Question 1

The purchasing power parity for different countries is adjusted (up or down) depending upon whether a country's cost of living is lower or higher than the cost of living in the United States.

Accepted Answer

Purchasing power parity (PPP) adjusts the exchange rates between countries to reflect differences in the cost of living, allowing for a more accurate comparison of economic productivity and standards of living.

Question 2

Economists who argue that innovation and entrepreneurial activity are the engines of long-run economic growth, define innovation broadly to include not just new products but also new processes, new organizations, new management practices, and new strategies.

Accepted Answer

Economists recognize that innovation encompasses a wide range of activities that contribute to economic growth, including improvements in processes, organizational structures, management, and strategies, not just the creation of new products.

Question 3

A totalitarian regime can promote economic growth if it commits to a market system and values strong protection of property rights.

Accepted Answer

A totalitarian regime can promote economic growth by implementing market-friendly policies and ensuring property rights, as seen in examples like China, where economic reforms led to significant growth.

Question 4

In general, command and mixed economies failed to deliver the kind of sustained economic performance that was achieved by countries adopting market-based systems.

Accepted Answer

Command and mixed economies often face inefficiencies due to centralized control and lack of competition, whereas market-based systems tend to encourage innovation and efficient resource allocation, leading to better economic performance.

Question 5

The gross national income (GNI) per capita comes much closer to Amartya Sen's conception of how development should be measured than narrow economic measures such as Human Development Index (HDI).

Accepted Answer

Amartya Sen's conception of development emphasizes capabilities and human well-being, which aligns more closely with the Human Development Index (HDI) than with GNI per capita, as HDI includes health and education indicators in addition to income.

Question 6

Five of the fastest growing economies of the past 30 years-China, South Korea, Taiwan, Singapore, and Hong Kong-had one thing in common at the start of their economic growth: democratic governments.

Accepted Answer

These economies initially experienced rapid growth under authoritarian or semi-authoritarian regimes, not democratic governments.

Question 7

The late influential political scientist Samuel Huntington predicted that the universalization of Western liberal democracy will be the final form of human government.

Accepted Answer

Samuel Huntington is known for his "Clash of Civilizations" theory, not for predicting the universalization of Western liberal democracy as the final form of human government. That prediction is associated with Francis Fukuyama.

Question 8

A shadow economy refers to similar economic activity that takes place in competing nations.

Accepted Answer

A shadow economy refers to economic activities that occur outside of official regulations and are not reported to the government, often to avoid taxes or regulations.

Question 9

In a planned economy, there is a great deal of freedom for entrepreneurial activity and reward.

Accepted Answer

In a planned economy, the government controls resources and production, limiting entrepreneurial freedom and rewards.

Question 10

Advances in technology and communication have fostered the growth of democratic ideals.

Accepted Answer

Technological advancements and improved communication have facilitated the spread of information, enabling greater public participation and awareness, which are key components of democratic ideals.

Question 11

The Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until they relax the property rights offered by their legal systems.

Accepted Answer

Hernando de Soto argues that the developing world needs to strengthen and formalize property rights, not relax them, to enable people to leverage their assets and participate effectively in capitalism.

Question 12

A strong belief that economic progress leads to adoption of a democratic regime underlies the fairly permissive attitude that many Western governments have adopted toward human rights violations in China.

Accepted Answer

The belief in modernization theory suggests that economic development leads to democratization, which has influenced some Western governments to prioritize economic relations with China over addressing human rights issues.

Question 13

Francis Fukuyama promoted the idea that Western liberal democracy would be the final form of human government and lead to a harmonious world.

Accepted Answer

Francis Fukuyama argued in his book "The End of History and the Last Man" that Western liberal democracy represents the endpoint of humanity's sociocultural evolution and the final form of human government.

Question 14

If a country's economy is to sustain long-run economic growth, the business environment must be conducive to the consistent production of product and process innovations and to entrepreneurial activity.

Accepted Answer

A conducive business environment encourages innovation and entrepreneurship, which are key drivers of long-term economic growth by improving productivity and creating new markets.

Question 15

As categorized by Freedom House, citizens in a "partly free" country enjoy a high degree of political and civil freedom.

Accepted Answer

Freedom House categorizes "partly free" countries as having limited political rights and civil liberties, not a high degree.

Question 16

Gross national income is a measure of the monthly income received by residents of a nation.

Accepted Answer

Gross national income (GNI) measures the total annual income received by a nation's residents, including both domestic and foreign sources.

Question 17

Nations that have economic freedom also have political freedom.

Accepted Answer

Economic freedom and political freedom are often correlated, as countries with strong economic systems tend to have more stable political systems and vice versa.

Question 18

A nation that has inadequate enforcement of property rights reduces the motivation for innovative activity.

Accepted Answer

Inadequate enforcement of property rights can lead to uncertainty and risk for innovators, as they may not be able to fully benefit from their inventions, thus reducing the motivation for innovative activity.

Question 19

During the late 1980s and early 1990s, many totalitarian governments collapsed and were replaced by democratically elected governments.

Accepted Answer

During the late 1980s and early 1990s, many totalitarian regimes, particularly in Eastern Europe and the Soviet Union, collapsed, leading to the establishment of democratic governments.

Question 20

Communist nations were the first to adopt deregulation efforts.

Accepted Answer

Deregulation is typically associated with capitalist economies, where the focus is on reducing government intervention in the market. Communist nations traditionally have more government control over the economy.

Quiz 3: National Differences in Economic Development