Question 1

Many developing countries were once under colonial rule,a system of government that:

Accepted Answer

Colonial rule often involved exploitation of the local population and resources for the benefit of the colonizing country. This meant that there were often few opportunities for the local population to develop entrepreneurial skills since they were not given access to resources, education, and other opportunities needed for business development.

Question 2

One measure of banking presence in a nation is _____.

Accepted Answer

The credit provided by banks as a percent of that nation's total output is a measure of banking presence as it reflects the extent to which banks are providing financial support to the economy as a whole.

Question 3

A primary requirement for development is:

Accepted Answer

A low and predictable inflation rate encourages saving, which leads to increased investment and ultimately promotes economic growth and development. High inflation rates can lead to unstable markets and discourage investment which can hinder development. Government control over production or distribution is not necessarily a primary requirement for development, and printing money can lead to inflation and instability in the long run. Confidence in foreign currency is also not a primary requirement, although it can be helpful in attracting investment and trade.

Question 4

Which of the following countries has a limited stock of natural resources?

Accepted Answer

Chad is known for having limited natural resources, particularly in terms of agricultural land and oil reserves. The country relies heavily on subsistence farming and foreign aid to sustain its economy. In contrast, the other countries listed (United Arab Emirates, Qatar, Kuwait, Bahrain) are all known for their abundant oil reserves and other natural resources.

Question 5

Most developing countries are in trouble whenever oil prices rise because _____.

Accepted Answer

Developing countries are usually importers of oil and therefore have to spend more money on importing oil when the prices rise. This drains their foreign exchange reserves, making it harder for them to import other necessary goods and services. This can lead to financial difficulties and economic challenges in these countries.

Question 6

Suppose the best and the brightest professionals of the country of Eronia migrate to Glassen for work.The upside of this brain drain is:

Accepted Answer

The remittances sent back to Eronia by its professionals working abroad represent a direct financial benefit to the country. These funds can support families, stimulate local economies, and contribute to national income.

Question 7

A problem for developing countries is that the prices of primary products fluctuate more widely than the prices of finished goods because:

Accepted Answer

The prices of primary products fluctuate more widely than the prices of finished goods because the supply of primary products, such as crops, fluctuates with the weather. This can cause significant variation in prices and make it difficult for developing countries to plan and budget effectively for their economies.

Question 8

The bulk of exports from developed countries consists of:

Accepted Answer

Developed countries tend to have advanced manufacturing industries that produce high-value products, such as cars, electronics, and machinery. These products are often in high demand globally and account for the majority of export revenue for these countries. While education, technology, and services may also be important export sectors, they are typically not as significant as manufacturing. Agricultural products and raw materials may be important exports for some developed countries, but they tend to be a smaller part of the overall picture.

Question 9

Which of the following group of countries is most likely to have a high number of telephone lines per 1,000 people?

Accepted Answer

High-income countries usually have a higher level of development and infrastructure, which includes communication systems. Therefore, it is likely that high-income industrial countries have a high number of telephone lines per 1,000 people.

Question 10

In the event of a trade deficit,a developing country will most likely not cut imports of:

Accepted Answer

Developing countries are heavily dependent on imports of food items as they might not have enough resources to produce food. Therefore, in the event of a trade deficit, developing countries are unlikely to cut imports of food items.

Question 11

Which of the following resources is necessary to efficiently combine other resources to produce goods and services?

Accepted Answer

Entrepreneurial ability is necessary to efficiently combine other resources to produce goods and services. This ability includes skills such as innovation, management, and risk-taking, which are essential for optimizing the use of natural resources, labor, and capital. Financial institutions may facilitate access to capital, but they are not necessary for efficient resource utilization.

Question 12

Inequality across households can be measured by looking at the share of national income:

Accepted Answer

C  Inequality is often measured by examining the share of national income received by the poorest segments of the population, such as the poorest fifth or tenth, to assess how income is distributed among the least advantaged.

Question 13

Dominik Rosen,the finance minister of the country of Glassen,has concluded that entrepreneurs are unable to generate the kind of growth the country needs.His decision to create state enterprises might be motivated by the desire to:

Accepted Answer

The fact that the finance minister believes entrepreneurs are unable to generate the kind of growth needed, coupled with the decision to create state enterprises suggests that the motivation may be to create jobs for friends and relatives of government officials, rather than solely for the purpose of earning profits or encouraging a free market. There is also no evidence to suggest that the decision is meant to limit the government's role in the economy or to take risks.

Question 14

The growth experiences of oil-rich countries indicate that _____.

Accepted Answer

The growth experiences of oil-rich countries indicate that natural resources are not enough to create a modern industrial economy. These countries often suffer from the "resource curse" where their economies become overly reliant on exporting raw materials and fail to diversify into other sectors that can lead to sustained growth and development.

Question 15

Developing countries need to trade with developed countries because:

Accepted Answer

Developing countries need technology and capital to increase productivity in various sectors such as agriculture, manufacturing, and services. Developed countries have advanced technologies and financial resources that can help developing countries improve their productivity and competitiveness. This can lead to job creation, economic growth, and improvement in the standard of living in developing countries. Option A is not necessarily true as developing countries may have their own unique ways of living, and it is not necessary to adopt the ways of developed countries. Option B is also not true as many developing countries have primary products that they can export. Option C is not true as developing countries may have their own unskilled labor force, and it is not necessary to rely on labor from developed countries. Option E is not true as developing countries do not usually have surplus capital to export to developed countries, and they need foreign exchange reserves to finance their imports and debt repayments.

Question 16

Which of the following is not true for banks in developing countries?

Accepted Answer

The incorrect statement is D because if financial institutions fail to serve as intermediaries effectively, it would hinder, not double, growth rates by limiting the availability of funds for investment.

Question 17

Laws,customs,conventions,and other institutional elements that sustain an economy fall under the category of:

Accepted Answer

Laws, customs, conventions, and other institutional elements that sustain an economy are the rules of the game that shape economic behavior and outcomes. These rules include property rights, contract enforcement, and regulatory frameworks, among others. They influence how economic agents interact with each other and how resources are allocated in society.

Question 18

The bulk of exports from developing countries is:

Accepted Answer

Developing countries tend to export primary products such as agricultural products, minerals, and raw materials because they may not have the resources or technology necessary to manufacture finished goods or provide services to the same extent as developed countries.

Question 19

Which of the following is not true about migration?

Accepted Answer

The statement "The best and the brightest professionals are very unlikely to migrate to developed countries" is not true. In fact, many highly skilled professionals choose to migrate to developed countries for better job opportunities and higher wages.

Question 20

Developing countries:

Accepted Answer

Developing countries need to acquire foreign exchange to pay for imports, such as machinery, technology, and other goods and services that are essential for development and growth. This is a fundamental aspect of international trade and economic policy.

Quiz 19: Economic Development