Deck 17: Institutions,policies,and Cross-Country Differences in Income and Growth

Question 1

Which of the following countries have liberalized their economies and substantially improved their economic freedom rating since 1990?

A)Argentina and Brazil
B)Zimbabwe and the Republic of Congo.
C)Estonia and India
D)Italy and France

Answer 1

C

Question 2

The purchasing power parity method of comparing income levels across countries

A)calculates the cost of purchasing a common bundle of goods in each country and then uses this price index to convert each country's income to a common currency.
B)uses the exchange rate to convert the income level of each country to a common currency.
C)uses the prime interest rate in each country to convert the income level of each country to a common currency.
D)calculates the ratio of imports relative to exports in each country and then uses this ratio to convert each country's income to a common currency.

Answer 2

A

Question 3

In the absence of an even-handed legal system,high transaction costs will eliminate many potential mutually advantageous trades and the accompanying gains from

A)division of labor and specialization.
B)expansion in the size of the market.
C)economies of scale resulting from use of mass production methods.
D)all of the above.

Answer 3

D

Question 4

Which of the following countries has the lowest per capita income?

A)United States
B)France
C)Ireland
D)Niger

Question 5

The purchasing power parity (PPP)method

A)calculates the cost of purchasing a specific bundle of goods and services in each country and uses this measure to convert the incomes of different countries to a common currency.
B)calculates how much the general price level has increased within one specific country through time.
C)calculates how much the average standard of living across all countries has changed through time.
D)is used when one wants to compare dollar values from today with those from more than 100 years ago.

Question 6

Countries that have a higher degree of economic freedom tend to

A)invest a larger share of their output,but the productivity of that investment is lower than for economies that are less free.
B)invest a smaller share of their output,but the productivity of that investment is higher than for economies that are less free.
C)invest a larger share of their output and the productivity of that investment is higher than for the economies that are less free.
D)invest a smaller share of their output and the productivity of that investment is lower than for economies that are less free.

Question 7

Which of the following countries has the highest per capita income?

A)Malawi
B)South Korea
C)Sierra Leone
D)Niger

Question 8

In order to achieve a high economic freedom rating,a country must

A)elect political officials democratically.
B)protect property rights,enforce contracts even-handedly,and rely extensively on markets to allocate goods and services.
C)provide citizens with housing,health care,and other basic goods free of charge.
D)use the taxing power of the state to redistribute income from the rich to the poor and thereby promote income equality.

Question 9

Countries that have adopted liberal reforms and substantially increased their economic freedom rating in recent years

A)experienced falling income levels per capita during 1995-2009.
B)grew slowly during 1995-2009.
C)achieved impressive growth rates of real GDP per person during 1995-2009.
D)have grown less rapidly than high income industrial economies.

Question 10

Which of the following countries has the lowest per capita income?

A)South Korea
B)Germany
C)Malawi
D)Ireland

Question 11

Which one of the following countries has the lowest per capita income?

A)Canada
B)South Korea
C)Switzerland
D)India

Question 12

Which of the following countries have the highest per person income levels?

A)Argentina,Brazil,and Mexico
B)China and India
C)France and Germany
D)Ireland,Norway,and the United States

Question 13

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

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 14

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

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

Question 15

Which of the following countries have the highest per person income levels?

A)China and Russia
B)France and Germany
C)Ireland and the United States
D)Australia and Japan

Question 16

Which of the following calculates the cost of purchasing a specific bundle of goods and services in each country and uses this measure to convert the incomes of different countries to a common currency so they may be more accurately compared?

A)the consumer price parity (CPP)method
B)the purchasing power parity (PPP)method
C)the GDP deflator exchange (GDPDE)method
D)the inflation conversion factor (ICF)method

Question 17

Which of the following countries has the highest per capita income?

A)Malawi
B)Ireland
C)Sierra Leone
D)Mexico

Question 18

Which of the following is true?

A)Low income countries that have adopted institutions and policies consistent with economic freedom have grown rapidly.
B)Low-income countries that have adopted institutions and policies consistent with economic freedom have failed to grow more rapidly than economies that are relatively unfree.
C)Economic freedom appears to improve the performance of developed economies,but not those that are less developed.
D)Economic freedom appears to improve the performance of less developed economies,but not those that already have a high degree of development.

Question 19

When making income comparisons across countries,economists generally prefer to use

A)the exchange rate conversion method.
B)the consumer price index ratio method.
C)the purchasing power parity method.
D)the interest rate differential conversion method.

Question 20

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

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 21

Which country had the most rapid growth rate of real income per person during 1980-2009?

A)Japan
B)China
C)United States
D)Russia

Question 22

Income per person in the United States is approximately ____ that of Sierra Leone,Malawi,and Niger,three of the world's poorest countries.

A)the same as
B)double
C)ten times
D)fifty times

Question 23

Which of the following countries achieved the most rapid growth rate of real income per person during 1980-2009?

A)Nigeria and South Africa
B)France and Germany
C)Japan and the United States
D)China and India

Question 24

Which of the following countries had the lowest growth rate of per capita GDP during 1980-2009?

A)China
B)South Korea
C)Ireland
D)Democratic Republic of the Congo

Question 25

According to data on GDP growth between 1980 and 2009,

A)poor nations stagnated,while the rich nations continued to grow.
B)poor nations grew rapidly,while the rich nations stagnated.
C)most of the world's rapidly growing countries were located in Africa.
D)many poor nations grew more rapidly than wealthy nations,while others continued to stagnate.

Question 26

Which of the following countries has had the highest growth rate of per capita GDP over the past 25 years?

A)Haiti
B)Niger
C)India
D)Zimbabwe

Question 27

During the past quarter of a century,which of the following has contributed to the economic growth of China?

A)agricultural reforms adopted in the late 1970s
B)low taxes and deregulation in the special economic zones that were established during the 1980s
C)the relaxation of restraints on foreign trade and joint ventures
D)all of the above

Question 28

Which of the following countries grew most rapidly during the 1980 through 2009 period?

A)Hong Kong,Singapore,and Ireland
B)United Kingdom,Italy,and Canada
C)United States,Germany,and France
D)Brazil,Argentina,and Venezuela

Question 29

During 1980-2009,the per-capita incomes of less-developed countries (LDCs)

A)grew rapidly.
B)declined.
C)were virtually unchanged.
D)registered a mixed growth record;some grew rapidly while others stagnated.

Question 30

Which of the following has contributed to China's economic growth since 1980?

A)the rapid growth of foreign aid from European countries
B)nationalization of many private industries
C)increased restrictions on international trade
D)increased privatization of the agricultural and small-business sectors

Question 31

The GDP figures fail to count labor services and other household production.Once this omission is taken into account,

A)the income differences between the high and low income countries are small.
B)the differences in living standards between the high and low income countries are small.
C)the income differences between the high and low income countries are still huge.
D)the life expectancy in the high and low income countries is approximately the same.

Question 32

Which of the following countries achieved the most rapid growth rate of real income per person during 1980-2009?

A)France and Germany
B)Argentina and Brazil
C)China and South Korea
D)Japan and the United States

Question 33

Compared to those in low-income countries,the residents of countries with high per person incomes nearly always

A)live longer.
B)have a lower illiteracy rate.
C)have a lower infant mortality rate.
D)all of the above.

Question 34

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?

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.

Question 35

Which of the following is true concerning the growth record of less developed countries (LDCs)during the last several decades?

A)The per capita GDP of several poverty stricken African countries was lower in 2009 than in 1980.
B)None of the LDCs have been able to match the per capita income growth rate of the United States.
C)During the last two decades,the fastest growing countries in the world (those with annual real growth rates of 3.5 percent or more)have been LDCs.
D)Both a and c are correct.
E)All of the above are correct.

Question 36

Which of the following is true?

A)The fastest growing economies in the world are mostly less developed countries.
B)The fastest growing economies in the world (those with annual real growth rates of 3.5 percent or more)are mostly high-income industrial countries.
C)The slowest growing countries in the world,many of which are experiencing declines in per capita GDP,are less developed countries.
D)Both a and c are true.

Question 37

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

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 38

Which of the following countries has had the highest growth rate of per capita GDP over the past 25 years?

A)South Korea
B)Japan
C)United States
D)Zambia

Question 39

Which of the following is true?

A)The developed nations are growing rapidly and the less-developed nations are stagnating.
B)Most of the countries that have achieved the highest growth rates in the world during the last quarter of a century were classified as LDCs in 1980.
C)It is an oversimplification to divide the world into the growing,developed nations and the stagnating,less-developed nations.
D)Both b and c are true.
E)All of the above are true.

Question 40

During 1980 through 2009,

A)the per capita income of high-income industrial countries declined.
B)the fastest growing economies in the world were LDCs.
C)almost all LDCs grew more rapidly than the high-income industrial economies.
D)most of the countries with rapid growth rates during the last two decades were located in South America.

Question 41

Which of the following will increase economic freedom?

A)subsidies and regulations that favor business
B)high tariff rates
C)high marginal tax rates
D)protection of persons and their property from aggression

Question 42

In order to achieve a high rating on the Economic Freedom of the World index,a country must

A)provide for the even-handed protection of private property and rely primarily on open markets and voluntary exchange to coordinate economic activity.
B)use central planning to direct investment and resolve the three basic economic problems of what,how,and for whom goods will be produced.
C)protect domestic businesses from foreign rivals who generally provide shoddy products.
D)protect domestic workers from businesses that are unwilling to pay high wages and provide quality working conditions.

Question 43

Which of the following is true?

A)In 1960,the per capita income levels of Hong Kong and Singapore were greater than those of the United States and Canada.
B)The economies of Hong Kong and Singapore have grown slowly in recent decades.
C)Economic freedom ratings indicate that both Hong Kong and Singapore rank among the world's freest economies.
D)Economic freedom ratings indicate that Nigeria and Venezuela rank among the world's freest economies.

Question 44

Which of the following economies was most economically free during 1980-2009?

A)United States
B)Brazil
C)Japan
D)Hong Kong

Question 45

Which of the following will increase economic freedom?

A)freedom to enter and compete in markets
B)high tariff rates
C)high taxes
D)rapid and unpredictable inflation

Question 46

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

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

Question 47

Which of the following will increase economic freedom?

A)institutions and policies supportive of voluntary exchange
B)high tariff rates
C)high taxes
D)rapid and unpredictable inflation
E)all of the above

Question 48

Which of the following is true?

A)The rich countries are consistently getting richer,while the poor countries are getting poorer.
B)No LDC was able to achieve a more rapid growth rate than the United States during the 1980 through 2009 period.
C)The growth picture of LDCs is clearly one of diversity;some LDCs are growing rapidly,while others continue to stagnate.
D)The fastest growing countries in the world are all high-income industrial economies.

Question 49

Realization of gains from trade,entrepreneurial discovery,and investment are largely dependent on

A)competitive elections and political democracy.
B)the presence of institutions and policies consistent with economic freedom.
C)the use of tariffs and quotas to protect domestic businesses from competition with foreigners.
D)the use of government planning to direct investments into worthwhile projects.

Question 50

According to the Economic Freedom of the World (EFW)rating,which of the following countries has the highest level of economic freedom?

A)Argentina
B)Nigeria
C)United States
D)Nicaragua

Question 51

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

A)subsidies and regulations that favor business
B)central planning
C)reliance on open markets
D)import quotas that protect domestic businesses from rivals

Question 52

Which of the following will increase economic freedom?

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

Question 53

Which of the following will increase economic freedom?

A)an increase in tariff rates imposed on imported goods
B)an increase in government spending as a share of the economy
C)elimination of regulations that make it difficult to start a business
D)an increase in the rate of inflation and its variability

Question 54

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

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 55

If a country is going to achieve a high economic freedom rating,it must

A)follow rule of law principles and create a stable monetary environment.
B)be a political democracy.
C)refrain from the imposition of barriers that limit voluntary exchange.
D)rely primarily on government expenditures and regulations (rather than markets)to allocate goods and resources.
E)both a and c are true.

Question 56

According to the Economic Freedom of the World (EFW)rating,which of the following countries has the highest level of economic freedom?

A)Singapore
B)Brazil
C)Myanmar
D)Democratic Republic of Congo

Question 57

Which of the following economies was most economically free during 1980-2009?

A)Singapore
B)Russia
C)Iran
D)Myanmar

Question 58

Which of the following economies is the least economically free?

A)Singapore
B)Hong Kong
C)Democratic Republic of Congo
D)United States

Question 59

In order to achieve a high economic freedom rating,a country must

A)provide secure protection of privately owned property and evenhanded enforcement of contracts.
B)refrain from creating barriers that limit domestic and international trade.
C)rely more fully on markets rather than governments to allocate goods and resources.
D)all of the above.

Question 60

According to the Economic Freedom of the World (EFW)rating,which of the following countries has the highest level of economic freedom?

A)Mexico
B)Switzerland
C)Syria
D)Democratic Republic of Congo

Question 61

According to the Economic Freedom of the World (EFW)rating,which of the following countries has the lowest level of economic freedom?

A)Singapore
B)Switzerland
C)Zimbabwe
D)Mexico

Question 62

Countries with lower levels of economic freedom tend to have

A)lower levels of economic growth
B)higher levels of per person income
C)higher levels of investment
D)all of the above

Question 63

Other things constant,countries that invest more will grow

A)more rapidly.
B)less rapidly.
C)at the same rate.
D)at exactly 2% per year.

Question 64

Countries with more economic freedom tend to invest a ____ share of their GDP and the productivity of that investment is ____ than for countries that are less free.(Fill in the blanks. )

A)larger;higher
B)larger;lower
C)smaller;higher
D)smaller;lower

Question 65

Compared to those with less economic freedom,countries with more economic freedom generally have ____ per capita GDP levels and ____ growth rates.

A)lower;less rapid
B)lower;more rapid
C)higher;less rapid
D)higher;more rapid

Question 66

(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.

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 67

Dividing data into quartiles means that you are dividing data into

A)two groups.
B)three groups.
C)four groups.
D)twenty-five groups.

Question 68

During 1980-2005,the developing countries that moved most rapidly toward economic freedom

A)achieved higher rates of economic growth,but the reductions in their poverty rates were smaller than those for countries that were less free.
B)grew less rapidly,but the reductions in the poverty rates were greater than those achieved in countries that were less free.
C)experienced both slower rates of economic growth and smaller reductions in poverty rates than countries that were less free.
D)experienced both more rapid rates of economic growth and larger reductions in poverty rates than countries that were less free.

Question 69

Private investment as a share of the economy tends to be higher in countries

A)with low levels of economic freedom.
B)with high levels of economic freedom.
C)with economic freedom ratings near zero.
D)that have experienced a sharp reduction in economic freedom during the most recent decade.

Question 70

Countries with more economic freedom during 1980-2009 tended to

A)grow more rapidly,but the 2009 income levels of the freer economies were still lower than those that were less free.
B)achieve higher levels of income but the growth rates of the less free economies have been more rapid in recent years.
C)achieve both more rapid growth and higher income levels than those that were less free.
D)grow less rapidly and the 2009 income levels of the freer economies were lower than those that were less free.

Question 71

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.

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

Question 72

When considering the impact of institutions and policies on economic performance,it is most important to focus on

A)long-term economic growth.
B)short-term economic growth.
C)business cycle fluctuations.
D)the labor force participation rate of married women.

Question 73

The empirical evidence indicates that compared to economies that are less free,countries with institutions and policies more consistent with economic freedom

A)grow more rapidly,but experience higher poverty rates.
B)achieve higher income levels per person but experience higher poverty rates.
C)grow more rapidly and achieve larger poverty rate reductions.
D)Experience less rapid rates of economic growth and higher overall poverty rates.

Question 74

Countries with more economic freedom have levels of economic growth that

A)are generally higher than those of nations with less economic freedom.
B)are similar to those of nations with less economic freedom since the level of investment,not economic freedom,determines the growth rate.
C)cannot continue at high levels because too little government planning is being done.
D)are generally lower than the growth rates of countries with less economic freedom.

Question 75

Which of the following is true in regards to Singapore?

A)It has a high level of economic freedom,but a low rate of economic growth.
B)It has a low level of economic freedom,but a high rate of economic growth.
C)It has both a high level of economic freedom and a high rate of economic growth.
D)It has both a low level of economic freedom and a low rate of economic growth.

Question 76

(I)Countries with more economic freedom during the past quarter of a century had a lower average per capita GDP.
(II)Countries with more economic freedom during the past quarter of a century generally achieved higher rates of economic growth.

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

Question 77

According to the Economic Freedom of the World (EFW)rating,which of the following countries has the lowest level of economic freedom?

A)Singapore
B)Canada
C)Hong Kong
D)Brazil

Question 78

On average,countries that have a larger degree of economic freedom tend to have

A)higher per capita income levels,but slower rates of economic growth,than countries with less economic freedom.
B)lower per capita income levels,but more rapid rates of economic growth,than countries with less economic freedom.
C)both higher per capita income levels and more rapid growth rates than countries with less economic freedom.
D)both lower income levels and slower growth rates than countries with less economic freedom.

Question 79

Compared to countries with less economic freedom,countries with more economic freedom

A)achieve higher per person income levels,but they also have higher poverty rates.
B)grow more rapidly,but the income levels of the poor are largely unaffected by the higher growth rates of the freer economies.
C)achieve both higher income levels per person and lower rates of poverty.
D)grow less rapidly and experience higher poverty rates.

Question 80

The per capita incomes of countries in the quartile with the most economic freedom during 1980-2009 were

A)slightly lower than those of the quartile of countries with the least economic freedom.
B)about the same as the quartile of countries with the least economic freedom.
C)about twice those of the countries with the least economic freedom.
D)about eight times those of the quartile of countries with the least economic freedom.