Question 1

Infrastructure is best illustrated by

Accepted Answer

Infrastructure refers to the fundamental facilities and systems serving a country, city, or area, including the services and facilities necessary for its economy to function, such as roads and bridges.

Question 2

Government can play a major positive role in the early stage of economic development by

Accepted Answer

Providing adequate infrastructure, such as roads, ports, and communication systems, can create an environment that facilitates trade and promotes economic growth. The other options, such as price controls and subsidies, can potentially distort market forces and hinder economic development.

Question 3

Which of the following statements is correct?

Accepted Answer

Investment levels in developing nations are often low due to a variety of factors, including limited access to capital, political instability, and inadequate infrastructure. This low level of investment hampers efforts to increase productivity and incomes, as there is less capital available for businesses to expand, innovate, and improve efficiency.

Question 4

Avenues for the government to foster economic growth and development include the following, except

Accepted Answer

Nationalization and protection of domestic industries can actually hinder economic growth and development by reducing competition and innovation. The other options listed are all proven methods for fostering economic growth and development.

Question 5

The diversion of surplus labor in agriculture to the production of schools or roads in developing countries is described as

Accepted Answer

The diversion of surplus labor in agriculture to the production of schools or roads in developing countries is an example of in-kind investment, where resources are invested directly into areas such as infrastructure and education rather than in monetary form. This strategy is aimed at creating long-term development and growth opportunities, and reducing poverty in the country. Land reform involves the redistribution of land to provide equal access to citizens, the brain drain refers to the emigration of skilled workers, and a capital-using technological advance refers to the use of technology in a way that requires more capital investment but less labor.

Question 6

If a local leader in a developing nation claims that there is little or no correlation between a person's efforts and the economic rewards that are given to that person, this leader is most likely expressing a

Accepted Answer

The answer of If a local leader in a developing...

Question 7

If it is cheaper in the long run to use a new metal plow that lasts a long time than an inferior wooden plow that needs to be replaced often, then this is an example of

Accepted Answer

The answer of If it is cheaper in the long...

Question 8

The vicious circle of poverty in the poorest DVCs can also be expressed as,

Accepted Answer

The phrase "The poor nations stay poor because they are poor" best summarizes the vicious circle of poverty in the poorest DVCs. This is because poverty leads to poor health and education outcomes, which in turn lead to limited opportunities and low productivity. Low productivity leads to low income levels, which perpetuate poverty and maintain the cycle. This cycle can be difficult to break without targeted interventions to address the root causes of poverty.

Question 9

Capital flight is a problem facing DVCs that involves the

Accepted Answer

Capital flight refers to the movement of money or assets out of a country, often from developing countries (DVCs) to industrialized or more economically stable countries (IACs), to seek a safer or more profitable investment environment. This can be due to economic instability, political uncertainty, or the desire for better returns, leading to a reduction in the available capital for investment within the DVCs.

Question 10

Which of the following is not a reason why government may play a key role in the early stage of economic development in developing nations?

Accepted Answer

The abundance of entrepreneurs in developing nations is not a reason for government intervention in the early stages of economic development. Instead, governments often need to step in to provide essential services and regulations that the private sector cannot or will not efficiently supply, such as infrastructure, encouragement of saving and investment, and law and order, rather than to regulate an abundance of entrepreneurs.

Question 11

An institutional change that is needed in most developing nations is

Accepted Answer

Land reform is necessary in most developing nations as it addresses the issue of unequal land distribution and helps in reducing poverty, increasing agricultural productivity, and promoting economic growth. It can provide access to land for landless and marginalized people, helping them to improve their livelihoods and contribute to economic development. Other options, such as the will to develop or reduced foreign aid, are more abstract and may not address the specific problems of each individual country. Birth control is also important, but it is a more specific solution that may not be as applicable to all developing nations.

Question 12

Many economists believe that the key to breaking the vicious circle of poverty is to

Accepted Answer

Increasing the rate of capital accumulation in poor nations can create more jobs and opportunities, leading to economic growth and development. This can help break the vicious cycle of poverty by creating a more stable economic environment and increasing access to education, healthcare, and other resources. Additionally, it can reduce the reliance on foreign aid and encourage investment from other countries. Cutting down mortality rates and reducing birth rates may also have positive effects on poverty reduction, but they may not be sufficient on their own. Increasing mobility of labor and migration may be beneficial in some cases, but can also have negative consequences such as brain drain and social disruption.

Question 13

What is the problem with saving in DVCs, even when saving as a percentage of domestic output is the same as in industrially advanced countries?

Accepted Answer

The issue with saving in Developing and Vulnerable Countries (DVCs) is that even if the saving rate as a percentage of domestic output matches that of industrially advanced countries, the overall lower level of domestic output in DVCs means that the absolute amount of savings generated is significantly smaller. This limits the funds available for investment and economic development.

Question 14

Which of the following is not an example of a sociocultural impediment to economic growth?

Accepted Answer

The migration of labor resources from agricultural to urban areas may actually promote economic growth by increasing productivity and providing opportunities for urbanization and industrialization. The other three options all involve cultural factors that can hinder economic development by limiting participation, mobility, and innovation.

Question 15

Which of the following is most characteristic of most developing nations?

Accepted Answer

Developing nations typically have low levels of saving and investment due to lower income levels, which restricts their ability to invest in infrastructure, education, and technology that could spur economic growth.

Question 16

Most economists agree that government efforts in economic development must be

Accepted Answer

Most economists agree that government efforts in economic development should be designed to support private efforts. This means that the government should not replace or crowd out private investment, but rather provide the necessary infrastructure, regulations, incentives, and public goods that facilitate private sector development. In this way, the government can create an environment that fosters innovation, competition, and productivity, which are essential for sustainable economic growth.

Question 17

Which of the following seems to be the most acute institutional problem that needs to be resolved by many DVCs?

Accepted Answer

Widespread political corruption is a common challenge faced by many DVCs. This issue undermines the efficient functioning of institutions and hinders economic progress. It also contributes to insecurity, inequality, and reduced social welfare. Therefore, addressing political corruption is a priority for DVCs to achieve sustainable development. The other options may also be important but are not as acute as political corruption.

Question 18

The "vicious circle of poverty" for developing nations can best be described by

Accepted Answer

The "vicious circle of poverty" refers to a self-reinforcing situation where low incomes prevent saving and investment in real and human capital, which in turn keeps productivity and income levels low, making it difficult for economies to break out of poverty.

Question 19

A new fertilizer that is better suited to a nation's topography and climate is an example of a technological advance that is

Accepted Answer

The new fertilizer is an example of a capital saving technological advance because it increases the productivity of existing capital (land), rather than requiring additional capital investment to achieve the same level of output.

Question 20

Which of the following would most help a developing country (DVC)break out of the vicious circle of poverty?

Accepted Answer

Increasing labor productivity would mean that workers are producing more goods and services in a given amount of time, which could lead to increased economic growth and higher incomes. This could help a DVC break out of the vicious circle of poverty. More consumption or more food production may not necessarily lead to sustained economic growth and could even exacerbate imbalances in resource allocation. Increasing the birth rate could strain already limited resources and aggravate poverty.

Quiz 28: The Economics of Developing Countries