Question 1

Which of the following would be most likely to improve the standard of living of a less-developed country?

Accepted Answer

A)   Development of strong labor unions.
B)   More foreign investment, attracted by the expectation of economic and political stability.
C)   Adoption of trade barriers (higher tariffs and quotas) .
D)   Widespread use of price controls to allocate goods and resources.E) A) and D)
F) B) and C)

Question 2

Which of the following is true of economic rules and institutions?

Accepted Answer

A)   When the rules and institutions of a country encourage productive actions, investment will be attracted and incomes will grow.
B)   When the rules and institutions of a country discourage productive actions, investment will be attracted and incomes will grow.
C)   Economic analysis indicates that rules and institutions do not exert much impact on investment and the growth of income.
D)   Rules and institutions influence high-income economies, but there is no evidence that they exert an impact on investment, growth, and the overall performance of low-income economies.E) None of the above
F) A) and B)

Question 3

Authoritarian political regimes

Accepted Answer

A)   never produce sound economic institutions, due to corruption.
B)   have produced movement toward sound economic institutions in Chile, South Korea and several other nations.
C)   will generally produce sound economic institutions and policies.
D)   are necessary for the emergence of sound institutions, but not for their continued operation.E) A) and D)
F) A) and C)

Question 4

Which of the following helps low income countries grow rapidly relative to high income countries?

Accepted Answer

A)   Low income countries are in a better position to save a larger share of their income.
B)   Low income countries can copy (or borrow at a low cost)  technologies and practices that have been successful in high income countries.
C)   Low income countries generally have legal systems that protect property rights and enforce contracts in a more evenhanded manner.
D)   Low income countries generally have more favorable weatherE) B) and D)
F) None of the above

Question 5

Which of the following is true?

Accepted Answer

A)   economic freedom is present if a country is a political democracy.
B)   economic freedom ratings indicate the consistency of a nation's institutions and policies with personal choice, freedom of exchange, and protection of private property.
C)   economies that are highly free tend to grow less rapidly than those with less economic freedom.
D)   all of the above are correct.E) C) and D)
F) A) and B)

Question 6

Countries with more economic freedom during 1990-2013 tended to

Accepted Answer

A)   grow more rapidly, but the 2013 income levels of the freer economies were still lower than those that were less free.
B)   achieve higher levels of income but the growth rates of the less free economies have been more rapid in recent years.
C)   achieve both more rapid growth and higher income levels than those that were less free.
D)   grow less rapidly and the 2013 income levels of the freer economies were lower than those that were less free.E) None of the above
F) A) and B)

Question 7

In order to achieve a high economic freedom rating, a country must

Accepted Answer

A)   elect political officials democratically.
B)   protect property rights, enforce contracts even-handedly, and rely extensively on markets to allocate goods and services.
C)   provide citizens with housing, health care, and other basic goods free of charge.
D)   use the taxing power of the state to redistribute income from the rich to the poor and thereby promote income equality.E) B) and C)
F) A) and C)

Question 8

(I)   Countries with more economic freedom during the past quarter of a century had a lower average per capita GDP.
(II)   Countries with more economic freedom during the past quarter of a century generally achieved higher rates of economic growth.

Accepted Answer

A)   Both I and II are true.
B)   Both I and II are false.
C)   I is true; II is false.
D)   I is false; II is true.E) A) and B)
F) All of the above

Question 9

Countries that have a higher degree of economic freedom tend to

Accepted Answer

A)   invest a larger share of their output, but the productivity of that investment is lower than for economies that are less free.
B)   invest a smaller share of their output, but the productivity of that investment is higher than for economies that are less free.
C)   invest a larger share of their output and the productivity of that investment is higher than for the economies that are less free.
D)   invest a smaller share of their output and the productivity of that investment is lower than for economies that are less free.E) None of the above
F) A) and B)

Question 10

Income per person in the United States is approximately ____ that of Malawi, and Niger, two of the world's poorest countries.

Accepted Answer

A)   the same as
B)   double
C)   ten times
D)   fifty timesE) B) and C)
F) A) and B)

Question 11

During 1980-2013, the developing countries that moved most rapidly toward  economic freedom

Accepted Answer

A)   achieved higher rates of economic growth, but the reductions in their poverty rates were smaller than those for countries that were less free.
B)   grew less rapidly, but the reductions in the poverty rates were greater than those achieved in countries that were less free.
C)   experienced both slower rates of economic growth and smaller reductions in poverty  rates than countries that were less free.
D)   experienced both more rapid rates of economic growth and larger reductions in poverty  rates than countries that were less free.E) C) and D)
F) B) and C)

Question 12

According to the Economic Freedom of the World data, the United States

Accepted Answer

A)   is now the freest economy in the world.
B)   is the world's third freest economy, behind only Hong Kong and Singapore.
C)   has experienced a decline in economic freedom since 2000, and it no longer ranks in the top ten of the world's freest economies.
D)   has experienced an increase in economic freedom since 2000 and it is now the world's 8th freest economy.E) A) and B)
F) A) and C)

Question 13

Which of the following about economic growth is true?

Accepted Answer

A)   The rich countries are consistently getting richer, while the poor countries are getting poorer.
B)   No LDC was able to achieve a more rapid growth rate than the United States during the 1980 through 2014 period.
C)   The growth picture of LDCs is clearly one of diversity; some LDCs are growing rapidly, while others continue to stagnate.
D)   The fastest growing countries in the world are all high-income industrial economies.E) A) and B)
F) B) and D)

Question 14

Which of the following is one of the reasons to believe that institutional change is more likely now than in the past?

Accepted Answer

A)   The colonial era is over and countries are in the position to make their own institutional choices.
B)   The collapse of communism has expanded the opportunity for institutional change.
C)   Reductions in transportation and communication costs have increased the importance of institutions and policies.
D)   All of the above are true.E) A) and C)
F) A) and B)

Question 15

The Economic Freedom of the World measure indicates that the United States

Accepted Answer

A)   was the freest economy in the world in 2010.
B)   has experienced a decline in economic  freedom since 2000.
C)   has experienced an increase in economic freedom since 2000.
D)   continues to be substantially more free than Australia, Canada, and Chile.E) None of the above
F) B) and C)

Question 16

In a majority-rules democracy, economic thinking suggests that we should expect to see institutions and policies that

Accepted Answer

A)   are short-sighted.
B)   take the long view, sacrificing current benefits to get larger future benefits.
C)   benefit the common citizen at the expense of narrow special interest groups which, after all, have fewer voters.
D)   are biased against income transfer programs, regardless of constitutional limits.E) B) and C)
F) A) and B)

Question 17

During 1980-2009, the countries achieving the most rapid growth of real GDP were nearly all

Accepted Answer

A)   high-income developed economies.
B)   low-income less developed economies at the beginning of the period.
C)   South American economies.
D)   European economies.
E)   African economies.F) D) and E)
G) A) and C)

Question 18

Which of the following about economic growth is true?

Accepted Answer

A)   The developed nations are growing rapidly and the less-developed nations are stagnating.
B)   Most of the countries that have achieved the highest growth rates in the world during the last quarter of a century were classified as LDCs in 1980.
C)   It is an oversimplification to divide the world into the growing, developed nations and the stagnating, less-developed nations.
D)   Both b and c are true.
E)   All of the above are true.F) A) and B)
G) D) and E)

Question 19

The economic freedom of the world data indicate that during the past three decades, low-income developing economies have

Accepted Answer

A)   moved toward more restrictive trade policies and followed monetary policies that were more inflationary.
B)   moved toward more restrictive trade policies, but their monetary policies were less inflationary.
C)   reduced trade restrictions, but followed more inflationary monetary policies.
D)   reduced trade restrictions and followed monetary policies more consistent with price stability.E) A) and B)
F) None of the above

Question 20

The purchasing power parity method of comparing income levels across countries

Accepted Answer

A)   calculates the cost of purchasing a common bundle of goods in each country and then uses this price index to convert each country's income to a common currency.
B)   uses the exchange rate to convert the income level of each country to a common currency.
C)   uses the prime interest rate in each country to convert the income level of each country to a common currency.
D)   calculates the ratio of imports relative to exports in each country and then uses this ratio to convert each country's income to a common currency.E) A) and B)
F) None of the above

Exam 17: Institutions, Policies, and Cross-Country Differences in Income and Growth

During 1980-2013, the developing countries that moved most rapidly toward economic freedom

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Which of the following is one of the reasons to believe that institutional change is more likely now than in the past?

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Countries that have a higher degree of economic freedom tend to

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Which of the following is true?

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The purchasing power parity method of comparing income levels across countries

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Which of the following is true of economic rules and institutions?

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Which of the following about economic growth is true?

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Which of the following would be most likely to improve the standard of living of a less-developed country?

Correct AnswerverifiedShow Answer

In a majority-rules democracy, economic thinking suggests that we should expect to see institutions and policies that

Correct AnswerverifiedShow Answer

Countries with more economic freedom during 1990-2013 tended to

Correct AnswerverifiedShow Answer

According to the Economic Freedom of the World data, the United States

Correct AnswerverifiedShow Answer

Authoritarian political regimes

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(I) Countries with more economic freedom during the past quarter of a century had a lower average per capita GDP. (II) Countries with more economic freedom during the past quarter of a century generally achieved higher rates of economic growth.

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The Economic Freedom of the World measure indicates that the United States

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The economic freedom of the world data indicate that during the past three decades, low-income developing economies have

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Which of the following helps low income countries grow rapidly relative to high income countries?

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During 1980-2009, the countries achieving the most rapid growth of real GDP were nearly all

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In order to achieve a high economic freedom rating, a country must

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Income per person in the United States is approximately ____ that of Malawi, and Niger, two of the world's poorest countries.

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Which of the following about economic growth is true?

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