Gottheil Quiz: The Economic Problems of Less-Developed Economies

Quiz
The Economic Problems of Less-Developed Economies

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1. Economists define a developed country (DC) as a country in which: a. people enjoy a high life expectancy at birth.
b. the adult literacy rate exceeds 90%.
c. the total or per capita real GDP is relatively high.
d. the per capita real GDP growth rate is relatively high.
e. the combined (primary, secondary, and tertiary) educational enrolment ratio exceeds 70%.

2. Economists define a less developed country (LDC) as a country in which: a. the infant mortality rate exceeds 10%.
b. the percentage of the population with access to safe water is less than 50.
c. the percentage of underweight children under age 5 exceeds 50.
d. the total or per capita real GDP is relatively low.
e. the female life expectancy at birth is smaller than the male life expectancy at birth.

3. In the late 1990s, people in 40 LDCs, including India's 930 million people, had per capita incomes of: a. under $100 per year.
b. under $200 per year.
c. under $300 per year.
d. under $400 per year.
e. under $500 per year.

4. Towards the end of the 20^th century, per capita income growth rates in many LDCs were: a. low or even negative.
b. rapidly rising.
c. rapidly falling.
d. equal to those in the developed countries.
e. higher than those in the developed countries.

5. A less developed country's real GDP grew from $50 billion in one year to $50.5 billion the next year. At the same time, its population grew from 500 million to 515 million. Therefore,: a. the country's real GDP grew by 1%.
b. the country's population grew by 3%.
c. the country's per capita income grew by 1/3%.
d. all of the above statements are true.
e. only (a) and (b) are true.

6. Which of the following statistics from the mid-1990s are not credible?: a. Life expectancy in the least developed countries was 50.4 years, but equaled 74.1 years in the industrial world.
b. The adult literacy rate in the least developed countries was 48.1%, but equaled 98.5% in the industrial world.
c. The combined (primary, secondary, and tertiary) educational enrolment ratio was 36% in the least developed countries, but equaled 83% in the industrial world.
d. The percentage of births attended by trained health personnel was 75 in the least developed countries, but equaled 99 in the industrial world.
e. The number of radios per 1,000 people was 96 in the least developed countries, but it equaled 1,018 in the industrial world.

7. Which of the following statements about the role of natural resources in economic development is credible?: a. An abundant supply of natural resources is an indispensable prerequisite for achieving a high level of economic development.
b. An abundant supply of natural resources is, by itself, a sufficient basis for achieving a high level of economic development.
c. Both (a) and (b) are correct.
d. Plentiful natural resources are neither a sufficient nor a necessary factor for achieving a high level of economic development.
e. Countries poor in natural resources may prosper, while countries rich in natural resources may not; thus, it seems, finding more natural resources in a country will, ceteris paribus, not help its economic development.

8. Which of the following statements about the role of capital resources in economic development is credible?: a. There is a predictable relationship between capital formation and labor productivity: Physical capital, such as a tractor or machine, increases an individual's ability to produce.
b. There is a predictable relationship between capital formation and labor productivity: Human capital, such as health, knowledge, and skills, increases an individual's ability to produce.
c. To produce capital, be it physical or human, present consumption must be forgone.
d. Saving, which is nonconsumption, is a prerequisite for capital formation, at least in a fully employed economy, and saving in a poor country is next to impossible.
e. All of the above statements are correct.

9. Which of the following statements about labor productivity is credible?: a. Labor productivity is relatively high in developed countries and relatively low in less developed countries.
b. Labor productivity equals the portion of the real GDP that is attributable to the use of labor (rather than the use of capital or natural resources).
c. Labor productivity can be computed as GDP divided by the quantity of physical capital used (which makes workers so productive).
d. Labor productivity can be computed as GDP divided by the quantity of human capital used (which makes workers so productive).
e. Labor productivity can be computed as GDP divided by the quantity of physical plus human capital used (which makes workers so productive).

10. Which of the following statements about advanced technology is credible?: a. The high per capita GDP of the developed countries, relative to that of the less developed countries, can be traced, in part, to the availability and use of advanced technology.
b. A less developed country may forgo the use of advanced technology because its labor force may lack education and education is costly to obtain.
c. A less developed country may forgo the use of advanced technology even if its labor force is sufficiently educated because technology itself is costly to obtain.
d. A less developed country may forgo the use of advanced technology even if its labor force is sufficiently educated, and the technology is affordable, if the use of other (for example, labor-intensive) production methods is cheaper.
e. All of the above statements are correct.

11. Which of the following statements about the property rights structure is credible?: a. The term refers to the whole range of laws, rules, and regulations that define rights for the use and transfer of scarce resources.
b. This structure plays a crucial role in explaining why some countries are rich and others poor.
c. Rapid increases in per capita real GDP are encouraged by a system of property rights that rewards people for directing their resources to effective economic projects.
d. Individuals will invest more, take more risks, and work harder when the property rights structure allows them to keep more of the fruits of their investing, risk taking, and labor.
e. All of the above statements are correct.

12. The term economic dualism refers to the condition in which: a. there is a huge disparity between the per capita incomes of the richest LDCs on the one hand and those of the poorest LDCs on the other hand.
b. there is a huge disparity between the per capita incomes of the developed countries (DCs) on the one hand and those of the less developed countries on the other hand.
c. the male population of the typical LDC is engaged in modern technology production, earning incomes similar to those in industrial economies, while the female population is engaged in low-level technology production, earning substantially less.
d. a minority of the typical LDC population is engaged in modern technology production, earning incomes similar to those in industrial economies, while the vast majority is engaged in low-level technology production, earning substantially less.
e. some policy makers attempt to accelerate economic development via the big-push strategy, emphasizing, with government help, investment in many projects all at once, while others push for the unbalanced strategy that relies less heavily on government.

13. The vicious circle of poverty associated with LDCs refers to the fact that many LDCs: a. are poor because they cannot devote resources to the production of physical or human capital because they are too poor to do the requisite saving.
b. are poor because they cannot devote resources to the production of physical or human capital because their governments are unstable and, therefore, incapable of pursuing a coherent development strategy for a sustained period of time.
c. are poor because they cannot devote resources to the production of physical or human capital because they lack the infrastructure of public facilities upon which an economy's development depends.
d. contain vast income disparities within their economies due to the fact that a minority of the population is engaged in modern technology production, earning incomes similar to those in industrial economies, while the vast majority is engaged in low-level technology production, earning substantially less.
e. are incapable of building infrastructure because its finance depends on a reliable tax system that does not exist.

14. According to the big-push strategy of economic development,: a. it is advisable to emphasize investment in many projects all at once to create both productive capacity and markets for the production.
b. government should play no role in the process at all because private-sector development is more reliable in the long run.
c. initial private-sector development in key areas of the economy creates backward linkages to new projects, which speeds up the process.
d. initial private-sector development in key areas of the economy creates forward linkages to new projects, which speeds up the process.
e. all of the above statements are correct.

15. According to the big-push strategy of economic development, the creation of an integrated network of government-sponsored and -financed investments, introduced into the economy all at once,: a. can be relied upon to create forward, rather than backward, linkages.
b. can be relied upon to create backward, rather than forward, linkages.
c. instantly creates markets for the new production that is made possible by the investments.
d. can be relied upon to elicit massive foreign investment and aid.
e. is less costly than alternative development strategies are apt to be.

16. The forward linkages that are so much talked about by the so-called unbalanced development strategists: a. are investment opportunities in industry A, which expects to produce inputs demanded as a result of investment in industry B.
b. are investment opportunities in industry C, which expects to use the output produced as a result of investment in industry B.
c. are expected increases in future per capita income as a result of current saving and investment.
d. are expected increases in future per capita income as a result of the current introduction of new technology.
e. are correctly described by (c) and (d).

17. As a result of foreign direct investment or foreign economic aid, a country can enjoy a current combination of consumption goods and capital goods that lies: a. below its production possibilities curve.
b. above its production possibilities curve.
c. farther up and left on its production possibilities curve.
d. farther down and right on its production possibilities curve.
e. on the foreign country's production possibilities curve.

18. Which of the following statements about foreign economic aid is credible?: a. Foreign aid can consist of long-term loans that are usually repayable over a period of 10 to 20 years.
b. Foreign aid can consist of soft loans that are paid back over very long periods (some up to 99 years) and at low interest rates.
c. Foreign aid can consist of the sale of surplus products to a country in exchange for the recipient's currency (rather than hard-to-get dollars, gold, and such).
d. Foreign aid can consist of technical assistance.
e. All of the above statements are correct.

19. Consider two countries with equal per capita real GDPs. If country A's per capita real GDP grows at 2% per year, while, as a result of foreign economic aid, country B's per capita real GDP grows at 4% per year,: a. country A's per capita real GDP after 5 years will equal only about 80% of country B's per capita real GDP.
b. country A's per capita real GDP after 10 years will equal only about 60% of country B's per capita real GDP.
c. country A's per capita real GDP will double in roughly 36 years.
d. country B's per capita real GDP will double in roughly 13 years.
e. all of the above will occur.

20. Which of the following statements about U.S. foreign economic aid is correct?: a. U.S. foreign economic aid is essentially a private-sector activity.
b. All U.S aid comes in the form of loans, repayable with interest.
c. In 1990, over 90% of U.S. aid consisted of outright gifts.
d. The United States devotes a larger percentage of its GDP to foreign economic aid than any other country in the world.
e. In 1995, U.S foreign economic aid equaled roughly $11,300 billion.