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True / False
1. In 2014, high-income economies with only about one-fifth of the world’s population produced more than half of the
world’s output.
a. True
b. False
2. On average, about half the labor force in developing countries works in agriculture versus only about 3 percent in
industrial market countries.
a. True
b. False
3. Sub-Saharan African countries fall under the category of industrial market economies.
a. True
b. False
4. More than half the labor force in India is engaged in the manufacturing sector.
a. True
b. False
5. Differences in stages of development among countries are reflected in a number of ways besides per capita income.
a. True
b. False
6. A few diseases that can become epidemics in poor countries are well controlled in industrial countries.
a. True
b. False
7. If the country of Zorg has a birth rate of greater than 2.2 births per woman, it is likely that Zorg is an industrial market
country.
a. True
b. False
8. An aging population poses fiscal problems for any country.
a. True
b. False
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Chapter 21: Economic Development
9. Throughout the world, poverty is found to be greater among men than women.
a. True
b. False
10. Wages are high in poor countries because businesses are run efficiently.
a. True
b. False
11. Education makes people more receptive to new ideas and methods and contributes to ready acceptance of technology.
a. True
b. False
12. Lack of education is a reason why farmers are unable to use advanced farming techniques.
a. True
b. False
13. Child labor limits educational opportunities in developing countries and slows the rate of growth of technological
change.
a. True
b. False
14. Unemployment is measured primarily in urban areas because in rural areas farm work is usually an outlet for labor.
a. True
b. False
15. Japan has one of the most developed economies in the world because Japan is rich in natural resources.
a. True
b. False
16. The practice of financing a large fraction of public outlay by printing money leads to deflation.
a. True
b. False
17. Usually, the poorest fifth of the population in a developing country receives more than 20 percent of the country’s
income.
a. True
b. False
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18. Privatization is the taking over of private companies by the government.
a. True
b. False
19. Developing countries must confront industrial countries’ trade restrictions, such as tariffs and quotas, which often
discriminate against primary products.
a. True
b. False
20. Migration has no advantage for poor countries.
a. True
b. False
21. For the newly industrialized countries of East Asia, export promotion has been more successful than import
substitution.
a. True
b. False
22. Export promotion provided infant industries with a protected market in many developing countries.
a. True
b. False
23. Studies by the World Bank have emphasized that countries that have adopted trade liberalization policies have been
successful.
a. True
b. False
24. Consumers easily organize themselves to support government policies on free trade as soon as they become aware of
the gains from free trade.
a. True
b. False
25. Private international borrowing and lending is freely allowed by governments of developing countries.
a. True
b. False
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26. The United States Agency for International Development focuses on short-range plans to meet the basic needs of the
poor.
a. True
b. False
27. The International Monetary Fund providing assistance to a country to improve that country’s balance of payments is
an example of multilateral assistance.
a. True
b. False
28. In general, it can be asserted that foreign aid promotes economic development.
a. True
b. False
29. Foreign aid often becomes a source of discretionary funds that benefit poor people in developing countries and not the
countries’ leaders.
a. True
b. False
30. When foreign aid is tied to purchases of low-priced food from the donor country, farm prices can drop in developing
countries, hurting poor farmers.
a. True
b. False
31. Most countries have received foreign aid for industrialization.
a. True
b. False
32. Successful development is time-consuming and gradually moves toward free markets.
a. True
b. False
33. Not much of foreign aid now flows through private channels.
a. True
b. False
34. If developed economies want to grow faster, they can do so with their existing technologies.
a. True
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b. False
35. The Asian Tigers that have graduated from developing economies to industrial market economies include Hong Kong,
Singapore, South Korea, and Taiwan.
a. True
b. False
36. Countries with a high level of human capital can make up for other shortcomings, such as destruction caused due to
war.
a. True
b. False
37. Poor economies tend to have high education levels and high literacy rates.
a. True
b. False
38. A stable macroeconomic environment and reliable financial institutions help developing economies close the
development gap.
a. True
b. False
39. Improvement in the quality of human capital is not an important requirement for technology adoption.
a. True
b. False
40. Convergence may be a long process because the roots of development go back centuries.
a. True
b. False
Multiple Choice
41. The yardstick most often used to compare living standards across nations is:
a. the average production cost per unit.
b. the sales revenue per month for all the firms in an economy.
c. utility per capita.
d. the output per capita.
e. the volume of imports per year.
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42. Which of the following is not true of the World Bank?
a. It is an economic development institution
b. It is affiliated with the United Nations
c. It offers low-fee checking accounts to anyone in the world
d. It estimates output per capita figures
e. It uses output per capita figures to classify economies
43. Which of the following is true about the GNI of the United States?
a. It includes profits earned by a Mercedes factory in Alabama.
b. It excludes profits earned by General Electric in India.
c. It includes profits earned by a Ford factory set up in Chennai.
d. It stands for General Native Income.
e. It is the difference between the value of U.S. exports and imports.
44. The World Bank classifies countries into the three following major groups:
a. high-income economies, middle-income economies, and low-spending economies.
b. high-spending economies, middle-spending economies, and low-spending economies.
c. super-high-income economies, middle-income economies, and low-income economies.
d. high-income economies, middle-income economies, and zero-income economies.
e. high-income economies, middle-income economies, and low-income economies.
45. The World Bank estimates GNI per capita and then adjusts figures across countries based on _____.
a. the population rate in each country
b. the unemployment rate in each country
c. the purchasing power of the income in each country
d. the inflation rate in each country
e. the consumer price index in each country
46. Industrial market countries are also referred to as:
a. developing countries.
b. low-income economies.
c. middle-income economies.
d. transitional economies.
e. high-income economies.
47. Which of the following is likely to be a characteristic of a developing economy?
a. A high rate of illiteracy
b. A low rate of growth of population
c. A high rate of economic growth
d. The export of manufactured goods
e. The efficient use of labor
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48. Developing countries consist of:
a. only low-income countries.
b. only middle-income countries.
c. both low-income and middle-income countries.
d. all industrial countries.
e. both industrial and middle-income countries.
49. Compared to industrial market countries, developing countries usually have:
a. exports consisting mostly of agricultural products and raw materials.
b. slower population growth.
c. lower unemployment rates.
d. low rates of illiteracy.
e. high standard of living.
50. In developing countries, farm productivity is low because _____.
a. half of the labor force is involved in industrial activities
b. half of the labor force is involved in the service sector
c. more than half of the population consists of old people
d. farming methods are generally primitive.
e. people prefer leisure over working
51. _____ was one of the first countries to experience long-term economic growth during the 19th century.
a. New Zealand
b. India
c. Cambodia
d. Iran
e. Syria
52. Which of the following regions has the lowest life expectancy at birth?
a. Continental European countries
b. The Baltic countries
c. The Nordic countries
d. Sub-Saharan African countries
e. Middle Eastern countries
53. Which of the following groups of countries has the highest incidence of HIV/AIDS?
a. Continental European countries
b. The Baltic countries
c. The Nordic countries
d. Sub-Saharan African countries
e. Middle Eastern countries
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54. The primary factor that contributes to more than half of the deaths of children under the age of 5 in low-income
countries is _____.
a. female genocide
b. nuclear radiation
c. malnutrition
d. yellow fever
e. the H1N1 virus
55. The WHO cites _____ as the biggest single threat to the world’s public health.
a. malnutrition
b. female genocide
c. nuclear radiation
d. yellow fever
e. the H1N1 virus
56. Which of the following countries has the highest infant mortality rate?
a. Japan
b. The Congo
c. The United States
d. Norway
e. Germany
57. _____ is one of the clearest ways of distinguishing between industrial and developing countries.
a. The interest rate
b. The birth rate
c. The enrolment rate
d. The number of skyscrapers
e. The composition of the population
58. Developing countries have higher birth rates because:
a. families with more children have higher levels of income.
b. children are viewed as economic and social security as parents age.
c. the opportunity cost of leisure for people in developing countries is less.
d. there are special government programs that encourage more children per family.
e. the infant mortality rate is low in developing countries.
59. In some developing countries, the standard of living, as measured by per capita income, has declined because:
a. the population growth rate has exceeded the growth rate in total production.
b. the growth rate in total production has exceeded the population growth rate.
c. the infant mortality rate has exceeded the total growth rate.
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d. the inflation rate has exceeded the total growth in production.
e. the growth rate in total production is not as high as the targeted growth rate.
60. A trend in developing countries is that:
a. the birth rate during a typical woman’s lifetime has increased from three to six children.
b. attitudes toward family size are changing.
c. fertility rates increase when women have employment opportunities outside the home.
d. women earn less as they become better educated.
e. women tend to have fewer children if they are less educated.
61. Which of the following is true of the poorest countries of the world?
a. Children make up less than one-fifth of the population.
b. There are more people over the age of 65 than under the age of 15.
c. Children under the age of 15 make up nearly half the population.
d. Fertility rates are very low compared to industrial countries.
e. The growth rate in total production generally exceeds the population growth rate.
62. Evidence from developing countries suggests that fertility rates decline when _____.
a. households are headed by women
b. the composition of children in the population exceeds the young adults
c. households are headed by men
d. literacy among women declines
e. women have employment opportunities outside their home.
63. Poverty can impose a special hardship on women because:
a. they contribute more to GDP than men.
b. they have more employment opportunities compared to men.
c. they are generally more educated than men.
d. they have to work in their homes as well as in the labor market.
e. they have a higher productivity than men.
64. Gloria, who lives in a developing country, is likely to:
a. be less educated than most men in her country.
b. be a graduate and her brother is likely to be a school dropout.
c. have more employment opportunities and earn higher wages than her male classmates.
d. work long hours on her farmland.
e. have special access to resources such as land, capital, and technology.
65. Which of the following is true of the agricultural sector in developing countries?
a. A very small percentage of labor force is employed in agriculture.
b. Farm productivity is usually very low.
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c. It relies heavily on technology.
d. It does not contribute to the exports of the countries.
e. It accounts for a high percentage of the national income.
66. One likely reason that the country of Arctura is poor is that it:
a. does not produce many goods and services.
b. has a low unemployment rate.
c. has a low birth rate.
d. enjoys a low infant mortality rate.
e. has a high literacy rate.
67. Labor productivity depends on:
a. the quality of labor.
b. the volume of imports.
c. the size of an economy.
d. the volume of exports.
e. the proportion of the labor force that is unionized.
68. Labor productivity depends on:
a. the effectiveness of government.
b. the amount of capital available in an economy.
c. the proportion of the labor force that is unionized.
d. the size of an economy.
e. the size of the labor force in an economy.
69. Labor productivity depends on:
a. the effectiveness of government.
b. the size of the economy.
c. the proportion of the labor force that is unionized.
d. the amount of natural resources.
e. the risks taken by an entrepreneur.
70. The country of Yipi can raise its productivity by investing more in:
a. both human and physical capital.
b. human capital only.
c. physical capital only.
d. stable foreign economies.
e. stocks and bonds rather than physical assets.
71. Workers are less productive in poor countries because:
a. the wealthy minority invests in stable foreign economies.
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b. the government invests in stocks and bonds.
c. more than half of the population consists of people above 65 years of age.
d. they prefer leisure over work.
e. the government provides for unemployment benefits that make workers less willing to work.
72. Underemployment occurs:
a. when skilled workers are employed in low-skill jobs.
b. when workers willing and able to work cannot find a job.
c. when workers drop out of the labor force in frustration.
d. only when a country adopts an export-promotion strategy.
e. only when a country adopts an import-substitution strategy.
73. Which of the following leads to an inefficient use of labor?
a. Underemployment
b. A high rate of economic growth
c. Overemployment
d. A high rate of growth of income
e. A high rate of inflation
74. Which of the following is true?
a. In low-income countries, less than 5 percent of those 15 and older were illiterate in 2007.
b. In middle-income countries, 17 percent of those 15 and older were illiterate in 2007.
c. In high-income countries, 38 percent of those 15 and older were illiterate in 2007.
d. Education bears little relationship to economic development in high-income countries.
e. Education is more important to the economic development of low-income countries than it is to high-income
countries.
75. People can make better use of resources if they _____.
a. have inherited family wealth
b. are living in developed countries
c. are a part of the government
d. are educated
e. have invested in stocks and bonds in other nations
76. Japan’s remarkable economic growth in the 20th century was a result of _____.
a. heavy imports of primary products from South Asian countries.
b. a growth in education, leading to a ready acceptance of technology.
c. a rise in the price of oil as Japan is an oil-rich country
d. migration of workers from Japan.
e. an increase in employment in the agricultural sector.
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77. If Eddie Li is a skilled worker employed in a low-skill job, he is:
a. underemployed.
b. unemployed.
c. overemployed.
d. fully employed.
e. a discouraged worker.
78. Unemployment occurs when _____.
a. people do not work because they are not happy with the work environment
b. people are unwilling to work at the prevailing market wage rate.
c. people prefer leisure over work
d. people do not work because they are physically unable to work
e. people are willing and are able to work, but cannot find jobs
79. The average value added per U.S. farm worker is about _____ times that of farm workers in low- and middle-income
countries.
a. two
b. fifteen
c. ten
d. seventy-five
e. five
80. Which of the following is a consequence of low income?
a. More hard work and lower labor productivity
b. More investment in human capital
c. More savings and less consumption
d. More hard work and higher labor productivity
e. Less savings and less investment
81. Which of the following countries has a limited stock of natural resources?
a. United Arab Emirates
b. Chad
c. Qatar
d. Kuwait
e. Bahrain
82. Most developing countries are in trouble whenever oil prices rise because _____.
a. they are the major exporters of oil and their export income falls
b. it causes political instability in the countries
c. it causes an increase in frictional unemployment
d. higher oil prices drain the developing countries of foreign exchange
e. it causes deflation in domestic economies.
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83. The growth experiences of oil-rich countries indicate that _____.
a. a large supply of natural resources helps in the industrialization of the countries
b. natural resources are not enough to create a modern industrial economy
c. low productivity is a result of low income
d. unemployment and underemployment reflect inefficiencies of labor
e. education makes people more receptive towards new ideas and methods
84. A primary requirement for development is:
a. government control over the production of essential consumer products.
b. government control over the distribution of natural resources.
c. a high confidence in foreign currency.
d. a low and predictable inflation rate that encourages saving.
e. printing money to finance a large proportion of public outlays
85. Which of the following is not true for banks in developing countries?
a. Banks are often viewed with suspicion.
b. Many bank depositors withdraw their funds at the first sign of economic problems.
c. Banks cannot make loans for extended periods because they cannot rely on a continuous supply of deposits.
d. If financial institutions fail to serve as intermediaries between savers and borrowers, the lack of funds for
investment will make growth rates double.
e. The credit provided by banks as a percentage of total output is one-fifth of that in high-income countries.
86. One measure of banking presence in a nation is _____.
a. the amount of credit provided by banks to that nation’s agricultural sector
b. the amount of savings that the banks set aside to meet its daily withdrawal needs.
c. the credit given out by banks to that nation’s service sector
d. the total profit of the banking sector
e. the credit provided by banks as a percent of that nation’s total output
87. Which of the following group of countries is most likely to have a high number of telephone lines per 1,000 people?
a. High-income industrial countries
b. Countries with high birth rates
c. Countries that import capital from abroad
d. Low-income countries
e. Middle-income countries
88. Which of the following resources is necessary to efficiently combine other resources to produce goods and services?
a. Natural resources
b. Capital
c. Labor
d. Entrepreneurial ability