ECON 201 ANSWERS
Capital flight is a problemfacing DVCs that involvesthe
A. difficultyof sustaining skilledworkers in thegovernment sector of the DVC economies.
B. transfer of private savings from DVCs to IACs.
flight of agricultural workersfrom rural tourban areas, especially capital cities,to take advantage of better job opportunities.
movement of capitalgoods from IACs toDVCs to avoid taxes.
Infrastructure is bestillustrated by
business equipment and factories.
agricultural machinery and tools.
D. roads and bridges.
A new fertilizer that is better suited to a nation's topography andclimate is an example of a technological advance that is
B. capital saving.
If it is cheaper in the long run tousea new metal plow that lasts a long time than an inferiorwooden plow that needs to be replaced often, then this is an exampleof
A. a capital-using technology.
B. a capital-saving technology.
private capital flows.
The diversion of surplus labor in agriculture to theproduction of schools or roads in developing countries is described as
the brain drain.
C. in-kind investment.
D. a capital-using technological advance.
Which of the following is not an example of a sociocultural impediment to economicgrowth?
tribal allegiances that take precedence over national unity
religious beliefsand practices that severely limit economic activity
C. migration of labor resources from agricultural tourban areas
D. a system for allocating jobs based on caste or tradition
If a local leader in a developing nation claims that thereis little orno correlation between a person'sefforts and theeconomic rewards that are given to that person, this leader is most likely expressing a
description of the vicious cycle ofpoverty.
theory of exploitation and dependence.
C. capricious view of the universe.
D. rationalefor neocolonialism.
Which of the following is most characteristic of most developing nations?
roughly equal distribution of income among thepopulation
high levels of labor productivity in agriculture
low propensity to consume goods and services
D. low levels of saving and investment
An institutional change that is needed in most developing nations is
the will to develop.
reduced foreign aid.
D. land reform.
Which of the following seems to be the most acuteinstitutional problem that needs toberesolved by many DVCs?
the use of capital-saving technology
development of natural resources
C. widespread political corruption
D. an increase in foreign aid
Which of the following statements is correct?
Saving is high in less-developed nationsbecause the opportunities for consumption are limited.
For developing nations, the annual rate of population increase is about 5 percent.
Most of the labor forces of developing nations are engaged in light industrial production.
D. Investment is low in developing nations, making it difficult to increase productivity andincomes.
The vicious circle ofpoverty in the poorest DVCs can also be expressed as,
"The rich get richer,while the poor get poorer."
"Fate dealt the poor nations a bad hand."
C. "The poor nationsstay poor because they arepoor."
D. "Historical developments have oppressedthe poor nations' incomes."
The "vicious circle of poverty" for developing nations can best be described by
A. low levels of international trade that reduce exports and increasethe dependence on imports.
B. low incomes that inhibit saving and the accumulation of real and human capital, making it difficult to increase productivity and income.
a large governmentsector, which reduces the availability of private investment spending but increasesmacroeconomic stability.
a lack of entrepreneurial talent that limits the formation of businesses and the development of private businesses.
Which of the following would most help a developing country (DVC) break out of the vicious circle of poverty?
more food production
an increase in the birth rate
D. an increase in labor productivity
Many economists believe that thekeyto breaking the vicious circle ofpoverty is to
cut down the mortality rates in poor nations.
reduce the birth rates in poor nations.
increase the mobilityof labor and migration.
D. increase the rate of capital accumulation in poor nations.
Most economists agree that government efforts in economicdevelopment must be
A. employed tosubstitute for private efforts.
B. designed to support private efforts.
the sole driver of economicdevelopment.
kept at a minimumbecause we can always rely on markets.
Avenues for the government to foster economicgrowth and development include the following, except
A. nationalization and protection of domesticindustries.
establishing the rule of law andprotection of property rights.
building infrastructure and technological support.
building human capital and entrepreneurship.
Government can play a major positive role inthe early stage of economicdevelopment by
A. providing an adequate infrastructure.
establishing price controls for products.
promoting exports by subsidizing them.
creating marketing boardsfor export products.
Which of the following is not a reason why government may play a key roleinthe early stage ofeconomic development in developing nations?
A. the infrastructure providedby government
B. the abundance of entrepreneurs whoneedto be regulated
the need toencourage saving andinvestment in theeconomy
the provision of law and order so that commerce can flourish
The role of government in fostering economicgrowth in DVCs has been criticized because
A. most governments operate as dictatorships.
B. there is often poor administration andcorruption in government.
government is generally supportive of business at the expense of labor.
governments have adopted the unpopularmethod of forced savings tostimulate investment.
Development experts are less enthusiastic than they used to be about three decades ago about the positive role of DVC governments in promotingeconomic growth in their less- developed nations because of the
A. corruption in government.
availability of foreign aid.
need for a greater tax collection.
need for more public capital goods.
Microcredit refers to
A. small-size stock markets with very limitedcapitalization.
B. a system of providingcredit to small-business owners.
bond markets for governments of small nations.
deposits in small banks in developing nations.
Microfinance or microcredit can help directly support
labor or workers.
Which of the following countries had the worst score inthe Corruption Perception Index in 2015?
Which of the following countries had the best score inthe Corruption Perception Index in 2015?
Economists would most likely suggest that advancednations can best assist in theeconomic development of developing nations by
increasing the amount of militaryaid to strengthen thegovernment's role in providing law and order.
increasing trade barriers so that less-developed nations will becomemore self-sufficient.
C. reducing trade barriers and increasing the amount of private andpublic capital.
D. decreasing the amountsof private capital or foreign aid to reducethe level of neocolonialism.
Industrially advanced countries can best help developing countriesby
establishing price supportsfor the productsproduced by DVCs.
increasing tariffs and quotas on products produced by DVCs.
C. increasing the flows of private capital to DVCs.
D. increasing control over DVCs' capital markets.
In recent years, many DVCs have cometo realize that
A. expandedinternational tradeis harmful toDVCs.
B. private capital investment is essential for economicgrowth in DVCs.
the International Monetary Fund is themajor institutional barrier toeconomic growth.
government involvement in economic development is the only avenueforeconomic growth.
Which of the following is not a way for industrially advancedcountries (IACs) tohelp developing countries (DVCs) achieve faster economic growth?
admitting more temporary workers
C. subsidizing their own (i.e., the IACsâ€™) agricultural sectors
D. discouraging arms sales
Industrially advanced countries can best help DVCs by
directing requests from DVCs for aid to the World Bank.
using the International Monetary Fund to determineexchange rates in DVCs.
increasing management control over development projects.
D. adopting policies that expand trade with DVCs.
Which organization primarily makes and guarantees loans todeveloping nations for basic development projects such as the construction of dams, roads, and schools?
A. the World Bank
the New Economic Order
the Federal Reserve System
the Committeeon Economic Development
The World Bank seeks to
provide financial backing for theworkof the International Monetary Fund.
maintain stable exchange rates in thecurrencies of developing countries.
C. assist developing countries in achieving economic growth.
D. maximize its profits for its worldwideshareholders.
One of the major objectives of the World Bank is to
provide financial backing for theUnited Nations.
maximize its profits for its worldwide shareholders.
C. provide technical assistancetoDVCs.
D. maintainstable exchange rates in IACs and DVCs.
The World Bank operatesprimarily as a
deposit institution for nations'gold supplies.
coordinator for private banks in major nations.
C. lenderof last resort to less-developed nations.
D. U.S. government agency that supervises banks worldwide.
Many of the major projects of the World Bank have been for
A. making loans to private citizens.
B. building infrastructure in a nation.
supervising the banking system in DVCs.
establishing new tax systems for governments in DVCs.
A large portionof foreign aidfrom IACs to DVCs is provided on thebasis of
D. politico-military considerations.
Most of the flow of foreignaid goes to
A. the poorest of developing countries (DVCs).
B. the most affluentof the developing country populations.
the smallestdeveloping countries.
about 70 percent of theworld's poorest people.
Which of the following IACs (industrially advanced countries) was the leading providerof development assistance to DVCs (developing countries) in 2015, in terms of absolute dollar amounts?
A. United States
Which of the following IACs (industrially advanced countries) gavethe smallest share of its GDP to foreign aid or development assistanceto DVCs (developing countries) in 2015?
A. United States
Which of the following IACs (industrially advanced countries) gavethe largest share of its GDP to foreign aid or development assistance to DVCs (developing countries) in 2015?
Making "soft loans"—loans that may not be self-liquidating—to the verypoorest of the developing countries on relatively liberal terms is the primary function of the
International Finance Corporation.
New Global Compact.
D. InternationalDevelopment Association.
The basic role of theInternational Finance Corporation is to
A. make loans togovernments in developing nations.
B. invest in private enterprises in developing nations.
finance exports from the UnitedStates to developing nations.
make loans to the World Bank, which in turn makes loans to governments in developing nations.
A major criticismof foreign aidto developing nations is that it
is capital saving rather than capitalintensive.
provides incentivesfor a brain drain.
C. encouragescorruption and misuse of funds.
D. gives too much power and control tothe International Monetary Fund.
A major criticismof foreign aidto developing nations is that it
provides incentivesto reduce the role of government.
is capital-using ratherthan capital-saving when it is spent.
C. encouragesdependency rather than self-sustained growth.
D. leads to widespread underemployment andunemployment.
Which of the following would be an example of direct foreign investment in DVCs?
A. a grant from the World Bank tobuild an irrigation project in Kenya
B. the financing of a newchemical plant in Peru by a German company
a low-interest loan from the U.S.government to Turkey topurchase military hardware
a loan from the Japanesegovernment to the Indonesiangovernment to payfor electronic equipment
A major complaintof DVCs about foreign aidfrom IACs is that it
is allocated just to the poorest nations.
is equally borne by the donor nations.
C. needs to be quantitatively larger for DVCs.
D. takes too long a time to reach DVCs.
A recommended policy for DVCs to implementthat promotes economicgrowth is
A. establishing realistic policies for exchange rates.
obtaining more low-interest loans from the U.S. government.
encouraging more tariffs and quotas to protectDVC businesses.
discouraging directforeign investment to make DVCs more self-sufficient.
Which of the following is a recommended policy for industrially advancedcountries to adoptin order to foster economic growth in DVCs?
A. admitting more temporary workersfrom DVCs
reducing the amount of debt relief for DVCs to make them less dependent
eliminating loans from the World Bank because it encourages bureaucracy
eliminating financial control of central banks where they have been established
Which of the following is considered to be a severe obstacle to economic growth for DVCs?
A. low trade barriers
B. large international debts
an increase in the rate of saving
a slowing of population growth
A recommended policy for developing countries tostimulate economic growthwould be
abolishing central banks.
more central planning by government.
C. encouraging more direct foreigninvestment.
D. expandingemployment in state industries.
To stimulate economic growth, it would be bestif developing countries adoptedpolicies to
subsidize state industries.
C. build more human capital.
D. increase population growth.
One way through which industrially advanced economies can help DVCs is known as "official development assistance (ODA),” or moresimply,
C. foreign aid.
D. international trade.
One suggested policy that industrially advanced nations could adopt to foster economic growth in less-developed nations would be to
A. leave the responsibility to theWorld Bank.
B. direct foreign aid to the poorest DVCs.
recruit more skilled workers from DVCs.
target the bankingsector for themost help.
The international organization, with 188 member nations, whose major objective is to helpDVCs achieve economicgrowth is the
A. World Trade Organization.
B. World Bank.
A suggested policy for industrially advanced countriesto adopt toencourage economic growth in developing countries would be
cutting debt relief for DVCs.
directing foreign aid to the more affluent DVCs.
restricting immigration of low-skilled workers from DVCs.
D. reducing tariffs and import quotas on labor-intensiveproducts.
Trade barriers that restrict imports from developing countries tend to be
highest in the capital goods and technology sectors of those economies.
lowest in the labor-intensive manufacturing sectors of those economies.
lowest for those products in which DVCs have a comparative advantage.
D. highest for those products in which DVCs have a comparative advantage.
What is the immigration problem for DVCs?
Too many people are allowed to move from DVCs to IACs, and IAC policies tend tofavor the movement of the most productive DVC workers.
Too many people are allowed to move from DVCs to IACs, and IAC policies tend to favor themovement of the least productive DVC workers.
C. Too few people areallowed to move from DVCs toIACs, and IAC policies tend to favor the movementof the most productive DVC workers.
D. Too few people areallowed to move from DVCs toIACs, and IAC policies tend to favor the movementof the least productiveDVCworkers.
In contrast to international development efforts in most of the20thcentury, more recent projectslike microfinance, microcredit, and cash transfers in thelastfew decades representa major shift. That is because these recent projectsare
all sponsored by local governments.
done through the UnitedNations.
launched by universities and colleges.
D. focused on giving direct aidto poor individuals.
Recent efforts at providingdirect cash transfersto poor individuals in DVCs have shown which of the following results?
A. Cash transfersnever worked, because the recipients just wastedthe money on unproductivespending.
B. These transfers have shown positive early results; themajority of the recipients spent the money as intended.
Only conditional cash transfersworked. Unconditional cash transfersnever worked.
These cash transfers worked only if theaid providers frequently followed up on the recipients.