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Chapter 30
Practice Quiz
Tutorial
Growth and the
Less-Developed Countries
©2000 South-Western College Publishing
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1. An LDC is defined as a country
a. without large stocks of advanced capital.
b. without well-educated labor.
c. with a low GDP per capita.
d. that is described by all of the above.
D. LDCs are economies based on agriculture
such as most countries of Africa, Asia, and
Latin America. They have a low level of
capital, a low level of education, and low
standard of living.
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2. According to the definition given in the
text, which of the following is not an LDC?
a. India.
b. Egypt.
c. China.
d. Ireland.
D. India, Egypt, and China are listed as
LDCs measured primarily by annual
GDP per capita.
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3. Which of the following is true when making GDPs
per capita comparisons between nations?
a. The GDP per capita is subject to greater
measurement errors for LDCs compared to IACs.
b. The GDP per capita does not measure income
distribution.
c. The GDP per capita is subject to fluctuations from
changes in exchange rates.
d. All of the above.
D. None of the answers is incorrect.
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4. LDCs are characterized by
a. high life expectancy.
b. high adult literacy.
c. low daily calorie supply.
d. all of the above.
e. none of the above.
C.
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Economic growth and development
Natural
resources
endowment
Human
resources
development
Capital
investment
Technological
progress
Political
environment
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5. According to the classification in the text,
which of the following is not an IAC?
a. United Arab Emirates
b. Israel.
c. Hong Kong.
d. Greece.
A. United Arab Emirates has a high GDP
per capita but there is a lack of
widespread industrial development.
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6. When the government fixes the exchange rate
above market exchange rates,
a. international trade falls.
b. the infrastructure improves.
c. real GDP per capita rises.
d. the vicious circle of poverty is broken.
A. When the exchange rate of a country
increases it becomes more expensive for
foreigners to buy goods and services from
that country.
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7. Which of the following statements is true?
a. An LDC is a country with a low GDP per
capita, low levels of capital, and uneducated
workers.
b. The vicious circle of poverty exists because
GDP must rise before people can save and
invest.
c. LDCs are characterized by rapid population
growth and low levels of investment in
human capital.
d. All of the above are true.
D. All of the above statements are true.
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8. An outward shift of the production
possibilities curve represents
a. economic growth.
b. a decline in economic development.
c. a decrease in human capital.
d. a decrease in resources.
A.
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Capital Goods
(quantity per year)
The Effect of External Financing on LDCs
B
Kb
Ka
PPC1
PPC2
Ca
Consumer Goods
(quantity per year)
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9. Which of the following problems do LDCs
face?
a. Low per capita income and high GDP
growth rate.
b. Low population growth and low per capita
income.
c. Rapid population growth and low human
capital.
d. Low per capita income and high saving rate.
C. Investment in human capital generally
results in increases in GDP per capita.
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10. Which of the following best defines the
vicious circle of poverty?
a. The GDP per capita must rise before
people can save and invest.
b. People cannot save while capital
accumulates.
c. Increased GDP per capita relates to lower
population growth.
d. Poverty, saving, and investment are
related like a circle.
A. The vicious circle of poverty is the trap in
which countries are poor because they cannot
afford to invest and save, but they cannot save
and invest because they are poor.
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11. Which of the following is
infrastructure?
a. International Harvester tractor plant.
b. Waste and water system provided by
government.
c. USAirways airplane.
d. Service of postal workers.
B. Infrastructure refers to capital goods
usually provided by the government,
including highways, bridges, and airports.
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12. Economic growth and development in
LDCs are low because many of them lack
a. capital investment.
b. technological progress.
c. a favorable political environment.
d. all of the above.
e. none of the above.
D. Economic growth and development involve
a complex process that is determined by
several interrelated forces.
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13. Which of the following makes short-term
conditional low-interest loans to developing
countries?
a. Agency for International Development
(AID).
b. World Bank.
c. International Monetary Fund (IMF).
d. New International Economic Order (NIEO).
C. AID is the agency of the U.S. State
Department is in charge of U.S. aid to foreign
countries. The World Bank makes long-term
low-interest loans to LDCs. NIEO is a series
of proposals made by LDCs to improve their
economic growth.
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14. Which of the following makes long-term lowinterest loans to less-developed countries
(LDCs)?
a. The Agency for International Development
(AID).
b. New International Economic Order (NIEO).
c. International Monetary Fund (IMF).
d. The World Bank.
D. AID is the agency of the U.S. State
Department in charge of U.S. aid to foreign
countries. The NIEO is a series of proposals
to help improve LDCs economic growth. The
IMF makes short-term conditional low- 17
interest loans to LDCs.
END
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