Quiz 3: National Differences in Economic Development
Business
Q 1Q 1
GNI per capita can be adjusted by purchasing power to account for differences in the cost of living.
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True False
True Explanation: To account for differences in the cost of living, one can adjust GNI per capita by purchasing power. Referred to as a purchasing power parity (PPP) adjustment, it allows for a more direct comparison of living standards in different countries.
Q 2Q 2
The base for the purchasing power parity adjustment of the GNI is the cost of living in the United States.
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True False
True Explanation: Referred to as a purchasing power parity (PPP) adjustment, it allows for a more direct comparison of living standards in different countries. The base for the adjustment is the cost of living in the United States.
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True False
False Explanation: 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.
Q 4Q 4
In Sen's view,development is an economic process that should be assessed by material output measures such as GNI per capita.
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True False
Q 5Q 5
Life expectancy at birth is one of the measures used by the Human Development Index (HDI)to measure the quality of human life in different nations.
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True False
Q 6Q 6
Political freedoms is one of the measures used by the Human Development Index (HDI)to measure the quality of human life in different nations.
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True False
Q 7Q 7
If a country's economy is to sustain long-run economic growth,the business environment must be conducive to innovations and entrepreneurial activity.
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True False
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True False
Q 9Q 9
The economic freedom associated with a market economy creates greater incentives for innovation and entrepreneurship than either a planned or a mixed economy.
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True False
Q 10Q 10
Privatization refers to the process of hiring private management consultancy firms to manage state-owned enterprises.
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True False
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True False
Q 12Q 12
Peruvian development economist Hernando de Soto has argued that the chronic inability of property owners to establish legal title to the property they own is a key problem for innovation,and entrepreneurial activity in developing nations.
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True False
Q 13Q 13
Some totalitarian regimes have fostered a market economy and strong property rights protection and have experienced rapid economic growth.
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True False
Q 14Q 14
Totalitarian states promote human freedom and human development,which facilitates economic progress.
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True False
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True False
Q 16Q 16
Anecdotal comparisons suggest that the assertion that nations that invest more in education will have higher growth rates is true.
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True False
Q 17Q 17
Since the late 1980s,there has been a strong move away from a more free market economic model and toward a more centrally planned and mixed economies.
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True False
Q 18Q 18
Many totalitarian regimes were able to deliver economic progress to the vast bulk of their populations,which curbed the spread of democracy during the late 1980s.
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True False
Q 19Q 19
New information and communication technologies have enabled the spread of democratic ideals.
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True False
Q 20Q 20
One of the reasons for the spread of democracy is the emergence of increasingly prosperous middle and working classes who have pushed for democratic reforms.
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True False
Q 21Q 21
Political scientist Samuel Huntington predicts that there will be a more harmonious world dominated by a universal civilization characterized by democratic regimes and free market capitalism.
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True False
Q 22Q 22
According to political scientist Samuel Huntington's thesis,global terrorism is a product of the tension between civilizations and the clash of value systems and ideology.
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True False
Q 23Q 23
Transformation from centrally planned command economies to market-based economies can be attributed to the fact that command and mixed economies failed to deliver the sustained economic performance achieved by countries adopting market-based systems.
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True False
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True False
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True False
Q 26Q 26
Deregulation involves prohibiting private enterprises from operating in most sectors of the economy.
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True False
Q 27Q 27
In mixed economies,in certain sectors the state set prices,owned businesses,limited private enterprise,restricted investment by foreigners,and restricted international trade.
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True False
Q 28Q 28
Privatization reduces the incentive of business owners to increase productivity,enter new markets,and to exit losing ones.
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True False
Q 29Q 29
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.
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True False
Q 30Q 30
For privatization to work,it must also be accompanied by a more general deregulation and opening of the economy.
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True False
Q 31Q 31
The government of a country takes over the airport security industries following a major terrorist attack,to improve airport security.This is an example of privatization.
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True False
Q 32Q 32
A well-functioning market economy requires laws protecting private property rights and providing mechanisms for contract enforcement.
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True False
Q 33Q 33
When communism collapsed,many of the communist countries lacked the legal structure required to protect property rights because all the property was earlier held by the state.
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True False
Q 34Q 34
A market with a large number of consumers,with low living standards will have a relatively large market when measured in economic terms.
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True False
Q 35Q 35
The long-run monetary benefits of doing business in a country are a function of the size of the market,the present wealth of consumers in that market,and the likely future wealth of consumers.
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True False
Q 36Q 36
By identifying and investing early in a potential future economic star,international firms can build brand loyalty and gain experience in that country's business practices.
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True False
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True False
Q 38Q 38
A country's economic system and property rights regime are reasonably good predictors of economic prospects.
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True False
Q 39Q 39
Countries with free market economies in which property rights are protected tend to achieve lower economic growth rates than command economies where property rights are poorly protected.
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True False
Q 40Q 40
It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.
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True False
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True False
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True False
Q 43Q 43
The overall attractiveness of a country as a potential market or investment site for an international business depends on balancing the benefits,costs,and risks associated with doing business in that country.
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True False
Q 44Q 44
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
Free
Multiple Choice
Q 45Q 45
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
Free
Multiple Choice
Q 46Q 46
In some countries,the official GNI per capita measured at PPP data does not reflect the actual the total annual income because:
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.
Free
Multiple Choice
Q 47Q 47
Which of the following is a measure that is 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
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Multiple Choice
Q 48Q 48
The HDI is based on all of the following measures EXCEPT:
A) life expectancy at birth.
B) political freedom.
C) educational attainment.
D) whether average incomes are sufficient to meet the basic needs of life.
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Multiple Choice
Q 49Q 49
_____,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
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Multiple Choice
Q 50Q 50
According to Amartya Sen,development should be:
A) seen as a process of expanding the real freedoms that people experience.
B) seen as a non-political concept that focuses on the net income of a country.
C) should be viewed as a purely economic process.
D) assessed by material output measures such as GNI per capita.
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Multiple Choice
Q 51Q 51
Which of the following statement pertaining to innovation and entrepreneurship is NOT true?
A) They are the engines of growth.
B) They require strong property rights.
C) They require state ownership of means of production.
D) They require a market economy.
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Multiple Choice
Q 52Q 52
A market economy encourages innovation because _____.
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
Free
Multiple Choice
Q 53Q 53
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 demand and supply.
D) lack of barriers to trade results in increased competition for domestic producers.
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Multiple Choice
Q 54Q 54
_____ 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
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Multiple Choice
Q 55Q 55
The state can expropriate the profits from innovation through legal means,such as _____.
A) bureaucratic kickbacks
B) excessive taxation
C) black market transactions
D) privatization
Free
Multiple Choice
Q 56Q 56
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 _____.
A) they have political stability
B) they invest in infrastructural development
C) they have better defined and secure property rights
D) they have adequate market regulation
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Multiple Choice
Q 57Q 57
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
Free
Multiple Choice
Q 58Q 58
A free market economy in which property rights are protected leads to subsequent economic growth,which often leads to the establishment of:
A) a democratic regime.
B) a planned economy.
C) government owned enterprises.
D) a socialist economy.
Free
Multiple Choice
Q 59Q 59
The political economy of many of the world's nation-states has changed radically since the late 1980s.All of the following are trends that have been evident EXCEPT:
A) a wave of democratic revolutions has swept the world.
B) totalitarian governments collapsed and have been replaced by democratically elected governments.
C) there has been a strong move away from centrally planned economies toward free market economic models.
D) mixed economies are fast replacing market economies.
Free
Multiple Choice
Q 60Q 60
Since the late 1980s,there has been a spread of democracy.This is because _____.
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
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Multiple Choice
Q 61Q 61
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
Free
Multiple Choice
Q 62Q 62
Political scientist Samuel Huntington argues that modernization in non-Western societies can result in a retreat toward the traditional.This is exemplified by _____.
A) the Islamic resurgence
B) the popularization of modern gadgets
C) the adoption of Western culture
D) the higher levels of literacy and education
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Multiple Choice
Q 63Q 63
According to political scientist Samuel Huntington,the rise of Islamic fundamentalism is a response to _____.
A) the corruption prevalent in planned economies
B) the restricted access to formal education
C) the alienation produced by modernization
D) the restrictions associated with totalitarian regimes
Free
Multiple Choice
Q 64Q 64
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.
Free
Multiple Choice
Q 65Q 65
Paralleling the spread of democracy,since the 1980s there 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.
Free
Multiple Choice
Q 66Q 66
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
Free
Multiple Choice
Q 67Q 67
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
Free
Multiple Choice
Q 68Q 68
_____ 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
Free
Multiple Choice
Q 69Q 69
Which of the following is an example of deregulation?
A) A country that implements a simplified income tax filing system
B) A country that takes over a leading private bank to prevent it from filing for bankruptcy
C) A country that provides agricultural subsidies to farmers
D) A country that encourages foreign direct investment
Free
Multiple Choice
Q 70Q 70
Which of the following is a characteristic of a command economy?
A) Promotion of foreign direct investment
B) Allowing prices to be set by the interplay between demand and supply
C) Limited international trade
D) Restricted state-ownership of means of production
Free
Multiple Choice
Q 71Q 71
The finance minister of a country considers several large,state-owned iron manufacturing units to be inefficient and a source of corruption.To generate resources for public expenditure and promote economic growth,the government decides to auction an entire iron manufacturing plant to sell it to a strategic investor.This process exemplifies _____.
A) nationalization
B) industrialization
C) liberalization
D) privatization
Free
Multiple Choice
Q 72Q 72
Studies of privatization in central Europe have shown that the process often fails to deliver predicted benefits if the newly privatized firms:
A) stop receiving subsidies from the government.
B) are completely owned by private individuals.
C) are sheltered from foreign competition.
D) are allowed to restructure their operations.
Free
Multiple Choice
Q 73Q 73
The sale of state assets through an auction is most likely to lead to _____.
A) trade certification
B) privatization
C) nationalization
D) market regulation
Free
Multiple Choice
Q 74Q 74
For privatization to work,it must also be accompanied by:
A) an increase in trade barriers and tariffs.
B) an increase in government subsidies.
C) stronger barriers to foreign competition.
D) a general deregulation of the economy.
Free
Multiple Choice
Q 75Q 75
Which of the following factors is NOT likely to make a country a more attractive location for international business?
A) Democratic regimes
B) Planned economies
C) Strong protection of property rights
D) Market-based economic policies
Free
Multiple Choice
Q 76Q 76
The benefits of doing business in a country are a function of all of the following EXCEPT:
A) the size of the market.
B) its present wealth.
C) its past growth.
D) its future growth prospects.
Free
Multiple Choice
Q 77Q 77
Sony was a pioneer in the portable music market segment.Sony's Walkman was an innovative product which created a new category altogether and made Sony a technological leader.This gave the company an edge over other consumer electronics brands that introduced portable music players for a very long time.In this example,Sony had the:
A) vertical integration advantage.
B) purchasing power parity advantage.
C) free-rider advantage.
D) first-mover advantage.
Free
Multiple Choice
Q 78Q 78
Google launched Google Plus to gain a foothold in the social media market.However,given that there are numerous social networking platforms and Facebook is already a leader in social media,Google Plus found it challenging to generate brand loyalty and establish itself in the market.This was because of _____.
A) incumbent disadvantage.
B) disintermediation disadvantage.
C) late-mover disadvantage.
D) horizontal integration disadvantage.
Free
Multiple Choice
Q 79Q 79
In all of the following scenarios,the costs of doing business in a country tend to be greater,EXCEPT where:
A) political payoffs are required to gain market access.
B) supporting infrastructure is lacking.
C) local laws set strict standards with regard to environmental pollution.
D) there is limits or caps on damage awards.
Free
Multiple Choice
Q 80Q 80
The likelihood that a trading partner will opportunistically break a contract or expropriate property rights is called a(n)_____.
A) economic risk
B) legal risk
C) cultural risk
D) political risk
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Multiple Choice
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Q 89Q 89
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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Q 91Q 91
Is privatization by itself enough to guarantee economic growth? Why? Explain using an example.
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Q 94Q 94
What are the factors that determine the long-run monetary benefits of doing business in a country?
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Q 98Q 98
Why does doing business in a country with a relatively unsophisticated economy result in increased costs?
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