Deck 22: The Economics of Developing Countries

Question 1

Low-income developing countries generally have the following characteristics, except:

A) Low population growth rates
B) Low levels of industrialization
C) Dependency on exports of agricultural products or raw materials
D) Minimal amounts of capital resources

Answer 1

Low population growth rates

Question 2

More than 80 percent of the world's income is earned by what percentage of the world's population?

A) 5 percent
B) 10 percent
C) 20 percent
D) 40 percent

Answer 2

20 percent

Question 3

Which of the following countries had the highest per capita energy consumption in 2009?

A) Brazil
B) China
C) Japan
D) United States

Answer 3

United States

Question 4

Which of the following nations is not considered an industrially advanced country?

A) Russia
B) Japan
C) Canada
D) Australia

Question 5

Expanding the supplies of raw materials, capital equipment, effective labor, and technological knowledge will:

A) Shift outward the production possibilities curve for a nation
B) Increase the demand for and decrease the supply of productive resources
C) Make a nation less productive because of the need to coordinate the increased quantity of resources
D) Lead to increased population growth that will decrease the per capita growth in a nation

Question 6

An IAC (industrially advanced country) had a per capita income of $28,200 while a DVC (developing country) had a per capita income of $1,200. If both countries experience a per-capita-income growth of 2 percent, then their respective per-capita income levels will become:

A) $33,840 and $1,440
B) $28,764 and $1,224
C) $33,840 and $1,224
D) $28,764 and $1,440

Question 7

The average per capita income in 2010 for low-income developing nations was:

A) $580
B) $2,100
C) $1,240
D) $4,600

Question 8

Most developing countries (DVCs) exhibit a low level of:

A) Illiteracy
B) Population growth
C) Life expectancy
D) Infant mortality

Question 9

Per capita income in the United States in 2010 was about:

A) $25,300 per person
B) $36,300 per person
C) $47,300 per person
D) $59,300 per person

Question 10

The industrially advanced nations had an average per capita income in 2010 of around:

A) $50,000 per person
B) $27,000 per person
C) $39,000 per person
D) $61,000 per person

Question 11

The annual global revenue of Walmart in 2010 was $405 billion, which was greater than the national incomes of all but _________ nations in the world.

A) 10
B) 23
C) 46
D) 35

Question 12

Developing countries (DVCs) can be subdivided into the following groups, except:

A) Low-income economies
B) High-income economies
C) Lower-middle-income economies
D) Upper-middle-income economies

Question 13

Brazil, Russia, and Thailand are referred to as:

A) Industrially advanced countries
B) Middle-income developing countries
C) Low-income developing countries
D) Command economies

Question 14

The poorest 20 percent of the world's population receive what percentage of world income?

A) Less than 2 percent
B) About 4 percent
C) Around 8 percent
D) Close to 10 percent

Question 15

What measure of economic development is used most often to classify nations as industrially advanced or as developing?

A) Per capita income
B) Life expectancy at birth
C) Per capita energy consumption
D) Daily per capita calorie supply

Question 16

If the per capita incomes of DVCs (developing countries) grew at the same annual rate as those of IACs (industrially advanced countries), then the absolute income gap between rich and poor nations over the years will:

A) Narrow
B) Widen
C) Stay the same
D) Reverse

Question 17

Which of the following countries had the highest per capita income in 2010?

A) China
B) United States
C) Japan
D) Germany

Question 18

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

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

Question 19

Per capita income in the United States in 2010 was how many times greater than that in China?

A) 3 times
B) 6 times
C) 11 times
D) 17 times

Question 20

The levels of national income per capita among developing countries (DVCs) are:

A) All within a narrow range
B) Widely varied
C) All growing rapidly
D) About half of those of industrially advanced countries (IACs)

Question 21

The fertility rates-the number of children per woman's lifetime-in many DVC (developing countries) are:

A) Rising slowly
B) Rising fast
C) Staying constant
D) Declining

Question 22

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

A) 25%
B) 50%
C) 70%
D) 90%

Question 23

Based on population and economic development trends, the world population is expected to ____ in the last part of this century.

A) Explode
B) Increase mildly
C) Become stable and constant
D) Decline

Question 24

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

A) Declining death rates
B) Increasing birth rates
C) Reduced infant mortality
D) Decreasing life expectancy

Question 25

The average annual rate of population increase in the Philippines from 2000 to 2010 was about 2 percent. Based on this rate of growth, the population of the Philippines will double in about:

A) 7 years
B) 11 years
C) 35 years
D) 46 years

Question 26

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

A) Per capita real income
B) Unemployment rate
C) Real GDP
D) Population size

Question 27

Human resources in the poorest DVCs have the following characteristics, except:

A) Populations are large
B) Unemployment and under-employment are widespread
C) Population growth is low
D) Labor productivity is low

Question 28

The traditional view regarding population and growth in DVCs is that:

A) The most important factor affecting population growth in DVCs is per capita consumption of energy
B) Unemployment and underemployment are the major sources of population growth in DVCs
C) Reduced birthrates 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

Question 29

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

A) Low literacy rates
B) Religious reasons
C) Peasant agriculture view about children
D) Government authorities

Question 30

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

A) $56 per person
B) $64 per person
C) $72 per person
D) $88 per person

Question 31

Assume the total real output of a developing country increases from $8 billion to $8.2 billion while its population expands from 14 to 15 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
C) Increased by $533 per person
D) Decreased by $533 per person

Question 32

What factor contributes to the weak economic growth in DVCs?

A) An increase in labor productivity in DVCs
B) A decrease in international debts of DVCs
C) An increase in the rate of saving in a DVC
D) A decrease in the prices of DVC natural resources

Question 33

The demographic transition view of population and growth in DVCs is that:

A) The most important factor affecting population growth in DVCs are demographic changes among the elderly
B) Slower population growth is neither desirable nor productive for DVCs given the state of the economies in these nations
C) Reduced birthrates 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

Question 34

Development economists suggest that the best strategy for 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
C) Birth rates to expand their available resources
D) Mortality rates to slow down their population growth

Question 35

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

A) Increased at the same rate as the population grows
B) Distributed more equitably across business sectors
C) Reallocated to export industries
D) Used more efficiently

Question 36

Population expansion can impede economic development for the following reasons, except:

A) Reduced saving and investment rates
B) Reduced productivity of labor
C) Larger supply of labor
D) Contribution to urban congestion and problems

Question 37

A study concludes that in DVCs rising incomes must first be achieved and only then will there be slower population growth. What view of DVC population growth would it be supporting?

A) Traditional view
B) Peasant agriculture view
C) The will-to-develop view
D) Demographic transition view

Question 38

A developing nation may not experience an increase in the average standard of living even if it increases its output of goods and services because of:

A) Land reform
B) Population growth
C) Underemployment and disguised unemployment
D) Capital-saving technology

Question 39

Which of the following factors contributes most to the high per-capita incomes in developed nations?

A) High rates of population growth
B) High rates of economic growth
C) Low rates of investment
D) Low rates of saving

Question 40

One essential factor for economic growth is:

A) Increasing population growth
B) Expanding the role of government
C) Using existing resources more efficiently
D) Expanding tax-credits for business investment

Question 41

A reason for placing special emphasis on capital accumulation in developing countries is the high:

A) Level of adult illiteracy
B) Productivity of workers in DVCs
C) Marginal benefits of capital goods
D) Level of import quotas and tariffs

Question 42

Studies generally show that if there is more investment in capital goods in DVCs, there will be greater:

A) Capital flight
B) Economic growth
C) Underemployment
D) Unemployment

Question 43

An obstacle to economic growth in developing countries is:

A) The limited demand for natural resources
B) The limited supply of capital goods
C) A decline in population growth
D) The low productivity of capital

Question 44

All developing countries suffer from a critical shortage of:

A) Land
B) Population
C) Capital goods
D) Government regulation

Question 45

Which of the following is a major obstacle to economic growth in DVCs?

A) A fall in population growth
B) A decline in demographic transition
C) The low demand for natural resources
D) The low supply of saving

Question 46

Which of the following is a factor limiting saving in DVCs?

A) The lack of foreign aid and loans from the World Bank
B) Governments control the banking system and set low interest rates
C) The flight of private savings to investments in IACs where there is less risk
D) Those who do save make their savings available only to their families who use it for consumption

Question 47

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 capital investment
C) Force the need for land reform
D) Keep governments stable

Question 48

A new fertilizer that is better suited to a nation's topography and climate is an example of a technological advance that is:

A) Capital-using
B) Capital-saving
C) Capital-intensive
D) An in-kind investment

Question 49

Which characteristic is most typical of human resources in developing nations?

A) A small population base
B) Low unemployment in urban areas
C) Low unemployment in rural areas
D) High unemployment in urban areas

Question 50

Which of the following is most characteristic of developing nations?

A) A small percentage of the labor force in agriculture
B) A relatively equitable distribution of income
C) Low levels of labor productivity
D) Low rates of population growth

Question 51

Capital flight is a problem facing DVCs that involves the:

A) Difficulty of sustaining skilled workers in the government sector of the DVC economies
B) Transfer of private savings from DVCs to IACs
C) Flight of agricultural workers from rural to urban areas, especially capital cities, to take advantage of better job opportunities
D) Movement of capital goods from IACs to DVCs to avoid taxes

Question 52

A factor that limits the amount of saving in developing countries is the fact that:

A) The banking system does not encourage saving
B) 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 and makes it difficult for people to save

Question 53

Surplus agricultural labor in a developing nation usually means that there is:

A) A caste system
B) Widespread under-employment
C) Immobility of labor resources
D) Increased investment in agriculture

Question 54

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

A) Steady
B) Declining
C) Rising modestly
D) Rising rapidly

Question 55

If it is cheaper in the long-run to use a new metal plow that lasts a long time than an inferior wooden plow that needs to be replaced often, then this is an example of:

A) A capital-using technology
B) A capital-saving technology
C) Capital consumption
D) Private capital flows

Question 56

The diversion of surplus labor in agriculture to the production of schools or roads in developing countries is described as:

A) Land reform
B) The brain drain
C) In-kind investment
D) A capital-using technological advance

Question 57

One of the major investment obstacles in less developed nations is:

A) An accumulation of savings with no place to invest the funds
B) A poor public infrastructure that hurts returns on private investment
C) A progressive tax system that is efficient in collecting taxes on investment
D) A low unemployment rate that makes it difficult to find the needed workers for businesses

Question 58

Infrastructure is best illustrated by:

A) Business equipment and factories
B) Agricultural machinery and tools
C) Financial institutions
D) Roads and bridges

Question 59

What is needed to aid capital formation in developing countries?

A) More capital flight
B) More oil resources
C) More entrepreneurship
D) Higher price supports for products

Question 60

What is the problem with saving in DVCs, even when saving as a percentage of domestic output is the same as in industrially advanced countries?

A) The interest rate paid on money kept in a bank in DVCs is not as high as the interest rate on money kept in a bank in an IAC
B) Capital flight reduces investment opportunities and the need for saving in DVCs
C) There is a continual brain drain that removes skilled labor from the work force and reduces labor productivity and the need for saving
D) The domestic output of DVCs is so low that the absolute volume of saving is small

Question 61

If a local leader in a developing nation claims that there is little or no correlation between a person's efforts and the economic rewards which are given to that person, this person is most likely expressing a:

A) Description of the vicious cycle of poverty
B) Theory of exploitation and dependence
C) Capricious view of the universe
D) Rationale for neocolonialism

Question 62

Microfinance can help directly support:

A) Labor or workers
B) Local governments
C) Entrepreneurs
D) Consumers

Question 63

Microfinance refers to:

A) Small-size stock markets with very limited capitalization
B) A system of providing credit to small-business owners
C) Bond markets for governments of small nations
D) Deposits in small banks in developing nations

Question 64

The role of government in fostering economic growth in DVCs has been criticized because:

A) Most governments operate as dictatorships
B) There is often poor administration and corruption in government
C) Government is generally supportive of business at the expense of labor
D) Governments have adopted the unpopular method of forced savings to stimulate investment

Question 65

Many economists believe that the key to breaking the vicious circle of poverty is to:

A) Cut down the mortality rates in poor nations
B) Reduce the birth rates in poor nations
C) Increase the mobility of labor and migration
D) Increase the rate of capital accumulation in poor nations

Question 66

The "vicious circle of poverty" for developing nations can best be described by:

A) Low levels of international trade that reduce exports and increase the dependence on imports
B) Low incomes that inhibit saving and the accumulation of real and human capital, making it difficult to increase productivity and income
C) A large government sector which reduces the availability of private investment spending but which increases macroeconomic stability
D) A lack of entrepreneurial talent that limits the formation of businesses and the development of private businesses

Question 67

Which of the following is most characteristic of most developing nations?

A) Roughly equal distribution of income among the population
B) High levels of labor productivity in agriculture
C) Low propensity to consume goods and services
D) Low levels of saving and investment

Question 68

An institutional change that is needed in most developing nations is:

A) The will to develop
B) Reduced foreign aid
C) Birth control
D) Land reform

Question 69

Government can play a major positive role in the early stage of economic development by:

A) Providing an adequate infrastructure
B) Establishing price controls for products
C) Promoting exports by subsidizing them
D) Creating marketing boards for export products

Question 70

Most economists agree that government efforts in economic development must be:

A) Employed to substitute for private efforts
B) Designed to support private efforts
C) The sole driver of economic development
D) Kept at a minimum because we can always rely on markets

Question 71

Economists would most likely suggest that advanced nations can best assist in the economic development of developing nations by:

A) Increasing the amount of military aid to strengthen the government's role in providing law and order
B) Increasing trade barriers so that less developed nations will become more self-sufficient
C) Reducing trade barriers and increasing the amount of private and public capital
D) Decreasing the amounts of private capital or foreign aid to reduce the level of neocolonialism

Question 72

Which of the following countries had the worst score in the Corruption Perception Index in 2012?

A) Italy
B) China
C) Mexico
D) Russia

Question 73

Which of the following is not an example of a socio-cultural impediment to economic growth?

A) Tribal allegiances that take precedence over national unity
B) Religious beliefs and practices that severely limit economic activity
C) Migration of labor resources from agricultural to urban areas
D) The existence of a system for allocating jobs based on caste or tradition

Question 74

The vicious circle of poverty in the poorest DVCs can also be expressed as:

A) The rich get richer while the poor get poorer
B) Fate dealt the poor nations a bad hand
C) The poor nations stay poor because they are poor
D) Historical developments have oppressed the poor nations' incomes

Question 75

Avenues for the government to foster economic growth and development include the following, except:

A) Nationalization and protection of domestic industries
B) Establishing the rule of law and protection of property rights
C) Building infrastructure and technological support
D) Building human capital and entrepreneurship

Question 76

Which of the following seems to be the most acute institutional problem that needs to be resolved by many DVCs?

A) The use of capital-saving technology
B) Development of natural resources
C) Widespread political corruption
D) An increase in foreign aid

Question 77

Development experts are less enthusiastic than they used to be about three decades ago about the positive role of DVC governments in promoting economic growth in their less developed nations because of the:

A) Corruption in government
B) Availability of foreign aid
C) Need for a greater tax collection
D) Need for more public capital goods

Question 78

Which of the following statements is correct?

A) Saving is high in less developed nations because the opportunities for consumption are limited
B) For developing nations, the annual rate of population increase is about 5 percent
C) 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 and incomes

Question 79

Which of the following is not a reason why government may play a key role in the early stage of economic development in developing nations?

A) The infrastructure provided by government
B) The abundance of entrepreneurs who need to be regulated
C) The need to encourage saving and investment in the economy
D) The provision of law and order so that commerce can flourish

Question 80

Which of the following would most help a developing country (DVC) break out of the vicious circle of poverty?

A) More consumption
B) More food production
C) An increase in the birth rate
D) An increase in labor productivity