International Economics, 9e (Krugman et al.)
Chapter 22 Developing Countries: Growth, Crisis, and Reform
22.1 Income, Wealth, and Growth in the World Economy
1) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would Pakistan and India fall under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Pakistan and India fall between lower-middle and upper-middle.
2) Average per-capita GNP in the richest, most prosperous economies is ________ times that of the
average in the ________ economies.
A) 95, low (poorest) income
B) 95, lower-middle income
C) 73, lower-middle income
D) 44, low (poorest) income
E) 76, low (poorest) income
3) Compared with industrialized economies, most developing countries are poor in the factors of
production essential to modern industry: These factors are
A) capital and skilled labor.
B) capital and unskilled labor.
C) fertile land and unskilled labor.
D) fertile land and skilled labor.
E) water and capital.
4) The main factors that discourage investment in capital and skills in developing countries are:
A) political instability, insecure property rights.
B) political instability, insecure property rights, misguided economic policies.
C) political instability, misguided economic policies.
D) political instability.
E) insecure property rights, misguided economic policies.
5) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would sub-Saharan Africa fall under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Sub-Saharan Africa falls between lower-middle and upper-middle.
6) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would mainland China fall under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
7) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would the smaller Latin American and Caribbean countries fall under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Smaller Latin American and Caribbean countries fall between low income and lower middle-income
economies.
8) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would the Saudi Arabia falls under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Saudi Arabia falls between low income and lower middle-income economies.
9) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would the South Africa falls under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) South Africa falls between low income and lower middle-income economies.
10) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would the Poland, Hungary, and the Czech and Slovak Republics fall under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Poland, Hungary, and the Czech and Slovak Republics fall between low income and lower middle–
income economies.
11) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would Malaysia falls under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Malaysia falls between low income and lower middle-income economies.
12) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would Israel falls under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Israel falls between low income and lower middle-income economies.
13) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would Kuwait falls under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Kuwait falls between low income and lower middle-income economies.
14) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would Singapore falls under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Singapore falls between low income and lower middle-income economies.
15) The upper middle-income countries enjoy only about ________ of the per-capita GNP of the
industrial group.
A) 20 percent
B) 15 percent
C) 10 percent
D) 5 percent
E) 30 percent
16) When one compares per-capital output growth rates among countries,
A) one needs to correct the data to account for departures from purchasing power parity.
B) such corrections are often not necessary.
C) such corrections are sometimes necessary.
D) the evidence whether such corrections are necessary are vague.
E) such corrections are not necessary.
17) Over the period 1960-2000, the United States economy grew at roughly
A) 2.1 percent.
B) 3 percent.
C) 4 percent.
D) one percent.
E) 3.5 percent.
18) Over the period 1960-2000, France grew relative to the United States economy
A) more.
B) less.
C) the same.
D) The French economy grew by one percent.
E) The French economy grew by 2 percent.
19) Over the post-war era, the gaps between industrial countries’ living standards
A) disappeared.
B) stayed the same.
C) increased.
D) decreased.
E) fluctuated.
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20) Over the post-war era, the tendency for gaps between all countries’ living standards
A) disappeared.
B) stayed the same.
C) increased.
D) decreased.
E) Hard to tell from the data.
21) Over the post-war era, poorer countries grew
A) faster.
B) slower.
C) stayed the same.
D) grew faster, then grew slower.
E) No general tendency can be found.
22) Countries in Africa have grown at rates far ________ those of the main industrial countries.
A) below
B) above
C) the same
D) above at the beginning of the period and below at the end of the period
E) below at the beginning of the period and above at the end of the period
23) Since 1960, South Korea and Singapore enjoyed an average per-capita growth rate well ________
the average industrialized world.
A) above
B) below
C) the same
D) above at the beginning of the period and below at the end of the period
E) below at the beginning of the period and above at the end of the period
24) Until recently, per-capita income increased in East Asian countries such as Hong Kong, Singapore,
South Korea, and Taiwan by ________-fold every generation
A) 2
B) 3
C) 4
D) 5
E) 1
25) Between 1960 and 1992, the annual growth rate in percent per year was the highest in
A) Canada.
B) United States.
C) Brazil.
D) Singapore.
E) South Korea.
26) What is the basic problem of developing countries?
A) corruption
B) murder
C) poverty
D) stock market
E) natural resources
27) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would Korea fall under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) Korea falls between low income and lower middle-income.
28) The world’s economies can be divided into four main categories according to their annual per-capita
income levels: low-income, lower middle-income, upper middle-income and high-income economies.
What category would the United States fall under?
A) low-income
B) upper middle-income
C) high-income
D) lower middle-income
E) The U.S. falls between high-income and upper middle-income.
29) How would you describe the world distribution of income?
A) persistently unequal
B) temporarily unequal
C) converging
D) fairly equal
E) completely unpredictable
30) How would you define convergence?
A) tendency for gaps between industrial countries’ per-capital incomes to narrow
B) tendency for gaps between all countries’ per-capital incomes to narrow
C) the theory that a crisis in a low-income country will spread to all countries, regardless of debt
structure
D) the theory that a crisis in a low-income country will spread to only those countries which had lent
money to the original country
E) tendency for the world distribution of income to be persistently unequal
31) Which of the following countries had a larger growth rate since 1960?
A) U.S.
B) Senegal
C) South Korea
D) Kamul
E) Colombia
32) What explains the sharply divergent long-run growth patterns?
33) Explain the theory behind convergence and why it is a “deceptively simple” theory.
34) Explain what the four main categories of world economies are and give examples?
35) Please consider Table 22-2 below.
Assuming constant Annual Average Growth Rate in the future, calculate the output per capita for the
United States and South Korea for the year 2040.
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36) Please consider Table 22-2 below.
At that Annual Average Growth Rate, how many years does it take for the output per capita to double in
both the United States and South Korea.
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37) Please consider Table 22-2 below.
Assuming constant Annual Average Growth Rate in the future, determine the year in which the United
States will have the same output per capita as South Korea?
22.2 Structural Features of Developing Countries
1) While many developing countries have reformed their economies in order to imitate the success of the
successful industrial economies, the process remains incomplete and most developing countries tend to
be characterized by all of the following except:
A) seigniorage.
B) control of capital movements by limiting foreign exchange transactions connected with trade in
assets.
C) use of natural resources or agricultural commodities as an important share of exports.
D) a worse job of directing savings toward their most efficient investment uses.
E) reduced corruption and poverty due to limited underground markets.
2) In general, one expects that life expectancy reflect international differences in income levels. Do the
data support such a claim?
A) Average life span falls as relative poverty falls.
B) Average life span increases as relative poverty falls.
C) There is no statistically significant relationship between the two.
D) The relation is not very strong.
E) The relationship looks more like a U-shape.
3) Seigniorage refers to
A) real resources a government earns when it prints money to use for spending on goods and services.
B) nominal resources a government earns when it prints money to use for spending on goods and
services.
C) real resources a government earns when it prints money.
D) nominal resources a government earns when it prints money.
E) real resources a government earns when it issues bonds to use for spending on goods and services.
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4) In developing countries, exchange rates tend to be
A) floating with some government intervention.
B) pegged.
C) hard to tell from the data.
D) run by currency boards.
E) flexible.
5) Most developing countries have tried to
A) liberalize capital movement.
B) control capital movements.
C) Hard to tell from the data.
D) in the 1960s and 1970s control, now to liberalize.
E) in the 1960s and 1970s liberalize, now to control.
6) For many developing countries, natural resources or agricultural commodities make up ________
share of exports
A) close to no
B) an unimportant
C) an important
D) close a to 5 percent
E) close to a 50 percent
7) In general, the development of underground economic activity ________ economic efficiency
A) hinders
B) has no effect
C) aides
D) hard to tell, sometime hinders, sometimes aides
E) spikes
8) One should expect ________ relationship between annual per-capita GDP and an inverse index of
corruption
A) a weak and negative
B) a weak and positive
C) a strong and negative
D) a strong and positive
E) an unpredictable
9) Which of the following is not a common characteristic of a developing country?
A) Extensive direct government control of the economy
B) History of low inflation
C) Many weak credit institutions
D) “Pegged” exchange rates
E) Agricultural commodities make up a large share of its exports.
10) The relationship between annual real per-capita GDP and corruption across countries has been found
to be:
A) negative.
B) positive.
C) The relationship was negative in the late 1960s but is now positive.
D) The relationship was in the late 1960s but is now negative.
E) There is no relationship between these two variables.
11) Which of the following does not explain why developing countries encouraged new manufacturing
industries of their own in the mid 20th century?
A) They were cut off from traditional suppliers of manufactures during WWII.
B) Former colonial areas had something to prove; they wanted to attain the same income levels as their
former rulers.
C) Leaders of these countries feared that their efforts to escape poverty would be doomed if they
continues to specialize in primary commodity exports.
D) There was political pressure to protect these industries.
E) Developing countries ran out of the natural resources that traditionally made up the majority of their
trade.
12) Which of the following are characteristic of a developing country?
A) extensive embrace of free trade policies
B) low inflation
C) high national savings
D) a current account deficit and low national savings
E) strong credit institutions
13) The real resource a government earns when it prints money and spends it on goods and services is
called:
A) seigniorage.
B) control of capital movements by limiting foreign exchange transactions.
C) pure profits.
D) inflation profits.
E) greenback.
14) For many developing countries, natural resources or agricultural commodities make up a ________
share of exports
A) large
B) moderate
C) nonexistent
D) small
E) insubstantial
15) Which of the following countries is the most corrupt?
A) U.S.
B) Iceland
C) Finland
D) New Zealand
E) Greenland
16) Describe some of the features hindering developing countries from growing faster.