Deck 3: National Differences in Economic Development

Question 1

Economic freedom necessarily equates with political freedom.

Answer 1

False
Explanation: Economic freedom does not necessarily equate with political freedom.

Question 2

Since the late 1980s, there has been a strong move away from a more free market economic model and toward a more centrally planned and mixed economies.

Answer 2

False
Explanation: The political economy of many of the world's nation-states has changed radically since the late 1980s. There has been a strong move away from centrally planned and mixed economies and toward a more free market economic model.

Question 3

The government of a country takes over the airport security industries following a major terrorist attack, to improve airport security. This is an example of privatization.

Answer 3

False
Explanation: Privatization transfers the ownership of state property into the hands of private individuals, frequently by the sale of state assets through an auction.

Question 4

In a command economy, the prices are determined by the free interplay of demand and supply.

Question 5

For privatization to work, it must also be accompanied by a more general deregulation and opening of the economy.

Question 6

Political freedom is one of the measures used by the Human Development Index (HDI) to measure the quality of human life in different nations.

Question 7

If a country's economy is to sustain long-run economic growth, the business environment must be conducive to innovations and entrepreneurial activity.

Question 8

Totalitarian states promote human freedom and human development, which facilitates economic progress.

Question 9

Peruvian development economist Hernando de Soto has argued that the chronic inability of property owners to establish legal title to the property they own is a key problem for innovation, and entrepreneurial activity in developing nations.

Question 10

New information and communication technologies have enabled the spread of democratic ideals.

Question 11

GNI allows a more direct comparison of living standards in different countries.

Question 12

In mixed economies, in certain sectors the state sets prices, owns businesses, limits private enterprise, restricts investment by foreigners, and restricts international trade.

Question 13

Transformation from centrally planned command economies to market-based economies can be attributed to the fact that command and mixed economies failed to deliver the sustained economic performance achieved by countries adopting market-based systems.

Question 14

In Sen's view, development is an economic process that should be assessed by material output measures such as GNI per capita.

Question 15

Most property in poor countries is owned legally by investors.

Question 16

Life expectancy at birth is one of the measures used by the Human Development Index (HDI) to measure the quality of human life in different nations.

Question 17

Many totalitarian regimes were able to deliver economic progress to the vast bulk of their populations, which curbed the spread of democracy during the late 1980s.

Question 18

A well-functioning market economy requires laws protecting private property rights and providing mechanisms for contract enforcement.

Question 19

Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition.

Question 20

Privatization refers to the process of hiring private management consultancy firms to manage state-owned enterprises.

Question 21

A country's economic system and property rights regime are reasonably good predictors of economic prospects.

Question 22

Which of the following is a legal means by which the state can expropriate the profits from innovation?

A) Demands for money to grant a license
B) Expropriation
C) Enforcing property rights
D) Excessive taxation

Question 23

The economic freedom associated with a _____ creates greater incentives for innovation and entrepreneurship than either a planned or a mixed economy.

A) mixed economy
B) planned economy
C) market economy
D) command economy

Question 24

According to political scientist's thesis is global terrorism a product of the tension between civilizations and the clash of value systems and ideology?

A) Amartya Sen
B) Samuel Huntington
C) Francis Fukuyama
D) Hernando de Soto

Question 25

One of the reasons for the spread of democracy is the emergence of _____ who have pushed for democratic reforms.

A) a more vocal working poor
B) better educated lower classes
C) a desperate urban poor
D) increasingly prosperous middle and working classes

Question 26

Anecdotal comparisons suggest that the assertion that nations that invest more in _____ will have higher growth rates is true.

A) infrastructure
B) centralized urban centers
C) education
D) manufacturing

Question 27

A market with a large number of consumers with low living standards will have a relatively large market when measured in economic terms.

Question 28

GNI and PPP data are useful because they provide a _____ of economic development.

A) dynamic analysis
B) cross-sectional view
C) static analysis
D) global view

Question 29

Some _____ have fostered a market economy and strong property rights protection and have experienced rapid economic growth.

A) totalitarian regimes
B) command economies
C) dictatorships
D) centrally planned systems

Question 30

GNI per capita can be adjusted by _____ to account for differences in the cost of living.

A) gross domestic product
B) gross values added
C) purchasing power
D) the total value of goods and services produced

Question 31

_____ per person figures can be misleading because they don't consider differences in the cost of living.

A) Gross domestic product (GDP)
B) Gross national income (GNI)
C) Purchasing power parity (PPP)
D) Human Development Index (HDI)

Question 32

Economic risks are independent of political risk.

Question 33

Political scientist _____ predicts that there will be a world that is split into different civilizations, each of which has its own value systems and ideology.

A) Samuel Huntington
B) Amartya Sen
C) Francis Fukuyama
D) Hernando de Soto

Question 34

Several of the fastest-growing Asian economies adopted more _____ governments during the past three decades, including South Korea and Taiwan.

A) totalitarian
B) democratic
C) dictatorial
D) socialists

Question 35

The _____ adjustment allows for a more direct comparison of living standards in different countries.

A) gross domestic product
B) value added
C) gross national income (GNI)
D) purchasing power parity (PPP)

Question 36

In a _____, the state owns all means of production.

A) mixed economy
B) planned economy
C) market economy
D) totalitarian state

Question 37

The long-run monetary benefits of doing business in a country are a function of the size of the market, the present wealth of consumers in that market, and the likely future wealth of consumers.

Question 38

_____ is seen as a way to stimulate gains in economic efficiency by giving owners a powerful incentive-the reward of greater profits-to search for increases in productivity, to enter new markets, and to exit losing ones.

A) Globalization
B) Economic transformation
C) Deregulation
D) Privatization

Question 39

When communism collapsed, many of the communist countries lacked the legal structure required to protect property rights because all the property was earlier held by the state.

Question 40

_____ involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate.

A) Privatization
B) Developing command economies
C) Deregulation
D) Globalization

Question 41

Which of the following helps in adjusting GNI such that it accounts for the differences in the cost of living?

A) Purchasing power parity (PPP) adjustment
B) Human Development Index
C) Debt to GNI ratio
D) Consumer Price Index

Question 42

According to Amartya Sen, development should be:

A) seen as a process of expanding the real freedoms that people experience.
B) seen as a non-political concept that focuses on the net income of a country.
C) viewed as a purely economic process.
D) assessed by material output measures such as GNI per capita.

Question 43

Which of the following is a measure that is developed by the United Nations to measure the quality of life in different nations?

A) Gross national income
B) Human Development Index
C) Purchasing power parity
D) Gross domestic product

Question 44

_____ are the advantages gained by early entrants into a market.

A) Early investor advantages
B) First-mover advantages
C) First-to-market advantages
D) Late-mover advantages

Question 45

According to Hernando de Soto, which of the following factors is essential for the developing world to be able to reap the benefits of innovation and entrepreneurship?

A) Detailed state planning
B) Restricting direct investment by foreign enterprises
C) Strong property rights
D) Market regulation

Question 46

One visible indicator of _____ tends to be a country's inflation rate.

A) economic mismanagement
B) high GNI
C) political risks
D) low HDI

Question 47

Stagnation can occur in planned economies because:

A) entrepreneurial individuals have few economic incentives for innovation.
B) private ownership of means of production leads to exploitation of workers.
C) prices of goods and services are fixed by market forces of demand and supply.
D) lack of barriers to trade results in increased competition for domestic producers.

Question 48

It may be more costly to do business in relatively primitive or undeveloped economies because of:

A) international trade restrictions.
B) the lack of governmental support.
C) difficulty obtaining workers.
D) the lack of infrastructure and supporting businesses.

Question 49

Which of the following statements pertaining to innovation and entrepreneurship is true?

A) They are the engines of growth.
B) They require strong legal systems.
C) They require state ownership of means of production.
D) They require a mixed economy.

Question 50

The overall attractiveness of a country as a potential market or investment site for an international business depends on:

A) if the country has a high gross national income.
B) balancing the benefits, costs, and risks associated with doing business in that country.
C) whether the company can be the first mover in the market.
D) whether the government can be greased.

Question 51

By identifying and investing early in a potential future economic star, international firms can _____ and gain experience in that country's business practices.

A) build brand loyalty
B) learn which government officials need to receive kickbacks
C) begin to stockpile that country's currency
D) build infrastructure

Question 52

Which of the following is one of the measures that HDI is based on?

A) Life expectancy at birth.
B) Political freedom.
C) Attainment of housing.
D) Whether the lowest incomes are sufficient to meet the basic needs of life.

Question 53

Countries with _____ economies in which property rights are protected tend to achieve greater economic growth rates than other economies where property rights are poorly protected.

A) mixed
B) market
C) free market
D) command

Question 54

A market economy encourages innovation because:

A) state ownership of enterprises reduces risks of innovation.
B) economic freedom leads to greater incentives for innovation.
C) government-owned and funded research centers become hubs of innovation.
D) the prices of goods and services, including new products, are fixed by government.

Question 55

GNI per person figures can be misleading because ____.

A) they also include barter agreements
B) they provide a dynamic picture of development
C) they don't consider differences in the cost of living
D) they don't consider exchange rate

Question 56

The state can expropriate the profits from innovation through legal means, such as _____.

A) bureaucratic kickbacks
B) excessive taxation
C) black market transactions
D) privatization

Question 57

In some countries, the official GNI per capita measured at PPP data does not reflect the actual the total annual income because:

A) it doesn't consider differences in the cost of living.
B) it gives a static picture of development.
C) it fails to include income earned from other countries in the form of dividends.
D) large amounts of economic activity may be in the form of barter agreements.

Question 58

The influential Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until they:

A) have political stability.
B) invest in infrastructural development.
C) have better defined and secure property rights.
D) have adequate market regulation.

Question 59

_____ is required for a business environment to be conducive to innovation and entrepreneurial activity.

A) State ownership of means of production
B) Strong legal protection of property rights
C) Barriers to foreign trade and investment
D) Government regulation of the market

Question 60

_____, a Nobel Prize-winning economist, has argued that development is not just an economic process, but it is a political one as well.

A) Hernando de Soto
B) Karl Marx
C) Samuel Huntington
D) Amartya Sen

Question 61

Which of the following factors is likely to make a country a more attractive location for international business?

A) Totalitarian regimes
B) Planned economies
C) Government ownership of production methods
D) Market-based economic policies

Question 62

The sale of state assets through an auction is most likely to lead to _____.

A) trade certification
B) privatization
C) nationalization
D) market regulation

Question 63

Political scientist Samuel Huntington argues that modernization in non-Western societies can result in a retreat toward the traditional. This is exemplified by the _____.

A) Islamic resurgence
B) popularization of modern gadgets
C) adoption of Western culture
D) higher levels of literacy and education

Question 64

Sony was a pioneer in the portable music market segment. Sony's Walkman was an innovative product which created a new category altogether and made Sony a technological leader. This gave the company an edge over other consumer electronics brands that introduced portable music players for a very long time. In this example, Sony had the:

A) vertical integration advantage.
B) purchasing power parity advantage.
C) free-rider advantage.
D) first-mover advantage.

Question 65

Which of the following is a step in the shift toward a market-based economic system?

A) Increasing trade barriers
B) Increasing price controls
C) Nationalization
D) Creation of a legal system to safeguard property rights

Question 66

Since the late 1980s, there has been a spread of democracy. This is because:

A) a state's ability to control access to uncensored information has increased.
B) the socialist model failed to deliver economic progress to the vast bulk of their populations.
C) in many countries the middle and working classes have become less powerful.
D) in many countries state-ownership of firms has encouraged innovation and entrepreneurship.

Question 67

The benefits of doing business in a country are a function of which of the following?

A) The size of the market.
B) Its past wealth.
C) Its past growth.
D) Its future plans for infrastructure development.

Question 68

A free market economy in which property rights are protected leads to subsequent economic growth, which often leads to the establishment of:

A) a democratic regime.
B) a planned economy.
C) government owned enterprises.
D) a socialist economy.

Question 69

_____ involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate.

A) Deregulation
B) Trade certification
C) A product law
D) A liability law

Question 70

Many states in Asia, Latin America, and Western Europe have shifted away from a mixed economy to a market-based economy. Which of the following measures is most likely to be promoted by such states?

A) State-ownership of enterprises
B) Fixing of prices by the government
C) Deregulation of the economy
D) Lowering competition

Question 71

The political economy of many of the world's nation-states has changed radically since the late 1980s. Which of the following is a trend that has been evident?

A) a wave of democratic revolutions has swept the world.
B) totalitarian governments have arisen, replacing democratically elected governments.
C) there has been a strong move toward centrally planned economies and away from free market economic models.
D) mixed economies are fast replacing market economies.

Question 72

According to political scientist Samuel Huntington, the rise of Islamic fundamentalism is a response to the:

A) corruption prevalent in planned economies.
B) restricted access to formal education.
C) alienation produced by modernization.
D) restrictions associated with totalitarian regimes.

Question 73

For privatization to work, it must also be accompanied by:

A) an increase in trade barriers and tariffs.
B) an increase in government subsidies.
C) stronger barriers to foreign competition.
D) a general deregulation of the economy.

Question 74

Which of the following is an example of deregulation?

A) A country that implements a simplified income tax filing system
B) A country that takes over a leading private bank to prevent it from filing for bankruptcy
C) A country that provides agricultural subsidies to farmers
D) A country that encourages foreign direct investment

Question 75

Paralleling the spread of democracy, since the 1980s there has been the transformation from:

A) free-market economies to socialist economies.
B) mixed economies to collectivist economies.
C) open economies to closed economies.
D) command economies to market-based economies.

Question 76

Which of the following is a characteristic of a command economy?

A) Promotion of foreign direct investment
B) Allowing prices to be set by the interplay between demand and supply
C) Limited international trade
D) Restricted state-ownership of means of production

Question 77

Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms:

A) stop receiving subsidies from the government.
B) are completely owned by private individuals.
C) are sheltered from foreign competition.
D) are allowed to restructure their operations.

Question 78

The finance minister of a country considers several large, state-owned iron manufacturing units to be inefficient and a source of corruption. To generate resources for public expenditure and promote economic growth, the government decides to auction an entire iron manufacturing plant to sell it to a strategic investor. This process exemplifies _____.

A) nationalization
B) industrialization
C) liberalization
D) privatization

Question 79

In many countries entrepreneurs and other business leaders, eager to protect their property rights and ensure the dispassionate enforcement of contracts, had pushed for _____. This contributed to a wave of democratic revolutions during the late 1980s and early 1990s.

A) state ownership of productive resources
B) regulated markets
C) democratic reforms
D) planned economies

Question 80

Which of the following statements is true about Samuel Huntington?

A) Samuel Huntington argues that there is a universal civilization based on widespread acceptance of Western democratic ideals.
B) Samuel Huntington argues that the rise of Islamic fundamentalism is a response to the alienation produced by modernization.
C) Samuel Huntington argues that global terrorism is a product of the static nature of traditional values and religious systems.
D) Samuel Huntington argues that many societies, by adopting the material paraphernalia of the modern world, are becoming more Western.