BADM218 True/False Ch.3
A strong belief that economic progress leads to adoption of a totalitarian regime underlies the fairly permissive attitude that many Western governments have adopted toward human rights violations in China.
FALSE A strong belief that economic progress leads to adoption of a democratic regime underlies the fairly permissive attitude that many Western governments have adopted toward human rights violations in China.
Although free markets and democracy can still be found around the world, the tide has been running in favor of command economies and totalitarian dictatorships.
FALSE Although command economies remain and totalitarian dictatorships can still be found around the world, the tide has been running in favor of free markets and democracy.
In both China and India, the shift toward a command-based economic system has produced large gains despite weak property rights and endemic corruption.
FALSE Both China and India have achieved high growth rates despite relatively weak property rights regimes and high levels of corruption. In both countries, the shift toward a market-based economic system has produced large gains despite weak property rights and endemic corruption.
Five of the fastest growing economies of the past 30 years—China, South Korea, Taiwan, Singapore, and Hong Kong—had one thing in common at the start of their economic growth: democratic governments.
FALSE Five of the fastest growing economies of the past 30 years—China, South Korea, Taiwan, Singapore, and Hong Kong—had one thing in common at the start of their economic growth: undemocratic governments.
In Amartya Sen's view, development is solely an economic process, and not a political process.
FALSE In Amartya Sen's view, development is not just an economic process, but it is a political one too, and to succeed requires the "democratization" of political communities to give citizens a voice in the important decisions made for the community.
The shift toward deregulation has been easier for former command economies than for mixed economies.
FALSE In mixed economies, the role of the state was more limited; but here too, in certain sectors the state set prices, owned businesses, limited private enterprise, restricted investment by foreigners, and restricted international trade. For these countries, deregulation has involved the same kind of initiatives that we have seen in former command economies, although the transformation has been easier because these countries often had a vibrant private sector.
Entrepreneurial individuals have fewer economic incentives to develop valuable new innovations in market economies than in planned economies.
FALSE It has been argued that the economic freedom associated with a market economy creates greater incentives for innovation and entrepreneurship than either a planned or a mixed economy.
New information and communication technologies have increased a state's ability to control access to uncensored information.
FALSE New information and communication technologies, including satellite television, fax machines, desktop publishing, and, most important, the Internet, have reduced a state's ability to control access to uncensored information.
According to Freedom House, all democracies are free countries in terms of political and civil liberties.
FALSE Not all democracies are free, according to Freedom House, because some democracies still restrict certain political and civil liberties. For example, Russia was rated "not free."
Social unrest and disorder are less likely to be found in countries that contain more than one ethnic nationality.
FALSE Social unrest and disorder are more likely to be found in countries that contain more than one ethnic nationality.
The gross national income (GNI) per capita comes much closer to Amartya Sen's conception of how development should be measured than narrow economic measures such as Human Development Index (HDI).
FALSE The HDI comes much closer to Sen's conception of how development should be measured than narrow economic measures such as GNI per capita.
The Peruvian development economist Hernando de Soto has argued that much of the developing world will fail to reap the benefits of capitalism until they relax the property rights offered by their legal systems.
FALSE 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 property rights are better defined and protected.
According to the influential economist Jeffrey Sachs, tropical regions have a more extensive division of labor than temperate regions.
FALSE The influential economist Jeffrey Sachs argues that temperate climes have generally supported higher densities of population and thus a more extensive division of labor than tropical regions.
The late Influential political scientist Samuel Huntington predicted that the universalization of Western liberal democracy will be the final form of human government.
FALSE The late influential political scientist Samuel Huntington argued there is no "universal" civilization based on widespread acceptance of Western liberal democratic ideals.
Author Francis Fukuyama envisioned a world split into different civilizations, each of which has its own value systems and ideology.
FALSE The late influential political scientist Samuel Huntington envisioned a world split into different civilizations, each of which has its own value systems and ideology. Fukuyama has said that the war of ideas may be at an end and that liberal democracy has triumphed.
A country's economic system and property rights regime do not influence the attractiveness of the country as a market or investment site.
FALSE The political, economic, and legal environments of a country clearly influence the attractiveness of that country as a market or investment site.
Totalitarian states, by limiting human freedom, are highly conducive to progress in terms of innovation, entrepreneurship, and economic growth.
FALSE Totalitarian states, by limiting human freedom, also suppress human development and therefore are detrimental to progress.
Although countries such as China and India are currently relatively poor, their economies are already large in absolute terms and growing more rapidly than those of many advanced nations.
TRUE Although countries such as China and India are currently relatively poor, their economies are already large in absolute terms and growing more rapidly than those of many advanced nations.
By identifying and investing early in a potential future economic star, international firms build brand loyalty and gain experience in that country's business practices.
TRUE By identifying and investing early in a potential future economic star, international firms may build brand loyalty and gain experience in that country's business practices. These will pay back substantial dividends if that country achieves sustained high economic growth rates.
During the late 1980s and early 1990s, totalitarian governments collapsed and were replaced by democratically elected governments.
TRUE During the late 1980s and early 1990s, a wave of democratic revolutions swept the world. Totalitarian governments collapsed and were replaced by democratically elected governments that were typically more committed to free market capitalism than their predecessors had been.
Economic freedom does not necessarily equate with political freedom.
TRUE Economic freedom does not necessarily equate with political freedom.
If a country's economy is to sustain long-run economic growth, the business environment must be conducive to the consistent production of product and process innovations and to entrepreneurial activity.
TRUE If a country's economy is to sustain long-run economic growth, the business environment must be conducive to the consistent production of product and process innovations and to entrepreneurial activity.
In China, state-owned companies still dominate the banking, energy, telecom, health care, and technology sectors.
TRUE In China, state-owned companies still dominate the banking, energy, telecom, health care, and technology sectors.
In Samuel Huntington's thesis, global terrorism is a product of the tension between civilizations and the clash of value systems and ideology.
TRUE In Huntington's thesis, global terrorism is a product of the tension between civilizations and the clash of value systems and ideology.
In general, command and mixed economies failed to deliver the kind of sustained economic performance that was achieved by countries adopting market-based systems.
TRUE 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.
In most eastern European nations, the title to urban and agricultural property is often uncertain because of incomplete and inaccurate records, multiple pledges on the same property, and unsettled claims resulting from demands for restitution from owners in the pre-communist era.
TRUE In most eastern European nations, the title to urban and agricultural property is often uncertain because of incomplete and inaccurate records, multiple pledges on the same property, and unsettled claims resulting from demands for restitution from owners in the pre-communist era.
It is more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses.
TRUE 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.
Many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations.
TRUE Many totalitarian regimes failed to deliver economic progress to the vast bulk of their populations.
If newly privatized firms are protected from foreign competition by barriers to international trade and foreign direct investment, they continue to act like state monopolies.
TRUE 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 by barriers to international trade and foreign direct investment. In such cases, the newly privatized firms are sheltered from competition and continue acting like state monopolies.
Economists who argue that innovation and entrepreneurial activity are the engines of long-run economic growth, define innovation broadly to include not just new products but also new processes, new organizations, new management practices, and new strategies.
TRUE There is substantial agreement among economists that innovation and entrepreneurial activity are the engines of long-run economic growth. Those who make this argument define innovation broadly to include not just new products but also new processes, new organizations, new management practices, and new strategies.
The purchasing power parity for different countries is adjusted (up or down) depending upon whether a country's cost of living is lower or higher than the cost of living in the United States.
TRUE To account for differences in the cost of living, one can adjust GNI per capita by purchasing power. The base for the adjustment is the cost of living in the United States. The PPP for different countries is then adjusted (up or down) depending upon whether the cost of living is lower or higher than in the United States.
Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities.
TRUE Without a legal system that protects property rights, and without the machinery to enforce that system, the incentive to engage in economic activity can be reduced substantially by private and public entities, including organized crime, that expropriate the profits generated by the efforts of private-sector entrepreneurs.
Strong legal protection of property rights is a requirement for a business environment to be conducive to innovation, entrepreneurial activity, and hence economic growth.
TRUE Without strong property rights protection, businesses and individuals run the risk that the profits from their innovative efforts will be expropriated, either by criminal elements or by the state.
