Hello friends in this post we are going to discuss about National Differences in Economic Development Multiple choice questions. We have already seen National Differences in Economic Development True False. Let’s look into this as well
26) per person figures can be misleading because they don’t consider differences in the cost of living.
A) Gross domestic product (GDP)
B) Gross national income (GNI)
C) Purchasing power parity (PPP)
D) Human Development Index (HDI)
27) GNI per capita can be adjusted by to account for differences in the cost of living.
A) gross domestic product
B) gross values added
C) purchasing power
D) the total value of goods and services produced
28) The adjustment allows for a more direct comparison of living standards in different countries.
A) gross domestic product
B) value added
C) gross national income (GNI)
D) purchasing power parity (PPP)
29) GNI and PPP data are useful because they provide a of economic development.
A) static picture
B) dynamic analysis
C) static analysis
D) global view
30) In a , the state owns all means of production.
A) mixed economy
B) planned economy
C) market economy
D) totalitarian state
31) The economic freedom associated with a creates greater incentives for innovation and entrepreneurship than either a planned or a mixed economy.
A) closed economy
B) political economy
C) market economy
D) command economy
32) Which of the following is a legal means by which the state can expropriate the profits from innovation?
A) demands for money to grant a license
C) enforcing property rights
D) excessive taxation
33) Some have fostered a market economy and strong property rights protection and have experienced rapid economic growth.
A) totalitarian regimes
B) command economies
D) centrally planned systems
34) Several of the fastest-growing Asian economies adopted more governments during the past three decades, including South Korea and Taiwan.
35) The general assertion is that nations investing more in __ will have higher economic growth rates.
B) centralized urban centers
36) To account for differences in the cost of living, one can adjust GNI per capita by, which allows for a more direct comparison of living standards in different countries.
A) gross domestic product
B) Human Development Index
C) living standards rate
D) purchasing power
37) Which of the following are more conducive to economic growth?
A) democratic regimes
B) totalitarian regimes
D) benevolent monarchies
38) In a, any individual who has an innovative idea is free to try to make money out of that idea by starting a business (by engaging in entrepreneurial activity).
A) command economy
B) planned economy
C) market economy
D) mixed economy
39) 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
40) 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
41) In some countries, the official GNI per capita measured at PPP data does not reflect the actual 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.
42) Which of the following was 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
43) Many countries in Africa score below 0.5 on the Human Development Index. This means that these countries have
A) few political freedoms.
B) poor quality of life.
C) low purchasing power parity.
D) no gross domestic product.
44) Which of the following is one of the measures that HDI is based on?
A) life expectancy at birth
B) political freedom
C) attainment of housing
D) whether the lowest incomes are sufficient to meet the basic needs of life
45) ________, a Nobel Prize–winning economist, has argued that development is not just aneconomic process, but it is a political one as well.
A) Hernando de Soto
B) Karl Marx
C) Samuel Huntington
D) Amartya Sen
46) According to Amartya Sen, development should be
A) seen as a process of expanding the real freedoms that people experience.
B) seen as a nonpolitical concept that focuses on the net income of a country.
C) viewed as a purely economic process.
D) assessed by material output measures such as GNI per capita.
47) Which of the following statements pertaining to innovation and entrepreneurship is true?
A) They are the engines of growth.
B) They require strong legal systems.
C) They require state ownership of means of production.
D) They require a mixed economy.
48) 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.
49) 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 supply and demand.
D) lack of barriers to trade results in increased competition for domestic producers.
50) ________ 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
51) 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 they
A) have political stability.
B) invest in infrastructural development.
C) have better defined and secure property rights.
D) have adequate market regulation.
52) 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
53) A free market economy in which property rights are protected leads to subsequent economic growth that often leads to the establishment of
A) a democratic regime.
B) a planned economy.
C) government-owned enterprises.
D) a socialist economy.
54) The political economy of many of the world’s nation-states has changed radically since the late 1980s. Which of the following is a trend that has been evident?
A) A wave of democratic revolutions has swept the world.
B) Totalitarian governments have arisen, replacing democratically elected governments.
C) There has been a strong move toward centrally planned economies and away from free
market economic models.
D) Mixed economies are fast replacing market economies.
55) Political scientist ________ predicts that there will be a world that is split into different civilizations, each of which has its own value systems and ideology.
A) Samuel Huntington
B) Amartya Sen
C) Francis Fukuyama
D) Hernando de Soto
56) Which of the following is one of the three main reasons for the spread of democracy?
A) New information and communication technologies have broken down the ability of
the state to control access to uncensored information.
B) Totalitarian regimes delivered economic progress to the bulk of their populations but not
enough to the power brokers.
C) Democratic regimes failed to deliver economic progress to the vast bulk of their
D) Economic advances in the past quarter-century have led to the emergence of a class of
57) According to what political scientist’s thesis is global terrorism a product of the tension between civilizations and the clash of value systems and ideology?
A) Amartya Sen
B) Samuel Huntington
C) Francis Fukuyama
D) Hernando de Soto
58) One of the reasons for the spread of democracy is the emergence of ________ who have pushed for democratic reforms.
A) a more vocal working poor
B) better educated lower classes
C) a desperate urban poor
D) increasingly prosperous middle and working classes
59) 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
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
60) 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
61) Political scientist Samuel Huntington argues that modernization in non-Western societies can result in a retreat toward the traditional. This is exemplified by the
A) Islamic resurgence.
B) popularization of modern gadgets.
C) adoption of Western culture.
D) higher levels of literacy and education.
62) According to political scientist Samuel Huntington, the rise of Islamic fundamentalism is a response to the
A) corruption prevalent in planned economies.
B) restricted access to formal education.
C) alienation produced by modernization.
D) restrictions associated with totalitarian regimes.
63) 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.
64) Paralleling the spread of democracy since the 1980s 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.
65) Since the 1980s, there has been a transformation from ________ economies to________ economies.
A) mixed; market-based
B) centrally planned command; market-based
C) centrally planned command; mixed
D) market-based; centrally planned command
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
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
D) creation of a legal system to safeguard property rights
68) ________ involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate.
B) Developing command economies
69) ________ is seen as a way to stimulate gains in economic efficiency by giving owners a powerful incentive—the reward of greater profits—to search for increases in productivity, to enter new markets, and to exit losing ones.
B) Economic transformation
70) ________ involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate.
B) Trade certification
C) A product law
D) A liability law
71) Which of the following is a step involved in the deregulation of a command economy?
A) adding price controls
B) temporarily restricting international trade
C) abolishing laws regulating the establishment and operation of private enterprises
D) increasing restrictions on direct investment by foreign enterprises
72) Without a strong legal system in a market economy
A) the incentive to engage in economic activity can be increased substantially.
B) private-sector entrepreneurs can expropriate the profits generated by the efforts of private
and public entities.
C) mechanisms for contract enforcement fall to private and corporate lawyers.
D) private and public entities can expropriate the profits generated by the efforts of
73) 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
74) 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
75) 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
76) 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.
77) The sale of state assets through an auction is most likely to lead to
A) trade certification.
D) market regulation.
78) 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.
79) Which of the following factors is likely to make a country a more attractive location for international business?
A) totalitarian regimes
B) planned economies
C) government ownership of production methods
D) market-based economic policies
80) The benefits of doing business in a country are a function of which of the following?
A) the size of the market
B) its past wealth
C) its past growth
D) its future plans for infrastructure development
81) Sony was a pioneer in the portable music market segment. The Sony Walkman was an innovative product that 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.
82) 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.
83) The costs of doing business in a country tend to be greater if
A) political payoffs are not required to gain market access.
B) supporting infrastructure is sponsored by government.
C) local laws set strict standards with regard to environmental pollution.
D) there are limits or caps on damage awards.
84) ________ are the advantages gained by early entrants into a market.
A) Early-investor advantages
B) First-mover advantages
C) First-to-market advantages
D) Late-mover advantages
85) Countries with ________ economies in which property rights are protected tend to achieve greater economic growth rates than other economies where property rights are poorly protected.
C) free market
86) It may be more costly to do business in relatively primitive or undeveloped economies because of
A) international trade restrictions.
B) the lack of governmental support.
C) difficulty obtaining workers.
D) the lack of infrastructure and supporting businesses.
87) One visible indicator of ________ tends to be a country’s inflation rate.
A) economic mismanagement
B) high GNI
C) political risks
D) low HDI
88) The overall attractiveness of a country as a potential market or investment site for an international business depends on
A) if the country has a high gross national income.
B) balancing the benefits, costs, and risks associated with doing business in that
C) whether the company can be the first mover in the market.
D) whether the government can be greased.
89) 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.
90) A change in political regime in a country can result in laws that ________ to international businesses.
A) are more favorable
B) are less favorable
C) provide less incentives
D) provide more incentives
91) By identifying and investing early in a potential future economic star, international firms can ________ and gain experience in that country’s business practices.
A) build brand loyalty
B) learn which government officials need to receive kickbacks
C) begin to stockpile that country’s currency
D) build infrastructure
92) Economic growth appears to be a function of a country’s capacity for growth and its
A) previous economic success.
B) political environment.
C) free market system.
D) mixed economy.
93) ________ are the handicaps that late entrants to a market might suffer.
A) Government regulations
B) Late-mover disadvantages
C) Black economy
D) Purchasing power disparity
94) Which of the following is a first-mover advantage?
A) International firms may gain experience in that country’s business practices.
B) An international firm can reap the rewards of growth in a new market without incurring
C) A firm may have the opportunity to be the first to introduce generic brands to a market.
D) A firm can gauge how well their product will do in the market without taking the risk of
95) What is the philosophy of Amartya Sen?
Answer: Amartya Sen is a Nobel Prize–winning economist who has argued that economic
development should be assessed less by material output measures such as GNI per capita
and more by the capabilities and opportunities that people enjoy. According to Sen,
development should be seen as a process of expanding the real freedoms that people
96) Why does education lead to economic development?
Answer: Nations that invest more in education will have higher growth rates because an
educated population is a more productive population. A survey of 14 statistical studies that
looked at the relationship between a country’s investment in education and its subsequent
growth rates concluded investment in education did have a positive and statistically
significant impact on a country’s rate of economic growth.
97) Discuss Samuel Huntington’s views on Islamic fundamentalism.
Answer: According to Samuel Huntington’s thesis, global terrorism is a product of the
tension between civilizations and the clash of value systems and ideology. He maintains that
while many societies may be modernizing, they are not becoming more Western. Huntington
theorizes that modernization in non-Western societies can result in a retreat toward the
traditional, such as the resurgence of Islam in many traditionally Muslim societies.
According to him, the rise of Islamic fundamentalism is a response to the alienation
produced by modernization.
98) Since the 1980s, there has been a transformation from centrally planned command economies to market-based economies. What is the rationale for this transformation?
Answer: The rationale for economic transformation has been the same the world over. 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.
99) Is privatization by itself enough to guarantee economic growth? Why? Explain using an example.
Answer: As privatization has proceeded around the world, it has become clear that simply selling state-owned assets to private investors is not enough to guarantee economic growth. 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, they will have little incentive to restructure their operations to become more efficient. For privatization to work, it must also be accompanied by a more general deregulation and opening of the economy. For example, when Brazil decided to privatize its state-owned telephone monopoly, Telebrás Brazil, the government also split the company into four independent units that were to compete with each other and removed barriers to foreign direct investment in telecommunications services. This action ensured that the newly privatized entities would face significant competition and thus would have to improve their operating efficiency to survive.
100) What are the factors that determine the long-run monetary benefits of doing business in a country?
Answer: The long-run monetary benefits of doing business in a country are a function of the size of the market, the present wealth (purchasing power) of consumers in that market, and the likely future wealth of consumers. While some markets are very large when measured by number of consumers (e.g., China and India), low living standards may imply limited purchasing power and therefore a relatively small market when measured in economic terms.
101) What are the factors that determine the costs of doing business in a country?
Answer: A number of political, economic, and legal factors determine the costs of doing business in a country. With regard to political factors, a company may have to pay off politically powerful entities in a country before the government allows it to do business there. With regard to economic factors, one of the most important variables is the sophistication of a country’s economy. As for legal factors, it can be more costly to do business in a country where local laws and regulations set strict standards with regard to product safety, safety in the workplace, environmental pollution, and the like (since adheringto such regulations is costly).
102) Why does doing business in a country with a relatively unsophisticated economy result in increased costs?
Answer: One of the most important economic variables is the sophistication of a country’s economy. 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. When McDonald’s decided to open its first restaurant in Moscow, it found that to serve food and drink indistinguishable from that served in McDonald’s restaurants elsewhere, it had to vertically integrate backward to supply its own needs. The quality of Russian-grown potatoes and meat was too poor, so to protect the quality of its product, McDonald’s set up its own dairy farms, cattle ranches, vegetable plots,and food-processing plants within Russia. This raised the cost of doing business in Russia, relative to the cost in more sophisticated economies
103) What are the factors that contribute to the risks of doing business in a country?
Answer: The risks of doing business in a country are determined by a number of political, economic, and legal factors. Political risk has been defined as the likelihood that political forces will cause drastic changes in a country’s business environment that adversely affect the profit and other goals of a business enterprise. An economic risk can be defined as the likelihood that economic mismanagement will cause drastic changes in a country’s business environment that hurt the profit and other goals of a particular business enterprise. A legal risk can be defined as the likelihood that a trading partner will opportunistically break a contract or expropriate property rights.