Question 1

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

Accepted Answer

While a country's political and economic systems are probably the big engine driving its rate of economic development, other factors are also important. One that has received attention is geography. But the belief that geography can influence economic policy, and hence economic growth rates, goes back to Adam Smith.

Question 2

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

Accepted Answer

Economic stagnation occurred in many mixed economies in those sectors where the state had a monopoly (such as coal mining and telecommunications in Great Britain). This stagnation provided the impetus for the widespread privatization of state-owned enterprises that was witnessed in many mixed economies during the mid-1980s.

Question 3

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

Accepted Answer

People in the West tend to associate a representative democracy with a market economic system, strong property rights protection, and economic progress.

Question 4

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

Accepted Answer

Freedom House classified some 88 countries as free in 2013, accounting for about 45 percent of the world's nations and 40 percent of the global population. In "free" countries, citizens enjoy a high degree of political and civil freedoms.

Question 5

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

Accepted Answer

The Human Development Index (HDI) is based on three measures: life expectancy at birth (a function of health care); educational attainment (measured by a combination of the adult literacy rate and enrollment in primary, secondary, and tertiary education); and whether average incomes, based on PPP estimates, are sufficient to meet the basic needs of life in a country (adequate food, shelter, and health care).

Question 6

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

Accepted Answer

Innovation refers to the development of new products, processes, organizations, management practices, and strategies.

Question 7

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?

Accepted Answer

The HDI comes much closer to Sen's conception of how development should be measured than narrow economic measures such as GNI per capita-although Sen's thesis suggests that political freedoms should also be included in the index, and they are not.

Question 8

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

Accepted Answer

Although democracy may not always be the cause of initial economic progress, it seems to be one consequence of that progress.

Question 9

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

Accepted Answer

Innovation and entrepreneurial activity help to increase economic activity by creating new products and markets that did not previously exist. Moreover, innovations in production and business processes lead to an increase in the productivity of labor and capital, which further boosts economic growth rates.

Question 10

Black economy is most likely to be prevalent when:

Accepted Answer

Large amounts of economic activity may be in the form of unrecorded cash transactions, or barter agreements. People engage in such transactions to avoid paying taxes, and although the share of total economic activity accounted for by such transactions may be small in developed economies such as the United States, in some countries (India being an example), they are reportedly very significant. Known as the black economy, estimates suggest that in India it may be around 50 percent of GDP.

Question 11

Which of the following best exemplifies an entrepreneur?

Accepted Answer

Entrepreneurs first commercialize innovative new products and processes, and entrepreneurial activity provides much of the dynamism in an economy.

Question 12

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

Accepted Answer

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

Question 13

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

Accepted Answer

During the late 1980s and early 1990s, a wave of democratic revolutions swept the world. Totalitarian governments collapsed and were replaced by democratically elected governments that were typically more committed to free market capitalism than their predecessors had been.

Question 14

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

Accepted Answer

In a planned economy, the state owns all means of production. Consequently, entrepreneurial individuals have few economic incentives to develop valuable new innovations, because it is the state, rather than the individual, that captures most of the gains.

Question 15

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

Accepted Answer

The HDI is scaled from 0 to 1. Countries scoring less than 0.5 are classified as having low human development (the quality of life is poor); those scoring from 0.5 to 0.8 are classified as having medium human development; those that score above 0.8 are classified as having high human development.

Question 16

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

Accepted Answer

The influential Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until property rights are better defined and protected.

Question 17

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.

Accepted Answer

The influential economist Jeffrey Sachs argues that throughout history, coastal states, with their long engagements in international trade, have been more supportive of market institutions than landlocked states, which have tended to organize themselves as hierarchical (and often military) societies.

Question 18

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

Accepted Answer

Only a totalitarian regime that is committed to a market system and strong protection of property rights is capable of promoting economic growth.

Question 19

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?

Accepted Answer

The work by Jeffrey Sachs suggests that investments in education help explain why some countries in Southeast Asia, such as Indonesia, Malaysia, and Singapore, 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.

Question 20

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

Accepted Answer

One notable development of the past 20 years has been the spread of democracy (and, by extension, the decline of totalitarianism).

Quiz 3: National Differences in Economic Development