Deck 21: Economic Growth in Developing and Transitional Economies

Question 1

When looking at the world population,the poorest one-fifth of families earns about ________ of total world income.

A)one half of one percent
B)three percent
C)seven percent
D)twelve percent

Answer 1

A

Question 2

Which of the following characteristics is generally representative of developed countries relative to developing nations?

A)a higher level of per capita GNI
B)a shorter life expectancy
C)a higher rate of infant mortality
D)a smaller percentage of children enrolled in school

Answer 2

A

Question 3

In the distribution of world income,the poorest one-fifth of the world's population earns about ________ of the world income.

A)0.5%
B)2%
C)5%
D)12%

Answer 3

A

Question 4

In 2006,the literacy rate of people over the age of 15 was 60.8% for people in countries classified as

A)low-income.
B)lower middle-income.
C)upper middle-income.
D)high-income.

Question 5

Characteristics of economic development include all of the following EXCEPT

A)improvements in basic education.
B)an increase in the standard of living.
C)a decrease in the percentage of the labor force in urban areas.
D)an increase in life expectancy.

Question 6

Which of the following statements is FALSE?

A)Low productivity in the agricultural sector in developing countries means that farm output per person is barely sufficient to feed a farmer's own family.
B)Income tends to be more equally distributed in developing countries than in developed countries.
C)The percentage of the labor force employed in urban areas is greater in developed nations than in developing nations.
D)Developed nations account for only about one-quarter of the world's population,but they consume about three-quarters of the world's output.

Question 7

The term "Fourth World" is used to describe countries that

A)are stagnant and have fallen far behind the economic advances of the rest of the world.
B)have experienced rapid economic growth.
C)are more developed than "Third World" countries.
D)are closer to developed countries than transitional economies.

Question 8

Which of the following characteristics is generally representative of developing countries relative to developed countries?

A)a smaller percentage of the labor force in urban areas
B)a lower infant mortality rate
C)a greater percentage of consumption of the world's output
D)a lower rate of illiteracy

Question 9

Which of the following is NOT a characteristic that is associated with developed countries?

A)a high per capita GNI
B)low infant mortality rates
C)high life expectancy
D)an income distribution that is very close to being equal

Question 10

In 2006,per capita income was roughly ________ times lower in low-income countries than in high-income countries.

A)12
B)31
C)56
D)181

Question 11

In 2005,the number of Internet users was ________ per 1,000 people in high-income countries.

A)194
B)523
C)774
D)851

Question 12

In 2012,the world population grew to ________ people.

A)over 6.9 billion
B)just under 17 billion
C)approximately 32 billion
D)almost 1 trillion

Question 13

Chronic food shortages,explosive population growth,and hyperinflations are problems facing

A)industrial countries.
B)first world countries.
C)developing countries.
D)developed countries.

Question 14

Which of the following characteristics is generally representative of developed countries relative to developing countries?

A)a larger percentage of the labor force in rural areas
B)a lower infant mortality rate
C)lower productivity in the agriculture sector
D)a lower rate of literacy

Question 15

In 2006,the infant mortality rate was ________ per 1,000 births in low-income countries.

A)6.9
B)29.9
C)39.8
D)114

Question 16

In developing countries,

A)financial markets are well developed.
B)central banks are effective in controlling the macroeconomy.
C)labor productivity in agriculture is high.
D)infant mortality is high.

Question 17

Which of the following statements is FALSE?

A)Developing countries have a lower per capita income compared to developed countries.
B)Developing countries have a lower infant mortality rate compared to developed countries.
C)Developing countries have lower life expectancy compared to developed countries.
D)A smaller percentage of the population live in urban areas in developing countries compared to developed countries.

Question 18

In the distribution of world income,the richest one-fifth of the world's population earns about ________ of the world income.

A)40%
B)65%
C)79%
D)98%

Question 19

Which of the following characteristics is generally representative of developing counties relative to developed countries?

A)a higher level of per-capita GNI
B)a larger percentage of the labor force in urban areas
C)a lower infant mortality rate
D)lower productivity in the agricultural sector

Question 20

Although the developed nations account for only about one-quarter of the world's population,they are estimated to consume what proportion of the world's output?

A)one-quarter
B)one-half
C)two-thirds
D)three-quarters

Question 21

Compensation sent back to family in the home country by recent emigrants is known as

A)remittances.
B)transaction costs.
C)outsourcing.
D)capital flight.

Question 22

India is on the World Bank's list of ________ countries and its capital city is one of the top ten centers of commerce in the world.

A)low-income
B)lower middle-income
C)upper middle-income
D)high-income

Question 23

Capital flight refers to the fact that both human and financial capital

A)flow into developing countries to build much needed infrastructure.
B)leave developing countries in search of a higher rate of return.
C)leave developed countries in search of a higher rate of return.
D)flow into developing countries to invest in risk free investments.

Question 24

Income distributions in developing countries are often so skewed that the richest households of very poor nations surpass the living standards of many high-income families in the developed economies.

Question 25

Despite India being on the World Bank's list of low-income countries,its capital city,Mumbai,is one of the top ten centers of commerce in the world.

Question 26

A "brain drain" is

A)the tendency of workers in developing countries to reject new technologies.
B)the tendency of talented people in developing countries to get education in developed countries and to stay there after graduation.
C)the impact of poverty on the productivity of workers in developing countries.
D)the impact of malnutrition on education and productivity in developing countries.

Question 27

Developing countries are characterized by low population growth rates.

Question 28

The vicious-circle-of-poverty hypothesis states that poor countries

A)are unable to save and invest enough to accumulate capital stock that would help them grow.
B)cannot develop because they lack the ability to educate their workers.
C)cannot develop because their economic policies are ineffective.
D)cannot develop because people don't consume due to lack of goods and services.

Question 29

Recent studies suggest that ________ of the population of the developing nations have annual incomes insufficient to provide for adequate nutrition.

A)10%
B)25%
C)40%
D)75%

Question 30

According to the World Bank,in 2006 the smallest population group (810 million people)belonged to countries classified as upper middle-income.

Question 31

Which of the following factors has been suggested as an explanation for the lack of economic growth in many poor nations?

A)insufficient capital formation
B)the supply of human resources is too high.
C)inadequate level of resources
D)a lack of dependence on the already developed nations

Question 32

All of the following are factors that limit a poor nation's economic growth EXCEPT

A)insufficient capital formation.
B)insufficient controls on free trade.
C)lack of entrepreneurial ability.
D)lack of human capital.

Question 33

In 2007,remittances from illegal immigrants in the United States to Mexico

A)began to fall because of increased crackdowns on illegal immigration.
B)continued to rise despite increased crackdowns on illegal immigration.
C)began to fall despite a decrease in enforcement of immigration laws.
D)continued to rise because of the decrease in enforcement of immigration laws.

Question 34

The lack of capital in developing nations causes

A)labor productivity to remain low.
B)the savings rate to be too high.
C)output to be low in the present but high in the future.
D)consumption rates to be too high.

Question 35

________ is/are estimated at approximately $100 billion per year.

A)Remittances sent from developed countries to less developed countries
B)Capital flight from the United States
C)Social overhead capital in the United States
D)The value of brain drain flowing into the United States

Question 36

An economy is not able to develop because of a lack of capital.Which of the following strategies would you suggest this economy pursue?

A)lower interest rates
B)impose quotas on how much capital can be imported from other countries to reduce dependency on foreign capital
C)increase the political stability of the economy
D)nationalize private enterprises because the government sector is not motivated by profit maximization

Question 37

A developing economy is considering restricting the amount of money its citizens can invest abroad.What might the purpose of this restriction be?

A)to increase the dependency of the economy on developed economics
B)to increase capital formation by forcing its citizens to invest in their own country
C)to reduce the nation's trade deficit so that interest rates will be reduced and capital formation will increase
D)to increase the degree of equality in the income distribution

Question 38

In 2006,low-income countries had the highest infant mortality rates and lowest literacy rates in the world.

Question 39

Building roads,power generators,and irrigation systems are projects that are referred to as

A)social overhead capital.
B)human capital.
C)physical capital.
D)financial capital.

Question 40

In 2006,the largest population group (2.4 billion people)belonged to countries classified as

A)low-income.
B)lower middle-income.
C)upper middle-income.
D)high-income.

Question 41

Related to the Economics in Practice on p.717: In Indonesia,children and allies of President Suharto were affiliated with many companies.When Suharto unexpectedly fell ill,the stock prices of these companies dropped significantly,suggesting that

A)these companies thrived under President Suharto despite their connection with Suharto's allies and relatives.
B)later regimes in Indonesia will be more concerned about economic efficiency and less corrupt.
C)President Suharto's removal from power was based not only on illness but also on concern over corruption.
D)investor opinion of many of these firms was based on their connections with President Suharto and not the economic efficiency of those companies.

Question 42

With microfinance,the mechanism of ________ is a way to avoid the problem of imperfect information.

A)requiring no collateral
B)peer lending
C)making only small loans
D)accepting savings deposits

Question 43

The practice of lending very small amounts of money,without collateral,and accepting small savings deposits is known as

A)microfinance.
B)capital flight.
C)debt rescheduling.
D)a stabilization program.

Question 44

China and India both have rapidly developing economies.Which of the following characteristics is shared by India and China?

A)Both have embraced free-market economies.
B)Property rights are well established in both countries.
C)Both are democratic countries.
D)Both have high literacy rates.

Question 45

Which agency lends money to countries to help them stabilize their exchange rates?

A)the International Monetary Fund
B)the World Bank
C)the Federal Reserve
D)the Bureau de Change

Question 46

From 1978 to 2003,________ grew on average 8 percent per year,a rate faster than any other country in the world.

A)India
B)China
C)the United States
D)Russia

Question 47

The government's role in a developing country is important during the country's development process for all of the following reasons EXCEPT

A)building social overhead capital cannot be taken on by the private sector.
B)building infrastructure is a huge project that only the government can undertake.
C)many social projects are associated with the free-rider problem,which minimizes the rate of return to the private sector.
D)the government is the only institution with a vested interest in a country's development.

Question 48

The International Monetary Fund (IMF)makes loans to encourage economic development.

Question 49

Compared to traditional bank loans,microfinance loans have all of the following characteristics EXCEPT

A)they are much smaller.
B)they require no collateral.
C)they are made more frequently to women than to men.
D)they have repayments that begin at a much later date.

Question 50

Social overhead capital is basic infrastructure projects such as roads,power generation and irrigation systems.

Question 51

In a developing economy,scarcity of capital may have more to do with a lack of incentive for citizens to save and invest productively than with any absolute scarcity of income available for capital accumulation.

Question 52

One of the most successful countries in implementing export promotion policies is

A)the United States.
B)Germany.
C)China.
D)Japan.

Question 53

The process of developing local industries to manufacture goods to replace imports is known as

A)export promotion.
B)import substitution.
C)export favoritism.
D)import promotion.

Question 54

Which agency lends money to countries to promote their economic development?

A)the International Monetary Fund
B)the Federal Reserve
C)the World Bank
D)the League of Nations

Question 55

Most of China's recent growth has been fueled by ________,and most of India's recent growth has been fueled by ________.

A)manufacturing;services
B)services;manufacturing
C)manufacturing;manufacturing
D)services;services

Question 56

Statistics show that the less developed a country is

A)the larger is the share of industrial output in its total output.
B)the larger is the share of agricultural output in its total output.
C)the larger is the per capita income.
D)the larger is the GDP.

Question 57

Investment in social overhead capital refers to investment in areas like education and nutrition.

Question 58

Related to the Economics in Practice on p.719: In areas of Bangladesh where the government has invested in building flood embankments,

A)marriages between cousins has fallen.
B)marriages between cousins has risen.
C)marriages to people from distant villages has fallen.
D)marriage rates in general have risen.

Question 59

A policy in which a government actively picks industries to support as a base for economic development is known as

A)social policy.
B)first-choice policy.
C)preferential policy.
D)industrial policy.

Question 60

The policy in which industrial production is oriented towards foreign consumers is called

A)import substitution.
B)export promotion.
C)export orientation.
D)import promotion.

Question 61

Most economists believe that import-substitution strategies have been quite successful around the world.

Question 62

Economic growth guarantees economic development.

Question 63

Throughout the developing world,________ is a problem that affects education.

A)student absenteeism
B)teacher absenteeism
C)an excess supply of classrooms
D)Both A and B are correct.

Question 64

Export promotion policies try to encourage firms to produce more of products the country has a comparative advantage in.

Question 65

China has developed a rapid approach to development.

Question 66

In some nations,the government pays parents to send their children to school.There is ________ that these payments ________ school attendance.

A)some evidence;actually decrease
B)no evidence;increase or decrease
C)no evidence;increase
D)some evidence;increase

Question 67

Studies by the World Bank during the 1970s indicate that

A)growth in GDP always leads to economic development.
B)growth in GDP does not guarantee improvements in development indicators.
C)growth in GDP improves education,nutrition and health.
D)growth in GDP decreases the GDP per capita.

Question 68

Countries with the highest level of per-capita GNI tend to generate a large percentage of GDP from agriculture production.

Question 69

India is a democratic country with a history of rule-of-law and an English speaking heritage,all factors thought to give a development advantage.

Question 70

A very small percentage of GDP tends to come from the service sectors in poor countries.

Question 71

Related to the Economic in Practice on p.717: Corruption often leads to more efficient firms producing the goods and services in a society.

Question 72

A frequently cited barrier to economic development is the apparent shortage of entrepreneurial activity in developing nations.

Question 73

Microfinance is aimed at introducing entrepreneurs among the very poorest parts of the developing world to the capital market.

Question 74

The following situation is an example of an import substitution strategy.Costa Rica has a comparative advantage in the production of coffee and,as a result,the Costa Rican government grants incentives to coffee planters to improve their performance in the international marketplace.

Question 75

Remittances can be used as investment capital for small businesses.

Question 76

A World Bank study found that charging user fees for medical treatment in developing countries

A)had no significant effect on treatment rates.
B)dramatically reduced treatment rates.
C)slightly increased treatment rates.
D)greatly increased treatment rates.

Question 77

Policies designed to promote import substitution often encouraged labor-intensive production methods,which encouraged the creation of jobs.

Question 78

With ________,outcomes of specific interventions are determined by using the intervention in a randomly selected subset of a sample and then comparing outcomes from the exposed and control group.

A)natural experiments
B)random experiments
C)manipulated experiments
D)predetermined experiments

Question 79

Human capital shortages are NOT a barrier to economic growth in developing countries.

Question 80

An alternative to random experiments is to rely on ________ to mimic the controlled experiment.

A)natural experiments
B)mirror experiments
C)manipulated experiments
D)predetermined experiments