Ch.17 Economic Growth Around The World Test Bank Answers - Principles of Macroeconomics -Complete Test Bank by Taylor. DOCX document preview.
Chapter 17
Economic Growth Around the World
Multiple Choice
1. The first of the United Nations Millennium Development Goals was to
a. | completely move those living in absolute poverty to the developed world. |
b. | double the amount of food production by 2030. |
c. | reduce the share of the world population living with an income of less than $1 a day by half. |
d. | raise the world’s GDP by 50 percent. |
e. | eliminate poverty by 2020. |
OBJ: factual
SEC: 0. Economic Growth Around the World
TOP: Economic Growth
MSC: Bloom's: Knowledge
2. One drawback of globalization is that
a. | economic fluctuations in one country will have an effect on other countries. |
b. | more countries will carry a national debt. |
c. | some countries can more easily exploit other countries. |
d. | one country can gain only if another country loses. |
e. | some countries will lose because of competition from foreign producers. |
OBJ: factual
SEC: 0. Economic Growth Around the World
TOP: Economic Growth Theory
MSC: Bloom's: Analysis | AACSB: Analytic
/
3. The global financial crisis that began in December of 2007 has revealed that the world is not as interconnected as most economists expected.
Basic
OBJ: conceptual | factual
SEC: 0. Economic Growth Around the World
TOP: Economic Growth
MSC: Bloom's: Knowledge
Multiple Choice
4. According to economic growth theory, if the spread of technology is not difficult, we would expect
a. | countries with lower productivity to adopt newer technology and raise their productivity. |
b. | countries with high levels of income per capita to continue growing faster than countries with low incomes per capita. |
c. | the elimination of diminishing returns to labor. |
d. | an increase in the diminishing returns to capital. |
e. | the elimination of diminishing returns to capital. |
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Growth Theory Predictions
MSC: Bloom's: Knowledge
5. Economic growth theory predicts that
a. | the amount of capital per hour of work is not a factor in determining growth. |
b. | regions with low levels of productivity will grow faster than regions with high levels of productivity. |
c. | the higher the amount of capital per hour worked, the more likely a country is to grow. |
d. | an economy's rate of growth is directly related to the amount of capital per hour worked. |
e. | only countries with low amounts of capital per hour of work can grow. |
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Growth Theory Predictions
MSC: Bloom's: Analysis | AACSB: Analytic
6. Economic growth theory predicts that poor countries will catch up with rich countries because
a. | productivity has tended to grow faster in the poor countries over time than in the rich countries. |
b. | the higher level of capital per worker in poor countries will attract more investment funds. |
c. | the higher level of capital per worker in rich countries will attract fewer investment funds. |
d. | the higher level of productivity in poor countries will attract more investment funds. |
e. | the higher level of productivity in rich countries will attract more investment funds. |
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Economic Growth Theory
MSC: Bloom's: Analysis | AACSB: Analytic
7. A line showing the inverse relationship between the level of productivity and the growth rate of productivity is referred to as the
a. | production function. |
b. | productivity function. |
c. | aggregate demand curve. |
d. | catch-up line. |
e. | growth accounting line. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Line
MSC: Bloom's: Knowledge
8. The main purpose of the catch-up line is to show
a. | how uneven the growth rate has been in different countries or regions of the world. |
b. | income inequality between different countries or regions. |
c. | how well the productivity level predicts the rate of productivity growth. |
d. | how well the productivity growth rate predicts the level of productivity. |
e. | that catch-up has occurred. |
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Line
MSC: Bloom's: Analysis | AACSB: Analytic
9. The catch-up line
a. | is vertical. |
b. | is horizontal. |
c. | is downward sloping. |
d. | is upward sloping. |
e. | has a V-shape. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Line
MSC: Bloom's: Knowledge
10. Economic growth theory predicts that poor countries will
a. | never be able to catch up with rich countries. |
b. | not be able to catch up with rich countries because rich countries will always have a higher growth potential than poor countries. |
c. | be able to catch up with rich countries because the existing level of low productivity in poor countries attracts investment. |
d. | never be able to catch up with rich countries because the existing level of low productivity in poor countries deters investment. |
e. | be able to catch up with rich countries because rich countries will run out of investment opportunities and will be forced to rely on investment opportunities in the poor countries. |
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Economic Growth Theory
MSC: Bloom's: Analysis | AACSB: Analytic
11. Data for the states within the United States show that states with low real income per capita in 1880
a. | tended to grow at faster rates. |
b. | tended to grow at slower rates. |
c. | tended to have negative growth rates. |
d. | have higher income per capita than states with high real income per capita in 1880. |
e. | do not exist today. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Economic Growth Theory
MSC: Bloom's: Knowledge | AACSB: Analytic
12. The historical growth experience of California
a. | was consistent with the catch-up line. |
b. | was opposite to the catch-up line. |
c. | cannot be explained by the catch-up line. |
d. | was consistent with the catch-up line only from 1960 to 2000. |
e. | was sometime consistent with the catch-up line and sometime against it. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Economic Growth Theory
MSC: Bloom's: Knowledge | AACSB: Analytic
/
13. Data from the 50 U.S. states support the catch-up line theory.
Basic
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Productivity Growth
MSC: Bloom's: Knowledge
14. Data from the 50 U.S. states show that higher-income states have higher growth rates.
Basic
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Productivity Growth
MSC: Bloom's: Knowledge
Multiple Choice
15. A country located on the upper-left-hand corner of the catch-up line is
a. | a rich country enjoying rapid growth rates. |
b. | a poor country experiencing slow growth rates. |
c. | a rich country experiencing slow growth rates. |
d. | a poor country experiencing rapid growth rates. |
e. | Not enough information is given. |
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Line
MSC: Bloom's: Analysis | AACSB: Analytic
16. A country located on the lower-right-hand corner of the catch-up line is
a. | Not enough information is given. |
b. | a rich country experiencing slow growth rates. |
c. | a poor country experiencing slow growth rates. |
d. | a poor country experiencing rapid growth rates. |
e. | a rich country enjoying rapid growth rates. |
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Line
MSC: Bloom's: Analysis | AACSB: Analytic
17. According to the catch-up phenomenon, a rich country like the United States will
a. | grow at a slower rate than a poor country. |
b. | grow at a constant rate indefinitely. |
c. | grow faster over time. |
d. | become a poor country over time. |
e. | become less productive immediately. |
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Line
MSC: Bloom's: Analysis | AACSB: Analytic
/
18. The theory of diminishing returns leads to the prediction that poor countries will catch up with rich countries.
Basic
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Diminishing Returns and Catch-Up
MSC: Bloom's: Knowledge
19. All else equal, regions with high capital per worker ratios should exhibit slower rates of growth than regions with low capital per worker ratios.
Moderate
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Diminishing Returns and Productivity
MSC: Bloom's: Analysis | AACSB: Analytic
20. If country B has a higher level of productivity than country A, we would predict country B's future rate of growth to be less than country A's.
Moderate
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Productivity Levels and Rates
MSC: Bloom's: Analysis | AACSB: Analytic
21. Growth theory predictions support what has been happening in the world economy over the past 100 years.
Moderate
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Predictions of Economic Growth Theory
MSC: Bloom's: Analysis | AACSB: Analytic
22. The catch-up line indicates that a lower growth rate productivity is related to a higher level of productivity.
Moderate
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Predictions of Economic Growth Theory
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
23. Which of the following statements is ?
a. | There is no correlation between a state's per capita income in 1880 and its growth rate over the past century. |
b. | States with low income per capita in 1880 had the same growth rates over the past century as states that had higher income per capita in 1880. |
c. | States with low income per capita in 1880 had higher growth rates over the past century than states that had higher income per capita in 1880. |
d. | States with low income per capita in 1880 had lower growth rates over the past century than states that had higher income per capita in 1880. |
e. | States with low income per capita in 1880 used aggressive growth policies to accelerate their growth rates. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Correlation between Per Capita Income and Productivity Growth
MSC: Bloom's: Knowledge
24. Japan is an example of a country
a. | that had lower per capita income than the United States in 1960 and grew more rapidly than the United States between 1960 and 2005. |
b. | that had lower per capita income than the United States in 1960 and grew less rapidly than the United States between 1960 and 2005. |
c. | that did not grow between 1960 and 2005. |
d. | that had higher per capita income than the United States in 1960 and grew less rapidly than the United States between 1960 and 2005. |
e. | in transition. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: An Example of Catching Up
MSC: Bloom's: Analysis | AACSB: Analytic
25. In terms of the catch-up line for advanced countries from 1960 to 2005, New Zealand is an example of a country that
a. | was richer and therefore grew less rapidly. |
b. | was poorer and therefore grew less rapidly. |
c. | was richer and therefore grew more rapidly. |
d. | was poorer and therefore grew more rapidly. |
e. | None of these |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up
MSC: Bloom's: Analysis | Bloom's: Knowledge
26. When comparing the advanced countries of the world,
a. | countries with high per capita income in 1960 experienced high growth rates between 1960 and 2005. |
b. | every country experienced the same growth rate between 1960 and 2005, regardless of its size in 1960. |
c. | the evidence does not support the catch-up behavior predicted by growth theory. |
d. | countries with low per capita income in 1960 experienced low growth rates between 1960 and 2005. |
e. | the evidence supports the catch-up behavior predicted by growth theory. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Historical Experience
MSC: Bloom's: Analysis | AACSB: Analytic
/
27. For the most advanced countries, there is an inverse relationship between the growth rate and the productivity level.
Basic
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Rate of Growth and Level of Productivity
MSC: Bloom's: Knowledge
28. Data from the most advanced economies support the catch-up theory.
Moderate
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up in Western Europe
MSC: Bloom's: Analysis | AACSB: Analytic
29. In terms of the catch-up line for advanced countries from 1960 to 2005, Japan is an example of a country that was richer and therefore grew less rapidly.
Basic
OBJ: conceptual | factual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up MSC: Bloom's: Knowledge
30. GDP per capita has been a good predictor of productivity growth in the developed countries.
Basic
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: GDP Per Capita as a Predictor of Growth
MSC: Bloom's: Knowledge
Multiple Choice
31. Which of the following statements is ?
a. | Growth theory cannot explain the growth pattern experienced by the whole world. |
b. | Growth theory does not explain the growth pattern experienced by the United States. |
c. | Growth theory does not explain the growth pattern experienced by the developed countries of the world. |
d. | Growth theory explains the growth pattern experienced by the whole world. |
e. | The growth experiences of Portugal and Spain are counter to what growth theory would have predicted. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Pattern of Growth
MSC: Bloom's: Knowledge
32. The figure below most closely depicts
a. | the growth pattern of Western Europe. |
b. | the growth pattern of the whole world. |
c. | the growth experience of the various states of the United States. |
d. | the growth pattern of the developed world. |
e. | None of these |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Pattern of Growth
MSC: Bloom's: Analysis | AACSB: Analytic
33. Which of the following statements is ?
a. | All countries with low productivity levels in 1960 grew slowly between 1960 and 2005. |
b. | Since the United States had the highest productivity level in 1960, it was the slowest-growing country in the world between 1960 and 2005. |
c. | Countries with high productivity levels in 1960 grew the fastest between 1960 and 2005. |
d. | All countries with low productivity levels in 1960 grew rapidly between 1960 and 2005. |
e. | There is little correlation between the productivity level in 1960 and the growth rate between 1960 and 2005 for the developing countries. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Pattern of Growth
MSC: Bloom's: Analysis | AACSB: Analytic
34. Which of the following statements is ?
a. | Bangladesh, Indonesia, South Korea, and Ethiopia had the same level of real GDP per capita in 1960 as well as the same rate of economic growth between 1960 and 2005. |
b. | Bangladesh, Indonesia, South Korea, and Ethiopia had the same rate of economic growth between 1960 and 2005; however, South Korea's and Singapore's levels of real GDP per capita were twice that of Bangladesh and Ethiopia. |
c. | Indonesia's and South Korea's growth rates between 1960 and 2005 and their level of per capita real GDP in 1960 were twice that of Bangladesh and Ethiopia. |
d. | Indonesia's and South Korea's growth rates between 1960 and 2005 were much higher than Bangladesh's and Ethiopia's even though the level of real per capita GDP in 1960 was almost the same for all four of these countries. |
e. | What happened in terms of economic growth to Bangladesh and Ethiopia between 1960 and 2005 did not happen to any other poor countries. |
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Pattern of Growth
MSC: Bloom's: Analysis | AACSB: Analytic
/
35. Evidence suggests that catch-up is not occurring among all countries of the world.
Basic
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up
MSC: Bloom's: Knowledge
36. Evidence from the developing countries supports the predictions of economic growth theory.
Basic
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Evidence from Developing Countries
MSC: Bloom's: Knowledge
37. Between 1960 and 2005 Indonesia and South Korea had higher growth rates than Nigeria and Ethiopia even though the levels of real per capita income in Indonesia and South Korea were much higher in 1960.
Basic
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Evidence from Developing Countries
MSC: Bloom's: Knowledge
38. South Korea's development in the last 40 years (or lack thereof) represents clear evidence against the economic growth theory, as its data do not fall along the catch-up line.
Moderate
OBJ: conceptual | factual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up; Evidence from Developing Countries
MSC: Bloom's: Analysis | AACSB: Analytic
39. Nigeria's development in the last 40 years (or lack thereof) represents evidence against the economic growth theory, as its data do not fall along the catch-up line.
Challenging
OBJ: conceptual | factual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up; Evidence from Developing Countries
MSC: Bloom's: Analysis | AACSB: Analytic
40. For the world as a whole, the level of per capita GDP is a poor predictor of a country's economic growth.
Moderate
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Per Capita GDP as a Predictor of Growth
MSC: Bloom's: Analysis | AACSB: Analytic
Short Answer
41. Explain how the catch-up theory depends upon diminishing returns to capital, the adaptability of technology, and the free, riskless flow of investment funds.
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Theory
MSC: Bloom's: Analysis | AACSB: Analytic
42. According to economic growth theory, how does a country's current productivity level predict its future growth rate?
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Economic Growth Theory
MSC: Bloom's: Analysis | AACSB: Analytic
43. According to economic growth theory, what should happen to the productivity level in all countries of the world in the long run? What is a key assumption of this prediction?
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up
MSC: Bloom's: Knowledge
44. Have the predictions of growth theory proven for the states of the United States? Why?
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: U.S. Economic Growth
MSC: Bloom's: Knowledge
45. Does the growth experience of poorer countries of the world support the predictions of growth theory? Why or why not?
OBJ: factual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up
MSC: Bloom's: Analysis | AACSB: Analytic
46. The table below shows the level of GDP per capita in 1900 for four regions of the world, as well as their growth rates between 1900 and 1938. Plot this table to determine whether catch-up is likely to occur among these regions. Does growth theory explain the growth experience of these regions between 1900 and 1938?
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Line
MSC: Bloom's: Analysis | AACSB: Analytic
47. What can be said about the accuracy of growth theory predictions for the group of countries shown in the table below?
OBJ: conceptual
SEC: 1. Catching Up (or Not?)
TOP: Catch-Up Line
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
48. Economic development is
a. | the branch of economics that studies economic growth. |
b. | another name for economic growth. |
c. | the branch of economics that studies why the catch-up theory has not applied in all parts of the world. |
d. | the branch of economics that studies the history of economic growth. |
e. | another name for welfare economics. |
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge | AACSB: Analytic
49. Developing countries include all the following except
a. | relatively poor countries. |
b. | emerging markets. |
c. | less-developed countries. |
d. | advanced economies. |
e. | low-income countries. |
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge
50. Which of the following is a developing country?
a. | Australia |
b. | Portugal |
c. | Japan |
d. | Indonesia |
e. | Italy |
OBJ: factual
SEC: 2. Economic Development
TOP: Developing Country
MSC: Bloom's: Knowledge
51. Which of the following is an industrialized country?
a. | Bangladesh |
b. | Russia |
c. | Korea |
d. | Italy |
e. | China |
OBJ: factual
SEC: 2. Economic Development
TOP: Industrialized Countries
MSC: Bloom's: Knowledge
52. Which of the following is an emerging market country?
a. | Japan |
b. | Philippines |
c. | Italy |
d. | Ethiopia |
e. | Chile |
OBJ: factual
SEC: 2. Economic Development
TOP: Emerging Market Countries
MSC: Bloom's: Knowledge
53. Which of the following is considered a developing country?
a. | United States |
b. | Japan |
c. | China |
d. | Canada |
e. | Korea |
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge
54. Which of the following is considered an emerging market country?
a. | United States |
b. | Japan |
c. | Mexico |
d. | Germany |
e. | Italy |
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge
55. An emerging market is a country that
a. | became a country after World War II. |
b. | was once poor but has since grown rapidly. |
c. | is at a stage of development ahead of an advanced economy. |
d. | has experienced no economic development. |
e. | has always depended on the growth of other countries. |
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge
56. Which of the following is not a unique feature of poor countries?
a. | Limited stocks of capital per worker |
b. | Diminishing returns to capital |
c. | Poor distribution systems |
d. | Poor educational systems |
e. | Political repression |
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge
57. For the majority of people in the world, per capita income is
a. | greater than $7,000. |
b. | greater than $10,000. |
c. | greater than $15,000. |
d. | less than $5,000. |
e. | greater than $5,000. |
OBJ: factual
SEC: 2. Economic Development
TOP: Income Distribution
MSC: Bloom's: Knowledge
58. The percentage of the world population with an income less than $5,000 is approximately
a. | 45 percent. |
b. | 90 percent. |
c. | 10 percent. |
d. | 2 percent. |
e. | 20 percent. |
OBJ: factual
SEC: 2. Economic Development
TOP: Income Distribution
MSC: Bloom's: Knowledge | AACSB: Analytic
59. The share of the population in the world living with less than two U.S. dollars a day is
a. | about 50 percent. |
b. | about 25 percent. |
c. | 10 percent. |
d. | 2 percent. |
e. | 90 percent. |
OBJ: factual
SEC: 2. Economic Development
TOP: Income Distribution
MSC: Bloom's: Knowledge
60. The richest countries in the world are those with a per capita income of more than
a. | $1,000. |
b. | $5,000. |
c. | $500,000. |
d. | $120,000. |
e. | $30,000. |
OBJ: factual
SEC: 2. Economic Development
TOP: Richest Countries
MSC: Bloom's: Knowledge
61. Which of the following is not a fact about economic development in today's world?
a. | Every year, some 3 million people die for lack of immunization worldwide. |
b. | Every year, some 1 million people die from malaria worldwide. |
c. | Every year, some 3 million people die from water-related diseases worldwide. |
d. | Every year, some 2 million people die from exposure to stove smoke inside their houses worldwide. |
e. | Today there are less than 200 million people living on less than the equivalent of $2 a day worldwide. |
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Analysis | AACSB: Analytic
62. Of the total amount of the world's GDP, approximately what percentage comes from developing countries in Africa?
a. | 3 percent |
b. | 15 percent |
c. | 10 percent |
d. | 20 percent |
e. | 25 percent |
OBJ: factual
SEC: 2. Economic Development
TOP: Africa's Share of GDP
MSC: Bloom's: Knowledge
63. For the most part, when making international geographic distinctions, it is accurate to say that
a. | the South is generally richer than the North. |
b. | the West is generally richer than the East. |
c. | there is no geographic pattern between rich and poor countries. |
d. | the East is generally richer than the West. |
e. | the North is generally richer than the South. |
OBJ: factual
SEC: 2. Economic Development
TOP: North-South Problem
MSC: Bloom's: Knowledge
64. Two countries that don't conform to the North-South income distribution pattern are
a. | Japan and Uruguay. |
b. | Korea and Japan. |
c. | Australia and New Zealand. |
d. | Italy and Portugal. |
e. | Norway and Ireland. |
OBJ: factual
SEC: 2. Economic Development
TOP: North-South Problem
MSC: Bloom's: Knowledge | AACSB: Analytic
65. Of the total amount of GDP produced in the world today, industrialized countries produce approximately
a. | 75 percent. |
b. | 33 percent. |
c. | 15 percent. |
d. | 25 percent. |
e. | 54 percent. |
OBJ: factual
SEC: 2. Economic Development
TOP: Output of Industrialized Countries
MSC: Bloom's: Knowledge
66. Approximately what percentage of the world's GDP is produced by the developing countries in Asia?
a. | 10 percent |
b. | 15 percent |
c. | 5 percent |
d. | 27 percent |
e. | 60 percent |
OBJ: factual
SEC: 2. Economic Development
TOP: Asia's Share of World GDP
MSC: Bloom's: Knowledge
67. Which of the following statements is ?
a. | China has a lower level of GDP per capita than Japan, but a higher level of GDP than Japan. |
b. | China's GDP and GDP per capita are lower than Japan's. |
c. | China's GDP and GDP per capita are greater than Japan's. |
d. | China has a higher level of GDP per capita than Japan, but a lower level of GDP than Japan. |
e. | China's GDP is the same as Japan's, and its level of GDP per capita is lower than Japan's. |
OBJ: factual
SEC: 2. Economic Development
TOP: China and Japan
MSC: Bloom's: Analysis | AACSB: Analytic
68. All of the following are part of the “Emerging Africa” except
a. | Tanzania. |
b. | South Africa. |
c. | Ghana. |
d. | Zambia. |
e. | Zimbawe. |
OBJ: factual
SEC: 2. Economic Development
TOP: Emerging Africa
MSC: Bloom's: Knowledge
/
69. Economic development economists focus primarily on how less developed countries can attract more investment funds from developed countries.
Moderate
OBJ: factual
SEC: 2. Economic Development
TOP: Development Economies
MSC: Bloom's: Analysis | AACSB: Analytic
70. The term developing country describes those countries that are relatively poor.
Basic
OBJ: conceptual
SEC: 2. Economic Development
TOP: Developing Country
MSC: Bloom's: Knowledge
71. A developing country refers to a country that is growing rapidly.
Basic
OBJ: conceptual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge
72. An emerging market country is a developing country.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: Emerging Market Countries
MSC: Bloom's: Knowledge
73. Huge disparities in world income distribution remain today.
Basic
OBJ: conceptual | factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge
74. China's GDP is larger than Japan's.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: China and Japan
MSC: Bloom's: Knowledge
75. China is now the world’s second largest economy and so it is classified as an advanced economy.
Basic
OBJ: conceptual | factual
SEC: 2. Economic Development
TOP: China and Japan
MSC: Bloom's: Knowledge | AACSB: Analytic
76. Today, there are more than 3 billion people, which is about half the human race, who live on less than the equivalent of $2 per day.
Moderate
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Analysis | AACSB: Analytic
77. More than 50 percent of the world's GDP comes from industrialized countries.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: Distribution of the World's GDP
MSC: Bloom's: Knowledge
78. The majority of the world's population has an annual income between $5,000 and $10,000.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: Income Distribution
MSC: Bloom's: Knowledge
79. The majority of the people in the world have a per capita income less than $5,000.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: Income Distribution
MSC: Bloom's: Knowledge
80. Income per capita in sub-Saharan African countries is about 2 percent to 3 percent of that in the United States.
Moderate
OBJ: factual
SEC: 2. Economic Development
TOP: Income Distribution
MSC: Bloom's: Knowledge
81. Income per capita in Argentina and Venezuela is about one-third that in the United States.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: Income Distribution
MSC: Bloom's: Knowledge
82. There is no connection between a country's geographic location and its per capita income level.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: North-South Problem
MSC: Bloom's: Knowledge
83. HIV-AIDS has killed about 3 billion people in Africa.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Development
MSC: Bloom's: Knowledge
84. The "East-West problem" is the phrase most often used to describe the world's income disparity problem.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: North-South Problem
MSC: Bloom's: Knowledge
85. One of the major purposes of the Meiji Restoration in Japan was to import Western technology into the Japanese economy.
Moderate
OBJ: factual
SEC: 2. Economic Development
TOP: Meiji Restoration
MSC: Bloom's: Knowledge
86. Economic development has never taken off in Africa.
Basic
OBJ: factual
SEC: 2. Economic Development
TOP: Emerging Africa
MSC: Bloom's: Knowledge
Short Answer
87. Is the world distribution of income per capita skewed (that is, highly unequal)? Explain.
OBJ: factual
SEC: 2. Economic Development
TOP: World Income Distribution
MSC: Bloom's: Knowledge | AACSB: Analytic
88. Is there a geographical pattern to the distribution of income in the world?
OBJ: factual
SEC: 2. Economic Development
TOP: North-South Problem
MSC: Bloom's: Knowledge
89. What justifies the proposition that China is a major force in the world economy?
OBJ: factual
SEC: 2. Economic Development
TOP: China's GDP
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
90. Two important facts about economic growth to remember are that large and persistent economic growth
a. | has occurred throughout history and economic growth has spread throughout much of the world. |
b. | began about 200 years ago and economic growth has spread throughout much of the world. |
c. | began about 200 years ago and economic growth has not spread throughout much of the world. |
d. | has occurred throughout history and economic growth has not spread throughout much of the world. |
e. | began about 100 years ago and economic growth has not spread throughout much of the world. |
OBJ: factual
SEC: 2. Economic Development
TOP: Economic Growth
MSC: Bloom's: Knowledge
91. Which of the following is ?
a. | Sustained economic growth began in the late 1700s, and it has spread throughout the world. |
b. | Sustained economic growth began in the late 1400s, and it has spread throughout the world. |
c. | For most of history, there has been no sustained economic growth. |
d. | Sustained economic growth has been occurring since the dawn of civilization, and it has spread throughout the world. |
e. | Sustained economic growth has always occurred in some countries, but it has spread unevenly. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Economic Growth
MSC: Bloom's: Knowledge
92. For most of history until the industrial revolution, the rate of economic growth throughout the world has averaged
a. | 1 percent. |
b. | 0 percent. |
c. | 3 percent. |
d. | 4 percent. |
e. | 2 percent. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Economic Growth
MSC: Bloom's: Knowledge
93. At the time of the Industrial Revolution,
a. | Europe was much more advanced in scientific knowledge than China or the Islamic nations. |
b. | Europe was first discovering the benefits of colonialism. |
c. | Europe had more natural resources than any other part of the world. |
d. | Europe was beginning to understand how slavery could advance economic development. |
e. | None of these. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Industrial Revolution
MSC: Bloom's: Analysis | AACSB: Analytic
94. Which of the following best explains why the Industrial Revolution began where it did?
a. | Strong government leadership |
b. | Colonialism and slavery |
c. | A larger stock of key natural resources |
d. | Capitalism |
e. | The more advanced state of scientific knowledge |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Industrial Revolution
MSC: Bloom's: Analysis | AACSB: Analytic
95. Which of the following was missing in countries that missed out on the Industrial Revolution?
a. | Strong government leadership |
b. | The more advanced state of scientific knowledge |
c. | Colonialism and slavery |
d. | A larger stock of key natural resources |
e. | Individual property rights |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Industrial Revolution
MSC: Bloom's: Knowledge
96. The establishment and recognition by courts of law of individual property rights
a. | made it more difficult for entrepreneurs to earn profits. |
b. | has been shown to have little effect on technological development. |
c. | did not occur until the twentieth century. |
d. | enabled entrepreneurs to keep the profits they earned. |
e. | enabled nobles and kings to confiscate profits. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Establishment of Individual Property Rights
MSC: Bloom's: Knowledge
97. According to Karl Marx,
a. | the development of science was the key to economic growth. |
b. | Malthus's predictions were coming true. |
c. | the bourgeois class inhibited growth. |
d. | the creation of the bourgeois class was the key to economic growth. |
e. | economic growth cannot occur under capitalism. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Karl Marx
MSC: Bloom's: Knowledge
/
98. The Industrial Revolution started in the United States.
Moderate
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Industrial Revolution
MSC: Bloom's: Knowledge
99. Examining the historical experience of the developed countries is of little value in explaining why today's poor countries remain poor.
Moderate
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Economic Growth
MSC: Bloom's: Analysis | AACSB: Analytic
100. More advanced scientific knowledge is the main reason why the Industrial Revolution occurred when and where it did.
Basic
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Causes of the Industrial Revolution
MSC: Bloom's: Knowledge
101. Countries lacking an adequate endowment of natural resources have tended to remain poor.
Basic
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Causes of the Industrial Revolution
MSC: Bloom's: Knowledge
102. The establishment of individual property rights played an important role in European economic growth.
Basic
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Individual Property Rights
MSC: Bloom's: Knowledge
103. Karl Marx argued that the bourgeoisie inhibited growth in the late 1700s.
Moderate
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Bourgeois Class
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
104. Many of today's developing countries lack
a. | the government leadership necessary to escape poverty. |
b. | the necessary scientific knowledge to escape poverty. |
c. | an adequate supply of natural resources. |
d. | a sufficient amount of government regulation necessary to escape poverty. |
e. | individual property rights. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Property Rights
MSC: Bloom's: Analysis | AACSB: Analytic
105. The emergence of informal sectors in developing economies is due to
a. | the low income of the population. |
b. | heavy restrictions on businesses. |
c. | the emergence of a service economy. |
d. | the lack of an industrial base. |
e. | the drug trade. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Informal Sector
MSC: Bloom's: Knowledge
106. Informal sector is a term used to describe
a. | one- or two-person firms. |
b. | service-related industries. |
c. | businesses that operate on barter. |
d. | illegal businesses. |
e. | part-time businesses. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Informal Sector
MSC: Bloom's: Knowledge
107. The size of the informal economy is
a. | directly related to the government's willingness to support individual property rights. |
b. | usually small in developing countries. |
c. | directly related to the cost of setting up a legal business. |
d. | inversely related to the cost of setting up a legal business. |
e. | determined mainly by the drug trade. |
OBJ: conceptual
SEC: 3. The Spread and Use of Technology
TOP: Informal Economy
MSC: Bloom's: Analysis | AACSB: Analytic
108. The informal economy in many less developed countries
a. | consists of legitimate businesses that do not want to take the time to fill out the required paperwork. |
b. | has better defined property rights than the formal sector. |
c. | tends to be less productive than the formal economy. |
d. | tends to be smaller than the formal economy. |
e. | exists mainly because people are uneducated. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Informal Sector
MSC: Bloom's: Analysis | AACSB: Analytic
109. An important precondition that enables a country to adopt existing technology is
a. | the establishment of a bourgeois class. |
b. | a supply of well-trained and highly skilled workers. |
c. | the existence of a manufacturing sector. |
d. | the establishment of an informal sector. |
e. | the establishment of a service sector. |
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Human Capital
MSC: Bloom's: Analysis | AACSB: Analytic
/
110. Private property enables entrepreneurs to capture the benefits of taking risks.
Basic
OBJ: conceptual
SEC: 3. The Spread and Use of Technology
TOP: Private Property
MSC: Bloom's: Knowledge
111. The informal economy has been beneficial to Peru's development.
Basic
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Peru's Informal Economy
MSC: Bloom's: Knowledge
112. There is a positive correlation between the size of an informal economy and the cost of setting up a legal business.
Moderate
OBJ: conceptual
SEC: 3. The Spread and Use of Technology
TOP: Informal Economy
MSC: Bloom's: Analysis | AACSB: Analytic
113. A wise development strategy would be to find a way to quickly bring all the informal sector businesses into the formal sector.
Moderate
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Informal Economy
MSC: Bloom's: Analysis | AACSB: Analytic
114. Human capital is needed in order for technology to be adopted.
Basic
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Human Capital
MSC: Bloom's: Knowledge
115. Differences in human capital do not explain different rates of catch-up.
Moderate
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Human Capital
MSC: Bloom's: Analysis | AACSB: Analytic
116. The Millennium Challenge Corporation (MCC) was created in 2003 by the U.S. Congress, and its stated mission goal is to reduce poverty by promoting economic growth.
Basic
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Foreign Aid
MSC: Bloom's: Knowledge
117. One of the 16 indicators used by the Millennium Challenge Corporation (MCC) to determine which countries obtain American foreign aid is Open Trade Policy, which refers to the accessibility of work visas that the country offers to foreigners.
Moderate
OBJ: conceptual | factual
SEC: 3. The Spread and Use of Technology
TOP: Foreign Aid
MSC: Bloom's: Analysis | AACSB: Analytic
Short Answer
118. What is the most important factor that explains why some countries have experienced sustained economic growth and some have not? Please explain.
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Property Rights
MSC: Bloom's: Analysis | AACSB: Analytic
119. Why is it necessary for individual property rights to be established if there is to be economic growth?
OBJ: conceptual
SEC: 3. The Spread and Use of Technology
TOP: Property Rights and Growth
MSC: Bloom's: Analysis | AACSB: Analytic
120. What is meant by the term informal economy? How does its existence affect economic growth?
OBJ: conceptual
SEC: 3. The Spread and Use of Technology
TOP: Informal Economy and Growth
MSC: Bloom's: Analysis | AACSB: Analytic
121. The existence of the informal sector in many less developed countries is evidence of the irrational behavior of less educated people in poor countries. Is this or ? Explain your answer.
OBJ: factual
SEC: 3. The Spread and Use of Technology
TOP: Informal Sector
MSC: Bloom's: Analysis | AACSB: Analytic
122. What is meant by the term human capital, and how does its availability affect growth?
OBJ: conceptual
SEC: 3. The Spread and Use of Technology
TOP: Human Capital
MSC: Bloom's: Analysis | AACSB: Analytic
Multiple Choice
123. All of the following can prevent poor countries to increase capital per worker except
a. | low population growth. |
b. | low saving rate. |
c. | low foreign investment inflow. |
d. | low domestic investment. |
e. | absence of foreign aid. |
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Population Growth
MSC: Bloom's: Knowledge | AACSB: Analytic
124. High population growth rates
a. | lower the amount of investment needed to maintain the amount of capital per worker. |
b. | raise the amount of investment needed to maintain the level of capital per worker. |
c. | are necessary for economic growth. |
d. | are positively related to economic growth. |
e. | cause the capital-labor ratio to increase. |
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Population Growth
MSC: Bloom's: Analysis | AACSB: Analytic
125. People choose to have fewer children if
a. | the life expectancy of their children increases. |
b. | they are less educated. |
c. | they are poor. |
d. | child labor is a common practice. |
e. | the life expectancy of their children decreases. |
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Life Expectancy
MSC: Bloom's: Analysis | AACSB: Analytic
126. Which of the following best explains the decline in population growth in the major industrialized countries?
a. | Lack of natural resources |
b. | A reduction in life expectancy |
c. | High income per capita |
d. | Not enough leisure time |
e. | The increased likelihood of both parents working |
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Population Growth Rates
MSC: Bloom's: Analysis | AACSB: Analytic
/
127. Life expectancy is not correlated with income per capita.
Basic
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Per Capita Income and Population
MSC: Bloom's: Knowledge
128. Population growth rates are inversely related to income per capita.
Basic
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Per Capita Income and Population
MSC: Bloom's: Knowledge
129. The rate of population growth and the level of productivity are inversely related, all else the same.
Basic
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Per Capita Income and Population
MSC: Bloom's: Knowledge
Multiple Choice
130. A major reason for the different growth rates between countries in Africa and East Asia is
a. | the different income tax rates. |
b. | the different saving rates. |
c. | the different languages people speak. |
d. | the education levels. |
e. | the proximity to advanced countries. |
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: National Saving
MSC: Bloom's: Knowledge | AACSB: Analytic
131. A major source of capital development funds for a poor country is
a. | government savings. |
b. | increased net exports. |
c. | private savings. |
d. | foreign investment from abroad. |
e. | taxes. |
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Source of Funds
MSC: Bloom's: Analysis | AACSB: Analytic
132. Poor countries have
a. | the same saving rates as rich countries. |
b. | lower saving rates than rich countries. |
c. | frequent current account surpluses. |
d. | negative saving rates. |
e. | the same saving rates as rich countries, but a smaller volume of savings. |
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Saving Rates
MSC: Bloom's: Analysis | Bloom's: Knowledge
/
133. China’s relatively high saving rate played a role in its faster economic growth in recent decades.
Basic
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: National Saving
MSC: Bloom's: Knowledge
134. Foreign investment is an important source of capital formation in developing countries.
Moderate
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Source of Funds
MSC: Bloom's: Knowledge
135. Government savings are an important source of funds for capital formation in developing countries.
Moderate
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Source of Funds
MSC: Bloom's: Knowledge
Multiple Choice
136. Which of the following statements is the best example of direct investment?
a. | A U.S. company acquires more than 10 percent ownership of a foreign company. |
b. | A foreign bank lends more than 10 percent of the funds needed by a business. |
c. | A foreign bank lends less than 10 percent of the funds needed by a business. |
d. | A U.S. company acquires less than 10 percent ownership of a foreign company. |
e. | The Bank of America extends a loan to a foreign country. |
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Direct Investment
MSC: Bloom's: Application | AACSB: Analytic
137. Which of the following is the best example of portfolio investment?
a. | A U.S. company acquires less than 10 percent ownership of a foreign company. |
b. | A U.S. company acquires more than 10 ownership of a foreign company. |
c. | A foreign bank lends more than 10 percent of the funds needed by a business. |
d. | A foreign bank lends less than 10 percent of the funds needed by a business. |
e. | The Bank of America extends a loan to a foreign country. |
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Portfolio Investment
MSC: Bloom's: Application | AACSB: Analytic
138. After World War II, in order to reform the international monetary system, the
a. | World Bank and the International Monetary Fund (IMF) were established. |
b. | Federal Reserve was made independent of the U.S. Treasury. |
c. | European Central Bank was created. |
d. | League of Nations was created. |
e. | United Nations was created. |
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: World Bank and IMF
MSC: Bloom's: Analysis | AACSB: Analytic
139. Which of the following is about the World Bank and the International Monetary Fund (IMF)?
a. | The World Bank and the IMF were created after World War II as part of a major reform of the international monetary system. |
b. | These institutions make loans to developing countries. |
c. | They serve as intermediaries, channeling funds from industrialized countries to developing ones. |
d. | All of the above are true. |
e. | None of the above are true. |
OBJ: conceptual | factual
SEC: 4. Increasing Capital Per Worker
TOP: World Bank and IMF
MSC: Bloom's: Knowledge | AACSB: Analytic
140. A major institution of the international monetary system is the IMF. What does IMF stand for?
a. | International Money & Finance |
b. | International Mechanism for Funding |
c. | International Monetary Fund |
d. | International Main Fund |
e. | None of these |
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: World Bank and IMF
MSC: Bloom's: Knowledge
141. Conditionality refers to
a. | the concept that the IMF will lend money on the condition that the country will not engage in politically unpopular policies. |
b. | the concept that the IMF will lend money on the condition that the loan's principal is repaid. |
c. | the concept that the IMF will lend money on the condition that interest payments will be maintained. |
d. | the concept that the IMF will lend money on the condition that the country undertakes economic reform. |
e. | the concept that the IMF will lend money on the condition that the country will also borrow from private banks. |
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Conditionality
MSC: Bloom's: Knowledge | AACSB: Analytic
/
142. The IMF is a financial intermediary.
Basic
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: World Bank and IMF
MSC: Bloom's: Knowledge
143. The World Bank makes loans to governments and for general purposes, never for specific projects.
Basic
OBJ: conceptual | factual
SEC: 4. Increasing Capital Per Worker
TOP: World Bank and IMF
MSC: Bloom's: Knowledge
144. The World Bank and the International Monetary Fund were established after World War II as part of a major reform of the international monetary system.
Basic
OBJ: conceptual | factual
SEC: 4. Increasing Capital Per Worker
TOP: World Bank and IMF
MSC: Bloom's: Knowledge
145. Portfolio investment is the purchase of capital by a foreign firm in more than a 10 percent ownership share in a domestic firm.
Basic
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Portfolio Investment
MSC: Bloom's: Knowledge
146. Poor countries are in principle aided by larger current account surpluses in the developed countries.
Basic
OBJ: factual
SEC: 4. Increasing Capital Per Worker
TOP: Saving Rates
MSC: Bloom's: Knowledge
Short Answer
147. Other things being equal, a country with population growth of 5 percent will grow more slowly than a country with population growth of 2 percent. Please answer or and explain.
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Saving Rates
MSC: Bloom's: Analysis | AACSB: Analytic
148. A country with a population growth of 5 percent and capital growth of 10 percent is better off than a country with population growth of 2 percent and capital growth of 2 percent. Please answer or and explain.
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Saving Rates
MSC: Bloom's: Analysis | AACSB: Analytic
149. Why is it not a good idea for a developing country to avoid having a trade deficit?
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Saving Rates
MSC: Bloom's: Analysis | AACSB: Analytic
Exhibit 28-1
150. Plot on a scatter diagram the data from the African countries listed in Exhibit 28-1. Does there appear to be a catch-up line in the scatter diagram?
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Catch-Up Line
MSC: Bloom's: Analysis | AACSB: Analytic
151. Suppose the African countries listed in Exhibit 28-1 make a concerted effort to enforce property rights and maintain political stability within their countries. How might this affect catch-up in the future?
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Catch-Up
MSC: Bloom's: Analysis | AACSB: Analytic
152. Why has there been a convergence in real income per capita for Western European countries, but not for African countries?
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Economic Development
MSC: Bloom's: Analysis | AACSB: Analytic
153. What are some of the benefits of allowing and encouraging foreign investment in a country?
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Foreign Investment
MSC: Bloom's: Analysis | AACSB: Analytic
154. Which of the following increases the likelihood of poor countries catching up to rich countries, and which decreases the likelihood? Explain.
(A) | Developing countries have better access to the technology of developed countries. |
(B) | Industrialized countries run larger government budget surpluses. |
(C) | The level of corruption in developing countries increases. |
(D) | Developing countries become more reluctant to provide schooling for all their citizens. |
(E) | Developing countries begin to emphasize export-led strategies. |
(A) | The likelihood of catch-up would increase because the improved availability of technology would increase the rate of economic growth. |
(B) | The likelihood of catch-up would increase because the increased saving rate would enable more investment in developing countries. |
(C) | The likelihood of catch-up would decline because increased corruption would inhibit investment and innovation. |
(D) | The likelihood of catch-up would decline because less schooling would result in a reduction in human capital formation. |
(E) | The likelihood of catch-up would increase because experience has shown that developing countries with export-led strategies experience higher rates of growth than developing countries that do not adopt these types of strategies. |
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Catch-Up
MSC: Bloom's: Analysis | AACSB: Analytic
155. Does the saving rate in developed countries have any effect on the time it takes for developing countries to catch up with the developed part of the world? Explain.
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Saving in Developed Countries
MSC: Bloom's: Analysis | AACSB: Analytic
156. Answer the questions below:
(A) | Explain the relationship between saving, investment, and net exports for the world as a whole. |
(B) | Suppose the developed countries decide to lend more to less developed countries. How would this affect the developing countries? |
(A) | For the world as a whole, savings must equal investment. In other words, if we sum all the savings worldwide, it will equal investment worldwide. This implies that the sum of net exports for all countries is zero. Those countries with a negative trade balance borrow, and those with a positive balance lend. World borrowing must equal world lending. |
(B) | If the developed countries decide to lend more, there will be an increase in the demand for borrowing worldwide. This will increase interest rates and reduce the available supply of funds for developing countries. Growth rates for developing countries will be lower, all else the same, because there will be less investment and capital growth. |
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: World Saving and Investment
MSC: Bloom's: Analysis | AACSB: Analytic
157. Suppose that per capita income in country A, a developed country, is $30,000 per year, and per capita income in country B, a developing country, is $5,000 per year.
(A) | Why does economic theory predict that country B will eventually catch up with country A? |
(B) | Suppose country B's income per capita grows at 5 percent and country A's income per capita grows at 1 percent. Using the rule of 72, plot the growth path of income per capita relative to time for each country. Based on this graph, do you think country B will catch up with country A? |
(C) | Do you think country B will continue to grow at 5 percent? |
(A) | The investment opportunities will be greater in country B because of diminishing returns to capital. Also, because the returns to capital are higher in country B, a one-unit increase in capital stock in country B will have a greater impact on output than a one-unit increase in capital in country A. |
(B) | Country B's income per capita will double to $10,000 in 14.4 years, to $20,000 in 28.8 years, and to $40,000 in 43.2 years. It will take 72 years for country A's income per capita to double to $60,000. Using only this simple formula, we cannot say exactly when B will catch up with A, but it will be within the 72 years |
(C) | Country B will be unlikely to continue to grow at 5 percent. Empirically, as countries grow, the rates of growth diminish. This will lengthen the catch-up time. |
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: Catch-Up Theory
MSC: Bloom's: Analysis | AACSB: Analytic
158. How would each of the following affect the world interest rate and growth prospects in developing countries, all else the same?
(A) | An increase in the marginal propensity to consume in developed countries |
(B) | A decrease in government spending in developed countries |
(A) | An increase in the MPC means less saving. This will increase world interest rates and reduce growth prospects in the developing countries as fewer funds become available. |
(B) | This will increase world saving, decrease world interest rates, and increase growth prospects in developing countries as more funds become available. |
OBJ: conceptual
SEC: 4. Increasing Capital Per Worker
TOP: World Saving and Investment
MSC: Bloom's: Analysis | AACSB: Analytic