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International Economics, 8e (Krugman) Chapter 22 Developing Countries: Growth, Crisis, and Reform22.1 Income, Wealth, and Growth in the World Economy1) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Pakistan and India fall under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Pakistan and India fall between lower-middle and upper-middle. Answer: A Question Status: Previous Edition2) Average per-capita GNP in the richest, most prosperous economies is _ times that of the average in the _ economies. A) 95, low (poorest) income B) 95, lower-middle income C) 73, lower-middle income D) 44, low (poorest) income E) 59, low (poorest) income Answer: E Question Status: Previous Edition3) Compared with industrialized economies, most developing countries are poor in the factors of production essential to modern industry: These factors are A) capital and skilled labor. B) capital and unskilled labor. C) fertile land and unskilled labor. D) fertile land and skilled labor. E) water and capital. Answer: A Question Status: Previous Edition4) The main factors that discourage investment in capital and skills in developing countries are: A) political instability, insecure property rights. B) political instability, insecure property rights, misguided economic policies. C) political instability, misguided economic policies. D) political instability. E) insecure property rights, misguided economic policies. Answer: B Question Status: Previous Edition 5) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would sub-Saharan Africa fall under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Sub-Saharan Africa falls between lower-middle and upper-middle. Answer: A Question Status: Previous Edition6) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would mainland China fall under? A) low-income B) upper middle-income C) high-income D) lower middle-income Answer: D Question Status: Previous Edition7) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would the smaller Latin American and Caribbean countries fall under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Smaller Latin American and Caribbean countries fall between low income and lower middle income. Answer: D Question Status: Previous Edition8) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would the Saudi Arabia falls under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Saudi Arabia falls between low income and lower middle income economies. Answer: B Question Status: Previous Edition9) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would the South Africa falls under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) South Africa falls between low income and lower middle income economies. Answer: B Question Status: Previous Edition 10) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would the Poland, Hungary, and the Czech and Slovak Republics fall under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Poland, Hungary, and the Czech and Slovak Republics fall between low income and lower middle income economies. Answer: B Question Status: Previous Edition11) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Malaysia falls under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Malaysia falls between low income and lower middle income economies. Answer: B Question Status: Previous Edition12) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Israel falls under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Israel falls between low income and lower middle income economies. Answer: C Question Status: Previous Edition13) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Kuwait falls under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Kuwait falls between low income and lower middle income economies. Answer: C Question Status: Previous Edition 14) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Singapore falls under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Singapore falls between low income and lower middle income economies. Answer: C Question Status: Previous Edition15) The upper middle-income countries enjoy only about _ of the per-capita GNP of the industrial group. A) 20 percent B) 15 percent C) 10 percent D) 5 percent E) 30 percent Answer: A Question Status: Previous Edition16) When one compares per-capital output growth rates among countries, A) one needs to correct the data to account for departures from purchasing power parity. B) such corrections are often not necessary. C) such corrections are sometimes necessary. D) the evidence whether such corrections are necessary are vague. E) such corrections are not necessary. Answer: A Question Status: Previous Edition17) Over the period 1960-2000, the United States economy grew at roughly A) 2.5 percent. B) 3 percent. C) 4 percent. D) one percent. E) 3.5 percent. Answer: A Question Status: Previous Edition18) Over the period 1960-2000, France grew relative to the United States economy A) more. B) less. C) the same. D) The French economy grew by one percent. E) The French economy grew by 2 percent. Answer: A Question Status: Previous Edition 19) Over the post-war era, the gaps between industrial countries living standards A) disappeared. B) stayed the same. C) increased. D) decreased. E) Hard to tell from the data. Answer: D Question Status: Previous Edition20) Over the post-war era, the tendency for gaps between all countries living standards A) disappeared. B) stayed the same. C) increased. D) decreased. E) Hard to tell from the data. Answer: E Question Status: Previous Edition21) Over the post-war era, poorer countries grew A) faster. B) slower. C) stayed the same. D) grew faster, then grew slower. E) No general tendency can be found. Answer: E Question Status: Previous Edition22) Countries in Africa have grown at rates far _ those of the main industrial countries. A) below B) above C) the same D) above at the beginning of the period and below at the end of the period E) below at the beginning of the period and Above at the end of the period Answer: A Question Status: Previous Edition23) Since 1960, South Korea and Singapore enjoyed an average per-capita growth rate well _ the average industrialized world. A) above B) below C) the same D) above at the beginning of the period and below at the end of the period E) below at the beginning of the period and above at the end of the period Answer: A Question Status: Previous Edition 24) Until recently, per-capita income increased in East Asian countries such as Hong Kong, Singapore, South Korea, and Taiwan by _-fold every generation A) 2 B) 3 C) 4 D) 5 E) 1 Answer: D Question Status: Previous Edition25) Between 1960 and 1992, the annual growth rate in percent per year was the highest in A) Canada. B) United States. C) Brazil. D) Singapore. E) South Korea. Answer: E Question Status: Previous Edition26) What is the basic problem of developing countries? A) corruption B) murder C) poverty D) stock market E) natural resources Answer: C Question Status: Previous Edition27) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would Korea fall under? A) low-income B) upper middle-income C) high-income D) lower middle-income E) Korea falls between low income and lower middle income. Answer: C Question Status: Previous Edition28) The worlds economies can be divided into four main categories according to their annual per-capita income levels: low-income, lower middle-income, upper middle-income and high-income economies. What category would the United States fall under? A) low-income B) upper middle-income C) high-income D) not in any E) lower middle-income Answer: C Question Status: Previous Edition 29) How would you describe the world distribution of income? A) persistently unequal B) temporarily unequal C) converging D) fairly equal E) None of the above. Answer: A Question Status: New30) How would you define convergence? A) tendency for gaps between industrial countries per-capital incomes to narrow B) tendency for gaps between all countries per-capital incomes to narrow C) the theory that a crisis in a low-income country will spread to all countries, regardless of debt structure D) the theory that a crisis in a low-income country will spread to only those countries which had lent money to the original country E) None of the above. Answer: A Question Status: New31) Which of the following countries had a larger growth rate since 1960? A) U.S. B) Senegal C) South Korea D) Kamul E) All had the same growth rate. Answer: C Question Status: New32) What explains the sharply divergent long-run growth patterns? Answer: The answer lies in the economic and political features of developing countries and the way these have changed over time in response to both world events and internal pressures. Question Status: Previous Edition33) Explain the theory behind convergence and why it is a deceptively simple theory. Answer: Convergence is the tendency for gaps between industrialized countries living standards (i.e. per capita income) to narrow. If trade is free, if capital can move to countries offering the highest returns, and if knowledge itself moves across political borders so that countries always have access to new production technologies, then there is no reason for international income differences to persist for long. Some differences, however, do exist because of policy differences across industrial countries. Question Status: Previous Edition34) Explain what the four main categories of world economies are and give examples? Answer: The four main categories of the world economies are categorized by annual per-capita income levels. Low-income economies which include India, Pakistan, and much of the sub-Saharan Africa. Lower middle income includes most Middle Eastern Countries, Latin American, Caribbean countries, the former Soviet countries and the most of the African countries. The upper middle income economies which are Latin American countries, Saudi Arabia, Malaysia, South Africa, Poland, Hungary, Czech and the Slovak Republic. The last category is the high-income economies such as Korea, Israel, Kuwait, Singapore and the United states. Question Status: Previous Edition 35) Please consider Table 22-2 below.Assuming constant Annual Average Growth Rate in the future, calculate the output per capita for the United States and South Korea for the year 2040. Answer: Since 2040 - 2000 = 2000 - 1960, then output per capita for U.S.= 34365 * (34365 / 1544)= 90,633output per capita for South Korea= 15702 * (15702 / 1544)= 159,685 Question Status: New 36) Please consider Table 22-2 below.At that Annual Average Growth Rate, how many years does it take for the output per capita to double in both the United States and South Korea. Answer: United States(1 + 0.025)t = 2t= ln(2) / ln(1.025)= 28 yearsSouth Korea(1 + 0.06)t = 2t= ln(2) / ln(1.06)= 12 years(short-cut-rule of 69)United Statest 69 / 2.5 = 28 yearsSouth Koreat 69 / 6 = 12 years Question Status: New 37) Please consider Table 22-2 below.Assuming constant Annual Average Growth Rate in the future, determine the year in which the United States will have the same output per capita as South Korea? Answer: (34,365) (1 + 0.025)t2000 = (15,702) (1 + 0.06)t-2000 (34,365) / (15,702) = (1.06) / (1.025)t-2000 t - 2000 = ln(34,365) / (15,702) / ln(1.06) / (1.025)t = 2023 Question Status: New 22.2 Structural Features of Developing Countries1) While many developing countries have reformed their economies in order to imitate the success of the successful industrial economies, the process remains incomplete and most developing countries tend to be characterized by all of the following except: A) seigniorage. B) control of capital movements by limiting foreign exchange transactions connected with trade in assets. C) use of natural resources or agricultural commodities as an important share of exports. D) a worse job of directing savings toward their most efficient investment uses. E) reduced corruption and poverty due to limited underground markets. Answer: E Question Status: Previous Edition2) In general, one expects that life expectancy reflect international differences in income levels. Do the data support such a claim? A) Average life span falls as relative poverty falls. B) Average life span increases as relative poverty falls. C) There is no statistically significant relationship between the two. D) The relation is not very strong. E) The relationship looks more like a U-shape. Answer: B Question Status: Previous Edition3) Seigniorage refers to A) real resources a government earns when it prints money to use for spending on goods and services. B) nominal resources a government earns when it prints money to use for spending on goods and services. C) real resources a government earns when it prints money. D) nominal resources a government earns when it prints money. E) real resources a government earns when it issues bonds to use for spending on goods and services. Answer: A Question Status: Previous Edition4) In developing countries, exchange rates tend to be A) floating with some government intervention. B) pegged. C) hard to tell from the data. D) run by currency boards. E) flexible. Answer: B Question Status: Previous Edition5) Most developing countries have tried to A) liberalize capital movement. B) control capital movements. C) Hard to tell from the data. D) in the 1960s and 1970s control, now to liberalize. E) in the 1960s and 1970s liberalize, now to control. Answer: B Question Status: Previous Edition 6) For many developing countries, natural resources or agricultural commodities make up _ share of exports A) close to zero B) not important C) an important D) close to 5 percent E) Hard to tell. Answer: C Question Status: Previous Edition7) In general, the development of underground economic activity _ economic efficiency A) hinders B) has no effect C) aides D) hard to tell, sometime hinders, sometimes aides E) None of the above. Answer: A Question Status: Previous Edition8) One should expect _ relationship between annual per-capita GDP and an inverse index of corruption A) weak and negative B) weak and positive C) strong and negative D) strong and positive E) no relationship Answer: D Question Status: Previous Edition9) Which of the following is NOT a common characteristic of a developing country? A) Extensive direct government control of the economy B) History of low inflation C) Many weak credit institutions D) Pegged exchange rates E) Agricultural commodities make up a large share of its exports Answer: B Question Status: Previous Edition10) The relationship between annual real per-capita GDP and corruption across countries has been found to be: A) negative. B) positive. C) The relationship used to be negative in the late 1960s but is now positive. D) The relationship used to be positive in the late 1960s but is now negative. E) There is no relationship between these two variables. Answer: A Question Status: Previous Edition 11) Which of the following explains why developing countries encouraged new manufacturing industries of their own in the mid 20th century? A) They were cut off from traditional suppliers of manufactures during WWII. B) Former colonial areas had something to prove; they wanted to attain the same income levels as their former rulers. C) Leaders of these countries feared that their efforts to escape poverty would b
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