International Economics, 6e (Gerber)
Chapter 17 The BRIC Countries in the World Economy
17.1 Introduction: The BRICs
1) What was the thesis to James O’Neill’s paper where he introduced the BRIC acronym?
A) These nations were going to collapse.
B) These were failing states and thus a treat to global stability.
C) These economies were moribund and needed IMF assistance.
D) These nations had the potential to change global trade and capital flows.
E) These nations would repeat the patterns of development and business cycles as the United
States and Europe had in their economic history.
2) Which of the following is one of the BRIC nations?
A) Indonesia
B) Bangledesh
C) Chile
D) Belgium
E) Russia
17.2 Demographic and Economic Characteristics
1) Openness and change in the economic models of India and China have meant for the world
economy all of the following EXCEPT
A) hundreds of millions of people have escaped poverty.
B) many manufactured goods and services have become cheaper.
C) forced some firms to downsize, offshore or otherwise change business practices.
D) increased the market power of firms in industrialized countries as they gained most from this
evolving trade.
2) Which of the following is TRUE?
A) India is the world’s largest democracy.
B) India began reforming and opening its economy prior to China.
C) At the end of the twenty-first century, China will have a larger population than India.
D) India has a larger population than China currently.
E) India has a larger manufacturing sector than China.
3) For China
A) there was a long period of success with the economic results of communism so it was hard to
change policies.
B) reform of its economic system was rapid, with a quick dismantling of most of the controls
exercised by the state and party over the economic system, but not the political system.
C) economic reforms were intended to create more wealth to distribute, not do undo the
communist party.
D) there are no longer state owned enterprises.
4) What is the best explanation for why China and India have received so much international
interest and foreign investment?
A) Their large populations
B) Their geographic location
C) Their control over natural resources
D) Government incentives provided to foreign firms
5) China’s initial economic reforms were in which sector?
A) Manufacturing
B) Infrastructure
C) Agriculture
D) Mining
6) Which primary trade partner of India suffered setbacks that ultimately helped lead India to
embark on economic reform?
A) The United Kingdom
B) The United States
C) The Soviet Union
D) South Korea
7) What did China create to allow more international trade?
A) Special economic zones
B) Foreign exchange centers
C) More open and transparent government meetings
D) New educational efforts
8) Which of the following is not a potential source of comparative advantage for China in the
manufacturing sector?
A) Abundant low wage, low skill workers
B) A large domestic market that can lead to scale economies
C) Coastal areas with good logistics for international trade
D) Abundant credit from China’s government sector to set up manufacturing operations
9) Because of China’s growth, natural resources
A) are in greater demand, but that demand is mostly going to the previously industrialized
nations so it is having little effect on economic development in developing countries.
B) are in greater demand and the natural resources are increasingly coming from developing
countries.
C) prices are falling since China has tremendous negotiating power.
D) are not in high demand since labor and capital are the emphasized inputs in Chinese
manufacturing.
10) Analysts that favor a fast transition to market economies argue that China’s success with a
gradual transition is a special case because
A) its trade flows were relatively large.
B) so much of its labor force was in agriculture.
C) heavy industry already had a strong foothold when the transition began.
D) its coastal areas were already relatively well developed.
E) its labor force was relatively well educated.
11) Which of the following is FALSE about the transition from communism to capitalism in
Russia and China?
A) China chose a dual track strategy.
B) China’s transition strategy was considered gradualist.
C) Russia chose a rapid transition strategy.
D) Russia’s transition was aided by the large number of workers it had in heavy industry.
E) China’s transition was aided by the large number of workers it had in rural agriculture.
12) Special economic zones in China have been
A) the same as export processing zones.
B) centers of economic reform.
C) controlled by state run enterprises.
D) closed to foreigners.
E) poor regions that are targeted for industrial development.
13) Which of the following is FALSE? All the BRICs
A) rank among the world’s top 10 in population.
B) have been transformed by reforms.
C) have become more isolated and focused on domestic issues.
D) are among the world’s top 11 economies.
E) have yet to fully realize their economic potential.
14) The percentage of world GDP represented by the G7 is ________ and the percentage of
world GDP represented by the BRIC economies is ________.
A) falling, rising
B) falling, falling
C) rising, falling
D) rising, rising
15) China has a larger population than India and is expected to be the most populous nation in
the world throughout the twenty-first century.
16) Direct foreign investment has been most critical for China’s domestic consumer market.
17) China is not an important market for other nations’ exports.
18) The largest migration pattern in China at present is from urban centers to more rural areas to
escape traffic and pollution.
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19) China has few state-owned enterprises left in its economy.
20) Russia chose a slow approach to creating a private economy and China chose a fast
approach.
21) China’s economy was much more agricultural than Russia’s, and observers believe this aided
its economic transition.
22) Most nations that split from the USSR saw their incomes increase over the next several years
after USSR’s collapse.
23) China’s economy did not decline at all during its transition from communism to capitalism.
24) The BRIC nations have one quarter of the world’s GDP and more than 40 percent of its
population.
25) A primary problem for Brazil from 1980 to 1995 was inflation.
26) Recently, there has been little political stability in Brazil.
27) Brazil and Russia both depend on capital equipment as their primary exports.
28) Three forces played a significant role in preparing Indian policy makers for economic
reform. Describe them.
29) Describe China’s reform path, including the forces that started China’s reform efforts and
how they continued through the 1980s and early 1990s.
30) Describe how Brazil and Russia are similar and how they are different.
31) Why have China and India received so much international attention and investment?
32) Who was the leader of Chinese economic reforms?
17.3 The BRICs in the World Economy
1) The BRICs share all of the following EXCEPT
A) they are getting a rising share of international trade and foreign investment.
B) they are easy places to do business.
C) their governments have a lot of power and authority in economic affairs.
D) to varying degrees they all present a new model, sometimes referred to as state capitalism.
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2) Which of the following is TRUE?
A) Russia is more dependent of international trade than Brazil.
B) Exports and imports are rising more slowly than GDP in the BRIC countries.
C) China was the last of the BRICs to start economic reforms.
D) All of the BRIC countries had to transition from socialist or communist systems.
17.4 The Challenges of the BRICs in the World Economy
1) Which of the following is FALSE about services trade for India and China?
A) China exports more services than India does.
B) India has a trade surplus in services.
C) China has a trade surplus in services.
D) India trades primarily information services and other business services.
2) What is the pattern of exports and imports in China and India?
A) Exports are heavily subsidized through government policy.
B) Many barriers to imports exist.
C) Exports and imports are tied together, with exports depending on imported inputs and
technology.
D) Imports are not important to either nation’s economy.
3) Which of the following would NOT be a sign that China wants to become a high technology
producer?
A) More patents are being sought and granted in China
B) Large spending on infrastructure
C) Rapid expansion of science, engineering and research
D) Less emphasis on education spending
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4) Which of the following accurately depicts the situation of India’s trade in services and what it
might mean for the global economy?
A) It is not perceived as threatening to the industrialized nations so it is likely to grow without
any impact.
B) Because it is nothing new, other economies have had time to adjust.
C) It creates only harm to other national economies.
D) It may lead to protectionist sentiment and policies in other nations as comparative advantages
shift.
5) Trade in services such as information technology
A) is like other trade, it creates winners and losers, but the gains for national economies likely
outweigh the costs.
B) creates gains for India’s economy, but national welfare losses for the countries that import
these services.
C) make it highly likely that information technology jobs will ultimately disappear in the
industrialized countries.
D) is not perceived as threatening by industrialized countries so is unlikely to lead to any
protectionist sentiment or pressures in the way the manufacturing does.
6) Which of the following is NOT identified by your text as a challenge to doing business in
China?
A) Issues related to the business climate, such as taxes
B) The availability of credit
C) Licensing requirements
D) Failure to protect intellectual property
E) Poor infrastructure and port facilities to support export of products
7) China linked its exchange rate to the U.S. dollar which meant in the 2004-2007 period
A) it appreciated against most other currencies, hurting its manufacturing competitiveness.
B) it depreciated against most other currencies, making its products cheaper.
C) it decreased the size of its merchandise trade surplus.
D) it overvalued its currency, making it hard to attract foreign investment.
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8) Environmental problems in China
A) increase pressure for decentralization of power and authority from the ruling Communist
party.
B) are not recognized by local Chinese interests, but get large amounts of attention from global
activists.
C) are improving at a rapid pace in Chinese urban areas.
D) are generally not an issue domestically or globally.
9) China has a trade deficit in services, while India has a trade surplus in services.
10) China exports more services than India.
11) What is the difference between Chinese and Indian trade in services?
12) Why has Chinese exchange rate policy been controversial?