Deck 18: Economic Systems and Developing Countries

Question 1

In a market economy, the answers to the fundamental economic questions-What? How? For whom?-are determined by government planners.

Answer 1

False

Question 2

Today, most societies have chosen mixed economies instead of purely capitalistic economies or command economies.

Answer 2

True

Question 3

In 2007, about ¾ of the world's population lived on $2 or less per day.

Answer 3

False

Question 4

In a planned economy, businesses are owned by the government, but the production decisions are made by individual workers.

Question 5

A major challenge for free-market economies is how to make capitalism work better for the poorest people in society.

Question 6

The fundamental motivation for change in Eastern European economies was a desire to achieve greater equality in the distribution of income.

Question 7

Today China describes itself as a socialist market economy.

Question 8

In 2002 China decided to withdraw from the World Trade Organization (WTO) in order to be free to pursue its own trade goals.

Question 9

Japan, New Zealand, and Australia are all classified as advanced nations.

Question 10

Overpopulation is a problem for many developing nations.

Question 11

Developing nations tend to have diversified exports because they specialize in many primary products.

Question 12

The gains from international trade are evenly distributed across advanced and developing nations.

Question 13

A country's terms of trade are defined as the average price of a country's exports divided by the average price of its imports.

Question 14

A decline in a country's terms of trade is equivalent to an increase in the standard of living because consumers can afford to buy more goods and services.

Question 15

Developing countries contend that their terms of trade have worsened in the last 100 years, but it is difficult to prove this for all developing countries.

Question 16

A majority of developing countries' exports go to advanced countries, rather than to other developing countries.

Question 17

Tariffs tend to be lower for labor-intensive goods produced around the world.

Question 18

The World Bank, headquartered in Washington D.C., provides loans to developing countries.

Question 19

Foreign banks and businesses can provide private capital in the form of loans or direct private investment in developing countries.

Question 20

If a developing country puts up trade barriers to protect its domestic rice producers, this is called export-led growth.

Question 21

In recent years, developing countries have shifted their focus from import substitution to export-led growth strategies.

Question 22

There is considerable evidence that economic growth in developing countries benefits the poor.

Question 23

Clothing and textiles represent less than half of low-income countries' exports.

Question 24

The Generalized System of Preferences (GSP) was established to help developing countries strengthen their international competitiveness and expand their industrial base.

Question 25

All International Monetary Fund loans are made with some degree of conditionality, in which the country agrees to implement financial and economic policies.

Question 26

A ______ economy is a free-enterprise system rooted in private property and markets.

A) command
B) capitalistic
C) socialistic
D) dictatorship

Question 27

Under a ______ economy, the government makes all decisions concerning the production and distribution of goods and services.

A) market
B) capitalistic
C) command
D) socialistic

Question 28

There are three fundamental economic questions that must be answered by any economic system. They include all of the following except

A) what?
B) when?
C) how?
D) for whom?

Question 29

U.S. companies have not made which of the following products within the U.S. in years?

A) automobiles
B) jewelry
C) shoes
D) televisions

Question 30

A primary influence on the manner in which the "who" question gets decided is

A) how the good is produced (type of production method)
B) the type of economy present (market, command, mixed)
C) the degree of international trade (tariffs)
D) the total amount of income generated (profits and losses)

Question 31

Economic power is the most decentralized in a

A) command economy
B) capitalistic economy
C) socialistic economy
D) mixed economy

Question 32

A widely-recognized problem with a market economy is that it could lead to

A) a total breakdown in international trade when the country becomes self-sufficient
B) too much power in the hand of government planners
C) high prices that attract new businesses to operate in that country
D) business decisions that disregard worker safety or environmental protection

Question 33

Which of the following is not true regarding a planned economy?

A) The government owns the means of production.
B) The government owns the land.
C) The quality of goods is usually higher than for other systems.
D) Environmental damage can occur as a result of production.

Question 34

Mixed economies

A) have elements of both market and command economies
B) are the same as capitalist economies
C) have governments that act for political, not economic, reasons
D) have governments that intervene in resource markets but not product markets

Question 35

In mixed economies, the objective is to leave decisions to the market

A) all the time
B) when it operates well
C) when income is equally distributed
D) never

Question 36

The welfare state, as an economic system, currently exists in

A) Sweden and Denmark
B) the United States and Cuba
C) Canada and Mexico
D) England and Nigeria.

Question 37

Which group/organization believes that a nation's economic plan should be formulated by manufacturers, farmers, workers, and government officials working together?

A) World Trade Organization
B) capitalists
C) International Monetary Fund
D) socialists

Question 38

What can be said about the U.S. economy during the decade of the 1990s?

A) It was a period of good growth and low inflation.
B) It was a period of high inflation and low interest rates.
C) It was a period of transition from a capitalistic economy to a mixed economy.
D) It was a period of greater regulation and more restricted trade.

Question 39

The economic performance of the U.S. during which decade provided the best evidence that centrally planned economies don't work as well as market-oriented economies?

A) 1960s
B) 1970s
C) 1980s
D) 1990s

Question 40

In order for markets to work well, a country needs

A) well-established laws and ways to enforce them
B) a government that is experienced in central planning
C) citizens that are willing to sacrifice economic freedoms and choice
D) international trade restrictions that protect domestic firms from competition

Question 41

Examples of genuine public goods include all of the following except

A) police
B) roads
C) parks
D) factories

Question 42

By 2000, it was widely recognized that ________ had won the worldwide "contest" among economic systems.

A) command economies
B) capitalistic economies
C) socialistic economies
D) dictatorship economies

Question 43

Ways to make capitalism work better for people at the lowest income levels include all of the following except

A) reduce spending for public education
B) increase the minimum wage
C) make the food stamp program more generous
D) create vouchers to make housing more affordable

Question 44

According to the text, proponents of a free-market economy must consider three major challenges. They include all of the following except

A) helping those who are at the lowest income and wage levels
B) maintaining integrity in the business world
C) ensuring an economy has top quality public, as well as private, services
D) keeping prices of goods and services at constant levels

Question 45

Promoting the responsible behavior of company executives, in order to avoid what happened in the 2001-2002 Enron/Arthur Anderson fiasco, is an important challenge for which type of economy?

A) command
B) socialistic
C) capitalistic
D) dictatorship

Question 46

Which of the following is considered to be a transition economy?

A) Poland
B) England
C) France
D) Canada

Question 47

In order to achieve success, transition economies must

A) impose restrictions on private property rights
B) institute domestic price controls
C) increase government involvement
D) promote domestic competition

Question 48

The fundamental motivation for recent change in Eastern Europe was the failure of their

A) governments to achieve political stability
B) economies to achieve a high enough standard of living
C) citizens to make the right choices of goods and services
D) workers to put in as many hours per week as other countries

Question 49

In Eastern European countries, before the transition to more market-oriented systems, entrepreneurs had little incentive to locate and operate in these countries due to

A) insufficient property rights
B) lack of natural resources
C) small size of the labor force
D) bad climate

Question 50

Piecemeal reforms in the transition economies, such as the lifting of price controls, were generally

A) opposed by the U.S.
B) accompanied by property right enforcement
C) a good first step in the process
D) not successful

Question 51

What often existed in Eastern Europe prior to reform?

A) property rights
B) profit incentives
C) shortages and surpluses of goods
D) incentives to innovate

Question 52

What often existed in transition economies, prior to reform?

A) free trade with the rest of the world
B) democratic freedoms
C) a high standard of living
D) price controls

Question 53

Prior to merging with Germany, East Germany had

A) a polluted environment
B) modern factories
C) high living standards
D) an emphasis on being a market economy

Question 54

The late 1980's to 1990s transition of the economies of eastern European countries was primarily motivated by

A) the failure of planned economic systems to provide freedom or a decent standard of living
B) the assassination of key political leaders throughout the world
C) the excessive emphasis on individual property rights
D) tax incentives that encouraged worker ownership of businesses

Question 55

For more than 2,000 years, China most often maintained a policy of _________, which caused its economy to lag behind advanced countries.

A) welcoming foreign investors
B) free trade
C) centralized control
D) having just one language

Question 56

In 1949, when a revolutionary communist movement took over in China, the country began to model its economy after

A) the Soviet Union
B) the United States
C) Japan
D) Brazil

Question 57

In the 1970's China saw its once-poor neighbors, including Japan and Singapore,

A) becoming worse-off as foreign countries began to take over their investments
B) shifting to small scale, labor intensive production
C) enjoying economic prosperity and growth
D) still struggling to disband its low-income farms

Question 58

By 2000, China had made a number of reforms, but in order to complete the transition process, it still needed to

A) put greater government control over its central bank
B) open its doors to foreign investment
C) let farmers sell their own produce
D) do a massive restructuring of state-owned industries

Question 59

By 2000, non-state firms manufactured about what percentage of China's industrial output?

A) 90%
B) 75%
C) 50%
D) 20%

Question 60

While in "transition," which of the following countries created zones in which firms could keep foreign exchange earnings and hire and fire workers?

A) East Germany
B) Australia
C) China
D) United States

Question 61

China differs significantly from other East Asian economies because it

A) has much higher levels of public ownership and share of public investment
B) has a more equal distribution of income
C) is less dependent on foreign capital to generate exports of manufactured products
D) has a scarcity of labor

Question 62

In China,

A) the savings rate is exceptionally low
B) state-owned enterprises have required few government subsidies
C) trade has not been consistent with comparative advantage
D) there is a big difference between urban and rural living standards

Question 63

The problems of developing countries tend to include all of the following except

A) limited access to world markets
B) not enough capital equipment
C) low population growth resulting in few workers
D) non-diversified economies that emphasize production of a few products

Question 64

The objective of "fair trade" coffee is to

A) lower the price of coffee to consumers
B) break up coffee cooperative organizations
C) give retailers an incentive to mark up the coffee
D) raise the incomes of coffee farmers in developing countries

Question 65

Developing countries generally have shortages of this:

A) people
B) infrastructure goods such as public utilities
C) time
D) water

Question 66

Tariffs tend to be highest in which of the following countries?

A) Cameroon
B) Mexico
C) Japan
D) U.S.

Question 67

Gross National Product per capita is highest in which of the following countries?

A) Chad
B) Sweden
C) Japan
D) United States

Question 68

Gross National Product per capita is lowest in which of the following countries?

A) Malaysia
B) Indonesia
C) Mozambique
D) Chile

Question 69

Currently, the richest 20 percent of the world's population receives about what percent of the world's total income?

A) 20
B) 40
C) 60
D) 80

Question 70

In developing countries, obstacles to economic development include all of the following except

A) inadequate natural resources
B) institutional and cultural barriers
C) shortages of labor
D) shoratges of capital goods

Question 71

Developing countries are said to experience a "vicious circle of poverty." This means people

A) save little, thus they invest little in new plant and human capital, so they remain poor
B) work little, thus they cannot afford to buy necessities or a home, so they leave the area
C) invent new technology, lowering the prices of goods, so they become poorer
D) improve their education, become overqualified for available jobs, and are not hired

Question 72

In developing countries, economic trade may be problematic because export markets are unstable. This is because

A) developing countries tend to concentrate their exports in one or a few primary products
B) many of the goods they wish to export are capital intensive
C) manufactured goods have become more popular exports for all developing countries
D) technology is very important in the production of goods exported by developing countries

Question 73

In 1990, the real per-capita income of the U.S. was about how many times that of people in the Soviet Union?

A) 2
B) 4
C) 7
D) 10

Question 74

Life expectancy is highest in which of these countries?

A) India
B) U.S.
C) Japan
D) Switzerland

Question 75

According to the text, the World Trade Organization (WTO) wants to prevent

A) wealthy countries from tilting their trade policies against poor countries
B) workers from immigrating between countries
C) communist countries from becoming capitalists countries
D) the Euro from becoming the only world currency

Question 76

The two major sources of funds for IMF loans are

A) taxes on developing countries and the World Bank
B) subscriptions and loans from member nations
C) the sale of crafts from developing countries and U.S. bankers's funds
D) foreign private investors and oil tariffs