Question 1

Which of the following is a true statement?

Accepted Answer

The answer of Which of the following is a true...

Question 2

In recent years, the governments of the IACs have

Accepted Answer

In recent years, the governments of the IACs have forgiven a portion of the debt owed by some low-income DVCs. This has been done to provide relief to the developing countries struggling with debt repayments and to promote economic growth. Option B is incorrect as reducing foreign aid to the DVCs would have a negative impact on their economic development. Option C is also incorrect as the contributions to the World Bank are essential in providing financial assistance to DVCs. Option D is incorrect as skilled DVC workers are encouraged to emigrate to the IACs to meet their workforce needs.

Question 3

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

Privatizing state industries would provide more incentives for employees to think and act like entrepreneurs because they would have a stake in the success of the business, and it would create a more competitive environment for business. Central planning or free trade would not necessarily address the issue, and free immigration and emigration may or may not be relevant to the development of entrepreneurial persons within state industries.

Question 4

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 as it limits the inflow of capital, technology, and expertise from foreign companies. This can limit opportunities for job creation and hinder economic development. Privatizing state industries, controlling population growth, and building human capital are policies that can contribute to economic growth by increasing efficiency, reducing dependency on the state, increasing productivity, and improving the quality of the workforce.

Question 5

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 6

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

Accepted Answer

Many low-income DVCs heavily rely on agriculture as their main source of income and employment.

Question 7

(Last Word) Loans offered through microcredit programs

Accepted Answer

Microcredit programs have high repayment rates, which is the result of a combination of factors including close monitoring and support from lenders, small loan sizes, and the use of social pressure for repayment. Studies have shown that microcredit programs can be effective in lifting borrowers out of poverty, although the impact varies depending on various factors such as the borrower's initial level of poverty and the type of business they start.

Question 8

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 9

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 export income of the DVCs, leading to negative impacts on their economies.

Question 10

Economic growth in the DVCs might increase if IACs

Accepted Answer

If IACs reduce their tariffs and import quotas, DVCs will have more access to larger markets and can export their goods more easily. This will lead to increased trade and economic growth in the DVCs.

Question 11

DVCs tend to have permanent shortages of farm labor.

Accepted Answer

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

Question 12

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

Accepted Answer

Low savings in many DVCs is due to various factors such as low income levels, lack of access to financial services, cultural factors, etc. One of the reasons mentioned in the statement - income being very equally distributed - may not necessarily lead to low savings. In fact, in certain cases, a more equal distribution of income might encourage higher savings and investments.

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 not the lack of desire to increase their standards of living, but rather the lack of resources and infrastructure to do so. Many factors contribute to this, including limited access to education and healthcare, inadequate transportation and communication systems, and a lack of investment in key economic sectors. Additionally, political instability and corruption can further impede growth and development in DVCs.

Question 15

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

Accepted Answer

Encouraging emigration of highly skilled workers would not increase DVC economic growth as it would result in a brain drain, where skilled workers leave the country and work abroad, leading to a loss of human capital and decreased economic growth. The other policies listed, such as encouraging direct foreign investment, opening economics to world trade, and establishing independent central banks, are all policies that can promote economic growth.

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

The option of providing grants to poor families who meet certain conditions like sending their children to school and ensuring proper medical care is known as conditional cash transfers. This approach aims to alleviate poverty while promoting education and health among the underprivileged sections of society.

Question 17

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

Accepted Answer

Early experiments with unconditional cash transfers have shown that the majority of recipients use the money for training and equipment that results in a higher long-term income. This suggests that cash transfers have the potential to increase people's earning power in the long run.

Question 18

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 19

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

While the percentage growth rate may be the same, the rich nation will still be starting from a much higher level of income than the poor nation. Therefore, even if both nations experience the same rate of growth, the absolute income gap between them will likely continue to widen over time.

Question 20

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

Accepted Answer

Early experience with conditional cash transfers has shown that while they can encourage school enrollment, the quality of education received can limit their ability to lift individuals out of poverty. There is also no significant improvement in nutrition and health compared to nonrecipients. While some studies have shown improvements in education and health, it is unclear whether these translate to significant earnings advantages over nonrecipients. However, it is important to note that the effectiveness of conditional cash transfers can vary depending on the specific program design and implementation.

Quiz 28: The Economics of Developing Countries