Question 1

In recent years, the governments of the IACs have

Accepted Answer

In recent years, some IACs have forgiven a portion of the debt owed by some low-income DVCs in order to alleviate their debt burden and improve their economic conditions. The other choices are not supported by current trends or policies of the IACs.

Question 2

DVCs tend to have permanent shortages of farm labor.

Accepted Answer

The answer of DVCs tend to have permanent shortages of...

Question 3

Capital flight refers to the fact that many DVCs must use their export earnings to pay interest on their outstanding external debts.

Accepted Answer

Capital flight refers to the rapid outflow of capital from a country, often due to economic instability or the expectation of political turmoil, rather than the use of export earnings to pay interest on external debts.

Question 4

(Last Word) Loans offered through microcredit programs

Accepted Answer

Microcredit programs have high repayment rates, typically above 90%. This is due to the rigorous screening process and the use of peer groups to ensure accountability among borrowers. The loans are typically used for income-generating activities, such as starting or expanding a business, which can help lift borrowers out of poverty. Therefore, option C is the correct one.

Question 5

Because families can afford to have more children, population growth is greater in the IACs than in the DVCs.

Accepted Answer

This statement is false. In reality, population growth is generally greater in developing or underdeveloped countries, which are primarily located in the DVCs. Studies show that as countries become more developed and urbanized, the population growth rate tends to decline due to factors such as increased access to education, birth control, and economic opportunities. Therefore, it is often the DVCs that experience higher population growth rates, not the IACs.

Question 6

Most nations of the world are now IACs, not middle- and low-income DVCs.

Accepted Answer

Most nations of the world are classified as middle- and low-income developing countries (DVCs), not high-income advanced countries (IACs).

Question 7

(Last Word) Early experience with conditional cash transfers has revealed that

Accepted Answer

Early experiences with conditional cash transfers have shown that they do encourage school enrollment, but poor-quality schools limit their ability to lift people out of poverty. There is also no significant improvement in nutrition and health compared to non-recipients. However, these transfers do not go unused due to parents not fulfilling requirements, and recipients do gain a significant earnings advantage over non-recipients.

Question 8

State industries are notoriously poor "incubators" for the development of profit-focused, entrepreneurial persons who may leave the firm to set up their own businesses.This statement is an argument in favor of

Accepted Answer

The statement suggests that state industries are not effective in developing entrepreneurial individuals who may leave and start their own businesses, implying that privatization and a more market-driven approach may be more beneficial in promoting entrepreneurship and innovation. Therefore, privatizing state industries (Choice B) is the best solution to address this problem. The other options do not directly address the issue presented in the statement.

Question 9

Economic growth in the DVCs might increase if IACs

Accepted Answer

By reducing tariffs and import quotas, IACs would increase their demand for goods and services produced in DVCs, which would lead to increased economic growth in those countries. This would also create opportunities for DVCs to export more of their goods and services to IACs, further increasing economic growth. Immigration of highly skilled workers, outlawing direct private investment abroad, and discouraging capital flight would not necessarily have a direct impact on economic growth in DVCs.

Question 10

Which of the following is not a DVC policy likely to increase DVC economic growth?

Accepted Answer

Encouraging emigration of highly skilled workers is not a DVC policy likely to increase economic growth as it leads to a brain drain and loss of expertise from the country. The other three options - encouraging foreign investment, opening up to world trade, and establishing independent central banks - are all policies that can lead to increased economic growth for DVCs.

Question 11

Large agricultural subsidies for food and fiber in IACs hurt the economies of the DVCs by

Accepted Answer

Large agricultural subsidies for food and fiber in IACs reduce world agricultural prices and thus reduce export income of the DVCs. This can harm the economies of DVCs, as their farmers might not be able to compete with the cheaper products produced in IACs. As a result, they might earn less income and struggle to invest in other sectors of the economy.

Question 12

If the real outputs per capita of a rich nation and a poor nation grow at the same percentage rate, the absolute income gap between the two nations will shrink.

Accepted Answer

Even if the real outputs per capita of a rich nation and a poor nation grow at the same percentage rate, the absolute income gap between the two nations may still widen if the rich nation's starting point was higher than the poor nation's starting point. For example, if the rich nation started with a real output per capita of $100,000 and the poor nation started with a real output per capita of $1,000, and both grew by 5%, the gap between them would increase by $4,750 over the course of a year ($5,000 increase for the rich nation minus $250 increase for the poor nation).

Question 13

Most of the DVCs of the world are located in Western Europe.

Accepted Answer

Most of the Developed Countries (DVCs) are spread across different regions including North America, Western Europe, and parts of Asia and Oceania, not predominantly in Western Europe.

Question 14

The most important growth obstacle common to all DVCs is the lack of desire to increase their standards of living.

Accepted Answer

The most important growth obstacle common to all DVCs is actually the lack of access to essential resources such as education, healthcare, infrastructure, and technology. While there may be varying degrees of desire to increase standards of living, it is not the most important obstacle to growth.

Question 15

The vast majority of the labor forces of the low-income DVCs are engaged in agriculture.

Accepted Answer

This statement is true. The low-income DVCs (Developing Countries) typically have a large proportion of their labor force engaged in agriculture.

Question 16

(Last Word) Providing poor families with grants if they send their children to school and get proper medical care is known as

Accepted Answer

Conditional cash transfers are a type of social welfare program where a government or organization provides cash payments to low-income families on the condition that they meet certain requirements, such as sending their children to school or getting proper medical care. This is different from unconditional cash transfers, which provide cash payments without any requirements, and in-kind transfers, which provide goods and services rather than cash.

Question 17

(Last Word) Early experiments with unconditional cash transfers have revealed that

Accepted Answer

Early experiments with unconditional cash transfers have shown that a majority of recipients use the money for training and equipment that results in a higher long-term income. This suggests that cash transfers can have a positive impact on the earning power of recipients.

Question 18

Which of the following DVC policies is not likely to increase DVC economic growth?

Accepted Answer

Restricting direct foreign investment from abroad is not likely to increase DVC economic growth because it limits the amount of capital available for investment and innovation, which are critical drivers of economic growth. Privatizing state industries, controlling population growth, and building human capital are all policies that can increase productivity and stimulate economic growth.

Question 19

The differences in the per capita incomes of the IACs and the DVCs have diminished sharply since the Second World War because of U.S.aid programs.

Accepted Answer

The statement is false. The differences in per capita incomes between the IACs (industrially advanced countries) and the DVCs (developing countries) have actually widened since the Second World War, despite U.S. aid programs.

Question 20

Saving is low in many DVCs primarily because income is very equally distributed.

Accepted Answer

Saving is low in many DVCs due to a range of factors, including low income levels, lack of access to financial services, political instability, and weak governance. Income inequality may be a contributing factor, but it is not the primary cause.

Quiz 42: The Economics of Developing Countries