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Student name:__________
1) What is the philosophy of Amartya Sen?
2) Why does education lead to economic development?
3) Discuss Samuel Huntington’s views on Islamic fundamentalism.
4) Since the 1980s, there has been a transformation from centrally planned command
economies to market-based economies. What is the rationale for this transformation?
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5) Is privatization by itself enough to guarantee economic growth? Why? Explain using an
example.
6) What are the factors that determine the long-run monetary benefits of doing business in a
country?
7) What are the factors that determine the costs of doing business in a country?
8) Why does doing business in a country with a relatively unsophisticated economy result in
increased costs?
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9) What are the factors that contribute to the risks of doing business in a country?
10) ________ per person figures can be misleading because they don’t consider differences in
the cost of living.
A) Gross domestic product (GDP)
B) Gross national income (GNI)
C) Purchasing power parity (PPP)
D) Human Development Index (HDI)
11) GNI per capita can be adjusted by _____ to account for differences in the cost of living.
A) gross domestic product
B) gross values added
C) purchasing power
D) the total value of goods and services produced
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12) The _____ adjustment allows for a more direct comparison of living standards in
different countries.
A) gross domestic product
B) value added
C) gross national income (GNI)
D) purchasing power parity (PPP)
13) In a _____, the state owns all means of production.
A) mixed economy
B) planned economy
C) market economy
D) totalitarian state
14) The economic freedom associated with a _____ creates greater incentives for
competition, innovation, and entrepreneurship than either a planned or a mixed economy.
A) closed economy
B) political economy
C) market economy
D) command economy
15) Which of the following is a legal means by which the state can expropriate the profits
from business activity?
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A) demands for money to grant a license
B) expropriation
C) enforcing property rights
D) excessive taxation
16) Several of the fastest-growing Asian economies adopted more _____ governments during
the past three decades, including South Korea and Taiwan.
A) totalitarian
B) democratic
C) dictatorial
D) socialist
17) The general assertion is that nations investing more in _____ will have higher economic
growth rates.
A) services
B) centralized urban centers
C) education, health, and infrastructure
D) manufacturing
18) To account for differences in the cost of living, one can adjust GNI per capita by _____,
which allows for a more direct comparison of living standards in different countries.
A) gross domestic product
B) Human Development Index
C) living standards rate
D) purchasing power
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19) In a _____, any individual who has an innovative idea is free to try to make money out of
that idea by starting a business (by engaging in entrepreneurial activity).
A) command economy
B) planned economy
C) market economy
D) mixed economy
20) GNI per person figures can be misleading because
A) they also include barter agreements.
B) they provide a dynamic picture of development.
C) they don’t consider differences in the cost of living.
D) they don’t consider exchange rate.
21) Which of the following helps in adjusting GNI such that it accounts for the differences in
the cost of living?
A) purchasing power parity (PPP) adjustment
B) Human Development Index
C) debt to GNI ratio
D) consumer price index
22) In some countries, the official GNI per capita measured at PPP data does not reflect the
actual total annual income because
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A) it doesn’t consider differences in the cost of living.
B) it gives a static picture of development.
C) it fails to include income earned from other countries in the form of dividends.
D) large amounts of economic activity may be in the form of barter agreements.
23) Which of the following was developed by the United Nations to measure the quality of
life in different nations?
A) gross national income
B) Human Development Index
C) purchasing power parity
D) gross domestic product
24) Many countries in Africa score below 0.5 on the Human Development Index. This means
that these countrieshave
A) few political freedoms.
B) poor quality of life.
C) low purchasing power parity.
D) no gross domestic product.
25) Which of the following is one of the measures that HDI is based on?
A) life expectancy at birth
B) political freedom
C) attainment of housing
D) whether the lowest incomes are sufficient to meet the basic needs of life
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26) _____, a Nobel Prize–winning economist, has argued that development is not just an
economic process, but it is a political one as well.
A) Hernando de Soto
B) Karl Marx
C) Samuel Huntington
D) Amartya Sen
27) According to Amartya Sen, development should be
A) seen as a process of expanding the real freedoms that people experience.
B) seen as a nonpolitical concept that focuses on the net income of a country.
C) viewed as a purely economic process.
D) assessed by material output measures such as GNI per capita.
28) Which of the following statements pertaining to innovation and entrepreneurship is true?
A) They are the engines of growth.
B) They require strong legal systems.
C) They require state ownership of means of production.
D) They require a mixed economy.
29) A market economy encourages innovation because
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A) state ownership of enterprises reduces risks of innovation.
B) economic freedom leads to greater incentives for innovation.
C) government-owned and funded research centers become hubs of innovation.
D) the prices of goods and services, including new products, are fixed by government.
30) Stagnation can occur in planned economies because
A) entrepreneurial individuals have few economic incentives for innovation.
B) private ownership of means of production leads to exploitation of workers.
C) prices of goods and services are fixed by market forces of supply and demand.
D) lack of barriers to trade results in increased competition for domestic producers.
31) _____ is required for a business environment to be conducive to innovation and
entrepreneurial activity.
A) State ownership of means of production
B) Strong legal protection of property rights
C) Barriers to foreign trade and investment
D) Government regulation of the market
32) The influential Peruvian development economist Hernando de Soto has argued that much
of the developing world will fail to reap the benefits of capitalism until they
A) have political stability.
B) invest in infrastructural development.
C) have better defined and secure property rights.
D) have adequate market regulation.
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33) According to Hernando de Soto, which of the following factors is essential for the
developing world to be able to reap the benefits of innovation and entrepreneurship?
A) detailed state planning
B) restricting direct investment by foreign enterprises
C) strong property rights
D) market regulation
34) The political economy of many of the world’s nation-states has changed radically since
the late 1980s. Which of the following is a trend that has been evident?
A) A wave of democratic revolutions has swept the world.
B) Totalitarian governments have arisen, replacing democratically elected governments.
C) There has been a strong move toward centrally planned economies and away from
free market economic models.
D) Mixed economies are fast replacing market economies.
35) Political scientist _____ predicts that there will be a world that is split into different
civilizations, each of which has its own value systems and ideology.
A) Samuel Huntington
B) Amartya Sen
C) Francis Fukuyama
D) Hernando de Soto
36) Which of the following is one of the three main reasons for the spread of democracy?
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A) New information and communication technologies have broken down the ability of
the state to control access to uncensored information.
B) Totalitarian regimes delivered economic progress to the bulk of their populations but
not enough to the power brokers.
C) Democratic regimes failed to deliver economic progress to the vast bulk of their
populations.
D) Economic advances in the past quarter-century have led to the emergence of a class
of ruling elite.
37) According to what political scientist’s thesis is global terrorism a product of the tension
between civilizations and the clash of value systems and ideology?
A) Amartya Sen
B) Samuel Huntington
C) Francis Fukuyama
D) Hernando de Soto
38) One of the reasons for the spread of democracy is the emergence of _____ who have
pushed for democratic reforms.
A) a more vocal working poor
B) better educated lower classes
C) a desperate urban poor
D) increasingly prosperous middle and working classes
39) Since the late 1980s, there has been a spread of democracy. This is because
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A) a state’s ability to control access to uncensored information has increased.
B) the socialist model failed to deliver economic progress to the vast bulk of their
populations.
C) in many countries the middle and working classes have become less powerful.
D) in many countries state-ownership of firms has encouraged innovation and
entrepreneurship.
40) In many countries entrepreneurs and other business leaders, eager to protect their
property rights and ensure the dispassionate enforcement of contracts, had pushed for ________;
this contributed to a wave of democratic revolutions during the late 1980s and early 1990s.
A) state ownership of productive resources
B) regulated markets
C) democratic reforms
D) planned economies
41) Political scientist Samuel Huntington argues that modernization in non-Western societies
can result in a retreat toward the traditional. This is exemplified by the
A) Islamic resurgence.
B) popularization of modern gadgets.
C) adoption of Western culture.
D) higher levels of literacy and education.
42) According to political scientist Samuel Huntington, the rise of Islamic fundamentalism is
a response to the
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A) corruption prevalent in planned economies.
B) restricted access to formal education.
C) alienation produced by modernization.
D) restrictions associated with totalitarian regimes.
43) Which of the following statements is true about Samuel Huntington?
A) Samuel Huntington argues that there is a universal civilization based on widespread
acceptance of Western democratic ideals.
B) Samuel Huntington argues that the rise of Islamic fundamentalism is a response to
the alienation produced by modernization.
C) Samuel Huntington argues that global terrorism is a product of the static nature of
traditional values and religious systems.
D) Samuel Huntington argues that many societies, by adopting the material
paraphernalia of the modern world, are becoming more Western.
44) Paralleling the spread of democracy since the 1980s has been the transformation from
A) free-market economies to socialist economies.
B) mixed economies to collectivist economies.
C) open economies to closed economies.
D) command economies to market-based economies.
45) Since the 1980s, there has been a transformation from _____ economies to _____
economies.
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A) mixed; market-based
B) centrally planned command; market-based
C) centrally planned command; mixed
D) market-based; centrally planned command
46) Many states in Asia, Latin America, and Western Europe have shifted away from a mixed
economy to a market-based economy. Which of the following measures is most likely to be
promoted by such states?
A) state-ownership of enterprises
B) fixing of prices by the government
C) deregulation of the economy
D) lowering competition
47) Which of the following is a step in the shift toward a market-based economic system?
A) increasing trade barriers
B) increasing price controls
C) nationalization
D) creation of a legal system to safeguard property rights
48) _____ involves removing legal restrictions to the free play of markets, the establishment
of private enterprises, and the manner in which private enterprises operate.
A) Privatization
B) Developing command economies
C) Deregulation
D) Globalization
49) _____ is seen as a way to stimulate gains in economic efficiency by giving owners a
powerful incentive—the reward of greater profits—to search for increases in productivity, to
enter new markets, and to exit losing ones.
A) Globalization
B) Economic transformation
C) Deregulation
D) Privatization
50) _____ involves removing legal restrictions to the free play of markets, the establishment
of private enterprises, and the manner in which private enterprises operate.
A) Deregulation
B) Trade certification
C) A product law
D) A liability law
51) Which of the following is a step involved in the deregulation of a command economy?
A) adding price controls
B) temporarily restricting international trade
C) abolishing laws regulating the establishment and operation of private enterprises
D) increasing restrictions on direct investment by foreign enterprises
52) Without a strong legal system in a market economy