurship schedule in the economy will ________.

A) become vertical
B) become horizontal
C) shift leftward
D) shift rightward

Question 76

Which of the following statements is true of the number of entrepreneurs in an economy?

A) The number of entrepreneurs is likely to be higher in a command economy than in a market economy.
B) The number of entrepreneurs is likely to be the same in a command economy and a market economy.
C) The number of entrepreneurs is likely to be higher in an economy with inclusive institutions than in an economy with extractive institutions.
D) The number of entrepreneurs is likely to be the same in an economy with inclusive institutions and an economy with extractive institutions.

Question 77

Which of the following statements is true?

A) After Czechoslovakia split into the Czech Republic and Slovakia, the nations adopted a command economy, which accelerated their economic growth.
B) After Czechoslovakia split into the Czech Republic and Slovakia, the nations adopted a market economy, which decelerated their economic growth.
C) After Czechoslovakia split into the Czech Republic and Slovakia, the nations adopted a command economy, which decelerated their economic growth.
D) After Czechoslovakia split into the Czech Republic and Slovakia, the nations adopted a market economy, which accelerated their economic growth.

Question 78

If the institutions in an economy limit the legal backup that protects the interests of entrepreneurs,the returns-to-entrepreneurship curve in the economy will ________.

A) shift leftward
B) shift rightward
C) become horizontal
D) become vertical

Question 79

If institutions in an economy change from being inclusive to extractive,then the ________.

A) returns to entrepreneurship will increase in the economy
B) number of entrepreneurs will decrease in the economy
C) existing entrepreneurs in the economy will earn higher profits
D) opportunity cost of entrepreneurship will decrease in the economy

Question 80

If an economic agent's returns to entrepreneurship are greater than his opportunity cost of entrepreneurship,he will ________.

A) most likely choose to be an entrepreneur
B) most likely not choose to be an entrepreneur
C) always make profits if he chooses to be an entrepreneur
D) always incur losses if he chooses to be an entrepreneur