c.
III
d.
IV
e.
V
60. The nation of Exland is considered a less-developed country and has the following characteristics.
Which one is not typical of a less-developed country?
a.
High illiteracy.
b.
High unemployment.
c.
Rapid growth of technology.
d.
Low growth in technology.
e.
Rapid population growth.
61. Which of the following is not a problem for less-developed countries?
a.
Poor health and nutrition.
b.
Shortages of labor.
c.
High unemployment rates.
d.
Low labor productivity.
e.
low life expectancy
62. If a country’s real GDP is growing at 5 percent and the population is also growing at 5 percent, its:
a.
per capita real GDP grows at an increasing rate.
b.
per capita real GDP grows at a constant rate.
c.
population growth will eventually exceed real GDP.
d.
per capita real GDP decreases at a constant rate.
e.
per capita real GDP does not change.
63. If a country’s population grows at the same rate as its real GDP, then real per capita GDP:
a.
grows at an increasing rate.
b.
grows at a constant rate.
c.
doesn’t change.
d.
decreases at a decreasing rate.
e.
decreases at a constant rate.
64. Which of the following does not hinder economic development?
a.
Low birth rates.
b.
Low GDP that limits saving and investment.
c.
Lack of knowledge.
d.
Lack of technology.
e.
Lack of physical capital.
65. Which of the following does not hinder economic development?
a.
Lack of education
b.
Poor agricultural productivity
c.
Low investment in human capital
d.
Lack of technology
e.
Good nutrition
66. Less-developed countries are poor for all of the following reasons except one. Which one?
a.
They do not produce many goods and services.
b.
Labor productivity is low.
c.
Investment funds tend to flow abroad
d.
Investment in human capital is very low.
e.
The labor force is too small.
67. One reason that a poor nation remains poor over time is that even though total national real GDP
grows,
a.
c and e.
b.
c, d, and e.
c.
it is too small to begin with.
d.
the growth rate is smaller than the growth rate of industrialized nations.
e.
it does not grow faster than population.
68. If a nation remains poor over time, it could be that:
a.
c and e.
b.
d and e.
c.
the population growth rate is at least as much as the national GDP growth rate.
d.
the per capita real GDP growth rate is larger than the population growth rate.
e.
the national real GDP growth rate is lower than the population growth rate.
69. Which of the following statements draws a false conclusion?
a.
Life expectancy in an average African country is lower than in an average European
country; therefore Europeans can expect to outlive Africans.
b.
Nations that currently produce no capital goods, and whose inhabitants are hungry, risk
famine with internally funded capital investments.
c.
Some African nations have substantially more food and capital investment than others;
therefore, their standard of living is higher.
d.
Population reduction policies, if effective, can improve the nation’s wealth by increasing
real per capita GDP.
e.
The vicious circle of poverty argument states that poverty precludes capital investment
and that no capital investment perpetuates poverty.
70. If national real GDP grows at twice the rate of population growth,
a.
c and e.
b.
eventually there will be too much GDP.
c.
per real capita GDP will double each year.
d.
per real capita GDP will be reduced by half each year.
e.
per real capita GDP growth will double each year.
71. In order for Ethiopia to increase its future economic growth, it must choose a point that is:
a.
below its production possibilities curve.
b.
further along on its production possibilities curve toward the capital goods axis.
c.
further along on its production possibilities curve toward the consumption goods axis.
d.
further along on its production possibilities curve away from the population axis.
e.
above its production possibilities curve.
72. “Countries are poor because they cannot afford to save and invest” is called the:
a.
vicious circle of poverty.
c.
LDC trap.
b.
savings-investment trap.
d.
cycle of insufficient credit.
73. Which of the following explains the vicious circle of poverty?
a.
By investing in education and infrastructure at the same time, the country can overcome
the problems of poverty.
b.
Poverty arises out of the lack of investment, but they cannot invest because they are poor.
c.
A nation can shift its production possibilities curve inward by shifting more resources into
the production of capital goods.
d.
A nation can shift its production possibilities curve outward by shifting more resources
into the production of consumer goods.
e.
There are dual economies in the world: Some are meant to be rich and others are meant to
be poor.
74. The vicious circle of poverty refers to a condition where:
a.
c and d.
b.
c and e.
c.
people are poor because they cannot invest in capital goods and they cannot invest in
capital goods because they are poor.
d.
people cannot invest in capital goods because they are poor and they are poor because they
cannot invest in capital goods.
e.
poverty is relative and poor people remain poor because the wealthy grow wealthier.
75. The vicious circle of poverty refers to the fact that in LDCs,
a.
low living standards lead to declines in population growth.
b.
too much spending leads to periods of recession.
c.
people are poor because too much is spent on capital goods.
d.
there are not enough people in the under-15 age groups.
e.
poverty leads to low investment in capital goods.
76. Which of the following best defines the vicious circle of poverty?
a.
Countries are poor because they cannot afford to save and invest.
b.
Countries are poor because of high population growth.
c.
Countries are poor because of lack of education and training for workers.
d.
Countries are poor because of poor international credit.
77. The vicious circle of poverty makes it difficult for an LDC to:
a.
establish political institutions.
c.
save and invest.
b.
control inflation.
d.
fix its exchange rate.
78. There is a significant positive relationship between ________ and __________.
a.
natural resource commodity exports, high levels of per capita GDP
b.
investment in capital, high levels of per capita GDP
c.
high levels of illiteracy, high levels of per capita GDP
d.
limited government recognition of land tenure and property ownership, high levels of per
capita GDP
79. __________ generally results in increases in per-capita GDP.
a.
Civil war
b.
High levels of inequality in the distribution of land ownership
c.
Investment in human capital
d.
A stock of natural resources
80. Which of the following is infrastructure?
a.
Police.
b.
Training and education.
c.
Highways.
d.
All of the above.
e.
None of the above.
81. Which of the following is not an example of a country’s infrastructure?
a.
Transportation system.
b.
Communications system.
c.
Political system.
d.
Educational system.
e.
Energy system.
82. Of the following choices, which is the best example of a nation’s economic infrastructure?
a.
Natural resources.
b.
Highway system.
c.
Government.
d.
Religious and cultural beliefs.
e.
Population growth rate.
83. Suppose Embryonica is an LDC with few skilled workers, a primitive banking system, and very little
electric power. What do we know for sure that Embryonica is lacking?
a.
Infrastructure.
b.
Political stability.
c.
Agricultural sector.
d.
Traditional values.
e.
Poverty.
84. A nation’s infrastructure includes all of the following except its:
a.
market system.
b.
educational system.
c.
energy system.
d.
railroad system.
e.
religious system.
85. Which of the following is in charge of U.S. aid to foreign countries?
a.
Agency for International Development (AID).
b.
World Bank.
c.
International Monetary Fund (IMF).
d.
New International Economic Order (NIEO).
86. How much of the U.S. federal budget is spent on foreign aid?
a.
About 1 percent.
c.
About 25 percent.
b.
About 5 percent.
d.
About 50 percent.
87. Which of the following makes long-term low-interest loans to LDCs?
a.
Agency for International Development (AID).
b.
World Bank.
c.
International Monetary Fund (IMF).
d.
New International Economic Order (NIEO).
88. Which of the following makes short-term conditional low-interest loans to LDCs?
a.
World Bank.
b.
Agency for International Development (AID).
c.
Agency for International Finance (AIF).
d.
International Monetary Fund (IMF).
TRUE/FALSE
1. A country with a high GDP per capita can be classified as an industrially advanced country (IAC)
regardless of its industrial development.
2. According to the text, Singapore and Hong Kong are classified as industrially advanced countries
(IACs).
3. According to the text, Ireland and Israel are classified as less developed countries (LDCs).
4. GDP per capita provides a reasonably accurate measurement of a country’s income distribution.
5. GDP per capita is about 10 times higher in industrially advanced countries (IACs) than in the poorer
less-developed countries (LDCs).
6. A country with a high GDP per capita is classified as an industrially advanced country (IAC).
7. According to the text, Singapore is classified as a less developed country (LDC).
8. According to the text, Ireland and Israel are classified as industrially advanced countries (IACs).
9. In general, GDP per capita is highly correlated with alternative measures of quality of life.
10. Waste systems and highways are part of a nation’s infrastructure.
11. In general, GDP per capita is not highly correlated with alternative measures of quality of life.
12. Most less-developed countries have sufficient infrastructure in place to become a developed country.
13. Total GDP is the best way to identify a less-developed country
14. A country cannot develop without a large natural resource base.
15. A country can develop without a large natural resource base.
16. Political instability is a deterrent to long-term private investment.
17. If population grows faster than GDP, then per capita GDP must fall.
18. Economists believe that political instability can facilitate economic development in an LDC by making
its citizens more open to change and new technology.
19. The vicious circle of poverty is the trap that parents with low education tend to have children with low
education.
20. The vicious circle of poverty refers to the fact that LDCs are poor because other countries do not want
to buy their goods and services.
21. The vicious circle of poverty is the trap in which the LDC is too poor to save and therefore it cannot
invest and remains poor.
22. Most LDCs face the problems of low population growth and excessive saving.
23. The main purpose of the International Monetary Fund is to manage and distribute U.S. foreign aid.
24. The world bank is the agency of the U.S. State Department that is in charge of U.S. loans to foreign
countries.
25. Receipt of foreign aid permits less-developed countries to move to a point outside their production
possibilities curve.
ESSAY
1. Describe in general terms four or five characteristics of less-developed countries.
2. What role does population growth play in economic development?
3. Describe the vicious cycle of poverty. What are the consequences of this cycle?
4. Explain why the LDCs are unable to invest much in capital goods and human capital.