Deck 3: National Differences in Economic Development

Question 1

The purchasing power parity for different countries is adjusted (up or down) depending upon whether a country's cost of living is lower or higher than the cost of living in the United States.

Answer 1

True
Explanation: To account for differences in the cost of living, one can adjust GNI per capita by purchasing power. The base for the adjustment is the cost of living in the United States. The PPP for different countries is then adjusted (up or down) depending upon whether the cost of living is lower or higher than in the United States.

Question 2

Many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations.

Answer 2

True
Explanation: Many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations.

Question 3

Economists who argue that innovation and entrepreneurial activity are the engines of long-run economic growth, define innovation broadly to include not just new products but also new processes, new organizations, new management practices, and new strategies.

Answer 3

True
Explanation: There is substantial agreement among economists that innovation and entrepreneurial activity are the engines of long-run economic growth. Those who make this argument define innovation broadly to include not just new products but also new processes, new organizations, new management practices, and new strategies.

Question 4

During the late 1980s and early 1990s, totalitarian governments collapsed and were replaced by democratically elected governments.

Question 5

In Amartya Sen's view, development is solely an economic process, and not a political process.

Question 6

In Samuel Huntington's thesis, global terrorism is a product of the tension between civilizations and the clash of value systems and ideology.

Question 7

The Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until they relax the property rights offered by their legal systems.

Question 8

Although countries such as China and India are currently relatively poor, their economies are already large in absolute terms and growing more rapidly than those of many advanced nations.

Question 9

Strong legal protection of property rights is a requirement for a business environment to be conducive to innovation, entrepreneurial activity, and hence economic growth.

Question 10

A strong belief that economic progress leads to adoption of a totalitarian regime underlies the fairly permissive attitude that many Western governments have adopted toward human rights violations in China.

Question 11

If a country's economy is to sustain long-run economic growth, the business environment must be conducive to the consistent production of product and process innovations and to entrepreneurial activity.

Question 12

Entrepreneurial individuals have fewer economic incentives to develop valuable new innovations in market economies than in planned economies.

Question 13

Five of the fastest growing economies of the past 30 years-China, South Korea, Taiwan, Singapore, and Hong Kong-had one thing in common at the start of their economic growth: democratic governments.

Question 14

According to the influential economist Jeffrey Sachs, tropical regions have a more extensive division of labor than temperate regions.

Question 15

According to Freedom House, all democracies are free countries in terms of political and civil liberties.

Question 16

New information and communication technologies have increased a state's ability to control access to uncensored information.

Question 17

Author Francis Fukuyama envisioned a world split into different civilizations, each of which has its own value systems and ideology.

Question 18

The gross national income (GNI) per capita comes much closer to Amartya Sen's conception of how development should be measured than narrow economic measures such as Human Development Index (HDI).

Question 19

Totalitarian states, by limiting human freedom, are highly conducive to progress in terms of innovation, entrepreneurship, and economic growth.

Question 20

The late Influential political scientist Samuel Huntington predicted that the universalization of Western liberal democracy will be the final form of human government.

Question 21

If newly privatized firms are protected from foreign competition by barriers to international trade and foreign direct investment, they continue to act like state monopolies.

Question 22

In both China and India, the shift toward a command-based economic system has produced large gains despite weak property rights and endemic corruption.

Question 23

Although free markets and democracy can still be found around the world, the tide has been running in favor of command economies and totalitarian dictatorships.

Question 24

It is more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

Question 25

In general, command and mixed economies failed to deliver the kind of sustained economic performance that was achieved by countries adopting market-based systems.

Question 26

Which of the following statements is true of purchasing power parity (PPP)?

A)PPP figures can be misleading because they don't consider differences in the cost of living.
B)The PPP for different countries is adjusted (up or down) depending upon whether the cost of living is lower or higher than in Great Britain.
C)The PPP data gives a static picture of economic development.
D)China's GNI PPP per capita is higher than that of the United States.
E)PPP adjustment does not allow for a direct comparison of living standards in different countries.

Question 27

Social unrest and disorder are less likely to be found in countries that contain more than one ethnic nationality.

Question 28

A country's economic system and property rights regime do not influence the attractiveness of the country as a market or investment site.

Question 29

One can adjust GNI per capita by purchasing power to account for differences in the:

A)cost of living.
B)population density.
C)geographical area.
D)factor endowments.
E)labor productivity.

Question 30

Which of the following measures the total annual income received by residents of a country and is regarded as a yardstick for the economic activity of a country?

A)Income elasticity of demand
B)Cash reserve ratio
C)Net cash flow ratio
D)Gross national income
E)Income equity ratio

Question 31

As a result of which of the following, large amounts of economic activity in India are unrecorded and the official GDP figures of the country fail to tell the entire story of the economy?

A)A large population
B)Active bartering
C)Deregulation
D)Nationalization
E)Closed totalitarianism

Question 32

One common measure of economic development is a country's:

A)gender ratio.
B)gross national income.
C)infant mortality rate.
D)population density.
E)total geographical area.

Question 33

In the context of political economy, the past three decades have seen a general move toward:

A)autocratic forms of government.
B)command-based economic reforms.
C)adoption of legal systems that better enforce property rights.
D)an environment which is unfavorable for international business.
E)military parties monopolizing political power worldwide.

Question 34

By identifying and investing early in a potential future economic star, international firms build brand loyalty and gain experience in that country's business practices.

Question 35

Economic freedom does not necessarily equate with political freedom.

Question 36

Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities.

Question 37

The shift toward deregulation has been easier for former command economies than for mixed economies.

Question 38

In 2012, if the PPP per capita of China was $9,040 and the PPP per capita of the United States was $52,340, this means that the:

A)GNI per capita was greater in China.
B)percent of goods and services consumed in the United States was lower.
C)standard of living in China was better.
D)cost of living was lower in China.
E)annual average GDP growth rate was lower in China.

Question 39

In China, state-owned companies still dominate the banking, energy, telecom, health care, and technology sectors.

Question 40

In most eastern European nations, the title to urban and agricultural property is often uncertain because of incomplete and inaccurate records, multiple pledges on the same property, and unsettled claims resulting from demands for restitution from owners in the pre-communist era.

Question 41

The belief that geography can influence economic policy, and hence economic growth rates, goes back to:

A)Adam Smith.
B)Amartya Sen.
C)Plato.
D)Aristotle.
E)Karl Marx.

Question 42

Which of the following creates an environment that is conducive to product and process innovations and to entrepreneurial activity?

A)Communism
B)Centrally planned economy
C)Privatization
D)Command economy
E)Lack of strong property rights

Question 43

People in the West tend to associate which of the following with a free market system, strong property rights protection, and economic progress?

A)Anarchist state
B)Representative democracy
C)Planned economy
D)Communist state
E)Command economy

Question 44

In the context of the changing political economy since the late 1980s, which of the following statements is true?

A)There has been a rapid spread of communism worldwide.
B)Capitalist ideologies have been in retreat.
C)A wave of totalitarian revolutions has swept the world.
D)Most countries have moved toward centrally planned and mixed economies.
E)Most of the world's nation-states are providing greater political and civil liberties to their citizens.

Question 45

Which of the following is based on three measures: life expectancy at birth, educational attainment, and average incomes based on PPP estimates?

A)Human Development Index
B)Gross National Income
C)Gross Domestic Product
D)Cost of Living Index
E)Cash Reserve Ratio

Question 46

Which of the following is broadly defined as the development of new products, processes, organizations, management practices, and strategies?

A)Privatization
B)Economic deregulation
C)Boundary spanning
D)Innovation
E)Benchmarking

Question 47

The Human Development Index comes close to Amartya Sen's conception of how development should be measured, although which of the following, suggested by Sen in his thesis, is not included in the index?

A)Basic health care
B)Political freedom
C)Educational attainment
D)Basic average income
E)Life expectancy at birth

Question 48

Which of the following is most likely to be the consequence of economic progress?

A)Adoption of communism
B)Adoption of democracy
C)Adoption of a command economy
D)Adoption of a totalitarian government
E)Restriction on individual freedom

Question 49

Which of the following statements is true about innovations and entrepreneurship?

A)A command economy creates greater incentives for innovation and entrepreneurship than a market economy.
B)If a country's economy is to sustain long-run economic growth, the business environment must restrict entrepreneurial activity.
C)A high level of entrepreneurial activity leads to a low level of innovation.
D)Innovations in production and business processes lead to an increase in the productivity of labor and capital.
E)Strong legal protection of property rights creates an unfavorable environment for innovation and entrepreneurship.

Question 50

Black economy is most likely to be prevalent when:

A)large amounts of economic activity are in the form of legally recorded cash transactions.
B)people engage in barter agreements to avoid paying taxes.
C)a country's GNI per capita exceeds $30,000.
D)the expenses of the government are less than its income.
E)a country is in trade surplus with another foreign country.

Question 51

Which of the following best exemplifies an entrepreneur?

A)Sam, an employee at a supermarket, is solely responsible for all the purchases and sales at the grocery department.
B)Joe recycles old household articles to build phones, radios, and other things for his personal use.
C)Max makes his living by investing in small companies that have the potential to grow.
D)Javier purchased an invention of his friend to start a company that processes plastic bags into synthetic cloth.
E)Ryan invented an anti-aging formulation and sold it to a major pharmaceutical firm.

Question 52

Due to strong legal protection of property rights, businesses and individuals will:

A)invest more in innovations.
B)face a huge burden from excessive taxation.
C)face more corruption.
D)move away from entrepreneurial activity.
E)run the risk of their profits being expropriated.

Question 53

During the late 1980s and early 1990s, many of the world's nation-states moved away from:

A)democratically elected governments.
B)free market capitalism.
C)individualism.
D)political and civil freedoms.
E)totalitarian governments.

Question 54

Which of the following creates an unfavorable environment for innovations and entrepreneurship?

A)Market economy
B)Economic freedom
C)State monopoly in production
D)Privatization
E)Strong legal protection of property rights

Question 55

Which of the following is an indicator of low human development in a country?

A)A score of 0.3 on the HDI scale
B)Rapid "democratization" of political communities
C)Large population due to a highly developed health care system
D)Giving citizens a voice in the important decisions made for the community
E)A higher GNI per capita than the United States

Question 56

The influential Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism:

A)until they adopt communism.
B)until property rights are better defined and protected.
C)if they adopt free market economies.
D)until their governments monopolize all means of production in their countries.
E)if they encourage innovation and entrepreneurship.

Question 57

The influential economist Jeffrey Sachs argues that throughout history, which of the following, with their long engagements in international trade, have been the most supportive of market institutions.

A)Mountainous states
B)Tropical regions
C)Military societies
D)Landlocked states
E)Coastal states

Question 58

Only a totalitarian regime that is committed to which of the following is capable of promoting economic growth?

A)A command economy
B)A dictatorship
C)Limiting human freedom
D)A market system and strong protection of property rights
E)Limiting individualism and privatization

Question 59

The work by Jeffrey Sachs suggests that investments in which of the following help explain why some countries in Southeast Asia have been able to overcome the disadvantages associated with their tropical geography and grow far more rapidly than tropical nations in Africa and Latin America?

A)Nuclear weapons
B)Education
C)Terrorist activities
D)Nationalization of private properties
E)Active bartering

Question 60

In the context of political economy, one notable development of the past 20 years has been the spread of:

A)centrally planned economies.
B)mixed economies.
C)totalitarian governments.
D)democracy.
E)communism.

Question 61

How does privatization help stimulate gains in economic efficiency?

A)It allows newly privatized firms to gain monopoly position in a particular industry.
B)It provides incentives to new private owners to search for increases in productivity and to enter new markets.
C)It encourages state control over price and production output.
D)It raises barriers to direct investment by foreign enterprises.
E)It results in reservation of heavy industry for state ownership and the increase of import tariffs.

Question 62

How have new information and communication technologies, including the Internet, affected the political economy in general?

A)They have led to the spread of communism.
B)They have reduced a state's ability to control access to uncensored information.
C)They have led to the collapse of democracy.
D)They have created new conduits for the spread of closed societies.
E)They have led to increased suppression of political and economic freedoms.

Question 63

The collapse of communism will result in the new world order that will be dominated by a universal civilization characterized by democratic regimes and free market capitalism, according to:

A)Amartya Sen.
B)Samuel Huntington.
C)Jeffrey Sachs.
D)Francis Fukuyama.
E)Adam Smith.

Question 64

Which of the following is most likely to prove detrimental to democracy and international business?

A)Emergence of increasingly prosperous middle and working classes
B)Development of new information and communication technologies
C)Dominance of a universal civilization which leads to the establishment of a more harmonious world
D)Transformation of nations from centrally planned command economies to market-based economies
E)Emergence of different civilizations, each of which has its own value systems and ideology

Question 65

The government of Greenland Republic protects its newly privatized firms from foreign competition by imposing stringent barriers to international trade and foreign direct investment. As a result of this, the newly privatized firms will:

A)continue acting like state monopolies.
B)operate at their maximum efficiency.
C)pay huge taxes.
D)import raw materials and many industrial goods at low tariffs.
E)have no control over production and pricing.

Question 66

Which of the following statements is true about the late influential political scientist Samuel Huntington's vision of the new world?

A)Samuel Huntington maintained that as societies continue modernizing they will also become more Western.
B)Samuel Huntington theorized that modernization in non-Western societies can result in a retreat toward the traditional.
C)Samuel Huntington predicted that the universalization of Western liberal democracy will be the final form of human government.
D)Samuel Huntington envisioned the end of the war of ideas between different civilizations.
E)Samuel Huntington suggested that most developing countries will stop adopting the material paraphernalia of the modern world.

Question 67

According to the author Francis Fukuyama, the world is most likely witnessing the end of:

A)free market economies.
B)capitalism.
C)liberal democracies.
D)privatization.
E)humanity's ideological evolution.

Question 68

The collapse of which of the following in eastern Europe was precipitated by the growing gulf between the vibrant and wealthy economies of the West and the stagnant economies of the East?

A)Democracy
B)Communism
C)Free economy
D)Capitalism
E)Individualism

Question 69

In Samuel Huntington's thesis, global terrorism is a product of the:

A)clash of value systems and ideology between civilizations.
B)widespread acceptance of universal global civilization.
C)declining liberal democratic ideals.
D)differences in the factor endowments between countries.
E)geographical differences between nations.

Question 70

The United Nation of Zorwaya has strict restrictions on direct investment by foreign enterprises, and it opposes the establishment and operation of private enterprises. The highest authority in the country enforces tight control over prices and production output. According to this information, the United Nation of Zorwaya most likely opposes:

A)nationalization of private assets.
B)deregulation.
C)socialism.
D)totalitarian ideologies.
E)command economies.

Question 71

The government of Great Lanthania is planning to adopt a market-based economic system. To be able to do so, the government of this country should:

A)abolish the laws that deal with protection of property rights.
B)introduce stringent foreign investment regulations.
C)increase its intervention in the economy.
D)adopt privatization.
E)oppose democracy.

Question 72

In the context of global economy, which of the following has been widely accepted since the late 1980s?

A)Centrally planned command economy
B)Mixed economy
C)Nationalization of private property
D)Deregulation of economies
E)Authoritarian regime

Question 73

Which of the following is most likely to be implemented by a country as a part of deregulation?

A)Prohibition of private enterprises from operating in certain sectors
B)Commitment toward communism
C)Removal of price controls
D)Centrally planned economic system
E)Increased restrictions on foreign direct investment

Question 74

Which of the following movements started in Great Britain in the early 1980s when then Prime Minister Margaret Thatcher started to sell state-owned assets such as the British telephone company?

A)Nationalization
B)Privatization
C)Anti-democratic
D)Communist
E)Anti-globalization

Question 75

Which of the following is most likely to indicate that the nation of Erbia has adopted deregulation?

A)The Erbian government exercises tight control over the prices of food grains.
B)The establishment of private enterprises in steel industry is prohibited by the Erbian government.
C)The retail sector in Erbia has been opened for foreign direct investment.
D)The Erbian government has been criticized for its inability to introduce a legal system to safeguard property rights.
E)Erbia ranks the lowest among the countries that grant both political and economic freedoms to its citizens.

Question 76

"Not all democracies are free, as some still restrict certain political and civil liberties." Which of the following countries best fits this argument?

A)Australia
B)United States
C)Great Britain
D)Russia
E)Canada

Question 77

Which of the following steps is most likely to be involved in the deregulation of an economy?

A)Increasing restrictions on direct investment by foreign enterprises and international trade
B)Privatizing state-owned enterprises
C)Exercising a high degree of state control over production and pricing
D)Abolishing laws related to the protection of property rights
E)Opposing democracy by adopting communism

Question 78

Which of the following statements is true about the changing economic system since the 1980s?

A)There has been a shift from market-based economies to centrally planned economies.
B)There has been a shift away from a mixed economy.
C)Many states have restricted the sale of state-owned businesses to private investors.
D)The competition between economies has been reducing.
E)The extent to which property rights are protected has declined.

Question 79

Economic advances in many countries have led to the:

A)decline of middle and working classes.
B)rise of totalitarian reforms.
C)decline of property rights.
D)emergence of closed and self-contained societies.
E)emergence of increasingly prosperous middle and working classes.

Question 80

Which of the following statements is true about privatization?

A)The privatization movement started in China in the early 1980s.
B)Privatization involves replacing a state-owned monopoly with a private monopoly.
C)For privatization to become successful, countries should adopt communism.
D)When newly privatized firms are extensively protected from foreign competition, they have little incentive to restructure their operations to become more efficient.
E)In today's context, a country runs the risk of experiencing a serious economic crisis if it liberalizes and privatizes state-owned enterprises.