Question 1

Economic freedom necessarily equates with political freedom.

Accepted Answer

Economic freedom does not necessarily equate with political freedom.

Question 2

Since the late 1980s, there has been a strong move away from a more free market economic model and toward a more centrally planned and mixed economies.

Accepted Answer

The political economy of many of the world's nation-states has changed radically since the late 1980s. There has been a strong move away from centrally planned and mixed economies and toward a more free market economic model.

Question 3

The government of a country takes over the airport security industries following a major terrorist attack, to improve airport security. This is an example of privatization.

Accepted Answer

Privatization transfers the ownership of state property into the hands of private individuals, frequently by the sale of state assets through an auction.

Question 4

In a command economy, the prices are determined by the free interplay of demand and supply.

Accepted Answer

Before the collapse of communism, the governments in most command economies exercised tight control over prices and output, setting both through detailed state planning.

Question 5

For privatization to work, it must also be accompanied by a more general deregulation and opening of the economy.

Accepted Answer

For privatization to work, it must also be accompanied by a more general deregulation and opening of the economy.

Question 6

Political freedom is one of the measures used by the Human Development Index (HDI) to measure the quality of human life in different nations.

Accepted Answer

The 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 7

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

Accepted Answer

Innovations in production and business processes lead to an increase in the productivity of labor and capital, which further boosts economic growth rates. Entrepreneurs first commercialize innovative new products and processes, and entrepreneurial activity provides much of the dynamism in an economy.

Question 8

Totalitarian states promote human freedom and human development, which facilitates economic progress.

Accepted Answer

Totalitarian states, by limiting human freedom, also suppress human development and therefore are detrimental to progress.

Question 9

Peruvian development economist Hernando de Soto has argued that the chronic inability of property owners to establish legal title to the property they own is a key problem for innovation, and entrepreneurial activity in developing nations.

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. His arguments are interesting because he says the key problem is not the risk of expropriation but the chronic inability of property owners to establish legal title to the property they own.

Question 10

New information and communication technologies have enabled the spread of democratic ideals.

Accepted Answer

New information and communication technologies have created new conduits for the spread of democratic ideals and information from free societies. Today, the Internet is allowing democratic ideals to penetrate closed societies as never before.

Question 11

GNI allows a more direct comparison of living standards in different countries.

Accepted Answer

Referred to as a purchasing power parity (PPP) adjustment, it allows a more direct comparison of living standards in different countries.

Question 12

In mixed economies, in certain sectors the state sets prices, owns businesses, limits private enterprise, restricts investment by foreigners, and restricts international trade.

Accepted Answer

In mixed economies, the role of the state was more limited; but here too, in certain sectors the state sets prices, owns businesses, limits private enterprise, restricts investment by foreigners, and restricts international trade.

Question 13

Transformation from centrally planned command economies to market-based economies can be attributed to the fact that command and mixed economies failed to deliver the sustained economic performance achieved by countries adopting market-based systems.

Accepted Answer

Command and mixed economies failed to deliver the kind of sustained economic performance that was achieved by countries adopting market-based systems, such as the United States, Switzerland, Hong Kong, and Taiwan. As a consequence, even more states have gravitated toward the market-based model.

Question 14

In Sen's view, development is an economic process that should be assessed by material output measures such as GNI per capita.

Accepted Answer

The Nobel Prize-winning economist Amartya Sen has argued that development should be assessed less by material output measures such as GNI per capita and more by the capabilities and opportunities that people enjoy. In Sen's view, development is not just an economic process, but it is a political one too.

Question 15

Most property in poor countries is owned legally by investors.

Accepted Answer

Because most property is poor countries is informally "owned," the absence of legal proof of ownership means that property holders cannot convert their assets into capital, which could then be used to finance business ventures.

Question 16

Life expectancy at birth is one of the measures used by the Human Development Index (HDI) to measure the quality of human life in different nations.

Accepted Answer

The 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 17

Many totalitarian regimes were able to deliver economic progress to the vast bulk of their populations, which curbed the spread of democracy during the late 1980s.

Accepted Answer

One of the causes for the spread of democracy is that many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations.

Question 18

A well-functioning market economy requires laws protecting private property rights and providing mechanisms for contract enforcement.

Accepted Answer

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, including organized crime, that expropriate the profits generated by the efforts of private-sector entrepreneurs.

Question 19

Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition.

Accepted Answer

Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition by barriers to international trade and foreign direct investment.

Question 20

Privatization refers to the process of hiring private management consultancy firms to manage state-owned enterprises.

Accepted Answer

Privatization refers to the process of selling state-owned enterprises to private investors.

Quiz 3: National Differences in Economic Development

Economic freedom necessarily equates with political freedom.

Since the late 1980s, there has been a strong move away from a more free market economic model and toward a more centrally planned and mixed economies.

The government of a country takes over the airport security industries following a major terrorist attack, to improve airport security. This is an example of privatization.

In a command economy, the prices are determined by the free interplay of demand and supply.

For privatization to work, it must also be accompanied by a more general deregulation and opening of the economy.

Political freedom is one of the measures used by the Human Development Index (HDI) to measure the quality of human life in different nations.

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

Totalitarian states promote human freedom and human development, which facilitates economic progress.

Peruvian development economist Hernando de Soto has argued that the chronic inability of property owners to establish legal title to the property they own is a key problem for innovation, and entrepreneurial activity in developing nations.

New information and communication technologies have enabled the spread of democratic ideals.

GNI allows a more direct comparison of living standards in different countries.

In mixed economies, in certain sectors the state sets prices, owns businesses, limits private enterprise, restricts investment by foreigners, and restricts international trade.

Transformation from centrally planned command economies to market-based economies can be attributed to the fact that command and mixed economies failed to deliver the sustained economic performance achieved by countries adopting market-based systems.

In Sen's view, development is an economic process that should be assessed by material output measures such as GNI per capita.

Most property in poor countries is owned legally by investors.

Life expectancy at birth is one of the measures used by the Human Development Index (HDI) to measure the quality of human life in different nations.

Many totalitarian regimes were able to deliver economic progress to the vast bulk of their populations, which curbed the spread of democracy during the late 1980s.

A well-functioning market economy requires laws protecting private property rights and providing mechanisms for contract enforcement.

Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition.

Privatization refers to the process of hiring private management consultancy firms to manage state-owned enterprises.