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ECON FINAL EXAM ANSWERS

At the beginning of the year,one developing country(DVC) has a real income per capita of $800.Ina developed country (IAC), the real income per capita is $30,000. Both countriesexperience a 4 percent growth rate for the year.At the end of theyear, the absolute income gap betweenthese two countries will have increased from $29,200 to

A. $30,368. B. $31,200.C. $30,120. D. $32,032.

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Blooms: Understand Difficulty: 02 Medium

Learning Objective: 22-01 Describe how the World Bank distinguishes between industrially advancedcountries and developing countries.

Test Bank: II Topic: The Rich and the Poor

Which of the following countrieshad the highest per capita income (on a purchasing power parity basis) in 2014?

A. China

B. United States

Japan

Brazil

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Blooms: Understand Difficulty: 02 Medium

Learning Objective: 22-01 Describe how the World Bank distinguishes between industrially advancedcountries and developing countries.

Test Bank: II Topic: The Rich and the Poor

Per capita income in theUnited States in 2014 was about

$25,300 per person.

$36,300 per person.

C. $55,200 per person.

D. $68,800 per person.

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Blooms: Understand Difficulty: 02 Medium

Learning Objective: 22-01 Describe how the World Bank distinguishes between industrially advancedcountries and developing countries.

Test Bank: II Topic: The Rich and the Poor

Per capita income in theUnited States in 2014 was how many times greater than that in China?

3 times

12 times

C. 7.5 times

D. 17times

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Blooms: Understand Difficulty: 02 Medium

Learning Objective: 22-01 Describe how the World Bank distinguishes between industrially advancedcountries and developing countries.

Test Bank: II Topic: The Rich and the Poor

Most developing countries (DVCs) exhibit a low level of

illiteracy.

population growth.

C. life expectancy.

D. infant mortality.

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Blooms: Understand Difficulty: 02 Medium

Learning Objective: 22-01 Describe how the World Bank distinguishes between industrially advancedcountries and developing countries.

Test Bank: II Topic: The Rich and the Poor

Which of the following countrieshad the highest per capita energy consumption in 2013?

India

China

Japan

D. UnitedStates

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Blooms: Understand Difficulty: 02 Medium

Learning Objective: 22-01 Describe how the World Bank distinguishes between industrially advancedcountries and developing countries.

Test Bank: II Topic: The Rich and the Poor

The two paths toeconomic development, which are the sameforboth developing countries andindustrially advanced economies, are

A. use existing resources moreefficiently and expandthe available resources.

expand the government sector and preserve allavailable resources.

enhance regulation and taxation, and redistribute income to reduceincome disparity.

expand the money supplyand eliminate budget deficits.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Expanding the supplies of raw materials, capital equipment, effective labor, andtechnological knowledge will

A. shift outwardtheproduction possibilities curve for a nation.

increase the demand for and decrease the supply of productive resources.

make a nation less productive because of the need to coordinatetheincreased quantityof resources.

lead to increased population growth that will decrease the per capitagrowth in a nation.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Which of the following factorscontributes most to thehigh per capita incomes in developed nations?

A. high rates of population growth

B. high rates of economic growth

low rates of investment

low rates of saving

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

One of theessential paths toeconomic growth is

increasing population growth.

expanding the role of government.

C. using existing resources moreefficiently.

D. expanding tax creditsfor business investment.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

One major path that leads to growth in both developing nations (DVCs) as well industrially advanced nations (IACs) is that productive resources must be

owned and managedby the public sector.

distributed more equitably across businesssectors.

reallocated to export industries.

D. used more efficiently.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Which of the following factorscontributes to the weak economicgrowth in DVCs?

an increase in labor productivity in DVCs

a decrease in international debts of DVCs

an increase in the rateofsaving in a DVC

D. a decrease in the prices of DVC natural resources

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Which of the following is not a characteristic of human resources in the poorest DVCs?

Populations are large.

Unemployment and underemployment are widespread.

C. Population growth is low.

D. Labor productivity is low.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

One common measure of the "standard of living" in a nation is

A. per capita real income.

unemployment rate.

real GDP.

population size.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Assume that the real output of a developing nation increasesfrom $120 billion to $140 billion, while its population expands from 100to 110 million.Asa result, real income per capita has increased by about

$56 per person.

$64 per person.

C. $72 per person.

D. $88 per person.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: The Rich and the Poor

Assume the total real output of a developing country increasesfrom $8 billionto $8.2 billion, while its population expands from 14to15 million people from one year to the next. Over the year, per capita income has

A. increased by $25 per person.

B. decreased by $25 per person.

increased by $533 perperson.

decreased by $533 perperson.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: The Rich and the Poor

Over the next 15 years, roughly what percentage of the increase in world population will come from DVCs?

25 percent

50 percent

70 percent

D. 90percent

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Which of the following countrieshad the highest population density (population per square km) in 2014?

A. UnitedStates

B. India

China

Venezuela

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Which of the following countrieshad the highest population growth ratein2013–2014?

A. UnitedStates

B. Pakistan

China

Venezuela

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Suppose that the average annual rate of population increase in Econlandin recent years was about 2 percent. Based on this rate of growth, thepopulation of Econland will doubleinabout

7 years.

11 years.

C. 35years.

D. 46years.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

The fertility rates—thenumber of children per woman's lifetime—in most DVCs (developing countries) are

rising slowly.

rising quickly.

staying constant.

D. declining.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

The population growth rate in IACs (industrially advanced countries) in 2000–2010 averaged 0.7 percent per year. This comparesto what percentage growth per year in low- incomeDVCs (developing countries)?

A. 1.1 percent

B. 2.1 percent

4.0 percent

0.4 percent

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

A developing nation may not experience an increase in the averagestandard of living even if it increasesits output of goods and services because of

A. landreform.

B. population growth.

underemployment and disguised unemployment.

capital-saving technology.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Birth- and population-control efforts in many DVCs (developing countries) face the following obstacles except

low literacy rates.

religious reasons.

a peasant agriculture view about children.

D. government authorities.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

The traditional view regardingpopulation andgrowth in DVCs is that

the most importantfactor affecting population growth in DVCs is per capita consumption of energy.

unemployment and underemployment are themajor sources of population growth in DVCs.

C. reduced birth rates must come first in DVCs,andthen higher per capita incomes will follow.

D. higher per capita incomes must come first in DVCs, and then reduced birth rates will follow.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

The demographic transition view of population and growthin DVCs is that

the most importantfactor affecting population growth in DVCs is demographicchanges among the elderly.

slower population growth is neither desirable nor productive for DVCs given the state of theeconomies in thesenations.

reduced birth rates must come first in DVCs, and then higher per capita incomes will follow.

D. higher per capita incomes must come first in DVCs, and then reduced birth rates will follow.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

A study concludes that in DVCs, rising incomes must first be achievedandonly then will therebe slower population growth. What view of DVC population growth would this study be supporting?

traditional view

peasant agriculture view

the will-to-develop view

D. demographictransition view

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Income gains in the poorest DVCs may increasepopulation growth initially, at least for a while, due to the following reasons except

declining death rates

increasing birth rates

reduced infant mortality

D. decreasinglife expectancy

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Population expansion can impede economic development for the following reasons except

reduced savingand investment rates.

reduced productivity of labor.

C. a larger supply of labor.

D. its contribution tourban congestion andproblems.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Development economists suggest that a key strategyfor the poorest DVCs to break out of their poverty is to implement policies that boost their

A. population growth for a greater labor supply.

B. output and slow down their population growth.

birth rates to expandtheir available resources.

mortality rates to slow down their population growth.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Based on population and economic development trends,theworld population is expectedto in the last part of this century.

explode

increase mildly

become stable and constant

D. decline

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

The population growth rate of the DVCs (developing countries) as a group in recentdecades has been

A. steady.

B. declining.

rising modestly.

rising rapidly.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Which characteristic is most typical of human resourcesin 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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 workersfrom migrating to cities from rural areas.

B. reduce the level of capital investment.

force the need for landreform.

keep governments stable.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

An obstacle to economicgrowth in developing countries is

A. thelimited demand for natural resources.

B. the limited supplyof capital goods.

a decline in population growth.

the low productivity of capital.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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 and tariffs.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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. capital flight.

B. economic growth.

underemployment.

unemployment.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

One of themajor 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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 foreign aid 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. Thosewho do save make their savings available only totheir families, who use it for consumption.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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 bankingsystem does not encourage saving.

there is too much foreignaid, so savings is not needed.

C. the level of aggregate domestic output is low.

D. thegovernment controls financial institutions andmakes it difficultfor people to save.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

What is needed to aidcapital formation in developing countries?

more capital flight

more oil resources

C. moreentrepreneurship

D. higher price supports for products

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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 interestrate paid on money kept in a bank in 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Capital flight is a problem facing DVCs that involves the

A. difficulty of sustaining skilledworkers in thegovernment sector of the DVC economies.

B. transfer of private savings from DVCs to IACs.

flight of agricultural workers from rural tourban areas, especially capital cities,to take advantage of better job opportunities.

movement of capital goods from IACs to DVCs to avoid taxes.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

Infrastructure is bestillustrated by

business equipment and factories.

agricultural machinery and tools.

financial institutions.

D. roads and bridges.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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. capital using.

B. capital saving.

capital intensive.

an in-kind investment.

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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 List some of the obstaclesto economic development.

Test Bank: II Topic: Obstacles to Economic Development

The diversionof 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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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Blooms: Remember Difficulty: 01 Easy

Learning Objective: 22-02 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