Download Chapter 30 Growth in the Less-Developed Countries 1. Which of the

Chapter 30
Growth in the Less-Developed Countries
1. Which of the following is a problem when comparing GDP per capita between
nations?
a. GDP per capita fails to measure income distribution.
b. Fluctuations in exchange rates affect differences in GDP per capita.
c. GDP per capita is subject to greater measurement errors for LDCs compared to IACs.
d. All of the above answers are correct.
ANS
a. Incorrect. Each answer is correct.
b. Incorrect. Each answer is correct.
c. Incorrect. Each answer is correct.
d. Correct. Each answer is correct.
2. GDP per capita is a relatively good measurement of
a. the distribution of income.
b. purchasing power.
c. household production.
d. the standard of living.
ANS
a. Incorrect. GDP per capita does not measure the distribution of income.
b. Incorrect. GDP per capita does not measure purchasing power.
c. Incorrect. GDP per capita does not measure household production.
d. Correct. GDP per capita is a relatively good measurement of the standard of living.
3. Which of the following is infrastructure?
a. Police
b. Training and education
c. Highways
d. All of the above answers are correct.
ANS
a. Incorrect. This is not a capital good.
b. Incorrect. This is not a capital good.
c. Correct. This is a capital good provided by the government.
d. Incorrect. Answers a. and b. are not correct.
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4. Which of the following statements explains the vicious circle of poverty?
a. By investing in education and infrastructure at the same time, the country can
overcome the problems of poverty.
b. Poverty arises out of the lack of investment, but countries cannot invest because they
are poor.
c. A nation can shift its production possibilities curve inward by shifting more resources
into the production of capital goods.
d. A nation can shift its production possibilities curve outward by shifting more resources
into the production of consumer goods.
ANS
a. Incorrect. The problem is a lack of investment.
b. Correct. This is the trap for poor countries.
c. Incorrect. Production of capital goods shifts the production possibilities curve outward.
d. Incorrect. Consumer goods do not create economic growth.
5. Which of the following is not a characteristic of most less-developed countries?
a. Inadequate human capital
b. Inadequate capital goods
c. High population growth rate
d. Inadequate water supplies
e. High productivity
ANS
a. Incorrect. This is a characteristic of LDCs.
b. Incorrect. This is a characteristic of LDCs.
c. Incorrect. This is a characteristic of LDCs.
d. Incorrect. This is a characteristic of LDCs.
e. Correct. Less-developed countries are relatively low in GDP per capita.
6. Compared to IACs, LDCs are often characterized by
a. lower life expectancy.
b. lower adult literacy.
c. lower per capita energy consumption.
d. All of the answers are correct.
ANS
a. Incorrect. Each answer is correct. See Exhibit 23.3 in the text.
b. Incorrect. Each answer is correct. See Exhibit 23.3 in the text.
c. Incorrect. Each answer is correct. See Exhibit 23.3 in the text.
d. Correct. Each answer is correct. See Exhibit 23.3 in the text.
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7. Real GDP per capita and other alternative measures of the quality of life are
a. independent.
b. directly correlated.
c. poorly correlated.
d. inversely related.
ANS
a. Incorrect. Real GDP per capita and other alternative measures of the quality of life are
directly correlated. See Exhibit 23.3 in the text.
b. Correct. Real GDP per capita and other alternative measures of the quality of life are
directly correlated. See Exhibit 23.3 in the text.
c. Incorrect. Real GDP per capita and other alternative measures of the quality of life are
directly correlated. See Exhibit 23.3 in the text.
d. Incorrect. Real GDP per capita and other alternative measures of the quality of life are
directly correlated. See Exhibit 23.3 in the text.
8. Economic development encompasses which of the following measures?
a. Economic growth
b. The political environment
c. Education
d. All of the above answers are correct.
ANS
a. Incorrect. Each answer is correct.
b. Incorrect. Each answer is correct.
c. Incorrect. Each answer is correct.
d. Correct. Each answer is correct.
9. Which of the following is a characteristic of an LDC?
a. Capital flight
b. Vicious circle of poverty
c. Lack of entrepreneurs
d. All of the above answers are correct.
ANS
a. Incorrect. Each answer is correct.
b. Incorrect. Each answer is correct.
c. Incorrect. Each answer is correct.
d. Correct. Each answer is correct.
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10. Economic growth and development in LDCs are low because many of them lack
a. saving.
b. infrastructure.
c. a political environment favorable to growth.
d. All of the above answers are correct.
ANS
a. Incorrect. Each answer is correct.
b. Incorrect. Each answer is correct.
c. Incorrect. Each answer is correct.
d. Correct. Each answer is correct.
11. Which of the following is a true statement?
a. The LDC classification is of questionable accuracy.
b. GDP per capita ignores the degree of income distribution.
c. GDP per capita is affected by exchange rate changes.
d. GDP per capita does not account for the difference in the cost of living among nations.
e. All of the above answers are correct.
ANS
a. Incorrect. Each answer is correct.
b. Incorrect. Each answer is correct.
c. Incorrect. Each answer is correct.
d. Incorrect. Each answer is correct.
e. Correct. Each answer is correct.
Exhibit 8 Nation of Padia
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12. Exhibit 8 shows the production possibilities curve of the nation of Padia. Based only
on this information, which point which would produce the highest rate of growth?
a. I
b. II
c. III
d. IV
e. V
ANS
a. Correct. Point I produces more capital goods that create growth compared to the other
answers.
b. Incorrect. Point I produces more capital goods that create growth compared to the other
answers.
c. Incorrect. Point I produces more capital goods that create growth compared to the other
answers.
d. Incorrect. Point I produces more capital goods that create growth compared to the other
answers.
e. Incorrect. Point I produces more capital goods that create growth compared to the other
answers.
13. Exhibit 8 shows the production possibitities curve of the nation of Padia. Based only
on this information, the point which would produce the lowest rate of growth would be
a. I
b. II
c. III
d. IV
e. V
ANS
a. Incorrect. Point V produces less capital goods that create growth compared to the other
answers.
b. Incorrect. Point V produces less capital goods that create growth compared to the other
answers.
c. Incorrect. Point V produces less less capital goods that create growth compared to the
other answers.
d. Incorrect. Point V produces less capital goods that create growth compared to the other
answers.
e. Correct. Point V produces less capital goods that create growth compared to the other
answers.
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14. Which of the following is in charge of U.S. aid to foreign countries?
a. Agency for International Development (AID)
b. World Bank
c. International Monetary Fund (IMF)
d. New International Economic Order (NIEO)
ANS
a. Correct. AID is in charge of U.S. aid to foreign countries.
b. Incorrect. The World Bank makes long-term low-interest loans to LDCs.
c. Incorrect. The IMF makes short-term conditional low-interest loans to LDCs.
d. Incorrect. The NIEO makes policy proposals for growth of LDCs.
15. Which of the following makes long-term low-interest loans to LDCs?
a. Agency for International Development (AID)
b. World Bank
c. International Monetary Fund (IMF)
d. New International Economic Order (NIEO)
ANS
a. Incorrect. AID is the U.S agency in charge of U.S. aid to foreign countries.
b. Correct. The World Bank makes long-term low-interest loans to LDCs.
c. Incorrect. The IMF makes short-term conditional low-interest loans to LDCs.
d. Incorrect. The NIEO makes policy proposals for growth of LDCs.
16. Which of the following makes short-term conditional low-interest loans to LDCs?
a. World Bank
b. Agency for International Development (AID)
c. Agency for International Finance (AIF)
d. International Monetary Fund (IMF)
ANS
a. Incorrect. The World Bank makes long-term low-interest loans to LDCs.
b. Correct. The IMF makes short-term conditional low-interest loans to LDCs.
c. Incorrect. This is a meaningless agency.
d. Incorrect. The IMF makes short-term conditional low-interest loans to LDCs.
17. Which of the following is not an example of a country’s infrastructure?
a. Transportation system
b. Communications system
c. Political system
d. Educational system
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ANS
a. Incorrect. This is an example of infrastructure.
b. Incorrect. This is an example of infrastructure.
c. Correct. The political system is not a capital good.
d. Incorrect. This is an example of infrastructure.
18. Which of the following best defines the vicious circle of poverty?
a. Countries are poor because they cannot afford to save and invest.
b. Countries are poor because of high population growth.
c. Countries are poor because of lack of education and training for workers.
d. Countries are poor because of poor international credit.
ANS
a. Correct. The vicious circle of poverty describes countries that are poor because they
cannot afford to save and invest.
b. Incorrect. The vicious circle of poverty describes countries that are poor because they
cannot afford to save and invest.
c. Incorrect. The vicious circle of poverty describes countries that are poor because they
cannot afford to save and invest.
d. Incorrect. The vicious circle of poverty describes countries that are poor because they
cannot afford to save and invest.
19. If a country’s population grows at the same rate as its real GDP, then real per capita
GDP
a. grows at an increasing rate.
b. grows at a constant rate.
c. doesn’t change.
d. decreases at a decreasing rate.
ANS
a. Incorrect. If a country’s population grows at the same rate as its real GDP, then real per
capita GDP doesn’t change.
b. Incorrect. If a country’s population grows at the same rate as its real GDP, then real per
capita GDP doesn’t change.
c. Correct. If a country’s population grows at the same rate as its real GDP, then real per
capita GDP doesn’t change.
d. Incorrect. If a country’s population grows at the same rate as its real GDP, then real per
capita GDP doesn’t change.
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20. In order for Ethiopia to increase its future economic growth, it must choose a point
that is
a. below its production possibilities curve.
b. further along on its production possibilities curve toward the capital goods axis.
c. further along on its production possibilities curve toward the consumption goods axis.
d. above its production possibilities curve.
ANS
a. Incorrect. This is an inefficient economy.
b. Correct. Increasing capital goods is a key to economic growth.
c. Incorrect. Consumption does not contribute to economic growth.
d. Incorrect. This is an non-feasible situation.
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