43) If there is a major problem in a country that leads to the rapid withdrawal of foreign
investment, this is known as
A) moral hazard.
B) adverse selection crisis.
C) an international leakage.
D) international financial crisis.
44) The largest form of international investment funds for developing countries has been
A) bank loans.
B) portfolio investments.
C) foreign direct investments.
D) loans from the World Bank.
45) Two types of asymmetric information that create problems for international investment are
A) adverse hazard and moral selection.
B) adverse hazard and moral hazard.
C) adverse selection and moral hazard.
D) adverse selection and moral selection.
46) The rapid withdrawal of foreign investment funds from a nation creates
A) an international financial crisis.
B) an international funding crisis.
C) an international fiscal crisis.
D) an international fiduciary crisis.
47) Adverse selection and moral hazard problems arise when there is
A) complete information
B) asymmetric information.
C) too much information.
D) symmetric information.
48) If there are concerns about moral hazard and adverse selection in a country
A) economic growth will reduce.
B) there will be more portfolio investment.
C) there will be more foreign direct investment.
D) it will be easier to arrange financing for new development projects.
49) An international financial crisis will likely occur when
A) the rate of money supply growth is not the same in all nations.
B) many international investors look at the behavior of a few large investors to determine when
funds should be withdrawn from a particular country.
C) newly-acquired political freedom in a country leads some interest groups to form a coalition
limiting competition.
D) there is an increase in portfolio investment.
50) A country experiencing an international financial crisis will likely
A) see an increase in portfolio investment.
B) see an increase in foreign direct investment.
C) experience a decrease in its economic growth rate.
D) be able to maintain growth and prosperity in its domestic economy, but its export sector will
suffer.
51) All of the following are barriers to international investment EXCEPT
A) symmetric information.
B) adverse selection.
C) incomplete information.
D) moral hazard.
52) The following are obstacles to international investment EXCEPT
A) rational expectations.
B) asymmetric information.
C) adverse selection.
D) moral hazard.
53) Discuss the rationales for foreign financing of investment in developing actions and explain
how developing countries benefit from international capital investment.
54) What are the sources of private investments in foreign nations?
18.5 International Institutions and Policies for Global Growth
1) Which of the following is TRUE about the World Bank?
A) It is a multinational agency that specializes in development loans.
B) It is a U.S. agency that specializes in development loans.
C) It is a U.N. sponsored agency that specializes in development loans.
D) It is made up of all central banks in the world.
2) The multinational agency that specializes in making loans to developing nations in an effort to
promote long-term development and growth is the
A) International Monetary Fund.
B) World Trade Organization.
C) United Nations Development Program.
D) World Bank.
3) Approximately what percentage of the World Bank’s loans go to developing nations in the
East Asia/Pacific and South Asia regions combined?
A) 5%
B) 35%
C) 70%
D) 100%
4) Approximately what percentage of the World Bank’s loans go to developing nations in the the
entire Africa continent?
A) 5%
B) 34%
C) 70%
D) 100%
5) The World Bank makes loans primarily to
A) nations without free markets, such as North Korea.
B) developing nations.
C) nations without national debt.
D) highly developed nations.
6) The multinational organization that aims to promote world economic growth by fostering
financial stability is the
A) International Monetary Fund.
B) World Trade Organization.
C) United Nations.
D) World Bank.
7) A nation’s account with the IMF is called its
A) deposit surplus.
B) current account.
C) quota subscription.
D) capital account.
8) The World Bank was formed in
A) 1930.
B) 1960.
C) 1945.
D) 1918.
9) The World Bank is
A) made up of the central banks of the leading industrial nations of the world.
B) made up of five separate institutions.
C) the Bank of the United Nations.
D) the European Union.
10) The International Monetary Fund (IMF) is an international organization designed to
A) promote world economic growth by means of greater financial stability.
B) promote world economic growth via loans to developed nations.
C) circulate a single currency worldwide.
D) act as the world’s central bank.
11) The international unit of accounting used by the International Monetary Fund (IMF) is called
A) the Eurodollar.
B) the IMF dollar.
C) the quota subscription.
D) special drawing rights.
12) The largest quota subscriber of the International Monetary Fund (IMF) is
A) Japan.
B) Germany.
C) the United States.
D) China.
13) The International Monetary Fund (IMF) was created to achieve each of the following goals
EXCEPT
A) to supervise exchange-rate practices of member countries.
B) to help finance economic development in poor countries.
C) to encourage convertibility of member countries’ currencies.
D) to lend funds to countries having difficulties meeting their international payment obligations.
14) Which of the following statements about the International Monetary Fund (IMF) is TRUE?
A) The IMF was created to finance long-term economic development projects in poor countries.
B) The IMF was created to reduce tariff barriers between nations.
C) The IMF functions as a central bank that conducts monetary policy for the world economy.
D) The IMF obtains funds from quota subscriptions charged to member countries.
15) Each nation’s International Monetary Fund (IMF) quota subscription is based on
A) its national income.
B) its share in world trade.
C) its public debt.
D) its trade surplus.
16) 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.
17) The World Bank specializes in making loans to promote
A) short-term assistance when a nation experiences a financial crisis.
B) so-called stand-by arrangements and credits.
C) financial stability.
D) long-term economic development.
18) 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.
19) 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
20) 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.
21) The largest International Monetary Fund quota subscription, denominated in Special
Drawing Rights, is held by
A) the United States.
B) Japan.
C) China.
D) Russia.
22) 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.
23) 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.
24) 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.
25) 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.
26) 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
27) 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.
28) 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.
29) 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.
30) 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.
31) 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.
32) 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.
33) 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.
34) 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.