ECON Q & A
Test Bank: I Topic: Obstaclesto Economic Development
Increases in the total real output ofmany DVCs do not increase thenation's standard of livingbecause
A. diminishing returns may beencountered in increasing total output.
B. population increases may dissipate the increase in real output.
disguised unemployment in agriculture will persist.
surplus farm labor may movefrom rural areas to industrial areas, causing unemployment.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
At the present time,the largest percentage of the national incomesof the low-income DVCs is used for
A. imports of thefinished products of foreignindustries.
B. food.
infrastructure.
industrial development.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The populations of the developing nations are growing
at about 5 percent per year.
at about the same rate as those of the industrially advanced nations.
slower than those of the industrially advanced nations.
D. faster than thoseofthe industrially advancednations.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Underemployment occurs
when workers do not have jobs.
when farm workers become more productive.
C. when workers are working fewer hours than they desire orwhen they areworking less productively than they are capable of.
D. in IACs but not in the DVCs.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstacles to Economic Development
Rapid population growth can be an obstacle toeconomic development
because it can translatea relatively large increase in real output into a small increase in real output percapita.
because more investment will be required to simplymaintain thequantity of capitalgoods per person.
because it may lead to theoverutilization andtherefore ecological degradation of farmland.
D. for all of these reasons.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Population growth remains high in most DVCs
because religious and sociocultural considerations favor largefamilies.
because children may provide economicsecurity for aging parents.
because children provide agricultural labor in rural areas.
D. for all of these reasons.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The demographic transition view allegesthat
the DVCs must first acceptthe use of birth control techniques to increase their standards of living.
population growth will decline only if mortality rates exceed birth rates.
C. if incomes first rise, population growth will then decline.
D. population growth has no bearingon a nation'sper capita income.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
For DVC per capita incomesto rise, birth rates must first be reduced.Thisstatement describesthe
A. human capital view of population growth.
B. traditional view of population growth.
capricious universeview.
demographic transition view of population growth.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Per capita incomes must first grow for birth rates to decline. This statementdescribes the
human capital view of population growth.
traditional view of population growth.
capricious universeview.
D. demographictransition view of population growth.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The demographic transition concept suggeststhat
A. effective birth control is the primary prerequisite of DVC income growth.
B. income growth must first occur before DVC birth rates will decline.
children are economic assets in the IACs but economic liabilities in the DVCs.
the IACs will have higher birth rates than the DVCs.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The demographic transition view of population growth argues that, on average (and as perceived by parents),the marginal
benefits of extra children are larger in IACs than in DVCs.
costs of extra children are lower in IACs than in DVCs.
C. costs of extra children are larger in IACs than in DVCs.
D. benefitsof extra children are the same in DVCs and IACs.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
In the DVCs, underemployment frequently takes theform of
factory workers who are workinglonger hours than they would prefer.
workers who areemployed inefficiently in small industrywhen they could be highly productiveinagriculture.
C. farmers whose productivity is very low.
D. craft workers andartisans who are replacedby simple machinery andequipment.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Which of the following is characteristic of DVCs?
A. A large percentage of the labor forceis in agriculture.
There are high levels of saving and investment.
They have high labor productivity.
There are high levels of training.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The "brain drain" problem in the DVCs refers to the fact that the best-educated workers
are concentrated in the public,rather than the private, sector.
are concentrated in the private,rather than the public,sector.
are concentrated in urban, rather than rural, areas.
D. haveemigrated from theDVCs to theIACs.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Capital flight from the DVCs may be caused by
a fear of government privatization efforts.
slow domestic inflation.
low rates of domestic taxation.
D. risks of severe fluctuations in exchangerates.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
When economists refer to capital flight,they are speakingof an
A. outflow of financialcapital from a certaincountry.
outflow of real capital from a certaincountry.
outflow of financial and real capital from a certaincountry.
outflow of human capital from a certaincountry.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Capital flight is a problem to DVCs because it
A. causes the value ofa DVC's currencyto appreciate.
B. reduces the volume of DVC investment.
reduces the flow of foreign aid from the IACs.
causes inflation in the DVCs.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Capital flight refers to
A. the tendency of large corporations of IACs to build new plants in the DVCs because labor is cheaper.
B. DVC citizens accumulating or investingtheir savings in theIACs.
the high international mobility of speculative funds caused by variations in exchange rates.
the tendency of DVCs to overinvest in commercialaircraft.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Most of the DVCs find it difficult to accumulate capital goods because
A. the terms of trade prohibit the inflow of private capital from theadvanced nations.
B. it is very difficultto restrict consumption and thus to free resourcesfor capital goods production.
domestic monetary policies designed to achieve price stability result in low interestrates, thereby discouraging investment.
investment is interest inelastic in DVCs.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
All of the following contributeto low investment spendingin DVCs except
low rates of saving.
inadequacy of public capital goods (infrastructure).
political instability.
D. expensivelabor.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Which of the following is not partof a nation's infrastructure?
communications facilities
roads, highways, and bridges
the electrical power system
D. industrial plants and equipment
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Infrastructure is best illustrated by
A. farm equipment.
B. school buildings and highways.
machinery and equipment for theproduction of consumer goods.
government tax revenues.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Investment in-kind refers to the possibility that
DVCs will invest for the purpose of becomingless dependent on world markets.
a DVC will overinvest in industries in which it has a comparative advantage,disrupting its development program.
newly established manufacturing firms may expandbyreinvesting their profits.
D. surplus labor in, say, agriculture can be diverted to the production of simple capital goods such as earthen dams.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Suppose that surplus labor in a Pakistani village is used to build a medical clinic and dig several wells. This is an illustration of
foreign aid.
capital-saving investment.
C. in-kind investment.
D. technological advance.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
If a technological advance expands output and requires a smaller investment in capitalgoods, this technological advance
is capital-using.
must involve nonfinancial investment.
C. is capital-saving.
D. must pertain to the infrastructure.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The ability of the DVCs to use the technologies of the IACs is somewhatlimited because
A. the IACs havepatents on most of their technologies.
B. the IACs and theDVCs have much differentresource endowments.
the technologies of the IACs rely heavilyon unskilled labor.
IAC technologies are labor-intensive, while DVC technologies are capital-intensive.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
It is sometimes difficult to transfer the advancedtechnologies of the industrializednations to the DVCs because
A. thetechnologies of the IACs are frequently based on relatively expensive labor and relatively cheap capital.
the resource endowments of theIACs and the DVCs are highly similar.
international patent laws prohibit such transfers.
the technologies of the IACs are frequently based on relatively cheap labor and relatively expensive capital.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The low per capita outputs of the DVCs are explained by
A. insufficient saving andinvestment.
overinvestment in human capital.
slow population growth.
excessively rapidtechnological advance.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
An economy's infrastructure refers to its
A. public capital goods, such as roads, schools,andpower facilities.
financial and bankinginstitutions.
land and natural resources.
surplus supplies of unskilled labor.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The "brain drain" problem in the DVCs refers to the fact the best-educated workers
are reluctantto become entrepreneurs.
are concentrated in rural areas where their skills are underutilized.
C. often immigrate to industrialized countries.
D. are reluctantto work in the publicsector.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The capricious universe view indicates that
in the long run,"acts of God" have contained population growth andthus contributed to economic development.
DVCs will obtain biological and chemical weapons andforce the redistribution of world wealth.
C. there is little or no correlation between one's efforts andthe rewards he or she receives.
D. international and civil wars have been the primary impediment togrowth.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Economic growth may hinge on whether individuals and institutions within a nation want growth badly enough to change their traditional ways of doing things. This statement refers to
in-kind investment.
the capricious universeview.
human capital investment.
D. thewillto develop.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
The idea that a person'sproductive effortsand his or her economic rewards are unrelated
is the neocolonialism view of economic development.
describes thevicious circle of poverty.
is the surplus labor theory of economic development.
D. is the capricious universeview.
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Learning Objective: 28-02 List some of the obstaclesto economic development.
Test Bank: I Topic: Obstaclesto Economic Development
Which of the following describes the vicious circle of poverty?
Government spending for public goods is inflationary, and this undermines incentives to save and invest.
Higher incomes increase consumption at the expense of capitalaccumulation, which causes income to fall.
C. Low per capita incomescause low levels of saving and investment,which mean low productivity and thereforelowincomes.
D. A growing national income increases the demand for money,which increases the interestrate and reducesinvestment.
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Learning Objective: 28-03 Explainthe vicious circle of poverty that afflicts low-income nations.
Test Bank: I Topic: The Vicious Circle
Many countries remain poor because they currently are poor. This statement summarizes the
A. infrastructure problem.
B. vicious circle of poverty.
demographic transition problem.
problem of capital flight.
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Learning Objective: 28-03 Explainthe vicious circle of poverty that afflicts low-income nations.
Test Bank: I Topic: The Vicious Circle
The government of a DVC may forcetheeconomy to save by deliberately causing inflation.Thispolicy is undesirable because inflationmay
A. distort investment away from productive facilities and toward luxury housing and preciousmetals.
increase voluntarysaving because thevalue of money is depreciating.
contribute to a balance of trade surplus.
entail all of these problems.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: I Topic: The Role of Government
Which of these sets of countries has the greatest degree of internal corruption as of 2015, accordingto Transparency International?
A. Somalia,Afghanistan, and North Korea
Finland, Denmark,and New Zealand
Spain, Greece, and Italy
Mexico, China, and Russia
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: I Topic: The Role of Government
A highly activerole by government may be needed to promoteeconomic growth in low-incomeDVCs because of
A. a lack of infrastructure.
rigid law enforcement in thecountry.
excessive local entrepreneurship.
all these reasons.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: I Topic: The Role of Government
The government of a DVC may purposely cause inflation because
a rapid rate of inflationattracts privateforeign capital into a DVC.
there is conclusiveevidence that inflation discourages people from having large families.
this will strengthen the nation's position in international markets.
D. inflation works liketaxation in that it may release resources from consumption so that they can be invested.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: I Topic: The Role of Government
Small loans to entrepreneurs and small business owners in DVCs are referred to as
A. human capital development projects.
B. microcredit.
capital flight promotion systems.
incubator lending.
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: I Topic: The Role of Government
Which of the following is generallynot aneffective strategyto promote DVC growth?
microlending
human capital development
C. fighting wars against neighbors to obtainresources and stimulateaggregate demand througharms spending
D. controlling inflation
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Learning Objective: 28-04 Discussthe role of government in promotingeconomic development within low-income nations.
Test Bank: I Topic: The Role of Government
Successful foreign aid programs
A. enhance a DVC's resources and therefore shift its production possibilities curve to theleft.
B. enhance a DVC's resourcesand therefore shift its production possibilities curve to the right.
move the DVC from a high-investment-low-consumption positionto a low-investment-high-consumptionposition on its stable production possibilities curve.
cause a DVC's exchangerate to depreciate.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
The international agency that lends money to DVCs for economicdevelopment projects is the
A. WorldBank.
International Monetary Fund (IMF).
World Trade Organization (WTO).
World Credit Union.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
The World Bank
A. is also known as the International Monetary Fund(IMF).
B. lends money to developing nations for basic infrastructure projects such as dams,irrigation, health and sanitation,communications, and transportation.
is an affiliate of the WorldTrade Organization (WTO).
provides subsidiesto private firms so they can improvetheir wages and working conditions.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
The World Bank
A. provides military assistancetothose nations interestedinimproving national defense.
B. makes and guarantees loans for basic development projectssuch as the construction of dams, roads, and schools.
provides goldforDVCs that want to go on the gold standard.
provides short-term loans toDVCs that areincurring balance of payments deficits.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
The primary function of the International Finance Corporation (IFC) is to
provide U.S. surplus foodto low-income countries.
provide short-term loans to poor countries to finance international tradedeficits.
make infrastructureloans, that is, loans for highways, schools,communication facilities, and so forth.
D. makeloans to private enterprises in the DVCs.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
In recent years, the industrially advancednations as a group have provided foreign aid amountingto about what percentage of their aggregate outputs?
A. 0.25 percent
0.7 percent
1 percent
2 percent
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
Government-provided foreign aid to developing countries
has averaged about 1 percent of theIACs' GDP each year.
has increased sharply and steadily since1995.
has dwarfed thesize of foreigndirect investment to the DVCs in recent years.
D. declined in the late1990s but increased from 2000 to 2008.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
In the 1990s,
A. direct private investment to the DVCs increased, and government-provided foreign aid decreased.
both direct private investment and government-provided foreign aidtothe DVCs increased.
both direct private investment and government-provided foreign aidtothe DVCs decreased.
direct privateinvestment totheDVCs decreased, and government-provided foreignaid increased.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
Development assistance as a percentage of GDP is greatest for which of thefollowing industrialized nations (as of 2015)?
the United States
Norway
C. Sweden
D. Netherlands
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
In recent years, U.S. foreignaid has been
A. less than one-quarter of 1 percent of its output.
about 1 percent of its output.
about 3 percent of its output.
about 5 percent of its output.
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Learning Objective: 28-05 Describehow industrial nations attempt to aid low-income countries.
Test Bank: I Topic: The Role of AdvancedNations
Foreign aid to the DVCs has been criticized
because it may generate economic dependence on the IACs.
because it encourages the centralization of governmentpower over theeconomy.
because government corruption in theDVCs causes aid to be misused.
D. for all of these reasons.