Question 1

A regime change occurs when a government changes one aspect of its actions.

Accepted Answer

A) True 
 B)False

Question 2

Foreign investment in developing countries is limited for all of the following reasons except:

Accepted Answer

A) developing countries lack the infrastructure necessary to attract foreign investment. 
B) it is often viewed in developing countries as exploitive. 
C) developing countries try to control the nature of foreign investment in order to obtain greater benefits from it. 
D) domestic saving in developing countries is too limited.

Question 3

Educational policy in most developing countries focuses too much on primary and secondary education and not enough on higher education.

Accepted Answer

A) True 
 B)False

Question 4

The more rapidly the government creates money to finance its budget deficits, the:

Accepted Answer

A) greater the inflation tax and the greater the reduction in the real value of any assets specified in nominal terms. 
B) greater the inflation tax and the smaller the reduction in the real value of any assets specified in nominal terms. 
C) smaller the inflation tax and the greater the reduction in the real value of any assets specified in nominal terms. 
D) smaller the inflation tax and the smaller the reduction in the real value of any assets specified in nominal terms.

Question 5

In contrast to development, growth refers to an increase in:

Accepted Answer

A) productive capacity with no change in output. 
B) output with no change in productive capacity. 
C) output brought about by an increase in inputs. 
D) output brought about by a change in the production function.

Question 6

In general, the IMF provides developing countries with:

Accepted Answer

A) loans and lets these countries decide how the loans will be used. 
B) loans, but only if the government adopts certain policies specified by the IMF in return. 
C) technical advice but does not provide them with loans. 
D) neither loans nor technical advice.

Question 7

What is the purchasing power parity method of comparing income in different countries? What are the results of using this method?

Accepted Answer

The answer of What is the purchasing power parity method...

Question 8

Developing countries tend to focus more on the goal of economic growth than developed countries.

Accepted Answer

A) True 
 B)False

Question 9

In the early 2000s, Ecuador suffered high inflation because the central bank was financing a government deficit. In terms of fiscal and monetary policy, what created the problem of inflation was that Ecuador's:

Accepted Answer

A) fiscal and monetary policy were expansionary. 
B) fiscal policy was expansionary, but its monetary policy was contractionary. 
C) fiscal policy was contractionary, but its monetary policy was expansionary. 
D) fiscal and monetary policy were contractionary.

Question 10

If a developing country has sufficient reserves, the buying and selling of foreign currency by the central bank is:

Accepted Answer

A) likely to have roughly the same impact on the exchange rate as in developed countries. 
B) likely to have a much greater impact on the exchange rate than in developed countries. 
C) likely to have a much smaller impact on the exchange rate than in developed countries. 
D) completely ineffective on the exchange rate.

Question 11

Developing countries do:

Accepted Answer

A) not compete with one another for foreign investment, because they lack the infrastructure to attract it in the first place. 
B) not compete with one another for foreign investment, because they have sufficient domestic saving to finance their investment needs. 
C) compete with one another for foreign investment, but this competition is beneficial to developing countries because it insures a more efficient allocation of resources. 
D) compete with one another for foreign investment, and this competition reduces the benefits from foreign investment.

Question 12

Many developing countries face a balance of payments constraint because:

Accepted Answer

A) they hold too many international reserves. 
B) they hold too few international reserves. 
C) the IMF forces them to adopt policies that are counterproductive. 
D) they fail to implement exchange rate policy correctly.

Question 13

Indians and Indian-Americans have played a pivotal role in powering Silicon Valley's digital revolution. The emigration of talented people from countries like India to countries like the United States is often called:

Accepted Answer

A) the brain drain. 
B) outsourcing. 
C) credentialism. 
D) Malthusianism.

Question 14

In the early 2000s, Ecuador replaced its currency, the sucre, with the U.S. dollar as its official currency. What will no longer be possible for the government of Ecuador?

Accepted Answer

A) Financing government deficits by printing money. 
B) Financing government deficits by borrowing in the financial markets. 
C) Running a balance of payments deficit on the current account. 
D) Running a balance of payments deficit on the capital account.

Question 15

In dealing with their financing needs, developing countries have found that the inflation tax provides:

Accepted Answer

A) both a short-run and a long-run solution. 
B) neither a short-run nor a long-run solution. 
C) a short-run solution but not a long-run solution. 
D) a long-run solution but not a short-run solution.

Question 16

What is the balance of payments constraint? What international financial institutions can countries turn to when facing this constraint?

Accepted Answer

The answer of What is the balance of payments constraint?...

Question 17

Seven problems facing developing countries that make their path to development difficult are: (a)Political instability, (b)Corruption, (c)Lack of appropriate institutions, (d)Lack of investment, (e)Inappropriate education, (f)Overpopulation, (g)Poor health and diseases.Briefly explain two of these problems,indicating how they make development difficult.

Accepted Answer

The answer of Seven problems facing developing countries that make...

Question 18

Central banks in most developing countries:

Accepted Answer

A) do not recognize the link between money creation and inflation. 
B) recognize the link between money creation and inflation but don't care about inflation. 
C) recognize the link between money creation and inflation and exploit this link to reduce their budget deficit. 
D) recognize the link between money creation and inflation but often have no other means of financing government expenditures.

Question 19

Which form of taxation do many developing countries rely on the most?

Accepted Answer

A) Import taxes or tariffs 
B) Income taxes 
C) Sales taxes 
D) Corporate taxes

Question 20

Since its independence in 1957, Ghana has experienced more than 12 coups d'état that have led to the overthrow of presidents and ministers, and in various cases, the change of political regimes. The textbook calls this situation an example of:

Accepted Answer

A) corruption. 
B) lack of appropriate institutions. 
C) political instability. 
D) overpopulation.

Exam 38: Macro Policy in Developing Countries

A regime change occurs when a government changes one aspect of its actions.

Foreign investment in developing countries is limited for all of the following reasons except:

Educational policy in most developing countries focuses too much on primary and secondary education and not enough on higher education.

The more rapidly the government creates money to finance its budget deficits, the:

In contrast to development, growth refers to an increase in:

In general, the IMF provides developing countries with:

What is the purchasing power parity method of comparing income in different countries? What are the results of using this method?

Developing countries tend to focus more on the goal of economic growth than developed countries.

In the early 2000s, Ecuador suffered high inflation because the central bank was financing a government deficit. In terms of fiscal and monetary policy, what created the problem of inflation was that Ecuador's:

If a developing country has sufficient reserves, the buying and selling of foreign currency by the central bank is:

Developing countries do:

Many developing countries face a balance of payments constraint because:

Indians and Indian-Americans have played a pivotal role in powering Silicon Valley's digital revolution. The emigration of talented people from countries like India to countries like the United States is often called:

In the early 2000s, Ecuador replaced its currency, the sucre, with the U.S. dollar as its official currency. What will no longer be possible for the government of Ecuador?

In dealing with their financing needs, developing countries have found that the inflation tax provides:

What is the balance of payments constraint? What international financial institutions can countries turn to when facing this constraint?

Central banks in most developing countries:

Which form of taxation do many developing countries rely on the most?

Since its independence in 1957, Ghana has experienced more than 12 coups d'état that have led to the overthrow of presidents and ministers, and in various cases, the change of political regimes. The textbook calls this situation an example of: