CH.16 - CH.18

Some low-income countries generally remain poor because

their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange.

Country A and country B initially have the same per capita income. Suppose that A sustains an annual growth rate of 3.5 percent, while the annual growth rate of country B is 1.75 percent. The "rule of 70" indicates that after forty years, the per capita income of country A will be approximately ____ that of country B.

twice

If labor-intensive textile products could be produced more cheaply in low-wage countries than in the United States, the United States would gain if it

used its resources to produce other items while importing textiles from foreigners.

Which of the following is most likely to be a serious obstacle retarding the growth of less-developed nations?

. low capital formation as the result of a weak legal system

In a country that is experiencing economic growth at 7 percent per year, per capita income will double in approximately

10 years

Which of the following is true for the world as a whole?

During the 800 years between 1000 and 1800, the increases in both world income per person and life expectancy at birth were small, but both of these indicators have increased sharply during the past 200 years.

In 1960 the per capita GDP of Hong Kong was substantially less than that of Argentina and Venezuela. By 2005, the per capita income of Hong Kong was more than three times the figures for Venezuela and Argentina. This dramatic change occurred because

Hong Kong was able to achieve and sustain a high rate of economic growth while the growth rates of Argentina and Venezuela were exceedingly low.

Which of the following will increase economic freedom?

Institutions and policies supportive of voluntary exchange.

Which of the following is most likely to increase U.S. exports?

The United States unilaterally reduces its restrictions on foreign imports.

Which of the following is true regarding the per person income of the world during the past 1000 years

The world's income per person changed very little during the 800 years prior to 1813, but it has increased by nearly tenfold during the past 200 years.

Which of the following is true of political institutions?

There is no assurance that political decision-making will lead to sound economic institutions and policies.

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

When the rules and institutions of a country encourage productive actions, investment will be attracted and incomes will grow.

During 1985-2013, on average, low-income less developed countries

adopted more liberal trade policies and followed monetary policies more consistent with price stability.

When a nation's institutional environment is more favorable, it will

attract more physical investment. encourage individuals to invest more heavily in human capital. encourage the development and efficient use of natural resources.

According to international trade theory, a country can gain

by importing goods when they can be obtained more economically from foreign producers.

An open capital market affects a nation's economic growth by

channeling capital into productive projects and away from wasteful projects. rewarding investors who find the most productive projects and invest in them. making the lowest-cost capital available from around the world.

Individuals are more likely to engage in productive activities when institutions and policies

create a fair and unbiased judicial system.

The primary benefits derived from tariffs usually accrue to the

domestic suppliers of goods protected by the tariffs.

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

experienced both more rapid rates of economic growth and larger reductions in poverty rates than countries that were less free

Which of the following provides the fuel for growth and achievement of high income levels?

gains from trade entrepreneurial discovery capital formation

High income countries with larger governments as a share of GDP have generally

grown less rapidly than their counterparts with smaller governments.

If a nation is going to achieve and sustain a high rate of economic growth, it must

have a mechanism capable of attracting savings and channeling them into wealth-creating projects.

According to Angus Madison, a leading authority in the area, world per capita GDP

increased by about 50 percent during the 800 years following year 1000, but it increased by nearly tenfold during the past 200 years.

During the past 1000 years, the income per person of the world has

increased by approximately tenfold during the past 200 years, but there was only a small increase during the 800 years prior to 1800.

When the markets of an economy are more competitive, economic growth

is enhanced because producers have a stronger incentive to provide goods efficiently

Fixing exchange rates and limiting the convertibility of currency will

lead to black markets and less trade.

Stable money and prices are a key source of economic growth because

price stability reduces the risks that accompany investment and other long-term commitments.

When competition is present and private ownership rights are clearly defined and securely enforced,

production and trade are encouraged and plunder (taking from others) is discouraged. people get ahead by helping others in exchange for income. employers will have to provide prospective employees with at least as good a deal as they could get elsewhere.

When competition is present and property rights secure, people will be encouraged to

provide others with things that they value in exchange for income.

The historical record indicates that foreign aid has

re-enforced corrupt governments and policies that stifle productive activities.

During 1980-2014, the per-capita incomes of less-developed countries (LDCs)

registered a mixed growth record; some grew rapidly while others stagnated.