Question 1

If newly privatized firms are protected from foreign competition by barriers to international trade and foreign direct investment, they continue to act like state monopolies.

Accepted Answer

Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms continue to receive subsidies from the state and if they are protected from foreign competition by barriers to international trade and foreign direct investment. In such cases, the newly privatized firms are sheltered from competition and continue acting like state monopolies.

Question 2

In both China and India, the shift toward a command-based economic system has produced large gains despite weak property rights and endemic corruption.

Accepted Answer

Both China and India have achieved high growth rates despite relatively weak property rights regimes and high levels of corruption. In both countries, the shift toward a market-based economic system has produced large gains despite weak property rights and endemic corruption.

Question 3

Although free markets and democracy can still be found around the world, the tide has been running in favor of command economies and totalitarian dictatorships.

Accepted Answer

Although command economies remain and totalitarian dictatorships can still be found around the world, the tide has been running in favor of free markets and democracy.

Question 4

It is more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

Accepted Answer

It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses. At the extreme, an international firm may have to provide its own infrastructure and supporting business, which obviously raises costs.

Question 5

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

In general, command and mixed economies failed to deliver the kind of sustained economic performance that was achieved by countries adopting market-based systems, such as the United States, Switzerland, Hong Kong, and Taiwan. As a consequence, even more states have gravitated toward the market-based model.

Question 6

Which of the following statements is true of purchasing power parity (PPP)?
A)PPP figures can be misleading because they don't consider differences in the cost of living.
B)The PPP for different countries is adjusted (up or down) depending upon whether the cost of living is lower or higher than in Great Britain.
C)The PPP data gives a static picture of economic development.
D)China's GNI PPP per capita is higher than that of the United States.
E)PPP adjustment does not allow for a direct comparison of living standards in different countries.

Accepted Answer

The GNI and PPP data give a static picture of development. They tell us, for example, that China is much poorer than the United States, but they do not tell us if China is closing the gap.

Question 7

Social unrest and disorder are less likely to be found in countries that contain more than one ethnic nationality.

Accepted Answer

Social unrest and disorder are more likely to be found in countries that contain more than one ethnic nationality.

Question 8

A country's economic system and property rights regime do not influence the attractiveness of the country as a market or investment site.

Accepted Answer

The political, economic, and legal environments of a country clearly influence the attractiveness of that country as a market or investment site.

Question 9

One can adjust GNI per capita by purchasing power to account for differences in the:
A)cost of living.
B)population density.
C)geographical area.
D)factor endowments.
E)labor productivity.

Accepted Answer

To account for differences in the cost of living, one can adjust GNI per capita by purchasing power.

Question 10

Which of the following measures the total annual income received by residents of a country and is regarded as a yardstick for the economic activity of a country?
A)Income elasticity of demand
B)Cash reserve ratio
C)Net cash flow ratio
D)Gross national income
E)Income equity ratio

Accepted Answer

GNI is regarded as a yardstick for the economic activity of a country; it measures the total annual income received by residents of a nation.

Question 11

As a result of which of the following, large amounts of economic activity in India are unrecorded and the official GDP figures of the country fail to tell the entire story of the economy?
A)A large population
B)Active bartering
C)Deregulation
D)Nationalization
E)Closed totalitarianism

Accepted Answer

In some countries the "official" figures do not tell the entire story. Large amounts of economic activity may be in the form of unrecorded cash transactions, or barter agreements. In some countries (India being an example), they are reportedly very significant. Known as the black economy, estimates suggest that in India it may be around 50 percent of GDP.

Question 12

One common measure of economic development is a country's:
A)gender ratio.
B)gross national income.
C)infant mortality rate.
D)population density.
E)total geographical area.

Accepted Answer

One common measure of economic development is a country's gross national income (GNI) per head of population.

Question 13

In the context of political economy, the past three decades have seen a general move toward:
A)autocratic forms of government.
B)command-based economic reforms.
C)adoption of legal systems that better enforce property rights.
D)an environment which is unfavorable for international business.
E)military parties monopolizing political power worldwide.

Accepted Answer

The past three decades have seen a general move toward more democratic forms of government, market-based economic reforms, and adoption of legal systems that better enforce property rights.

Question 14

By identifying and investing early in a potential future economic star, international firms build brand loyalty and gain experience in that country's business practices.

Accepted Answer

By identifying and investing early in a potential future economic star, international firms may build brand loyalty and gain experience in that country's business practices. These will pay back substantial dividends if that country achieves sustained high economic growth rates.

Question 15

Economic freedom does not necessarily equate with political freedom.

Accepted Answer

Economic freedom does not necessarily equate with political freedom.

Question 16

Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities.

Accepted Answer

Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities, including organized crime, that expropriate the profits generated by the efforts of private-sector entrepreneurs.

Question 17

The shift toward deregulation has been easier for former command economies than for mixed economies.

Accepted Answer

In mixed economies, the role of the state was more limited; but here too, in certain sectors the state set prices, owned businesses, limited private enterprise, restricted investment by foreigners, and restricted international trade. For these countries, deregulation has involved the same kind of initiatives that we have seen in former command economies, although the transformation has been easier because these countries often had a vibrant private sector.

Question 18

In 2012, if the PPP per capita of China was $9,040 and the PPP per capita of the United States was $52,340, this means that the:
A)GNI per capita was greater in China.
B)percent of goods and services consumed in the United States was lower.
C)standard of living in China was better.
D)cost of living was lower in China.
E)annual average GDP growth rate was lower in China.

Accepted Answer

In 2012 the GNI per capita for China was $5,720, but the PPP per capita was $9,040, suggesting that the cost of living was lower in China and that $5,720 in China would buy as much as $9,040 in the United States.

Question 19

In China, state-owned companies still dominate the banking, energy, telecom, health care, and technology sectors.

Accepted Answer

In China, state-owned companies still dominate the banking, energy, telecom, health care, and technology sectors.

Question 20

In most eastern European nations, the title to urban and agricultural property is often uncertain because of incomplete and inaccurate records, multiple pledges on the same property, and unsettled claims resulting from demands for restitution from owners in the pre-communist era.

Accepted Answer

In most eastern European nations, the title to urban and agricultural property is often uncertain because of incomplete and inaccurate records, multiple pledges on the same property, and unsettled claims resulting from demands for restitution from owners in the pre-communist era.

Quiz 3: National Differences in Economic Development

If newly privatized firms are protected from foreign competition by barriers to international trade and foreign direct investment, they continue to act like state monopolies.

In both China and India, the shift toward a command-based economic system has produced large gains despite weak property rights and endemic corruption.

Although free markets and democracy can still be found around the world, the tide has been running in favor of command economies and totalitarian dictatorships.

It is more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.

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

Which of the following statements is true of purchasing power parity (PPP) ?

Social unrest and disorder are less likely to be found in countries that contain more than one ethnic nationality.

A country's economic system and property rights regime do not influence the attractiveness of the country as a market or investment site.

One can adjust GNI per capita by purchasing power to account for differences in the:

Which of the following measures the total annual income received by residents of a country and is regarded as a yardstick for the economic activity of a country?

As a result of which of the following, large amounts of economic activity in India are unrecorded and the official GDP figures of the country fail to tell the entire story of the economy?

One common measure of economic development is a country's:

In the context of political economy, the past three decades have seen a general move toward:

By identifying and investing early in a potential future economic star, international firms build brand loyalty and gain experience in that country's business practices.

Economic freedom does not necessarily equate with political freedom.

Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities.

The shift toward deregulation has been easier for former command economies than for mixed economies.

In 2012, if the PPP per capita of China was $9,040 and the PPP per capita of the United States was $52,340, this means that the:

In China, state-owned companies still dominate the banking, energy, telecom, health care, and technology sectors.

In most eastern European nations, the title to urban and agricultural property is often uncertain because of incomplete and inaccurate records, multiple pledges on the same property, and unsettled claims resulting from demands for restitution from owners in the pre-communist era.