52. Assume that initially country A exchanges three barrels of oil for one ton of steel from country B. Later the
arrangement changes to four barrels of oil for one ton of steel. This indicates that:
a.
the terms of trade for country B have improved.
b.
country A has a comparative advantage in the production of steel.
c.
the relative price of steel in terms of oil has fallen.
d.
the terms of trade for country A have improved.
e.
country B has an absolute advantage in the production of oil.
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
United States – Reflective Thinking
Development Strategies
53. Which of the following is not an argument in favor of inward-oriented strategies?
a.
A newly developing economy needs protection from foreign competition.
b.
Government restrictions are necessary to maximize the rate of economic growth.
c.
Deteriorating prices of primary products in relation to manufactured goods expose developing countries to
increasingly unfavorable terms of trade.
d.
Developing countries should compete on the basis of comparative advantage.
e.
Economic growth requires rapid industrialization and a shift away from primary products.
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
United States – Reflective Thinking
Development Strategies
54. A dual economy is characterized by:
a.
rapid productivity growth in both the agricultural sector and the manufacturing sector.
b.
uneven development trends in two economic sectors.
c.
drastic differences in regional work ethics.
d.
the nonexistence of the government and foreign trade sectors.
e.
a manufacturing sector that does not depend on natural resource supplies for production.
United States – Analytic – BB-Legal
MACR.BOYE.16.89 – ch. 17, 3
United States – Analytic – BB-Legal
United States – Measuring the Economy
Development Strategies
55. The existence of dual economies support the argument for _____.
a.
developing domestic exports
b.
reducing quotas on foreign goods
c.
a more active monetary policy
d.
the free movement of resources
e.
imposing trade restrictions
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
Development Strategies
56. What is the main reason for the failure of import-substitution strategies to generate rapid economic growth?
a.
b.
c.
d.
e.
MACR.BOYE.16.89 – ch. 17, 3
United States – Reflective Thinking
Development Strategies
57. Foreign direct investment occurs when a company:
a.
purchases foreign securities such as stocks and bonds.
b.
establishes foreign operating units.
c.
enters into a contractual agreement involving exchange of services and payments.
d.
engages in international trade.
e.
gives aid to a Third World country.
MACR.BOYE.16.90 – ch. 17, 4
United States – Measuring the Economy
United States – Measuring the Economy
Development Strategies
58. Which of the following is a common argument against allowing a foreign firm to operate a business in a developing
country?
a.
The foreign firm may gain control over national resources.
b.
Foreign productive expertise may outdistance domestic labor skills.
c.
The foreign firm may reduce domestic competition.
d.
Technology may be transferred from industrial countries to the developing countries.
e.
The foreign firm may reduce dependency on domestic imports.
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
59. _____ is the purchase of securities, like stocks and bonds of foreign firms.
a.
Short selling
b.
Foreign direct investment
c.
Future contracts
d.
Portfolio investment
e.
Reverse trading
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
60. International trade financing is dominated by:
a.
the U.S. Agency for International Development.
b.
private export-import agencies.
c.
the World Bank.
d.
the IMF.
e.
commercial bank syndicates.
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
61. What is a trade credit?
a.
A credit card purchase
b.
A government loan for exporters
c.
The extension of a period of time before which an importer must pay for goods and services purchased
d.
An IMF loan to meet trade deficit and liabilities for hard currencies
e.
The time it takes for franchisees to pay for the products they obtain from the main franchiser
62. Which of the following is likely to be a benefit of foreign investment in a developing country?
a.
Domestic firms are subjected to foreign competition
b.
Labor-intensive industries grow quickly
c.
New technology is adapted
d.
The natural rate of unemployment falls to zero
e.
The rate of inflation declines
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
63. Which of the following statements is true?
a.
Multinational firms tend to reduce the flow of technology between countries.
b.
Most foreign direct investment is found in labor-intensive industries.
c.
Multinationals do not always help to reduce the trade deficit of the host country.
d.
Foreign firms contribute to a significant increase in the host country’s unemployment rate.
e.
Foreign direct investment reduces the stock of capital of the domestic country.
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
64. The host country’s balance-of-payments problem tends to worsen when foreign firms:
a.
invest solely in capital-intensive industries.
b.
repatriate their profits to the headquarters from the host country.
MACR.BOYE.16.90 – ch. 17, 4
United States – Measuring the Economy
Foreign Investment and Aid
c.
acquire the foreign operations in order to diversify corporate investment holdings.
d.
refuse to share technological expertise with the host country.
e.
export all products to other countries.
65. Which of the following limit the direct creation of new jobs through foreign investment?
a.
Availability of large number of unemployed workers
b.
Nature of the industries in which investment is allowed
c.
Low cost of setting up the capital-intensive industries
d.
High percentage of youth in the country’s population
e.
Regulation on technology transfer
MACR.BOYE.16.90 – ch. 17, 4
United States – Analytic – BB-Legal
Foreign Investment and Aid
66. Which of the following sentences about the benefits of foreign investment is true?
a.
Foreign investment is invited only in labor-intensive industries.
b.
Foreign investment has more effect on employment in developing countries.
c.
Most expenditures on research and development are made by the major developing countries.
d.
The ability of foreign firms to utilize modern technology in a developing country depends on having a supply
of engineers and technical personnel in the host country.
e.
Foreign investment will improve balance of payments if the foreign investment is used to produce goods
primarily for domestic consumption.
MACR.BOYE.16.90 – ch. 17, 4
United States – Analytic – BB-Legal
United States – Measuring the Economy
Foreign Investment and Aid
67. A foreign aid that flows from one country to another is called a(n):
a.
project aid.
b.
emergency aid.
c.
development aid.
d.
bilateral aid.
MACR.BOYE.16.90 – ch. 17, 4
United States – Analytic – BB-Legal
United States – Measuring the Economy
Foreign Investment and Aid
e.
multilateral aid.
68. Which of the following is an example of a bilateral aid?
a.
A U.S. commercial bank loan to a Mexican investor
b.
The establishment of a Brazilian subsidiary by a German firm
c.
U.S. humanitarian aid to Somalia
d.
A trade credit extended to Morocco for the purchase of Iranian oil
e.
A World Bank loan to Kenya
MACR.BOYE.16.90 – ch. 17, 4
United States – Reflective Thinking
Foreign Investment and Aid
69. Which of the following coordinates and plans foreign aid programs and expenditures in the United Sates?
a.
The Federal Reserve Board
b.
The Federal Open Market Committee
c.
The Agency for International Development
d.
The Bureau of Economic Analysis
e.
The U.S.Department of the Treasury
MACR.BOYE.16.90 – ch. 17, 4
United States – Measuring the Economy
Foreign Investment and Aid
70. Which of the following is not a probable consequence of food aid to developing countries?
a.
Increased domestic food prices
b.
Declining domestic output
c.
Misallocation of food supplies
d.
Increased dependency on foreign food supplies
e.
Increased starvation of the needy
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
71. Which of the following groups would be most adversely affected by food aid?
a.
Manufacturers in the country providing aid
b.
Government in the country providing aid
c.
Government in the country receiving aid
d.
Citizens in the country providing aid
e.
Farmers in the country receiving aid
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
72. The predominant source of multilateral aid is:
a.
the European Community.
b.
the United Nations.
c.
the Agency for International Development.
d.
the World Bank.
e.
the British government.
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
73. Which of the following can be categorized as multilateral aid?
a.
The U.S. providing funds to Haiti
b.
World Bank providing financial assistance in the form of flood relief funds to Brazil
c.
Pakistan requesting financial assistance for earthquake relief from the developed world
d.
France promising funds to the Philippines against duty-free imports of French products
e.
USAID relieving Nepal of the outstanding debt the latter owes to the organization
MACR.BOYE.16.90 – ch. 17, 4
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
74. The First World is made up of communist nations.
a.
True
b.
False
False
Easy
MACR.BOYE.16.87 – ch. 17, 1
United States – Measuring the Economy
The Developing World
Knowledge
75. Because of the absolutism concept of poverty, a poor family in the United States will fall within the same category as
a poor family in Cuba.
a.
True
b.
False
False
Challenging
MACR.BOYE.16.87 – ch. 17, 1
United States – Reflective Thinking
The Developing World
76. Poverty is usually defined by economists in relative terms.
a.
True
b.
False
False
Easy
MACR.BOYE.16.87 – ch. 17, 1
United States – Measuring the Economy
The Developing World
77. Per capita GNP and quality-of-life are the only ways to determine a country’s level of economic development.
a.
True
b.
False
False
Easy
MACR.BOYE.16.87 – ch. 17, 1
United States – Measuring the Economy
Knowledge
Foreign Investment and Aid
Application
78. A quality-of-life index measures absolute poverty levels.
a.
True
b.
False
79. Higher per capita GNP always means higher quality of life.
a.
True
b.
False
False
Easy
MACR.BOYE.16.87 – ch. 17, 1
United States – Measuring the Economy
The Developing World
Knowledge
80. Generally, there is a strong positive correlation between per capita GNP and other measures of human development.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.87 – ch. 17, 1
United States – Measuring the Economy
The Developing World
Knowledge
81. To have significant foreign direct investment, a developing country ought to have a stable system of property rights.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.88 – ch. 17, 2
Obstacles to Growth
82. Corruption reduces growth most directly because governments invest in projects with low productivity.
a.
True
False
Easy
MACR.BOYE.16.87 – ch. 17, 1
The Developing World
Knowledge
b.
False
83. Generally speaking, the more competitive a country’s markets are, the greater are the opportunities for corruption.
a.
True
b.
False
False
Easy
MACR.BOYE.16.88 – ch. 17, 2
Obstacles to Growth
Knowledge
84. Entrepreneurs are more likely to develop among minority groups that have been blocked from traditional high-paying
jobs.
a.
True
b.
False
Easy
MACR.BOYE.16.88 – ch. 17, 2
Foreign Investment and Aid
Knowledge
85. Less-developed countries are experiencing rapid population growth because birthrates are on the rise and mortality
rates are falling.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.88 – ch. 17, 2
United States – Measuring the Economy
Obstacles to Growth
Knowledge
86. Capital shallowing occurs because old capital depreciates, or becomes completely obsolete with the passage of time.
a.
True
b.
False
True
Easy
MACR.BOYE.16.88 – ch. 17, 2
Obstacles to Growth
Knowledge
87. The higher the death rates in less-developed countries, the smaller the average family size.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.88 – ch. 17, 2
United States – Reflective Thinking
Obstacles to Growth
Comprehension
88. Inward-oriented development strategies focus on exports of goods and services.
a.
True
b.
False
False
Easy
MACR.BOYE.16.89 – ch. 17, 3
Development Strategies
Knowledge
89. Import substitution is the only strategy used by developing countries to develop their manufacturing industries.
a.
True
b.
False
False
Easy
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
Development Strategies
Knowledge
90. Import quotas are aimed at increasing the quality of domestic products.
a.
True
b.
False
False
MACR.BOYE.16.89 – ch. 17, 3
False
Moderate
MACR.BOYE.16.88 – ch. 17, 2
United States – Measuring the Economy
Obstacles to Growth
Knowledge
91. South Korea used an inward-oriented development strategy to focus on the growth of exports.
a.
True
b.
False
False
Easy
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
Knowledge
92. While using an outward-oriented development strategy, the government in Taiwan did not make any attempt to
stimulate exports.
a.
True
b.
False
False
Easy
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
Development Strategies
Knowledge
93. Proponents of inward-oriented policies ignore the fact that natural resources are exhaustible, so their long-run market
value will fall.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
Development Strategies
Knowledge
94. The deteriorating-terms-of-trade argument has been used to justify import-substitution policies.
a.
True
b.
False
Easy
United States – Analytic – BB-Legal
Comprehension
95. A country is strongly outward-oriented if there is less or no control on international trade.
a.
True
b.
False
True
Easy
MACR.BOYE.16.89 – ch. 17, 3
Development Strategies
Knowledge
96. A country is moderately outward-oriented if there are relatively high import-substitution restrictions.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
Development Strategies
Knowledge
97. A country is strongly inward-oriented if exports are clearly discouraged by controls to isolate and protect the domestic
market.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.89 – ch. 17, 3
Knowledge
98. Statistics show that countries with the lowest rates of economic growth have a strong outward-oriented development
strategy.
a.
True
b.
False
False
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
United States – Measuring the Economy
Development Strategies
Knowledge
99. Foreign direct investment includes portfolio investment.
a.
True
b.
False
False
Easy
MACR.BOYE.16.89 – ch. 17, 3
United States – Measuring the Economy
Foreign Investment and Aid
Knowledge
100. In the 1990s, foreign direct investment had become the most important source of funds for developing countries.
a.
True
b.
False
True
Easy
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
Knowledge
101. Mexico and India have a fairly large number of engineers and technical personnel, which means that new technology
can be adapted relatively quickly.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.90 – ch. 17, 4
United States – Measuring the Economy
Foreign Investment and Aid
102. If foreign firms send profits back to their industrial countries from the developing countries, developing countries
will have a larger deficit on their balance of payments accounts.
a.
True
b.
False
True
Easy
Foreign Investment and Aid
Development Strategies
Knowledge
103. Foreign aid usually consists of funds loaned at high interest rates.
a.
True
b.
False
False
Easy
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
Knowledge
104. Foreign aid that flows from one country to another is called multilateral aid.
a.
True
b.
False
False
Easy
MACR.BOYE.16.90 – ch. 17, 4
United States – Measuring the Economy
Foreign Investment and Aid
Knowledge
105. No government that receives foreign aid sells products to its people.
a.
True
b.
False
False
Easy
MACR.BOYE.16.90 – ch. 17, 4
Foreign Investment and Aid
Knowledge
Knowledge