Test Bank (Multiple Choice)
Chapter 4: Economics and International Development
Introduction to the Chapter
1. Which of the following factors contributed to the Great Economic Crisis that
began in 2008?
a) a sharp rise in US banking liquidity
b) the collapse of the real estate bubble in the US
c) excessive US banking regulation in the 1980s
d) the sovereign debt crisis in the Eurozone
2. Which Asian economy technically avoided a major recession during the global
economic crisis of 2008?
a) China
b) India
c) South Korea
d) All of these are correct.
3. Which of the following is the formal, economic definition of a recession?
a) The inability of a country to pay back its debts
b) A period of reduced economic activity often marked by high unemployment
and inflation
c) The ability to pay debts when they come due without incurring unacceptable
losses
d) Two consecutive quarters of declining economic growth
4. What factor does the book say helped to mitigate, if not prevent, the effects of the
global crisis on a number of Middle Eastern nations?
a) having more natural gas and shale
b) having fewer economic ties to Iran
c) having more petroleum/oil
d) having fewer economic ties to China
What is Economics?
1. What is the meaningful unit of analysis in most contemporary definitions of
economics?
a) the multinational corporation seeking rents
b) an individual actor seeking utility
c) the government seeking to make economic policy
d) irrational human beings
2. The textbook describes which three economic paradigms?
a) Liberal, nationalist, and Marxist
b) Marxist, capitalist, and mercantilist
c) Liberal, conservative, and communist
d) None of these is correct.
Liberal Economics
1. Liberal economic theory states that
a) all nations would benefit by opening trade between nations without
restrictions.
b) all nations would benefit by opening trade between nations with reasonable
restrictions.
c) every nation should implement protectionist policies to ensure the well-being
of its people first and foremost and then allow for trade between nations.
d) None of these is correct.
2. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations,
published in 1776, was the first book to articulate the theory of
a) political liberalism.
b) liberal economics.
c) socialism.
d) taxation without representation.
3. Liberal economic theorists assume that individual actors are “rational” in what
sense?
a) Individuals know their best interests and how to get what they want.
b) Individuals have goals that make sense and will work to attain these goals in a
rational manner.
c) Individuals attempt to achieve their goals at minimal cost to themselves.
d) Individuals do not use their emotions when planning how to get ahead.
4. According to the law of supply and demand, which factor does not determine the
price of a good in the marketplace?
a) The supply of the item
b) The number of banks in the country
c) The number of buyers who want it
d) The availability of money
Economic Nationalism
1. Which of these are often considered synonymous?
a) Economic nationalism and Marxism
b) Socialism and protectionism
c) Liberalism and economic nationalism
d) Economic nationalism and mercantilism
2. Which of the following statements is not true of the theory of economic
nationalism?
a) Tariffs, subsidies, and import quotas have an important place in economic
policy.
b) Economic activity is independent of a country’s social and political systems.
c) Economic activity is zero-sum; one nation’s gain is another’s loss.
d) All of these are true about the theory of economic nationalism.
Marxism
1. According to Karl Marx, the value of goods and services
a) is determined by supply and demand.
b) should be determined by the state.
c) derives from the cost of labor needed to produce them.
d) depends on the materials goods are made from.
2. Marx theorized that economic and political inequality were inescapable as long as
there was a working class and a capitalist class that
a) owned all the businesses.
b) owned the means of production.
c) owned colonies overseas.
d) owned government bonds.
Microeconomics and Macroeconomics
1. What is the definition of the economic indicator known as the gross domestic
product, or GDP?
a) The total value of all the goods produced in a country in a year
b) The total value of all the services produced in a country in a year
c) The total value of all the goods and services produced in a country in a year
d) None of these is correct.
Development Economics
1. What does development economics study?
a) Growth strategies in less developed countries
b) How capital produces more capital
c) How economic control metamorphoses into political control
d) All of these are correct.
2. Which author theorized that nations pass through five economic stages before
reaching the stage of high mass consumption, like that seen in the United States
and Western Europe?
a) Adam Smith
b) W. W. Rostow
c) Immanuel Wallerstein
d) Margaret Thatcher
3. What did economist Arturo Escobar argue is the reason development projects
successful in the First World often fail when instituted in the Third World?
a) Lack of sufficient capital to sustain initial growth
b) Decades of labor exploitation leading Third World workers to embrace apathy
instead of ambition
c) Different cultural logics
d) None of these are correct.
Globalization
1. What is the goal of neoliberalism?
a) To free the movements of goods and services between countries
b) To maximize economic profits and efficiency regardless of citizenship
c) To ease trade restrictions between different nations
d) All of these are correct.
2. What is/was the Washington Consensus?
a) an agreement about how to address the 2008 global economic crisis
b) a set of policies aimed at instituting free markers in the entire Western
hemisphere
c) an idea advocated by Joseph Stiglitz
d) a plan to increase tariffs on goods from Latin America
3. When was the World Trade Organization founded?
a) 1978
b) 1984
c) 1995
d) 2005
Non-Western Economics
1. What is one reason given in the textbook to explain Western and non-Western
economic differences?
a) Western culture urges people to work hard to accumulate goods and services to
achieve happiness.
b) Many non-Western cultures urge members to minimize wants to achieve
happiness.
c) Both of these are correct.
d) Neither of these is correct.
Sustainability
2. What is the underlying issue concerning sustainability?
a) Industrial capitalism is the cause of economic deficiency.
b) Depletion of natural resources is only a few years away.
c) Perpetual growth and economic efficiency are not sustainable.
d) All of these are correct.
3. What do ecological economists attempt to do?
a) identify the best farming practices in Nigeria and the Swiss Alpine valleys
b) include a reasonable method of deciding on the value of things like clean
water, functioning environments, and future resource needs
c) trade short-term gains for long-term costs
d) find new, untapped sources of petroleum
Chapter 4
Question
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