1. Chapter 18: Policies and Prospects for Global Economic Growth

2. many people do not join the labor force.
According to the text, population growth in many poor countries does not generally result in increased labor resources because
many people do not join the labor force.
many people join the labor force.
many people work two jobs.
most jobs are for middle-age workers.
Answer: A

3. it leads to an increase in the amount of dead capital.
A higher population growth rate can potentially lead to a higher rate of growth in per capita real GDP if
it leads to an increase in the amount of dead capital.
it leads to greater democracy in a nation.
young workers replace older workers.
there is a greater labor force participation rate.
Answer: D

4. machinery that fails to operate properly.
Dead capital is
machinery that fails to operate properly.
machinery that requires constant maintenance.
any capital resource that lacks clear title of ownership.
a capital resource that depreciates rapidly.
Answer: C

5. inefficient government regulation. corruption.
All of the following are major factors limiting economic growth in developing countries EXCEPT
dead capital.
deregulation.
inefficient government regulation.
corruption.
Answer: B

6. Foreign direct investment is defined as
the acquisition of more than 10 percent of the shares of ownership in a company in another nation.
funds allocated into a foreign stock market that represent an ownership share of firms less than 5 percent.
purchasing both capital equipment and government bonds abroad.
purchasing government bonds.
Answer: A

7. An example of foreign direct investment is the
domestic acquisition of less than 10 percent of a foreign company.
foreign purchase of more than 10 percent of stock in a domestic company.
purchase of livestock from abroad.
sale of insurance in a foreign nation.
Answer: B

8. Most international investment finance today comes from
portfolio and foreign direct investment.
the sale of antiques.
government financing.
tax collections.
Answer: A

9. Portfolio investment means buying
less than 10 percent ownership in a foreign company.
more than 50 percent ownership in a foreign company.
a life insurance policy when traveling abroad.
livestock.
Answer: A

10. foreign direct investment World Bank and IMF loans
Which of the following is NOT one of the three primary sources of private investment funds flowing into developing nations?
bank loans
foreign direct investment
World Bank and IMF loans
portfolio investment
Answer: C

11. The World Bank has extended a loan to Country X to build a new toll road and counts on the repayment of the loan from the collected tolls. After the funds have been transferred to the country, the government decides to spend the money to build a new presidential palace. This is an example of
hostile selection.
adverse selection.
moral hazard.
government risk.
Answer: C

12. market-based approach.
Which of the following is NOT a method for promoting global economic growth?
reliance on private markets to direct capital goods toward their best use
count on the world's governments to develop policies that promote economic growth in developing nations
encourage population growth so that developing nations' labor supply increases
market-based approach.
Answer: C

13. foreign direct investment. taxation. portfolio investment.
All of the following are sources of funding for capital goods in developing countries EXCEPT
loans from banks.
foreign direct investment.
taxation.
portfolio investment.
Answer: C

14. Which of the following is true about the World Bank?
It is a multinational agency that specializes in development loans.
It is a U.S. agency that specializes in development loans.
It is a U.N. sponsored agency that specializes in development loans.
It is made up of all central banks in the world.
Answer: A

15. Approximately what percentage of the World Bank's loans go to developing nations in the East Asia/Pacific and South Asia regions combined?
10%
40%
70%
100%
Answer: B

16. The World Bank makes loans primarily to
nations without free markets, such as North Korea.
developing nations.
the United States.
highly developed nations.
Answer: B

17. promote world economic growth by means of greater financial stability.
The International Monetary Fund (IMF) is an international organization designed to
promote world economic growth by means of greater financial stability.
promote world economic growth via loans to developed nations.
circulate a single currency worldwide.
act as the world's central bank.
Answer: A

18. the quota subscription. special drawing rights.
The international unit of accounting used by the International Monetary Fund (IMF) is called
the eurodollar.
the IMF dollar.
the quota subscription.
special drawing rights.
Answer: D

19. The World Bank specializes in making loans to promote
short-term assistance when a nation experiences a financial crisis.
so-called stand-by arrangements and credits.
financial stability.
long-term development and growth.
Answer: D

20. International Monetary Fund.
The international organization with the sole goal of promoting global antipoverty efforts is the
World Bank.
International Monetary Fund.
Board of Governors of the Federal Reserve System.
GAE.
Answer: A

21. Which of the following statements is true?
All nations that belong to the International Monetary Fund have equal voting power.
The voting power of a nation in the International Monetary Fund is determined by its quota subscription.
The voting power of a nation in the International Monetary Fund is called special drawing rights.
The voting procedure in the International Fund is determined by the World Bank.
Answer: B