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QN1: Foreign trade has the advantage:
a. Trading countries get foreign exchange
b. Can import scarce raw materials
c. Can import machinery and technology
d. (b) and (c) of above

View Answer

d. (b) and (c) of above

QN2: The theory explaining trade between two countries is called:
a. Comparative disadvantage theory
b. Comparative cost theory
c. Comparative trade theory
d. None of the above

View Answer

b. Comparative cost theory

QN3: Balance of payments means:
a. The balance of receipts and payments of all banks
b. The balance of receipts and payments of State Bank
c. The balance of receipts and payments of foreign exchange by a country
d. The balance of govt. receipts and payments

View Answer

c. The balance of receipts and payments of foreign exchange by a country

QN4: International trade is possible primarily through:
a. Generalization in production of all goods
b. Specialization in production of one good
c. Specialization in production of a few goods
d. All of the above

View Answer

c. Specialization in production of a few goods

QN5: Commercial policy means:
a. Policy about markets
b. Policy about money supply
c. Policy about imports and exports
d. Policy for controlling of prices of goods

View Answer

c. Policy about imports and exports

QN6: Policy of Protection in trade:
a. Facilitates trade
b. Protects foreign producers
c. Protects local producers
d. Protects exporters

View Answer

c. Protects local producers

QN7: “In foreign trade, Protection policy means:”
a. Restrictions on exports
b. Restriction on transfer of foreign exchange
c. Restrictions on imports
d. All of the above

View Answer

c. Restrictions on imports

QN8: Foreign trade:
a. Increases employment opportunities
b. Increases international mobility of labour
c. Increases competition
d. All of the above

View Answer

d. All of the above

QN9: “If a country decreases the external value of its currency, it will affect:”
a. Volume of exports
b. Volume of imports
c. General price level
d. All of the above

View Answer

d. All of the above

QN10: The theory explaining trade between two countries is called:
a. Comparative advantage
b. Comparative bargain
c. Comparative trade
d. Comparative returns

View Answer

a. Comparative advantage

QN11: This is an advantage of foreign trade:
a. We can preserve our natural resources
b. New technology comes to the country
c. People need not go abroad
d. We can get foreign currencies

View Answer

b. New technology comes to the country

QN12: What would encourage trade between two countries?
a. Different tax system
b. Quality control
c. Reduced tariffs
d. Fixing import quotax

View Answer

c. Reduced tariffs

QN13: David Ricardo presented the theory of international trade called:
a. Theory of absolute advantage
b. Theory of comparative advantage
c. Theory of equal advantage
d. Theory of total advantage

View Answer

b. Theory of comparative advantage

QN14: “””Terms of trade”” between two countries refer to a ratio of:”
a. Export prices to import prices
b. Currency values
c. Exports to imports
d. Balance of trade to balance of payments

View Answer

a. Export prices to import prices

QN15: Terms of trade of a country:
a. Mean the trade agreement between trading countries
b. Is another name of exchange ratio of two currencies
c. Show the ratio between total export earnings and import bill of a country
d. Are determined by the price index of export and import goods

View Answer

d. Are determined by the price index of export and import goods

QN16: It is drawback of free trade:
a. Prices of local goods rise
b. Government looses income from custom duties
c. National resources are underutilized
d. (a) and (b) of above

View Answer

b. Government looses income from custom duties

QN17: Which of the following is international trade:
a. Trade between provinces
b. Trade between regions
c. Trade between countries
d. (b) and (c) of above

View Answer

c. Trade between countries

QN18: Trade between two countries takes place when:
a. Cost ratios of commodities are equal
b. Cost ratios of commodities are different
c. Cost ratios of commodities are high
d. Cost ratios of commodities are low

View Answer

b. Cost ratios of commodities are different

QN19: This is NOT an advantage of foreign trade:
a. We can get gold from abroad
b. New technology comes to the country
c. We can import goods which are in short supply in India
d. We can made best use of natural resources

View Answer

a. We can get gold from abroad

QN20: “Companies become involved in exporting for a number of reasons, all of which are linked to the desire to:”
a. increase profits and sales
b. protect profits and sales from being eroded
c. ” both “”a”” and “”b”””
d. none of the above

View Answer

c. ” both “”a”” and “”b”””

QN21: Exports create:
a. Low wage employment
b. High wage employment
c. No increase or decrease in employment
d. None of the above

View Answer

a. Low wage employment

QN22: Who does international trade allow to seek out products, services, and components in foreign countries?
a. Manufacturers and distributors
b. Distributors and suppliers
c. Suppliers and public officials
d. Manufacturers and suppliers

View Answer

a. Manufacturers and distributors

QN23: “For developing countries, determinants of import demand include:”
a. Government restrictions on all exports
b. Government restrictions on imports
c. Government restrictions on commercial exports only
d. Government restrictions on gold shipments

View Answer

b. Government restrictions on imports

QN24: Countries that are members of the GATT/WTO are called:
a. Member nations
b. Members
c. Contracting parties
d. Contracting members

View Answer

c. Contracting parties

QN25: The Final Act of the Uruguay Round established:
a. Reduction in global trade barriers and a multilateral framework of discipline for trade in services
b. Reduction in global trade barriers and protection of trade-related intellectual property rights
c. A multilateral framework of discipline for trade in services and protection of trade-related intellectual property rights
d. Reduction in global trade barriers, a multilateral framework of discipline for trade in services, and protection of trade-related intellectual property rights

View Answer

d. Reduction in global trade barriers, a multilateral framework of discipline for trade in services, and protection of trade-related intellectual property rights

QN26: “The first step in locating foreign markets, whether for export or for foreign manufacturing is to determine whether:”
a. sufficient personnel are available to handle the foreign operations
b. sufficient capital is available to expand internationally
c. excess production capacity exists in the home market
d. a market exists for the firm’s product

View Answer

d. a market exists for the firm’s product

QN27: A major reason given for a firm not exporting is
a. preoccupation with corporate restructuring
b. preoccupation with the vast American market
c. no knowledge of foreign operations
d. insufficient capital to expand foreign markets

View Answer

b. preoccupation with the vast American market

QN28: Which of the following are included in a typical services export?
a. Tourism and transportation
b. Sales and forecasting
c. Technology and e-commerce
d. All of the above

View Answer

a. Tourism and transportation

QN29: Which of the following is not a reason for exporting?
a. To offset cyclical sales of the global market
b. To satisfy a host government’s requirement that the local subsidiary export
c. To remain competitive in the home market
d. To test foreign markets and foreign competition inexpensively

View Answer

a. To offset cyclical sales of the global market

QN30: “Although exporters would prefer to sell on the almost riskless letter of credit terms, increased foreign competition and the universally tight money situation are forcing them to:”
a. accept payment in foreign currency
b. accept export drafts
c. accept documentary drafts
d. offer credit

View Answer

d. offer credit

QN31: Which of the following is not one of the purposes served by the export bill of lading?
a. It is a contract for carriage between the shipper and carrier
b. It is a receipt from the carrier for the goods shipped
c. It is a certificate of ownership
d. It is a certificate for release of liability

View Answer

d. It is a certificate for release of liability

QN32: The sales agreement should specify:
a. all of the terms and conditions of the sale
b. as simply as possible the duties of the representative and the firm
c. as comprehensively as possible the duties of the representative and the firm
d. None of the above

View Answer

b. as simply as possible the duties of the representative and the firm

QN33: The _________________ is a program that provides current sales leads from overseas firms that want to buy or represent American firms.
a. Trade Representation Program
b. Trade Incentives Program
c. Trade Alternatives Program
d. Trade Opportunities Program

View Answer

d. Trade Opportunities Program

QN34: An export marketing plan is ________________ a domestic marketing plan.
a. essentially the same as
b. more comprehensive than
c. more detailed than
d. more specific than

View Answer

a. essentially the same as

QN35: An unconditional order that is drawn by the seller on the buyer to pay the draft’s amount on presentation or at an agreed future date and that must be paid before the buyer receives shipping documents is called:
a. an unconditional draft
b. a presentation draft
c. an export draft
d. a documentary draft

View Answer

c. an export draft

QN36:__________ warehouse is authorized by customs authorities for the storage of goods on which payment of import duties is deferred until the goods are removed
a. A bonded
b. An import
c. A customs
d. A deferred

View Answer

a. A bonded

QN37: A specialized corporate form authorized by the federal government that provides tax advantages for exporting firms is known as:
a. an exporting corporation
b. a foreign sales corporation
c. a foreign exporting corporation
d. a foreign tax advantage corporation

View Answer

b. a foreign sales corporation

QN38: Which of the following is not one of the kinds of payment terms offered by exporters to foreign buyers?
a. Cash on delivery
b. Cash in advance
c. Consignment
d. Documentary drafts

View Answer

a. Cash on delivery

QN39: “When non-exporters complain about the complexity of export procedures, they are generally referring to:”
a. government regulations
b. dealing with foreign regulations
c. documentation
d. all of the above

View Answer

c. documentation

QN40: The Heckscher-Ohlin theory explains comparative advantage as the result of differences in countries:
a. Economies of large-scale production
b. Relative abundance of various resources
c. Relative costs of labor
d. Research and development expenditures

View Answer

b. Relative abundance of various resources

QN41: The factor endowment model of international trade was developed by
a. Adam Smith
b. David Ricardo
c. John Stuart Mill
d. Eli Heckscher and Bertil Ohlin

View Answer

d. Eli Heckscher and Bertil Ohlin

QN42: Dynamic comparative advantage theory
a. helps explain why some nations use industrial policy to support potentially competitive new firms
b. cannot explain strategic competition between firms such as Boeing and Airbus
c. is another name for Ricardo s comparative advantage theory
d. None of the above

View Answer

a. helps explain why some nations use industrial policy to support potentially competitive new firms

QN43: Intra-industry trade theory
a. explains why the United States might export autos and import clothing
b. “explains why the United States might export and import differentiated versions of the same product, such as different types of autos”
c. assumes that transport costs are very low or do not exist
d. ignores seasonal considerations for agricultural goods

View Answer

b. “explains why the United States might export and import differentiated versions of the same product, such as different types of autos”

QN44: “Should international transportation costs decrease, the effect on international trade would include a (an):”
a. Increase in the volume of trade
b. Smaller gain from trade
c. Decline in the income of home producers.
d. Decrease in the level of specialization in production

View Answer

a. Increase in the volume of trade

QN45: “If tastes are identical between countries, then comparative advantage is determined by:”
a. supply conditions only
b. demand conditions only
c. supply and demand conditions.
d. can t tell without more information.

View Answer

a. supply conditions only

QN46: The trade model of the Swedish economists Heckscher and Ohlin maintains that:
a. Absolute advantage determines the distribution of the gains from trade.
b. Comparative advantage determines the distribution of the gains from trade.
c. The division of labor is limited by the size of the world market
d. A country exports goods for which its resource endowments are most suited

View Answer

d. A country exports goods for which its resource endowments are most suited

QN47: The product cycle theory of trade is essentially a
a. “static, short run trade theory”
b. “dynamic, long run trade theory”
c. zero-sum theory of trade
d. negative-sum theory of trade

QN48: The comparative advantage model of Ricardo was based on
a. intraindustry specialization and trade
b. interindustry specialization and trade
c. demand conditions underlying specialization and trade
d. income conditions underlying specialization and trade

QN49: “According to the factor endowment model of Heckscher and Ohlin, countries heavily endowed with land will”
a. Devote excessive amounts of resources to agricultural production
b. Devote insufficient amounts of resources to agricultural production
c. Export products that are land-intensive
d. Import products that are land-intensive

View Answer

c. Export products that are land-intensive

QN50: Wassily Leontief’s results can be interpreted as
a. evidence against the Ricardian model
b. evidence against the Heckscher-Ohlin model
c. support for the Ricardian model
d. support for the Heckscher-Ohlin model

View Answer

b. evidence against the Heckscher-Ohlin model

QN51: A tariff can _________ raise a country’s welfare
a. never
b. sometimes
c. always
d. none of the above

View Answer

b. sometimes

QN52: The Heckscher-Ohlin assumes that _______ are identical between countries
a. tastes and preferences
b. technology levels
c. factor endowments
d. both (a) and (b)

View Answer

d. both (a) and (b)

QN53: “If a country an imposes an import tariff, its welfare can improve if”
a. “the country is a “”small country”” rather than a “”large country?”
b. its terms of trade improve enough
c. the tariff enhances the welfare of its trading partners
d. its government’s tax revenue increases because of the tariff

View Answer

b. its terms of trade improve enough

QN54: Wassily Leontief used an input-output table in order to test the
a. Ricardian theory of comparative advantage
b. Heckscher Ohlin theory of comparative advantage
c. Linder theory of overlapping demand
d. all of the above

View Answer

b. Heckscher Ohlin theory of comparative advantage

QN55: “In his empirical test of comparative advantage, Wassily Leontief found that”
a. U.S. exports are capital intensive relative to U.S. imports
b. U.S. imports are labor intensive relative to U.S. exports
c. U.S. exports are neither labor nor capital intensive
d. none of the above

View Answer

d. none of the above

QN56: According to the Heckscher-Ohlin model
a. everyone automatically gains from trade
b. the gainers from trade outnumber the losers from trade
c. the scarce factor necessarily gains from trade
d. none of the above

View Answer

b. the gainers from trade outnumber the losers from trade

QN57: A tariff that prohibits imports has only
a. a revenue effect and redistribution effect
b. revenue effect and protection effect
c. consumption effect and protection effect
d. redistribution effect and consumption effect

View Answer

c. consumption effect and protection effect

QN58: “In developed countries, tariffs on raw materials tend to be”
a. highest of all
b. higher than on manufactured goods
c. equal to tariffs on manufactured goods
d. lower than on manufactured goods

View Answer

d. lower than on manufactured goods

QN59: One of the predictions of the Heckscher-Ohlin model is that:
a. countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other.
b. “countries will tend to specialize, but not completely, in their comparative advantage good”
c. reciprocal demand leads to an equilibrium terms of trade by inducing changes in both demand and supply
d. all of the above

View Answer

d. all of the above

View Answer

Answer: c) Inventory

QN60: Which of the following best describes the primary function of the International Monetary Fund?
A) It acts as the Secretary of Treasury.
B) It provides relief to needy counties in the United States.
C) It provides assistance to needy contries.
D) It assists in banking affairs to keep foreign currency exchange balanced.

View Answer

Answer: C) It provides assistance to needy contries.

QN61: The EU treaty creates open borders for trade by providing for the free flow of all of the following EXCEPT
A) capital.
B) goods.
C) services
D) custom duties.

View Answer

Answer: D) custom duties.

QN62: A dispute among members of the WTO is first heard by
A) the director of foreign affairs.
B) the WTO’s appellate body.
C) a three-member panel of the WTO.
D) leaders from their respective countries.

View Answer

Answer: C) a three-member panel of the WTO.

QN63: The Maastricht Treaty included provisions in which of the following areas?
A) justice and home affairs
B) monetary union
C) military integration
D) political integration
E) All these answers are correct.

View Answer

Answer: E) All these answers are correct.

QN64: The African Union is an example of___integration.
A) regional
B) relative
C) global
D) bilateral

View Answer

Answer: A) regional

QN65: Regional trade groups in Africa___.
A) are more concerned about political than economic issues
B) often overlap in terms of membership
C) have not been implemented due to trade barriers
D) have resulted in countries relying more on each other than on former colonial powers for trading relationships

View Answer

Answer: D) have resulted in countries relying more on each other than on former colonial powers for trading relationships

QN66: The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)___.
A) allows rich countries to produce generic versions of patented drugs without having to pay royalties to the patent holder
B) permits developing countries to import generic products from other countries if they don’t have the capacity to produce generic drugs
C) requires tiered pricing for most drugs
D) deals with vaccines, such as for malaria, but does not cover drugs such as those used to treat HIV/AIDS

View Answer

Answer: B) permits developing countries to import generic products from other countries if they don’t have the capacity to produce generic drugs

QN67: The NAFTA side agreements include___.
A) labor standards only
B) internal tariff laws
C) environmental standards only
D) environmental and labor standards

View Answer

Answer: D) environmental and labor standards

QN68: Labor and environmental standards were included in the NAFTA agreement
A) to protect U.S. consumers from receiving environmentally damaging products from abroad
B) because of rules required by the WTO
C) to help opponents of NAFTA concerned about labor and environmental problems in Mexico
D) in order to convince the Mexican Congress that U.S. investors would not damage Mexico.

View Answer

Answer: B) because of rules required by the WTO

QN69: Rules of origin ensure that___.
A) only goods that were produced mostly within the member country are eligible for the more liberal tariff conditions created by FTA
B) only African products may be shipped to member countries
C) the members of FTA may import products from only neighboring members
D) all members have the same external tariffs

View Answer

Answer: A) only goods that were produced mostly within the member country are eligible for the more liberal tariff conditions created by FTA

QN70: The euro, the currency of the European Union,___.
A) was adopted by all 15 existing members when it was first initiated
B) must be adopted by countries as a precondition to joining the European Union
C) is open to countries that are not members of the EU as long as they use the European Central Bank to set interest rates
D) was designed to help eliminate currency as a barrier to trade in the EU

View Answer

Answer: D) was designed to help eliminate currency as a barrier to trade in the EU

QN71: Which of the original 15 members of the European Union did not adopt the euro when it was first implemented?
A) the U.K.
B) France
C) Germany
D) Malta

View Answer

Answer: A) the U.K.

QN72: Assume that U.S. companies are importing the same product from Mexico and Taiwan. The United States enters into an FTA with Mexico but not with Taiwan. Consequently, the United States begins to import more goods from Mexico (due to lower tariffs) than from Taiwan, even though the Mexican products may not be any better or cheaper. This is an example of___.
A) trade specialization
B) trade internalization
C) trade creation
D) trade diversion

View Answer

Answer: D) trade diversion

QN73: The___set steps to accomplish monetary union in the European Union, which included the creation of the euro.
A) Single European Act
B) Treaty of Maastricht
C) European Monetary Union
D) European Central Bank

View Answer

Answer: B) Treaty of Maastricht

QN74: The___is the common currency of the European Union.
A) franc
B) pound
C) euro
D) mark

View Answer

Answer: C) euro

QN75: The three major responsibilities of the___are legislative power, control over the budget, and supervision of executive decisions.
A) European Commission
B) European Council
C) European Parliament
D) European Court of Justice

View Answer

Answer: C) European Parliament

QN76: The EU organization that provides political leadership, drafts laws, and runs the daily programs of the EU is the___.
A) European Commission
B) Council of Ministers
C) European Parliament
D) European Central Bureaucracy

View Answer

Answer: C) European Parliament

QN77: The EU organization that ensures consistent interpretation and application of EU treaties is the___.
A) European Commission
B) Council of Ministers
C) Court of Justice
D) Council of Treaties and Laws

View Answer

Answer: A) European Commission

QN78: The___is the European Union’s ultimate decision-making body and is composed of the different ministers of the member countries.
A) European Commission
B) Council of the European Union
C) European Parliament
D) European Court of Justice

View Answer

Answer: B) Council of the European Union

QN79: Trade shifting to countries in a group at the expense of trade with countries not in the group, even though the nonmember companies might be more efficient in the absence of trade barriers, is known as___.
A) trade specialization
B) trade diversion
C) trade creation
D) trade internalization

View Answer

Answer: B) trade diversion

QN80: The goal of a___is to abolish all tariffs among member countries.
A) customs union
B) common market
C) free trade agreement
D) Common internal tariff

View Answer

Answer: C) free trade agreement

QN81: The European Union is an example of a___.
A) customs union
B) free trade agreement only
C) regional trade agreement with no internal barriers but with individual external tariffs
D) common language agreement

View Answer

Answer: A) customs union

QN82: A___results when free mobility of factors of product is added to a customs union.
A) customs union
B) common market
C) free trade agreement
D) regional trade agreement

View Answer

Answer: B) common market

QN83: A trade agreement where the member countries have a common external tariff is a
A) free trade agreement
B) customs union
C) regional free trade zone
D) NAFTA-style agreement

View Answer

Answer: A) free trade agreement

QN84: Geographic proximity is an important factor in establishing trading blocs because
A) countries next to each other rarely have trade barriers
B) neighboring countries typically use the same language
C) good trading relationships often exist, so it is easier to reduce barriers and increase trade for countries that are close geographically
D) the WTO gives preference to trading blocs that involve two or more countries that share a common border

View Answer

Answer: C) good trading relationships often exist, so it is easier to reduce barriers and increase trade for countries that are close geographically

QN85: Most trade groups contain countries in the same area of the world. Why is this so?
A) The distances that goods need to travel between such countries are short.
B) Distribution channels are not easily established in adjacent countries.
C) Adjacent countries are reluctant to coordinate policies.
D) Neighboring countries usually lack a common history and interests.

View Answer

Answer: A) The distances that goods need to travel between such countries are short.

QN86: Trade agreements, whether regional, bilateral, or global, help companies___.
A) by opening up markets in countries that are part of the agreements
B) to invest more abroad but not necessarily export more
C) to export products to countries that are part of the agreements but not necessarily import more
D) make export and import decisions, but they do not help with investment decisions

View Answer

Answer: A) by opening up markets in countries that are part of the agreements

QN87: The clause embodied the fundamental principle of GATT-trade without discrimination.
A) most-favored-nation
B) nontariff barriers
C) free rider
D) normal trade relations

View Answer

Answer: A) most-favored-nation

QN88: ___is a WTO principle that allows member nations to extend tariff cuts to WTO members.
A) Most-favored-nation
B) Nontariff barrier relations
C) The free rider policy
D) Normal trade relations

View Answer

Answer: D) Normal trade relations

QN89: Under the WTO agreement,___.
A) Baa a dispute resolution mechanism allows countries to bring grievances to the WTO against countries that levy inappropriate trade discrimination measures
B) there there ithere is no dispute resolution mechanism except for trade involving environmental products
C) countries are countries are allowed to place trade barriers on member countries with no particular justification, because the WTO has no enforcement mechanism, just like GATT
D) tariffs are nottariffs are permitted to be levied by developed countries against developing countries but not against each other

View Answer

Answer: A) Baa a dispute resolution mechanism allows countries to bring grievances to the WTO against countries that levy inappropriate trade discrimination measures

QN90: A major problem with the Doha Round is that___.
A) developing countries want developed countries to better protect their intellectual property
B) developed countries want a reduction in agricultural subsidies by the developing countries
C) the WTO does not want the developing countries to liberalize their investment rules
D) because of security issues, not all countries were able to attend the meetings, so it was impossible to get a consensus vote

View Answer

Answer: B) developed countries want a reduction in agricultural subsidies by the developing countries

QN91: integration is the political and economic agreements among countries that give preference to member countries to the agreement.
A) Global
B) Economic
C) Bilateral
D) Regional

View Answer

Answer: B) Economic

QN92: Which of the following countries are members of NAFTA?
A) the United States, Canada, and Mexico
B) North America and Latin America
C) the United Kingdom, the United States, and Canada
D) the United States, Canada, and Australia

View Answer

Answer: A) the United States, Canada, and Mexico

QN93: Which of the following country is not a member of SADC?
A) Angola
B) Nigeria
C) Zambia
D) South Africa

View Answer

Answer: B) Nigeria

QN94: Member countries of the African Union are planning to establish a Court of Justice for which the statutes defining the composition and functions of the Court of Justice will be submitted to the Assembly in
A) Maputo
B) Durban
C) Lome
D) Lusaka

View Answer

Answer: A) Maputo

QN95: Treaty to establishing the African Economic Community (AEC) was signed in
A) 1993
B) 1991
C) 1990
D) 1998

View Answer

Answer: B) 1991

QN96: Which of the following country is not a member of SAARC?
A) Bangladesh
B) Bhutan
C) India
D) China

View Answer

Answer: D) China

QN97: Which of the following are not third-world regions?
a. Latin America.
b. Asia.
c. Africa.
d. Australia.

View Answer

Answer: d. Australia.

QN98: Which of the following countries are not newly industrialized countries (NICs)?
a. Taiwan.
b. North Korea.
c. Singapore.
d. Hong Kong.

View Answer

Answer: d. Hong Kong.

QN99: Which country is not a transitional economy
a. China.
b. Russia.
c. Hungary.
d. Mexico.

View Answer

Answer: d. Mexico.

QN100: Development economics focuses primarily on the poorest ___ of the world’s a. population.
b. two-thirds.
c. one-third.
d. 28 percent.
e. 5 percent.

View Answer

Answer: b. two-thirds.

QN101: The poorest region of the world is
a. the Middle East.
b. sub-Saharan Africa.
c. Asia.
d. Latin America.

View Answer

Answer: b. sub-Saharan Africa.

QN102: Of the world’s population, what portion lives in developing countries?
a. approximately 35%.
b. approximately 80%.
c. nearly 10 billion people.
d. less than 1 billion people.

View Answer

Answer: b. approximately 80%.

QN103: In which of the following countries would you expect material lifestyles to be most like those in the United States?
a. Nigeria.
b. Japan.
c. India.
d. Mali.

View Answer

Answer: b. Japan.

QN104: Compared to the income of the family of Balayya discussed in the text, the Smiths’ family income was roughly
a. twice as large.
b. 10 to 12 times as large.
c. 200 times larger.
d. -three-fourths as large.

View Answer

Answer: c. 200 times larger.

QN105: Which of the following could be considered critical questions in development economics?
a. How do the poorest 2/3 of the world live?
b. What are the major theories of economic development?
c. What factors affect labor skills in the third world?
d. all of the above are correct.

View Answer

Answer: b. What are the major theories of economic development?

QN106: Which of the following characteristics are most likely found in developing countries?
a. high population growth rates.
b. large number of people living in poverty.
c. very traditional methods of agricultural production.
d. all of the above
e. none of the above

View Answer

Answer: d. all of the above

QN107: Which of the following could not be considered a major economic system?
a. capitalism.
b. communism.
c. socialism.
d. physical quality of life index.
e. none of the above.

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Answer: d. physical quality of life index.

QN108: One classification of development levels used by the World Bank divides countries into three group on the basis of GNP per capita. They are
a. NIC, OPEC and G7
b. Low-income, middle-income and high-income
c. Southeast, Northeast and Southwest
d. Asia, America and Europe

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Answer: b. Low-income, middle-income and high-income

QN109: The World Bank’s GNP per capita classification for low-income, middle-income and high income countries respectively is
a. less than $900, $900-$9,000 and more than $9,000.
b. less than $5,000, $5,000-$15,000 and more than $15,000.
c. less than $100, $100-$1,000 and more than $1000.
d. less than $50,000, $50,000-$150,000 and more than $150 000.

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Answer: c. less than $100, $100-$1,000 and more than $1000.

QN110: OPEC is the
a. Organization of Petroleum Exporting Country.
b. Organization of Pre- European Commission.
c. Oil Producing Economies Caucus.
d. Organization of Problematic Economies Committee

View Answer

Answer: a. Organization of Petroleum Exporting Country.

QN111: The Paasche index uses ___ weights.
a. current-year
b. base-year
c. fisher ideal index
d. Purchasing Power Parity (PPP)

View Answer

Answer: b. base-year

QN112: Which of the following is not a problem in comparing developed and developing countries’ GNP?
a. GNP is understated for developed countries, since a number of items included in their national incomes are intermediate goods
b. The economic contribution of a housewife in a peasant family may not be measured in GNP in poor country.
c. GNP is understated for developing countries since many of their labor-intensive good have no impact on exchange rate since they are not traded.
d. GNP is overstated for countries where the price of foreign exchange is less than market clearing price.

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Answer: b. The economic contribution of a housewife in a peasant family may not be measured in GNP in poor country.

QN113: The University of Pennsylvania researchers Summers and Heston compute the price level of GDP as the ratio of purchasing power parity (PPP) exchange rate to the actual exchange rate where
a. both exchange rates are measured as the domestic currency price of the US-dollar.
b. both exchange rates are not converted into international dollars.
c. both exchange rates are pegged.
d. both exchange rate are converted into Big Mac PPP formula.

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Answer: a. both exchange rates are measured as the domestic currency price of the US-dollar.

QN114: PPP is
a. a theory that tells us that exchange rates between currencies are in equilibrium when their purchasing power is the same in both countries.
b. GDP divided by exchange rate.
c. a measure of income inequality.
d. a measure of infant mortality in developing countries.

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Answer: c. a measure of income inequality.

QN115: The Physical Quality of Life Index (PQLI) combines three indicators. They are
a. infant mortality, life expectancy and adult literacy rate.
b. crime rate, clean environment and quality of housing.
c. air pollution rate, water pollution rate and sanitation.
d. health, education and environment.

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Answer: a. infant mortality, life expectancy and adult literacy rate.

QN116: Which of the following is not one of the Newly Industrialized Countries (NICs)?
a. Japan
b. South Korea
c. Taiwan
d. Singapore

View Answer

Answer: a. Japan

QN117: According to the text, basic needs include
a. food, clothing and housing.
b. health, education and quality housing.
c. adequate nutrition, primary education, health, sanitation, water supply and housing.
d. longevity and living standards.

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Answer: a. food, clothing and housing.

QN118: Which of the following statement is not true about LDCs?
a. Most LDCs have less than 1/10 the per capita GNP of the U.S.
b. A greater share of GNP would have to be devoted to education to attain the same primary enrollment rates as in the U.S.
c. Setting up western labor standard and minimum wages in labor-abundant LDCs is sensible.
d. Most LDCs have a greater shortage of qualified teachers than the U.S. does.

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Answer: d. Most LDCs have a greater shortage of qualified teachers than the U.S. does.

QN119: Imitating labor standards from rich countries in LDCs may increase
a. equality.
b. poverty.
c. employment.
d. human development.

View Answer

Answer: d. human development.

QN120: Which of the following did Mahatma Gandhi, non-violent politician and leader of India’s nationalist movement, not advocate?
a. village economic development.
b. handicraft production and labor-intensive technology.
c. centralized decision making.
d. reduction of material wants.

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Answer: c. centralized decision making.

QN121: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States are
a. G-7 countries.
b. countries with highest productivity growth in the world since 1960.
c. countries with decreasing TFP growth since 1990s.
d. countries with the lowest information technology equipment and software index prices.

View Answer

Answer: a. G-7 countries.

QN122: Which of the following is not TRUE?
a. In 1990, the world had 98 mainline phones and 2 mobile phones per 1,000 people; in 2001, 169 mainline and 153 mobile per 1,000.
b. Mobile phones do not require the massive infrastructure investment that mainline telephones require.
c. In 2001, the world information technology expenditures were about 1/20 of 1% of world gross investment.
d. In 2001, internet users per 1,000 people in middle income countries were greater than high income countries.

View Answer

Answer: c. In 2001, the world information technology expenditures were about 1/20 of 1% of world gross investment.

QN123: Dani Rodrik points out that
a. an economy more open to foreign trade and investment faces a more inelastic demand for unskilled workers.
b. employers and consumers can more readily replace domestic workers with foreign workers by investing abroad or buying imports.
c. globalization increases job insecurity.
d. financial liberalization in LDCs leads to collapse of the economy.

View Answer

Answer: b. employers and consumers can more readily replace domestic workers with foreign workers by investing abroad or buying imports.

QN124: Which of the following statement is NOT true about OECD aid?
a. During the 1980s, OECD countries contributed four-fifths of the world’s bilateral official development assistance to LDCs.
b. In the early 1990s, the OECD contributed 98 percent of all aid.
c. The OECD aid increased from $6.9 billion in 1970 to $8.9 billion in 2001.
d. In 2001, only Denmark, Norway, Sweden, the Netherlands, and Luxembourg exceeded the aid target for LDCs.

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Answer: d. In 2001, only Denmark, Norway, Sweden, the Netherlands, and Luxembourg exceeded the aid target for LDCs.

QN125: Japan’s aid programs
I are understaffed, politically muddled, and administratively complex.
II are biased toward Asia.
III go primarily to least developed countries in Africa.
IV focus on loans and the grant element of aid is low.
a. I, II and III.
b. I, II and IV.
c. II, III and IV.
d. I, II, III and IV.

View Answer

Answer: a. I, II and III.

QN126: Aid or official development assistance (ODA) includes
I development grants.
II loans with at least 25 percent grant element.
III military assistance.
IV technical cooperation.
a. I and II only.
b. I, II and III only.
c. I, II and IV only.
d. I, II, III and IV only.

View Answer

Answer: b. I, II and III only.

QN127: I = S + F The equation above states that a country can increase its new capital formation (or investment) through its
a. own domestic savings and by inflows of capital from abroad.
b. stock market and fiscal policy.
c. savings from abroad and financial outflow.
d. savings and financial liberalization.

View Answer

Answer: b. stock market and fiscal policy.

QN128: MNCs can help the developing country to
I Finance a savings gap or balance of payments deficit.
II Obtain foreign technology and innovative methods of increasing productivity.
III Generate appropriate technology by adapting existing processes.
IV Employ domestic labor, especially in skilled jobs.
a. I and II only
b. III and IV only
c. I, II and III only
d. I, II, III and IV

View Answer

Answer: c. I, II and III only

QN129: The balance on current account
I equals the absolute value of the balance on capital account.
II is financed by savings.
III is net grants minus remittances.
IV includes goods, services, and unilateral transfers.
a. I and II only.
b. II and III only.
c. I and IV only.
d. None of the above.

View Answer

Answer: b. II and III only.

QN130: Bilateral aid
a. is technical aid given by IMF.
b. is given directly by one country to another.
c. is aid with repayment in inconvertible currency.
d. is a loan at bankers’ standards.

View Answer

Answer: b. is given directly by one country to another.

QN131: International trade and specialization are determined by
a. absolute advantage.
b. comparative advantage.
c. absolute costs.
d. production possibility frontier.

View Answer

Answer: b. comparative advantage.

QN132: India has a comparative cost advantage in
a. textiles.
b. steel.
c. both of them
d. none of them

View Answer

Answer: c. both of them

QN133: Japan has comparative cost in
a. steel.
b. textiles.
c. both of them.
d. cannot be determined.

View Answer

Answer: c. both of them.

QN134: Factor proportions theory is also known as the
a. comparative advantage theory.
b. laissez faire theorem.
c. HeckscherOhlin theorem.
d. product cycle model.

View Answer

Answer: d. product cycle model.

QN135: The product cycle model indicates that while a product requires ___labor in the beginning, later as markets grow and techniques become common knowledge, a good becomes standardized, so that less sophisticated countries can mass produce the item with ___labor.
a. abundant, less.
b. less skilled, highly skilled.
c. a lot of , no.
d. highly skilled, less skilled.

View Answer

Answer: a. abundant, less.

QN136: The infant industry arguments refers to a tariff designed to
a. help foreign industries establish themselves in the local market.
b. protect young manufacturing products from foreign competition.
c. help consumers enjoy a variety of products in the local market.
d. provide incentives for established local manufacturing firms to venture in foreign markets

View Answer

Answer: d. provide incentives for established local manufacturing firms to venture in foreign markets