Chapter 25/Production and Growth ? 1071
168. Inward-oriented policies
a. include imposing tariffs and other trade restrictions.
b. have generally increased productivity and growth in the countries that pursued them. c. promote the production of goods and services the country produce most efficiently. d. All of the above are correct. ANS: A PTS: 1 DIF: 1 REF: 25-3 TOP: Trade policy MSC: Definitional 169. Inward-oriented policies
a. are generally supported by economists.
b. are primarily concerned with the development of human capital. c. in some ways are like prohibiting the use of certain technologies. d. All of the above are correct. ANS: C PTS: 1 DIF: 1 REF: 25-3 TOP: Trade policy MSC: Definitional
170. The President of a developing country proposes that his country needs to help domestic firms by imposing trade
restrictions.
a. These are outward-oriented policies and most economists believe they would have beneficial effects on growth. b. These are outward-oriented policies and most economists believe they would have adverse effects on growth. c. These are inward-oriented policies and most economists believe they would have beneficial effects on growth. d. These are inward-oriented policies and most economists believe they would have adverse effects on growth. ANS: D PTS: 1 DIF: 2 REF: 25-3 TOP: Trade policy MSC: Applicative 171. In the past there have been violent protests against the World Bank and the World Trade Organization. The protesters
argued that these institutions promote free trade and also encourage corporations in rich countries to invest in poor countries. The protesters contended that these practices make rich countries richer and poor countries poorer. An economist would
a. disagree with the protesters because these practices will help make both rich and poor countries richer.
b. disagree with the protesters about free trade, but would agree with the protesters about corporate investment. c. disagree with the protesters about corporate investment, but would agree with the protesters about free trade. d. agree with the protesters. ANS: A PTS: 1 DIF: 2 REF: 25-3 TOP: Trade policy MSC: Applicative 172. Outward-oriented policies
a. prevent countries from taking advantage of gains from trade.
b. have generally led to high growth for the countries that pursued them. c. receive little support from economists, despite such polices success. d. None of the above is correct. ANS: B PTS: 1 DIF: 2 REF: 25-3 TOP: Trade policy MSC: Definitional
173. When a country removes trade barriers and imports toys and exports farm machinery,
a. its growth slows.
b. its productivity decreases.
c. it is essentially transforming farm machinery into toys.
d. its economic well-being decreases while that of the country that sells toys increases. ANS: C PTS: 1 DIF: 2 REF: 25-3 TOP: Trade policy MSC: Applicative 174. Suppose a country reduces trade restrictions. This country would be pursing an
a. inward policy, which most economists believe has beneficial effects on the economy. b. inward policy, which most economists believe has adverse effects on the economy. c. outward policy, which most economists believe has beneficial effects on the economy. d. outward policy, which most economists believe has adverse effects on the economy. ANS: C PTS: 1 DIF: 1 REF: 25-3 TOP: Free trade MSC: Definitional
1072 ? Chapter 25/Production and Growth
175. Presidents of the African countries of Mali and Burkina Faso were particularly concerned with subsidies richer
countries provide for domestic production of a. oil.
b. tobacco. c. gold. d. cotton. ANS: D PTS: 1 DIF: 1 REF: 25-3 TOP: Free trade MSC: Definitional
176. In 2003 The Presidents of the African countries of Mali and Burkina Faso
a. requested that rich countries apply free trade rules to those products where poor countries have a proven
competitive advantage.
b. argued that free trade was not a policy that developing nations would find it wise to follow.
c. said that at their current stage of development that most of the principles of market economies were not practical. d. None of the above is correct. ANS: A PTS: 1 DIF: 1 REF: 25-3 TOP: Free trade MSC: Definitional
177. National defense and knowledge are generally considered to be
a. private goods. b. public goods. c. proprietary goods. d. societal goods. ANS: B PTS: 1 DIF: 1 REF: 25-3 TOP: Public goodss MSC: Definitional 178. Patents turn new ideas into
a. public goods, and increase the incentive to engage in research. b. public goods, but decrease the incentive to engage in research. c. private goods, and increase the incentive to engage in research. d. private goods, but decrease the incentive to engage in research. ANS: C PTS: 1 DIF: 1 REF: 25-3 TOP: Patents | Private goods MSC: Interpretive 179. Once an idea enters society's pool of knowledge, the knowledge becomes a
a. societal good. b. private good. c. public good. d. proprietary good. ANS: C PTS: 1 DIF: 1 REF: 25-3 TOP: Public goods MSC: Definitional
180. In medieval Europe an important technological advance was the use of the padded horse collar for plowing. Once this
idea was thought of, other people used it. This illustrates that knowledge is generally a a. public good. b. societal good. c. private good. d. normal good. ANS: A PTS: 1 DIF: 1 REF: 25-3 TOP: Public goods MSC: Applicative 181. Drug companies can usually obtain patents on new drugs. This turns new ideas into
a. private goods, and increase the incentive to engage in research. b. private goods, but decrease the incentive to engage in research. c. public goods, and increase the incentive to engage in research. d. public goods, and decrease the incentive to engage in research. ANS: A PTS: 1 DIF: 1 REF: 25-3 TOP: Patents | Private goods MSC: Applicative
Chapter 25/Production and Growth ? 1073
182. Malthus predicted that the power of population
a. was greater than the power of the earth to produce subsistence. His forecast was on the mark. b. was greater than the power of the earth to produce subsistence. His forecast was off the mark. c. was less than the power of the earth to produce subsistence. His forecast was on the mark. d. was less than the power of the earth to produce subsistence. His forecast was off the mark. ANS: B PTS: 1 DIF: 1 REF: 25-3 TOP: Malthus | Population MSC: Definitional 183. A rapid increase in the number of workers, other things the same, is likely in the short term to
a. raise real GDP per person, but decrease real GDP. b. decrease both real GDP and real GDP per person. c. raise both real GDP and real GDP per person. d. raise real GDP, but decrease real GDP per person. ANS: D PTS: 1 DIF: 1 REF: 25-3 TOP: Population MSC: Interpretive
184. Which of the following is not correct?
a. China allows only one child per family and couples that violate this rule are subject to substantial fines. b. In developed countries, population growth is 3 percent; in many developing countries it is 5 percent. c. Educational attainment tends to be lowest in countries with the highest population growth.
d. Economists generally believe that a country that decreases a high population growth rate can increase its
economic growth rate.
ANS: B PTS: 1 DIF: 1 REF: 25-3 TOP: Growth policy MSC: Interpretive 185. Which of the following countries achieved higher economic growth, in part by mandating a reduction in population
growth?
a. Great Britain b. China c. Australia d. France ANS: B PTS: 1 DIF: 2 REF: 25-3 TOP: Population MSC: Definitional
186. Which of the following is an observation made by Kremer?
a. World growth rates increased as the population increased.
b. Technological progress allows for increasing population because of advances in agriculture.
c. World population is growing so rapidly that soon it will outstrip natural resources and our standard of living will
decline.
d. All of the above are observations made by Kermer. ANS: A PTS: 1 DIF: 1 REF: 25-3 TOP: Population MSC: Definitional
187. Which of the following is correct?
a. If developing countries limit career and educational opportunities for women, birth rates are likely to be lower. b. Growth rates in developed and developing countries are nearly the same.
c. Historically, in periods where the rate of population growth was high, so was the rate of growth in world real
GDP per person.
d. None of the above is correct. ANS: C PTS: 1 DIF: 2 REF: 25-3 TOP: Population MSC: Definitional
1074 ? Chapter 25/Production and Growth
188. Which of the following is true?
a. Kremer argued that with greater population, society would generate more ideas so that growth of real GDP per
person could continue. Malthus argued that increasing population would outstrip agricultural production.
b. Kremer argued that increases in population would reduce the amount of human and physical capital per worker
so that eventually the standard of living would decline. Malthus argued that increases in technology would allow increased output growth so that even with population growth, society would enjoy a higher standard of living. c. Malthus argued that with greater population, society would generate more ideas so that growth of real GDP per
person could continue. Kremer argued that increasing population would outstrip agricultural production.
d. Malthus argued that increases in population would reduce the amount of human and physical capital per worker
so that eventually the standard of living would decline. Kremer argued that increases in technology would allow increased output growth so that even with population growth, society would enjoy a higher standard of living.
ANS: A PTS: 1 DIF: 1 REF: 25-3 TOP: Population MSC: Definitional
189. Over extended periods of time population growth
a. has no effect on the standard of living.
b. has uncertain effects on the standard of living. c. clearly raises the standard of living. d. clearly lowers the standard of living. ANS: B PTS: 1 DIF: 2 REF: 25-3 TOP: Population MSC: Interpretive
190. On the basis of theory and empirical evidence economists have concluded several things concerning growth. Which
of the following is not one of these conclusions?
a. A relatively simple way to increase growth rates permanently is to increase a country's saving rate. b. Growth is generally inhibited rather than promoted by policies like protective tariffs.
c. Well-established property rights that are enforced by fair and efficient courts are important to economic growth. d. Countries with few domestic natural resources still have opportunities for economic growth. ANS: A PTS: 1 DIF: 2 REF: 25-3 TOP: Growth policy MSC: Interpretive 191. All else equal, which of the following would tend to cause real GDP per person to rise?
a. Changing policy from outward to inward oriented. b. Investment in human capital.
c. In the short-term, effects of a rapid growth in the number of workers. d. All of the above are correct. ANS: B PTS: 1 DIF: 1 REF: 25-3 TOP: Growth policy MSC: Interpretive
192. Which of the following statements is not correct?
a. The catch-up effect is based on the assumption of diminishing returns to capital.
b. Investment in poor countries by citizens of rich countries is one way poor countries can learn new technologies. c. Malthus argued that charity and government aid was an effective way to reduce poverty. d. Peace and justice are keys to growth. ANS: C PTS: 1 DIF: 2 REF: 25-3 TOP: Growth policy MSC: Definitional 193. Senator Noitall says that in order to help poor countries develop, the United States should: 1. Prevent U.S.
corporations from investing in poor countries because they take profits that the poor countries should have; 2. Not import goods from poor countries that use child labor; 3. Work to promote political stability in poor countries; and 4. Reduce poor countries reliance on market forces in their economies. How many of these ideas are likely to help poor countries grow? a. 1 b. 2 c. 3 d. 4 ANS: A PTS: 1 DIF: 2 REF: 25-3 TOP: Growth policy MSC: Applicative
Chapter 25/Production and Growth ? 1075
194. Senator Smith says that in order to help poor countries develop, the United States should: 1. Prevent U.S.
corporations from investing in poor countries because they take profits that the poor countries should have; 2. reduce or eliminate subsidizes to U.S. producers when poor countries have a comparative advantage producing those goods the U.S. subsidizes; 3. Work to promote political stability in poor countries; and 4. Reduce poor countries reliance on market forces in their economies. How many of these ideas are likely to help poor countries grow? a. 1 b. 2 c. 3 d. 4 ANS: B PTS: 1 DIF: 2 REF: 25-3 TOP: Growth policy MSC: Applicative 195. The president of a poor country has announced that he will implement the following measures which he claims are
designed to increase growth: 1. Reduce corruption in the legal system; 2. Reduce reliance on market forces because they allocate goods and services in an unfair manner; 3. Restrict investment in domestic industries by foreigners because they take some of the profits out of the country; 4. Encourage trade with neighboring countries; and 5. Increase the fraction of GDP devoted to consumption. How many of these measures will have a positive effect on growth? a. 1 b. 2 c. 3 d. 4 ANS: B PTS: 1 DIF: 3 REF: 25-3 TOP: Growth policy MSC: Applicative 196. The Economic Development Minister of a country has a list of things she thinks may explain her country's low
growth of real GDP per person relative to other countries. She asks you to pick the one you think most likely explains her country's low growth. Which of the following contributes to low growth? a. poorly enforced property rights. b. outward oriented trade policies.
c. policies that permit foreign investment. d. All of the above are correct. ANS: A PTS: 1 DIF: 2 REF: 25-3 TOP: Growth policy MSC: Applicative 197. Some poor countries appear to be falling behind rather than catching up with rich countries. Which of the following
could explain the failure of a poor county to catch up? a. The poor country has outward-oriented trade policies. b. The poor country allows foreign direct investment. c. The poor country has poorly developed property rights. d. All of the above are correct. ANS: C PTS: 1 DIF: 1 REF: 25-3 TOP: Growth policy MSC: Applicative 198. According to an in-house review, what percent of World Bank projects had been properly evaluated to see if they
made a difference? a. 2% b. 10% c. 30% d. 70% ANS: A PTS: 1 DIF: 1 REF: 25-3 TOP: World Bank poverty aid MSC: Definitional