Question 1

The purchasing power parity method of comparing income across countries is based on

Accepted Answer

The purchasing power parity method compares income across countries based on the cost of purchasing a specific bundle of goods and services in each country. This allows for a more accurate comparison of standards of living, as it takes into account differences in the prices of goods and services between countries. The exchange rate and size of government are not used in this method.

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 more developed nations requires investment and expertise. A less-developed nation must improve its institutions and create a favorable environment for investors to import capital and expertise in order to take advantage of these technologies and practices. Without this, the adoption of new ideas may not lead to substantial benefits.

Question 3

The rapid growth rates of less developed countries (LDCs)after adopting institutions and policies more favorable to economic freedom and voluntary exchange is not surprising when one considers that

Accepted Answer

LDCs have the opportunity to learn from and emulate successful practices and technologies from more developed nations, which can lead to rapid growth rates.

Question 4

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

Improving institutions such as legal systems, regulatory frameworks, and infrastructure will create an environment that is attractive to investors, entrepreneurs, and skilled workers. This will lead to increased investment, job creation, and economic growth. Without a sound institutional framework, modern technologies and business methods may not be able to achieve their full potential.

Question 5

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

Accepted Answer

Investment and productive activities require a certain level of trust and stability in institutions and policies. Discouraging market exchange or abolishing private property rights would not create a conducive environment for investment or productivity. Protecting people and their property and enforcing contracts even-handedly, on the other hand, would provide a sense of security for investors and entrepreneurs, encouraging them to engage in productive activities.

Question 6

To compare income across countries in a common currency,economists generally prefer to use the

Accepted Answer

The purchasing power parity (PPP) method is preferred by economists to compare income across countries in a common currency because it takes into account the relative cost of goods and services in different countries. This is important because exchange rates do not always accurately reflect these differences in costs, leading to a potentially distorted comparison of income levels. PPP adjusts for the variation in the cost of living across countries, allowing for a more accurate comparison of incomes.

Question 7

Which of the following is true regarding the growth record of LDCs over the past 25 years?

Accepted Answer

Not all LDCs have been growing rapidly, and it is not true that all have experienced negative growth rates. The growth record of LDCs over the past 25 years is actually mixed, with some countries experiencing high growth rates while others have not. Therefore, choice C is the most accurate statement.

Question 8

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 9

Which of the following countries had the highest growth rate of per capita GDP over the past 27 years?

Accepted Answer

China has had the highest growth rate of per capita GDP over the past 27 years, averaging 8.4% per year. Madagascar and Haiti have had much lower growth rates, and while the United States has had steady growth, it has not been as high as China's.

Question 10

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

Accepted Answer

Constitutional constraints that protect property rights and limit government intervention in the economy are essential for the emergence of good economic institutions and policies. This allows for a free market system, with minimal government interference, that encourages entrepreneurship and innovation. It also promotes a level playing field, where all individuals have an equal opportunity to succeed based on their own merit rather than social connections or political influence. Without these constitutional constraints, political institutions are more likely to become corrupt and work for the interests of a few powerful individuals or groups, leading to economic inefficiencies and inequality.

Question 11

Democracy tends to best promote freedom when there is

Accepted Answer

Constitutional protection of private property rights ensures individual freedom and prevents the government from abusing its power. Unrestrained executive and legislative majority power can lead to authoritarianism, and a large and centralized government sector can infringe on individual liberties. Therefore, the only choice that directly promotes freedom is constitutional protection of private property rights.

Question 12

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

Accepted Answer

All of the above (encourage market exchange, reward innovation, and protect people and their property) are important institutions and policies that create a conducive environment for investment and productive activities. When individuals and businesses can rely on a stable legal and institutional framework that protects their property rights and allows them to freely engage in market transactions, without fear of corruption or arbitrary regulatory interference, they are more likely to invest and innovate. This can lead to economic growth and development for the country as a whole.

Question 13

A country that organizes economic activity in a manner consistent with personal choice,voluntary exchange coordinated by markets,freedom to enter and compete in markets,and protection of persons and their property from aggression by others is said to have a high degree of

Accepted Answer

The description given in the question aligns with the concept of economic freedom, where individuals are free to make their own economic choices, participate in voluntary exchange through competitive markets, and have their property rights protected from aggression by others. Therefore, the country in question has a high degree of economic freedom.

Question 14

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

Accepted Answer

Economic institutions and policies are created and shaped by the political process. The decisions made by governments and policymakers in relation to taxation, property rights, trade, and regulation significantly affect the economic environment. Therefore, the emergence of sound economic institutions and policies depends on the effectiveness and accountability of the political process. However, it is not guaranteed that they will emerge, as political decisions may be influenced by corruption, rent-seeking, or short-term thinking.

Question 15

Democracy tends to best promote economic freedom when there is

Accepted Answer

Checks on the power of both the executive and legislative majorities ensure that the government does not overreach and restrict economic freedoms. Constitutional protection of private property rights ensures that individuals have the right to own and use their property as they see fit, without government interference. Political decentralization allows for more competition between local governments, which can lead to more favorable economic policies. Therefore, when all of these conditions are present in a democratic society, there is a greater likelihood that economic freedom will be promoted.

Question 16

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 diminishing returns to capital mean that each additional unit of capital will yield smaller increases in output as the level of capital stock increases. Since developed nations already have a higher level of capital per unit labor, a similar improvement in institutions and added capital would lead to smaller increments in production. Conversely, low-income nations with less capital stock will experience greater increases in production due to the same improvement in institutions and added capital.

Question 17

Which of the following countries has the highest per capita income?

Accepted Answer

Ireland has the highest per capita income among the given options. Malawi and Niger are both low-income countries with significantly lower per capita incomes than Ireland. Mexico has a higher per capita income than Malawi and Niger but is still lower than Ireland.

Question 18

Authoritarian political regimes

Accepted Answer

While authoritarian political regimes often face corruption and lack of accountability, there have been cases where such regimes have been able to implement sound economic policies and institutions, leading to economic growth and development. Examples include Chile under Pinochet and South Korea under Park Chung-hee. However, this does not mean that authoritarianism is necessary for the emergence or continued operation of sound economic institutions. It is possible for democratic governments to also implement effective economic policies and institutions.

Question 19

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 that...

Question 20

Which of the following provides the best explanation of why low-income countries generally remain poor?

Accepted Answer

Institutional arrangements and policies can have a significant impact on a country's economic development. If they discourage productive activity and reduce the potential gains from specialization and exchange, it can be difficult for people to earn higher incomes and for the country to achieve long-term growth.

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

The purchasing power parity method of comparing income across countries is based on

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 rapid growth rates of less developed countries (LDCs) after adopting institutions and policies more favorable to economic freedom and voluntary exchange is not surprising when one considers that

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

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

To compare income across countries in a common currency,economists generally prefer to use the

Which of the following is true regarding the growth record of LDCs over the past 25 years?

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

Which of the following countries had the highest growth rate of per capita GDP over the past 27 years?

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

Democracy tends to best promote freedom when there is

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

A country that organizes economic activity in a manner consistent with personal choice,voluntary exchange coordinated by markets,freedom to enter and compete in markets,and protection of persons and their property from aggression by others is said to have a high degree of

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

Democracy tends to best promote economic freedom when there is

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

Which of the following countries has the highest per capita income?

Authoritarian political regimes

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

Which of the following provides the best explanation of why low-income countries generally remain poor?