Global Business Today, 11e (Hill)
Chapter 3 National Differences in Economic Development
1) The purchasing power parity for different countries is adjusted (up or down) depending upon
whether a country’s cost of living is lower or higher than the cost of living in the United States.
2) Gross national income is a measure of the monthly income received by residents of a nation.
3) A shadow economy refers to similar economic activity that takes place in competing nations.
4) The gross national income (GNI) per capita comes much closer to Amartya Sen’s conception of
how development should be measured than narrow economic measures such as Human
Development Index (HDI).
5) Economists who argue that innovation and entrepreneurial activity are the engines of long-run
economic growth, define innovation broadly to include not just new products but also new
processes, new organizations, new management practices, and new strategies.
6) If a country’s economy is to sustain long-run economic growth, the business environment must
be conducive to the consistent production of product and process innovations and to
entrepreneurial activity.
7) In a planned economy, there is a great deal of freedom for entrepreneurial activity and reward.
8) A nation that has inadequate enforcement of property rights reduces the motivation for
innovative activity.
9) The Peruvian development economist Hernando de Soto has argued that much of the
developing world will fail to reap the benefits of capitalism until they relax the property rights
offered by their legal systems.
10) Five of the fastest growing economies of the past 30 years—China, South Korea, Taiwan,
Singapore, and Hong Kong—had one thing in common at the start of their economic growth:
democratic governments.
11) A totalitarian regime can promote economic growth if it commits to a market system and
values strong protection of property rights.
12) A strong belief that economic progress leads to adoption of a democratic regime underlies the
fairly permissive attitude that many Western governments have adopted toward human rights
violations in China.
13) During the late 1980s and early 1990s, many totalitarian governments collapsed and were
replaced by democratically elected governments.
14) As categorized by Freedom House, citizens in a “partly free” country enjoy a high degree of
political and civil freedom.
15) Advances in technology and communication have fostered the growth of democratic ideals.
16) The late influential political scientist Samuel Huntington predicted that the universalization of
Western liberal democracy will be the final form of human government.
17) Francis Fukuyama promoted the idea that Western liberal democracy would be the final form
of human government and lead to a harmonious world.
18) In general, command and mixed economies failed to deliver the kind of sustained economic
performance that was achieved by countries adopting market-based systems.
19) Nations that have economic freedom also have political freedom.
20) Communist nations were the first to adopt deregulation efforts.
21) Privatization occurs when state-owned property is transferred into the hands of individuals.
22) State-owned enterprises still dominate the banking and health care industries in China.
23) It is predicted that China will surpass the United States and become the world’s largest national
economy within the next two decades.
24) It is more costly to do business in relatively primitive or undeveloped economies because of
the lack of infrastructure and supporting businesses.
25) Social unrest and disorder are less likely to be found in countries that contain more than one
ethnic nationality.
26) Gross national income figures should be carefully evaluated because they don’t take into
account differences in
A) the available workforce.
B) government intervention.
C) the cost of living.
D) market conditions.
E) political power.
27) One common measure of economic development is a country’s
A) gender ratio.
B) gross national income.
C) infant mortality rate.
D) population density.
E) total geographical area.
28) A country’s ________ measures the total annual income received by residents of a country and
is regarded as a yardstick for the economic activity of a country.
A) income elasticity of demand
B) gross national product
C) net cash flow ratio
D) gross national income
E) income equity ratio
29) Purchasing power parity is used to adjust gross national income in order to make a more direct
comparison of ________ in various countries.
A) living standards
B) population density
C) geographical area
D) factor endowments
E) labor productivity
30) To calculate purchasing power parity, the figure is adjusted based on
A) the trading value of gold in the exchange market.
B) the median cost of living in the top five economic nations.
C) the status of the cost of living in the United States
D) average daily exchange rates in the selected nation.
E) limits set by each nation’s government.
31) In 2017, if the PPP per capita of China was $16,760 and the PPP per capita of the United States
was $60,200, this means that the
A) GNI per capita was greater in China.
B) percent of goods and services consumed in the United States was lower.
C) standard of living in China was better.
D) cost of living was lower in China.
E) annual average GDP growth rate was lower in China.
32) In 2017, if the GNI per capita of India was $1,820 and its PPP per capita was $7,060, this
means that the cost of living in India was lower than the cost of living in
A) China.
B) Great Britain.
C) Germany.
D) the United States.
E) the rest of the world.
33) As a result of ________, large amounts of economic activity in India are not made official and
the GDP figures of the country fail to tell the entire story of the economy.
A) a large population
B) unrecorded cash transactions
C) deregulation
D) nationalization
E) closed totalitarianism
34) A black economy occurs when
A) large amounts of economic activity are in the form of legally recorded cash transactions.
B) citizens engage in barter agreements to avoid paying taxes.
C) a country’s GNI per capita exceeds $30,000.
D) the expenses of the government are less than its income.
E) a country has a trade surplus with another foreign country.
35) The three measures of the ________ are life expectancy at birth, educational attainment, and
average incomes based on PPP estimates.
A) Human Development Index
B) Gross National Income
C) Gross Domestic Product
D) Cost of Living Index
E) Cash Reserve Ratio
36) Amartya Sen believed that ________ should also be a factor in the human development index.
A) birth rates
B) political freedom
C) educational attainment
D) basic average income
E) geographical conditions
37) According to the Human Development Index, average income adjusted for PPP should be
sufficient to
A) provide basic needs such as food and shelter.
B) promote economic development.
C) foster decentralization.
D) boost social class.
E) foster entrepreneurial dynamism.
38) The country of Jinret is classified as having low human development (the quality of life is
poor). This means its HDI is
A) a score of less than 0.5 on the HDI scale.
B) around 6.0.
C) greater than 5.0 but less than 7.0.
D) around 80.
E) in the bottom 60 percentile.
39) ________ is broadly defined as the development of new products, processes, organizations,
management practices, and strategies.
A) Privatization
B) Dynamism
C) Demographics
D) Innovation
E) Benchmarking
40) Traditional grocery stores now have to compete with Amazon’s front-door delivery services.
As a result, many grocery stores now offer online ordering and home delivery. This new strategy is
an example of
A) privatization.
B) economic deregulation.
C) purchasing power parity.
D) innovation
E) benchmarking.
41) Which activity engaged in by DenimExpress best exemplifies innovation?
A) DenimExpress cut the prices of its products by 10 percent.
B) DenimExpress entered the Chinese market.
C) DenimExpress offered a “me-to” product similar to that of a competitor.
D) DenimExpress developed a new business model by selling directly to customers.
E) DenimExpress cut its costs by 10 percent.
42) Which of these individuals can be considered an entrepreneur?
A) Sam, an employee at a sporting goods store, is solely responsible for all the purchases and sales
at the store.
B) Joe recycles old household articles to build phones, radios, and other things for his personal use.
C) Max makes his living by investing in small companies that have the potential to grow.
D) Shondra started a company that processes plastic bags into fabric used in automobiles.
E) Ryan invented a hair regrowth formula and sold it to a company that sells several other hair
growth products.
43) When considering innovations and entrepreneurship, it can be said that
A) a command economy creates greater incentives for innovation and entrepreneurship than a
market economy.
B) if a country’s economy is to sustain long-run economic growth, the business environment must
restrict entrepreneurial activity.
C) a high level of entrepreneurial activity leads to a low level of innovation.
D) innovations in production and business processes lead to an increase in the productivity of labor
and capital.
E) strong legal protection of property rights creates an unfavorable environment for innovation and
entrepreneurship.
44) An unfavorable environment for innovations and entrepreneurship is the result of
A) a market economy.
B) economic freedom.
C) state monopoly in production.
D) privatization.
E) strong legal protection of property rights.
45) Lindsey lives in a country where the state owns all the means of production and there is little
incentive for entrepreneurial activity. Lindsey lives in a
A) market economy.
B) mixed economy.
C) planned economy.
D) private economy.
E) democratic economy.