Question 1

Economic wealth is uncorrelated with the level of women's rights and political liberty in a country.

Accepted Answer

There is evidence to suggest that economic wealth has a positive correlation with the level of women's rights and political liberty. However, there are also examples of countries with high levels of economic wealth that have poor records on women's rights and political liberty, as well as countries with low levels of economic wealth that have relatively strong records in these areas. Therefore, a strong correlation between economic wealth and women's rights/political liberty cannot be assumed.

Question 2

Two people can benefit from trade if they both live in the same country, but not if they live in different countries.

Accepted Answer

Two people can still benefit from trade even if they live in different countries as long as they have different comparative advantages and can specialize in producing and exporting goods and services that are in high demand in the other country, and import goods and services that are cheaper or not available in their own country. This is the basis of international trade and globalization.

Question 3

If two countries are initially at the same level of development, the institution of well-functioning markets can allow one country to develop faster than the other.

Accepted Answer

The institution of well-functioning markets can lead to efficient allocation of resources, increased productivity, and higher economic growth. This can lead to one country developing faster than the other, even if they were initially at the same level of development.

Question 4

While economic growth does increase the quality of life, the trade-off is that life expectancy is now shorter than in the past.

Accepted Answer

This statement is incorrect. Economic growth has actually led to an increase in life expectancy over time due to improvements in healthcare, nutrition, and other factors.

Question 5

People in developing countries are more vulnerable to illness and disease than people in developed countries mainly because they lack the ability to pay for preventative interventions.

Accepted Answer

Developing countries often have a lack of resources and infrastructure, resulting in lower access to preventative interventions such as vaccines, clean water, and sanitation. This makes individuals in these countries more vulnerable to illnesses and diseases. Additionally, poverty and inadequate healthcare systems can further exacerbate the health disparities between developing and developed countries.

Question 6

In the process of trading in free markets, firms and consumers benefit but workers do not.

Accepted Answer

In free markets, firms and consumers benefit from increased competition and availability of goods and services, but workers can also benefit from increased job opportunities and higher wages as firms compete for their labor. Therefore, the statement is false.

Question 7

People in wealthier economies tend to lead richer and more fulfilled lives.

Accepted Answer

Wealthier economies usually provide better access to basic needs like food, shelter, healthcare, education, and job opportunities, which in turn leads to a better quality of life and greater fulfillment.

Question 8

The environment best suited for economic growth is one with well-functioning competitive markets, property rights, and creativity in its firms.

Accepted Answer

Research and empirical evidence show that well-managed competitive markets, secure property rights, and innovative companies are key determinants of economic growth. Competition stimulates productivity and reduces prices, while property rights protect investments and assets, giving individuals and firms incentives to undertake productive activities. Innovation promotes technological progress, leading to new products and services, improved efficiency, and increased economic growth. Together, these factors create an environment that fosters economic activity, job creation, and prosperity.

Question 9

Monetary and fiscal policies are among a government's tools for mitigating economic fluctuations.

Accepted Answer

Both monetary and fiscal policies are tools used by governments to stabilize the economy and respond to economic fluctuations. Monetary policy refers to actions taken by a central bank, such as adjusting interest rates or controlling the money supply, while fiscal policy refers to actions taken by a government, such as changing tax rates or increasing government spending. Both policies aim to influence aggregate demand and promote economic stability.

Question 10

America was so poor in past centuries that even George Washington caught malaria.

Accepted Answer

Malaria was prevalent in many parts of colonial America, including Virginia where George Washington lived. Poverty may have contributed to the spread of the disease as people lived in overcrowded and unsanitary conditions.

Question 11

Everyone can benefit from trade through increased specialization, division of knowledge, and productivity.

Accepted Answer

Trade allows individuals, businesses, and countries to specialize in what they do best, resulting in increased efficiency and productivity. This leads to a greater abundance of goods and services and ultimately benefits all parties involved.

Question 12

South Korea is an example of a country that has adopted good institutions for promoting economic growth.

Accepted Answer

South Korea is often cited as a success story of creating and implementing good institutional frameworks for economic growth. The country has established strong property rights, a stable political environment, and an efficient regulatory system, which has helped attract investments and foster economic development. South Korea's economic achievements over the past few decades, including the rise of Korean conglomerates (chaebols), high-tech industries, and global brands, are largely attributed to its favorable institutional setting.

Question 13

Greater emphasis on self-sufficiency and trading less with foreign countries would increase incomes and living standards in the United States.

Accepted Answer

Trading and interconnected global markets have contributed significantly to the growth and prosperity of the US economy. The US has a comparative advantage in certain industries, and trading with other countries allows for greater efficiency and access to goods and services that may not be available domestically. A focus on self-sufficiency and reduced trade with foreign countries would likely result in higher prices for goods and services, lower competitiveness, and reduced access to global markets, which could lead to lower incomes and living standards for US citizens.

Question 14

The economics of trade depends on whether the trading partners live in the same country and share the same language and religion.

Accepted Answer

The economics of trade depends on various factors such as economic policies, market conditions, exchange rates, transportation costs, tariffs, cultural differences, and political relationships. While sharing language and religion may facilitate trade by reducing communication barriers, it is not a necessary condition for trade to occur. In fact, numerous countries with different languages and religions engage in extensive trade and economic cooperation.

Question 15

For countries to be wealthy, they need lots of physical and human capital per worker, which, in turn, depends on a system of private property rights, political stability, a just legal system, honest government, and competitive and open markets.

Accepted Answer

This statement is true. Wealthy countries typically have high levels of physical and human capital per worker, which can be facilitated by factors such as private property rights, political stability, a just legal system, honest government, and competitive and open markets.

Question 16

Understanding economic growth is one of the most important tasks of economics.

Accepted Answer

Economic growth is a crucial aspect of economics as it determines the standard of living of a country. It refers to the increase in the production and consumption of goods and services over time, leading to an increase in prosperity and living standards. Therefore, understanding economic growth is essential for policymakers, economists, and individuals to make informed decisions for the overall development of the economy.

Question 17

While trade has many benefits, the division of knowledge is a negative outcome of trade.

Accepted Answer

The division of knowledge is a positive outcome of trade, as it allows for specialization and the sharing of expertise, leading to increased efficiency and innovation.

Question 18

The theory of comparative advantage concludes that people can produce more by specializing than by doing everything themselves.

Accepted Answer

The theory states that if individuals, countries or regions specialize in producing goods or services for which they have the lowest opportunity cost, they can enjoy greater production efficiency and ultimately produce more.

Question 19

Because of their low incomes, about a million people in the United States die from malaria each year.

Accepted Answer

This statement is false. Malaria is not endemic in the United States, and only a few cases are reported each year in travelers returning from affected areas. Additionally, the vast majority of malaria deaths worldwide occur in sub-Saharan Africa, where poverty and lack of access to healthcare are major contributing factors.

Question 20

The Federal Reserve acted quickly and appropriately to diffuse the Great Depression.

Accepted Answer

The Federal Reserve's tight monetary policies during the early years of the Great Depression have been widely criticized for worsening the economic downturn. The Fed's decision to raise interest rates and reduce the money supply in 1929 and 1930 made it more difficult for banks to lend and for businesses to invest, exacerbating deflation and unemployment. It wasn't until 1932 that the Federal Reserve began to implement expansionary policies, which helped to stabilize the economy but did not fully reverse the damage done by the previous years of contraction.

Quiz 1: The Big Ideas