Chapter 18 Policies and Prospects for Global Economic Growth 993
15) Which of the following is NOT a criticism that has been leveled at the World Bank?
A) Too many loans go to nations capable of privately financing their projects.
B) Since 1990, the World Bank has loaned mostly to African countries, to the detriment of
nations in other parts of the world.
C) Some countries receiving World Bank loans are net lenders of funds to other nations and
so should not be receiving World Bank funds.
D) Despite receiving loans from the World Bank, economic growth in many client nations has
been disappointing.
16) The World Bank specializes in making loans to promote
A) short term assistance when a nation experiences a financial crisis.
B) so called stand
b
y arrangements and credits.
C) financial stability.
D) long term development and growth.
17) The World Bank
A) is a central bank like the Federal Reserve System.
B) is the bank that causes international financial crisis when the reserves are too high.
C) is a multinational agency that specializes in making loans to promote long term
development and growth in developing countries.
D) is a multinational organization that aims to promote world economic growth through
more financial stability.
18) Which of the following world regions has received the largest percentage of lending from the
World Bank since 1990?
A) Latin America/Caribbean B) South Asia
C) Africa D) Middle east
19) The International Monetary Fund
A) is a central bank like the Federal Reserve System.
B) is the bank that causes international financial crisis when the reserves are too high.
C) is a multinational agency that specializes in making loans to promote long term
development and growth in developing countries.
D) is a multinational organization that aims to promote world economic growth through
more financial stability.
20) The largest International Monetary Fund quota subscription, denominated in Special Drawing
Rights, is held by
A) the United States. B)
J
apan.
C) China. D) Russia.
21) A multinational agency that specializes solely in making loans to promote long term
development and growth in developing countries is the
A) Federal Reserve System. B) World Bank.
C) International Monetary Fund. D) International World Fund.
22) A multinational organization that aims to promote world economic growth through more
financial stability is the
A) Federal Reserve System. B) World Bank.
C) International Monetary Fund. D) International World Fund.
23) The World Bank will primarily make
A) short term loans for investment projects that are relatively safe.
B) short term loans for investment projects which might not receive private financial
support.
C) long term loans for investment projects that are relatively risky.
D) long term in nature for investment projects which might not receive private financial
support.
24) The international organization with the sole goal of promoting global antipoverty efforts is the
A) World Bank.
B) International Monetary Fund.
C) Board of Governors of the Federal Reserve System.
D) GAE.
25) Which of the following are NOT part of the World Bank?
A) International Development Association
B) Federal Reserve Bank of New York
C) International Center for Settlement of Investment Disputes
D) Multinational Investment Guarantee Agency
26) The primary source of funds for the World Bank is
A) quota subscriptions. B) private financial markets.
C) the world s wealthiest countries. D) the New York Stock Exchange.
27) A quota subscription is
A) the maximum amount of funds that can be drawn at the World Bank without a formal
proposal.
B) the maximum amount that a private investor can invest in foreign firms.
C) a nation s account at the International Monetary Fund.
D) when an investor sets limits on the proportion of their portfolio that will contain foreign
investments.
28) A nation s account with the International Monetary Fund denominated in special drawing rights
is
A) the quota subscription. B) the account at the World Bank.
C) portfolio investment. D) the account at the Fed.
29) The funds that nation s have on account at the International Monetary Fund is measured in
A) U.S. dollars.
B) the currency of the nation that has deposited the funds.
C) a quota subscription.
D) an international unit of accounting called special drawing rights.
30) To be a member of the Internal Monetary Fund a nation must deposit funds based on
A) its national income.
B) the amount of funds it wants to deposit.
C) the need to loan money to developing nations.
D) rules set up by the World Bank.
31) Which of the following statements is true?
A) All nations that belong to the International Monetary Fund have equal voting power.
B) The voting power of a nation in the International Monetary Fund is determined by its
quota subscription.
C) The voting power of a nation in the International Monetary Fund is called special drawing
rights.
D) The voting procedure in the International Fund is determined by the World Bank.
32) The amount of funds that a nation can withdraw from the International Monetary Fund
depends upon
A) its quota subscription.
B) whether it is a developing nation or a developed nation.
C) whether it is seeking a long term or short term loan.
D) the rules set up by the World Bank.
33) The primary function of the International Monetary Fund is
A) to provide loans only to private firms in developing countries.
B) to make direct, irrevocable transfers of funds from wealthy nations to poor nations.
C) to lend solely on the basis of a nation s relative poverty.
D) to make loans aimed at promoting global stability and hence growth.
34) All the following would be a possible loan that the International Monetary Fund might make
EXCEPT
A) a loan to a private firm.
B) long term loans to a nation s government which support growth promoting projects.
C) short term loans to a nation s government.
D) long term loans to countries which are having problems in repaying existing debts.
35) Which of the following statements is true about the success of the World Bank?
A) The World Bank has been very successful in promoting economic growth because loans
have been primarily made to countries that have trouble attracting private funds.
B) The World Bank has not been successful because many loans have been made to countries
that can attract private funds.
C) The World Bank has been successful because it has focused on its primary function of
making loans to governments.
D) The World Bank has not been successful because it has focused on making loans to
governments where there has been a loss of confidence in a nation s financial system.
36) If the World Bank makes loans to nations that can attract private funds,
A) the increase in growth in that nation will spill over to other nations that are developing.
B) these loans will interfere in the private market for capital goods and can lead to inefficient
investment.
C) the World Bank s loans will crowd out the private funds made to developing nations to
encourage economic growth.
D) the presence of the World Bank s loans will lead to even more private funds being
attracted to that country.
37) It is believed that in order to promote growth, a top priority of the World Bank and the
International Monetary Fund is to
A) promote the increase of dead capital.
B) make more loans.
C) focus on basic market foundations of guaranteeing property and contract rights.
D)
j
oin forces and merge into one unit.
38) Because of the problems of adverse selection and moral hazard, it has been suggested that the
World Bank and International Monetary Fund
A) make loans to the riskiest nations so that private investors will not be tempted to take a
risk.
B) loan only to countries that have free elections.
C) not make loans to risky nations because there is a high demand for funds from safer
nations.
D) impose tougher preconditions on borrowers.
39) The World Bank
A) determines the price level in each of its member nations.
B) determines the labor force participation rate in each of its member nations.
C) mediates contracts regarding minimum prices for various globally traded commodities.
D) extends long term loans for capital investment projects to developing nations.
40) Where does the World Bank get its funds?
A) from selling internal reports to the public
B) from tariffs collected on goods traded internationally
C) from governments of the wealthiest nations and from private financial markets
D) from seizing dead capital in developing nations and selling it at auction
41) The World Bank is
A) composed of five separate institutions.
B) the central bank of the U.S. government.
C) the official name of the International Monetary Fund.
D) the central bank of the United Nations.
42) Special drawing rights are
A) the reserves held by members of the European Union to back their accounts with the
European Central Bank.
B) credit accounts held by individual stockholders with portfolio investments in other
countries.
C) international units of account held by the International Monetary Fund for member
countries.
D) the estimated level of oil reserves remaining in OPEC countries.
43) How did the original focus of the IMF differ from that of the World Bank?
A) The IMF provided short term loans and the World Bank provided long term loans.
B) The IMF assisted wealthy nations and the World Bank assisted developing nations.
C) The IMF gave grants to developing countries and the World Bank made loans.
D) The IMF dealt in North and South America only, and the World Bank dealt with the rest of
the world.
44) The official mission of the World Bank is to
A) fight global inflation.
B) advise member nations on the appropriate levels of taxation.
C) establish exchange rates between the currencies of member nations.
D) provide funding for needed development projects that would have difficulty attracting
private investment.
45) Those who advocate a role for the World Bank in establishing systems of well defined property
and contract rights in developing nations would argue that
A) such changes would eliminate the need for long term capital funding.
B) such changes would eliminate the need for short term loans.
C) such changes would make these economies more productive.
D) asymmetric information is currently not a problem in these countries.
46) The World Bank was formed in
A) 1919. B) 1945. C) 1960. D) 1980.
47) The World Bank specializes in making loans to
A) industrialized nations. B) communist nations.
C) developing nations. D) African nations.
48) Most of the loanable funds available to the World Bank to lend to developing nations come from
A) the sale of oil.
B) developing nations.
C) the world s wealthiest nations.
D) the sale of international bonds that are issued by the World Bank.
49) One of the major criticisms of the World Bank is that it lends funds
A) to impoverished nations.
B) to countries which could easily borrow funds from other sources.
C) to industrialized nations.
D) to terrorist groups not affiliated with any country.
50) The World Bank primarily engages in
A) short term lending aimed at helping developing nations repay debt accumulated in past
years.
B) short term lending aimed at helping developing nations repay loans from the
International Monetary Fund.
C) long term lending aimed at helping developing nations governments and central banks
keep exchange rates from varying.
D) long term lending aimed at helping developing nations governments and businesses
make investments that will contribute to economic growth.
51) The goal of the World Bank is to
A) supervise exchange rate stability.
B) supervise the activities of the central banks of member nations.
C) sell the government securities of member nations on the open market.
D) help finance economic development.
52) The ________ specializes in making long term loans for capital investment projects that do not
have private financial support.
A) International Monetary Fund B) European Central Bank
C) World Bank D) Federal Reserve Bank
53) A multinational agency that specializes in making loans to a larger number of developing
nations to promote long term development and growth is
A) the International Bank. B) the World Bank.
C) the International Monetary Fund. D) the World Monetary Fund.
54) If the government of a developing country is having difficulty selling bonds to build an
irrigation system, it could go to the
A) World Bank. B) Federal Reserve Bank.
C) United Nations International Bank. D) International Monetary Organization.
55) An international organization formed with the aim of promoting world economic growth
through financial stability is called
A) the World Bank.
B) the International Development Association.
C) the International Finance Corporation.
D) the International Monetary Fund (IMF).
56) Which of the following countries has the largest quota subscription at the IMF?
A)
J
apan B) Russia C) United States D) India
57) The International Monetary Fund was created to achieve each of the following goals EXCEPT
A) lend funds to countries with international payment problems.
B) lend funds to large government infrastructure projects.
C) monitor and offer advice on the exchange rate policies of member nations.
D) encourage free convertibility of the currencies of member nations.
58) When a nation s currency suddenly loses value, the ________ may step in to buy the afflicted
currency.
A) World Bank B) International Monetary Fund
C) Federal Reserve Bank D) United Nations
59) A nation s account with the International Monetary Fund is measured in an international unit
known as
A) international reserves. B) special drawing rights.
C) monetary rights. D) monetary deposits.
60) A nation s account with the International Monetary Fund is known as
A) a quota subscription. B) monetary deposits.
C) monetary rights. D) international reserves.
61) A multinational organization that aims to promote world economic growth through more
financial stability is
A) the World Monetary Fund. B) the International Bank.
C) the International Monetary Fund. D) the International Monetary Bank.
62) The international unit of accounting used by the IMF is the
A) euro. B) special financial right.
C) special drawing right. D) dollar.
63) Both the International Monetary Fund and the World Bank were established
A) at the end of World War I. B) at the end of World War II.
C) in the 1960s. D) in the 1970s.
64) Voting power in the IMF is determined by
A) the population size of member states.
B) the quota subscription size.
C) the length of membership.
D) the size of the member nation s trade surplus.
65) Both the World Bank and the IMF typically
A) make loans for less than 5 years only.
B) impose stringent preconditions that the borrowers must meet.
C) charge lower than average loan rates to ensure repayment.
D) charge higher than average loan rates.
66) The currency of the IMF is the
A) International Currency Unit. B) Special Drawing Right.
C) IMF Dollar. D) U.S. dollar.
67) Each country s IMF quota subscription is determined by
A) the relative size of its national income.
B) the size of its population.
C) the size of world trade.
D) how much a country wants to contribute.
68) After the financial crisis in the 1990s many economists criticized the IMF and the World Bank.
Some suggestions for reform are to
A) create a board of directors made up of finance ministers for the IMF.
B) eliminate both the institutions.
C) increase private sector lending by governments providing tax breaks to lenders.
D) all of the above
69) When a nation joins the IMF, it deposits funds into an account. These funds have a value based
on a weighted average of
A) the euro, the British pound sterling, the Japanese yen, and the U.S. dollar.
B) the euro, the British pound sterling, the Chinese yuan, and the U.S. dollar.
C) the Russian ruble, the British pound sterling, the Japanese yen, and the U.S. dollar.
D) the Russian ruble, the British pound sterling, the Chinese yuan, and the U.S. dollar.
70) Which organization functions as a lender of last resort for national governments?
A) The World Bank B) The U.S. Treasury
C) The Federal Reserve Bank D) The International Monetary Fund
71) Which of the following is NOT a function of the International Monetary Fund?
A) serve as lender of last resort for national governments
B) administer an international foreign exchange system
C) establish the SDR system nations utilize to settle international payment obligations
D) establish and administer each nation s fiscal and monetary policies
72) What is the mission of the World Bank?
73) What is the mission of the International Monetary Fund (IMF)?
74) Name the two international institutions that have been formed to attain higher rates of global
economic growth and briefly discuss what each of the agencies does.
75) Discuss why the World Bank has been criticized for making loans to nations that can attract
private funds.
76) What are some of the criticisms that have been levied on the World Bank and the International
Monetary Fund concerning adverse selection and moral hazard?