Question 1

Political institutions are more likely to allow and encourage the emergence of good economic institutions and policies when

Accepted Answer

Constitutional constraints prevent the government from passing laws and regulations that could harm economic institutions and policies, and protect the rights of property owners, promote voluntary exchange, and decentralize government. This allows for a stable economic environment that encourages economic growth and development.

Question 2

A less-developed nation will be able to benefit substantially by adopting the technologies and the business practices that have been successful in other nations, but only if

Accepted Answer

Adopting technologies and business practices from other nations can be beneficial for a less-developed nation, but it is important to have proper institutions in place to attract investors who can bring in capital and expertise. Without good institutions, the nation may not be able to fully take advantage of the new ideas and methods. Therefore, choice D is the best option.

Question 3

The sound economic institutions and policies needed for economic growth and prosperity

Accepted Answer

Economic institutions and policies are influenced by political decision-making and are often shaped by the prevailing political ideology and interests. Therefore, the emergence of sound economic institutions and policies is not automatic or guaranteed, but rather depends on the political process and the ability of policymakers to adopt and implement relevant reforms.

Question 4

Nations will attract investment and its citizens will engage in productive activities when the institutions and policies of that country

Accepted Answer

Institutions and policies that protect people and their property rights, and fairly enforce contracts are essential for attracting investment and engaging citizens in productive activities. Discouraging market exchange or abolishing private property rights may hinder economic growth and development.

Question 5

Nations will attract investment and its citizens will engage in productive activities when the institutions and policies of that country

Accepted Answer

The institutions and policies of a country play a crucial role in attracting investment and promoting productive activities. When a country encourages market exchange, it makes it easier for businesses to operate and attract investment. When it rewards innovation, it creates an environment where businesses can thrive and grow. Finally, when a country protects people and their property, it provides a stable environment that is conducive to investment and economic growth. Therefore, all of the above are important for attracting investment and promoting productive activities.

Question 6

Which of the following would be most likely to improve the standard of living of a less-developed country?

Accepted Answer

More foreign investment can bring in capital and technology which can increase production, employment opportunities and improve overall economic growth. This can lead to an increase in the standard of living of people in the country. However, options A, C, and D can have adverse effects on the economy by discouraging investment, reducing efficiency and productivity, and leading to shortages and black markets, respectively.

Question 7

Democracy tends to best promote freedom when there is

Accepted Answer

Constitutional protection of private property rights allows individuals to exercise their freedoms without fear of government interference or seizure of property. This protects citizens from potential abuses of power by government officials and promotes a culture of individualism and free choice. The presence of a large and centralized government sector can potentially limit individual freedoms, and unrestrained executive and legislative majority power can be prone to abuses and authoritarianism.

Question 8

In a majority-rules democracy, economic thinking suggests that we should expect to see institutions and policies that

Accepted Answer

The answer of In a majority-rules democracy, economic thinking suggests...

Question 9

Stable money and prices are a key source of economic growth because

Accepted Answer

Price stability reduces the risks that accompany investment and other long-term commitments, which leads to greater investment and economic growth. A, B, and C are incorrect as they do not accurately describe the relationship between stable money/prices and economic growth.

Question 10

Which of the following will be required for a country to move up the income ladder and achieve high-income status?

Accepted Answer

Sustained economic growth is necessary for a country to move up the income ladder and achieve high-income status. This growth can come from a variety of factors, including technological advancements, investment in infrastructure, and improved education and skills training for the workforce. Other options such as rapid growth of the money supply or tax incentives that encourage consumption rather than investment may have short-term benefits but may not lead to sustained economic growth in the long-term. Restrictions limiting imports may also hinder growth by preventing access to necessary goods and resources.

Question 11

Private ownership and competitive markets are important for economic growth because they provide individuals with a strong incentive to:

Accepted Answer

Private ownership and competitive markets provide individuals with incentives to care for resources, innovate and introduce new products, and produce goods efficiently. This leads to economic growth through increased productivity and profitability.

Question 12

The adoption of modern technologies and business methods have the possibility to improve economic performance in a nation with low per capita income and low growth, but only if

Accepted Answer

Without sound institutions, any potential capital and entrepreneurial activity will be deterred, reducing the possibility for economic improvement. The other options, such as natural resources and skilled planners, can certainly contribute to economic growth, but they are not as critical as institutional strength.

Question 13

Authoritarian political regimes

Accepted Answer

While authoritarian regimes are not always known for being transparent or free of corruption, some nations under authoritarian rule have produced sound economic policies and institutions. Chile and South Korea are two examples of countries that have made substantial economic progress while under authoritarian governments. However, it is important to note that these improvements are not always sustainable without democratic institutions in place to promote continued economic growth and stability.

Question 14

When competition is present and private ownership rights are clearly defined and securely enforced,

Accepted Answer

When there is competition and private ownership rights are clearly defined and securely enforced, production and trade are encouraged as individuals are allowed to benefit from their own efforts and investments, while plunder is discouraged as it violates other's ownership rights. This encourages individuals to help others in exchange for income, as it is beneficial for both parties. Additionally, employers have to provide attractive incentives to prospective employees to ensure they come work for them instead of rival companies, thus benefitting the employees as well. Therefore, all options are correct.

Question 15

Which of the following is true?

Accepted Answer

Economic freedom ratings provide an indication of how consistently a nation's institutions and policies support personal choice, freedom of exchange, and protection of private property. Option A is incorrect as having a political democracy does not directly guarantee economic freedom. Option C is incorrect as evidence suggests that economies with higher levels of economic freedom tend to grow more rapidly than those with less economic freedom.

Question 16

Democracy tends to best promote economic freedom when there is

Accepted Answer

All three options are important for promoting economic freedom within a democratic system. Checks on the power of the executive and legislative majorities prevent them from passing laws that inhibit economic freedom. Constitutional protection of private property rights ensures that individuals and businesses have the right to own and use property without interference from the government. Political decentralization allows for greater competition among different regions and localities, which can lead to greater economic freedom and innovation.

Question 17

Economic theory and history indicate that open elections and democratically elected governments

Accepted Answer

The answer of Economic theory and history indicate that open...

Question 18

When a low-income nation improves its institutions, so that growth results, one reason the growth may be more rapid than would result from a similar improvement in a developed nation that brings the same amount of added capital per worker to each nation, is that

Accepted Answer

This is because higher-income nations already have more capital per worker, and thus the added capital produces smaller increments to production due to the law of diminishing returns. Therefore, low-income nations with less capital per worker can experience a greater increase in production as a result of the added capital.

Question 19

If a country's political leaders wanted to promote economic growth, which of the following policy alternatives would be most effective?

Accepted Answer

Monetary policy consistent with long-run price stability is the most effective policy alternative to promote economic growth. If the monetary policy is stable, it leads to low inflation, low interest rates, and increased investment and consumption which, in turn, lead to economic growth. Imposition of price controls on agricultural products reduces incentives for farmers to produce, ultimately leading to a decrease in supply and economic growth. Imposition of high marginal tax rates, although promoting income equality, can discourage investment and innovation, ultimately decreasing economic growth. Similarly, imposing tariffs and trade restraints limits international trade, decreasing competition and innovation, leading to decreased economic growth.

Question 20

Which of the following is true?

Accepted Answer

During the period from 1980 to 2005, many less developed countries (LDCs) experienced rapid economic growth, often outpacing more developed countries.

Quiz 17: Institutions, Policies, and Cross-Country Differences in Income and Growth

Political institutions are more likely to allow and encourage the emergence of good economic institutions and policies when

A less-developed nation will be able to benefit substantially by adopting the technologies and the business practices that have been successful in other nations, but only if

The sound economic institutions and policies needed for economic growth and prosperity

Nations will attract investment and its citizens will engage in productive activities when the institutions and policies of that country

Nations will attract investment and its citizens will engage in productive activities when the institutions and policies of that country

Which of the following would be most likely to improve the standard of living of a less-developed country?

Democracy tends to best promote freedom when there is

In a majority-rules democracy, economic thinking suggests that we should expect to see institutions and policies that

Stable money and prices are a key source of economic growth because

Which of the following will be required for a country to move up the income ladder and achieve high-income status?

Private ownership and competitive markets are important for economic growth because they provide individuals with a strong incentive to:

The adoption of modern technologies and business methods have the possibility to improve economic performance in a nation with low per capita income and low growth, but only if

Authoritarian political regimes

When competition is present and private ownership rights are clearly defined and securely enforced,

Which of the following is true?

Democracy tends to best promote economic freedom when there is

Economic theory and history indicate that open elections and democratically elected governments

When a low-income nation improves its institutions, so that growth results, one reason the growth may be more rapid than would result from a similar improvement in a developed nation that brings the same amount of added capital per worker to each nation, is that

If a country's political leaders wanted to promote economic growth, which of the following policy alternatives would be most effective?

Which of the following is true?