ECON 202 ANSWERS
Test Bank: II Topic: Obstacles to Economic Development
Which characteristic is most typical of human resources in developing nations?
a small population base
low unemployment in urban areas
low unemployment in rural areas
D. high unemployment in urban areas
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
Which of the following is most characteristic of developing nations?
a small percentage of the labor forceinagriculture
a relatively equitable distribution of income
C. low levels of labor productivity
D. low rates of population growth
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
Surplus agricultural labor in a developing nation usually means that there is
A. a caste system.
B. widespread underemployment.
immobility of labor resources.
increased investment in agriculture.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
The lack of an entrepreneurial class in developing nations tends to
A. keep workers from migrating to cities from rural areas.
B. reduce the level of capitalinvestment.
force the need for land reform.
keep governments stable.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
All developing countries suffer from a critical shortage of
land.
population.
C. capital goods.
D. government regulation.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
An obstacle toeconomic growth in developing countries is
A. the limited demand for natural resources.
B. the limitedsupply of capitalgoods.
a decline in population growth.
the low productivity of capital.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
A reason for placingspecial emphasis on capital accumulation in developing countries is the high
level of adult illiteracy.
productivity of workers in DVCs.
C. marginal benefits of capital goods.
D. level of import quotas andtariffs.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
Studies generally show that if there is more investment in capital goods in DVCs,there will be greater
A. capitalflight.
B. economic growth.
underemployment.
unemployment.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
One of the major investment obstaclesin less-developed nations is
A. an accumulation of savings with no place to invest the funds.
B. a poor public infrastructurethat hurts returns on private investment.
a progressive tax system that is efficientin collecting taxes on investment.
a low unemployment rate that makes it difficult to find the needed workersfor businesses.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
Which of the following is a major obstacleto economic growth in DVCs?
a fall in population growth
a decline in demographic transition
the low demand for natural resources
D. thelowsupply of saving
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
Which of the following is a factor limiting saving in DVCs?
the lack of foreignaid and loans from the World Bank
Governments control the banking system and set low interest rates.
C. theflight of private savings toinvestments in IACs, where thereis less risk
D. Those who do save make their savings available only to their families,whouse it for consumption.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
A factor that limits the amount of saving in developing countries is the fact that
the banking system does not encourage saving.
there is too much foreign aid, so savings is not needed.
C. the level of aggregate domestic output is low.
D. the government controls financial institutions andmakes it difficultfor people to save.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
What is needed to aid capital formation in developing countries?
more capital flight
more oil resources
C. moreentrepreneurship
D. higher price supportsfor products
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
What is the problem with saving in DVCs, even when saving as a percentage of domestic output is the same as in industrially advancedcountries?
The interest rate paid on money kept in a bankin DVCs is not as high as the interestrate on money kept in a bankin an IAC.
Capital flight reduces investment opportunities and the need for saving in DVCs.
There is a continual brain drain that removes skilledlabor from the work forceand reduces labor productivity and the need for saving.
D. Thedomestic output of DVCs is so low that the absolutevolume of saving is small.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
Capital flight is a problem facing 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 workers from rural to urban areas, especially capital cities,to take advantage of better job opportunities.
movement of capitalgoods from IACs toDVCs to avoid taxes.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
Infrastructure is best illustrated by
business equipment and factories.
agricultural machinery and tools.
financial institutions.
D. roads and bridges.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
A new fertilizer that is better suited to a nation's topography andclimate is an example of a technological advance that is
A. capitalusing.
B. capital saving.
capital intensive.
an in-kind investment.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
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.
capital consumption.
private capital flows.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
The diversion of surplus labor in agriculture to theproduction of schools or roads in developing countries is described as
land reform.
the brain drain.
C. in-kind investment.
D. a capital-using technological advance.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
Which of the following is not an example of a sociocultural impediment to economicgrowth?
tribal allegiances that take precedence over national unity
religious beliefs and practices that severelylimit economic activity
C. migration of labor resources from agricultural tourban areas
D. a system for allocating jobs based on caste or tradition
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstacles to Economic Development
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 of poverty.
theory of exploitation and dependence.
C. capriciousview of the universe.
D. rationalefor neocolonialism.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstaclesto Economic Development
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
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic: Obstaclesto Economic Development
An institutional change that is neededinmost developing nations is
the will to develop.
reduced foreign aid.
birth control.
D. landreform.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
Which of the following seems to be themost acute institutional problem that needs toberesolved by many DVCs?
the use of capital-saving technology
development of natural resources
C. widespread political corruption
D. an increasein foreign aid
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
Which of the following statements is correct?
Saving is high in less-developed nations becausetheopportunities 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.
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Learning Objective: 28-03 Explainthe vicious circle of poverty that afflicts low-income nations.
Test Bank: II Topic: The ViciousCircle
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. "Thepoor nations stay poor because they arepoor."
D. "Historical developments have oppressedthe poor nations' incomes."
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Learning Objective: 28-03 Explainthe vicious circle of poverty that afflicts low-income nations.
Test Bank: II Topic: The ViciousCircle
The "vicious circle of poverty" for developing nations can best be described by
A. low levels of international tradethat reduce exports and increase thedependence 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 government sector, 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.
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Learning Objective: 28-03 Explainthe vicious circle of poverty that afflicts low-income nations.
Test Bank: II Topic: The Vicious Circle
Which of the following would most help a developing country (DVC) break out of the vicious circle of poverty?
more consumption
more food production
an increasein the birth rate
D. an increase in labor productivity
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: II Topic:Obstacles to Economic Development
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 mobility of labor and migration.
D. increase the rate of capital accumulation in poor nations.
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Learning Objective: 28-03 Explainthe vicious circle of poverty that afflicts low-income nations.
Test Bank: II Topic: The Vicious Circle
Most economists agree that governmentefforts in economicdevelopment must be
A. employed tosubstitute for private efforts.
B. designed to support private efforts.
the sole driver of economic development.
kept at a minimumbecause we can always rely on markets.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic: The Role of Government
Avenues for the government to foster economicgrowth and development include the following, except
A. nationalization andprotection of domesticindustries.
establishing the rule of law andprotection of property rights.
building infrastructure and technological support.
building human capital and entrepreneurship.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic: The Role of Government
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 boards for exportproducts.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic: The Role of Government
Which of the following is not a reason why government may play a key role in theearly stage of economic development in developing nations?
A. the infrastructure providedby government
B. the abundance of entrepreneurs whoneedto be regulated
the need to encourage saving andinvestment in theeconomy
the provision of law and order so that commerce can flourish
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic:The Role of Government
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.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic:The Role of Government
Development experts are less enthusiasticthan 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.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic: The Role of Government
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.
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Learning Objective: 28-04 Discuss the role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic: The Role of Government
Microfinance or microcredit can help directly support
labor or workers.
local governments.
C. entrepreneurs.
D. consumers.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic: The Role of Government
Which of the following countrieshad the worst score inthe Corruption Perception Index in 2015?
Italy
China
Mexico
D. Russia
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic:The Role of Government
Which of the following countrieshad the best score inthe Corruption Perception Index in 2015?
Japan
China
United States
D. Canada
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: II Topic:The Role of Government
Economists would most likely suggestthat advanced nations can best assist in the economicdevelopment of developing nations by
increasing the amount of military aidto strengthen thegovernment's role in providing law and order.
increasing trade barriers sothat less-developed nations will becomemore self-sufficient.
C. reducing trade barriers and increasing the amount of private and public capital.
D. decreasing the amounts of private capital or foreignaid to reducethe level of neocolonialism.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic: The Role of Advanced Nations
Industrially advanced countries can best help developing countriesby
establishing price supports for theproducts produced 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.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic: The Role of Advanced Nations
In recent years, many DVCs havecome to 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.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic: The Role of Advanced Nations
Which of the following is not a wayfor industrially advancedcountries (IACs) tohelp developing countries (DVCs) achieve faster economic growth?
expanding trade
admitting more temporary workers
C. subsidizing their own (i.e., the IACs’) agricultural sectors
D. discouraging arms sales
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic:The Role of Advanced Nations
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.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic:The Role of Advanced Nations
Which organization primarily makes and guarantees loans todeveloping nations for basic development projects such as the construction of dams, roads, and schools?
A. theWorld Bank
the New EconomicOrder
the Federal Reserve System
the Committee on Economic Development
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic: The Role of Advanced Nations
The World Bank seeks to
provide financialbacking for theworkof the International Monetary Fund.
maintain stable exchange rates in thecurrencies of developing countries.
C. assist developing countries in achievingeconomic growth.
D. maximize its profits for its worldwideshareholders.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic: The Role of Advanced Nations
One of the major objectives of the World Bank is to
provide financialbacking for theUnited Nations.
maximize its profits for its worldwide shareholders.
C. provide technical assistancetoDVCs.
D. maintainstable exchange rates in IACs and DVCs.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic: The Role of Advanced Nations
The World Bank operates primarilyas a
deposit institution for nations' gold supplies.
coordinator for private banks in major nations.
C. lender of last resort to less-developed nations.
D. U.S. government agency that supervises banks worldwide.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic:The Role of Advanced Nations
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.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic:The Role of Advanced Nations
A large portion of foreign aidfrom IACs to DVCs is provided on thebasis of
economic considerations.
geographical considerations.
humanitarian considerations.
D. politico-military considerations.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic: The Role of Advanced Nations
Most of the flow of foreignaid goes to
A. the poorest of developing countries (DVCs).
B. the most affluentof the developing country populations.
the smallest developing countries.
about 70 percent of theworld's poorest people.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: II Topic: The Role of Advanced Nations
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. UnitedStates
Japan
Canada
Germany