Ch32 Macroeconomic Policy Around the World

*Ch32 Macroeconomic Policy Around the World*

*Multiple Choice Questions*

*1.* In what way is each and every one of the economies of the more than 200 countries of the world similar?

A. all use the same macroeconomic policies
B. each focuses on a Keynesian perspective
C. all have their own distinctive characteristics
D. each focuses on a neoclassical perspective

Answer: C Reference:

Explanation:

Type: Multiple Choice

*2.* The high-income economies of the world contain approximately __________ of the world’s population and produce and consume ___________ of the World’s GDP.

A. 14%; over 50%
B. 12%; over 60%
C. 14%; over 70%
D. 12%; over 80%

Answer: B Reference:

Explanation:

Type: Multiple Choice

*3.* What do growth in standard of living, low unemployment, low inflation, and a sustainable balance of trade all share in common?

A. main universal goals of macroeconomic policy
B. lack of diversity in undeveloped countries in the World
C. microeconomic policy goals of developed countries
D. microeconomic policy goals of undeveloped countries

Answer: A Reference:

Explanation:

Type: Multiple Choice

*4.* By measuring and comparing per capita GDP data, economists can determine the extent that per capita GDP differs between the nations of the World. While this is useful information, which of the following is a valid criticism of comparing per capita GDP for this purpose?

A. national economies within the global economy are diverse
B. most comparisons between regions are admittedly rough
C. fails to capture diversity across the regions
D. fails to capture the precise standard of living

Answer: D Reference:

Explanation:

Type: Multiple Choice Category: Evaluate

*5.* When per capita GDP is used as a rough measure to compare the economic regions of the World, the richest region is _________________ and the poorest region is ________________.

A. East Asia and the Pacific; South Asia
B. the United States, Western Europe and Japan; South Asia
C. the United States, Western Europe and Japan; Sub-Saharan Africa
D. East Asia and the Pacific; Sub-Saharan Africa

Answer: C Reference:

Explanation:

Type: Multiple Choice

*6.* When GDP per capita is used as a rough measure to compare the economic regions of the World, Latin America and the Caribbean are better off than _________________, but worse off than ___________________.

A. Sub-Saharan Africa; South Asia, Eastern Europe and Central Asia
B. Eastern Europe and Central Asia; East Asia and the Pacific
C. East Asia and the Pacific; the Middle East and North Africa
D. South Asia; Eastern Europe and Central Asia

Answer: A Reference:

Explanation:

Type: Multiple Choice

*7.* When other factors such as health and illiteracy rates are added to global comparisons of GDP and population, which of the following is likely to be revealed?

A. rough comparisons between regions as data are not available
B. very wide differences in the standard of living
C. 2% of the world’s GDP comes from agriculture in low-income countries
D. the similarity in the low degree of urbanization

Answer: B Reference:

Explanation:

Type: Multiple Choice

*8.* North American and the European Union have about _________% of the world’s population and their combined economic statistics show that they produce and consume about _________% of the world’s GDP.

A. 70, 16
B. 80, 70
C. 16, 16
D. 9, 70

Answer: D Reference:

Explanation:

Type: Multiple Choice

*9.* Factors like health, education, human rights, crime, personal safety, and cleanliness of environment all:

A. fail to capture the standard of living in a precise manner.
B. have a large impact on the standard of living of a country.
C. have a slight impact on the standard of living of a country.
D. fail to capture diversities that make up the global economy.

Answer: B Reference:

Explanation:

Type: Multiple Choice

*10.* Which of the following most likely contributed to the early economic development for the Netherlands?

A. higher proportion of youth and young adults
B. only about 2% of GDP comes from agriculture
C. 30–40% of the population lives in urban areas
D. geographically located in Europe with coastlines

Answer: D Reference:

Explanation:

Type: Multiple Choice

*11.* High income countries are classified as having a GDP per capita that is greater than

A. $12,475
B. $14,970
C. $17,964
D. $21,556

Answer: A Reference:

Explanation:

Type: Multiple Choice

*12.* In Sub-Saharan Africa, the population is 910 million, and the average GDP per capita is:

A. $5,399.
B. $2,733.
C. $1,415.
D. $7,308.

Answer: C Reference:

Explanation:

Type: Multiple Choice

*13.* In _____________________________, firms and workers often build upon or copy technologies and industries developed by the technology leaders.

A. Eastern Europe’s disconnected economy
B. China and India’s converging economies
C. the Middle East’s low-income economies
D. South Africa’s developing economy

Answer: B Reference:

Explanation:

Type: Multiple Choice

*14.* Developing the means to increase human capital, and using existing technology to connect to the global economy are generally associated with growth policies of:

A. all nations.
B. technologically disconnected nations.
C. nations that are technology leaders.
D. converging nations.

Answer: D Reference:

Explanation:

Type: Multiple Choice

*15.* Growth policies that mainly focus on both finding appropriate technology and on getting connected through communications and transport infrastructure are generally associated with:

A. technologically disconnected nations.
B. nations that are technology leaders.
C. neoclassical economic theory
D. Keynesian economic theory

Answer: A Reference:

Explanation:

Type: Multiple Choice

*16.* What name was given to South Korea, Thailand, Malaysia, Indonesia, Singapore, Hong Kong and Taiwan because of their economic success?

A. Asian tigers
B. West Asian tigers
C. East Asian tigers
D. Tigers

Answer: C Reference:

Explanation:

Type: Multiple Choice

*17.* Many high-income nations are approaching a situation in which:

A. they will intentionally aim for a low standard of living.
B. the elderly will soon form a much larger share of the population.
C. the demands of the elderly will cause an unsustainable trade imbalance.
D. they will intentionally aim for high rates of unemployment and inflation.

Answer: B Reference:

Explanation:

Type: Multiple Choice

*18.* By about 2050, the ___________ populations in _____________ are expected to boom.

A. elderly; high income countries
B. youth; high income countries
C. youth; low income countries
D. elderly; low-income countries

Answer: D Reference:

Explanation:

Type: Multiple Choice

*19.* ________________________ are the result of improvements in human capital, physical capital, and technology interacting in a _____________________.

A. High income economies; command economy
B. Productivity improvements; market-driven economy
C. Global economies; remarkably similar manner
D. Sustainable balances of trade; global economy

Answer: B Reference:

Explanation:

Type: Multiple Choice

*20.* Countries have strong differences in economic institutions: the U.S. is extremely _________________, Cuba has a ________________ and Canada is a mixture of both.

A. high-income; low-income
B. technological; shortage of technology
C. market-oriented; command economy
D. regulated; lack of regulation

Answer: C Reference:

Explanation:

Type: Multiple Choice

*21.* __________________________ address the problem of economic growth by continually striving for a more educated workforce that can create, invest in and apply new technologies.

A. Technological leaders
B. Technologically disconnected nations
C. Converging economies
D. Command economies

Answer: A Reference:

Explanation:

Type: Multiple Choice

*22.* The main public policies of technological leading countries are _______________ focused on investment, including investment in human capital, in technology, and in physical plant and equipment.

A. market-orientated policies
B. monetary policies
C. economic policies
D. fiscal policies

Answer: D Reference:

Explanation:

Type: Multiple Choice

*23.* If a technological leader’s economy produces per capita growth rates of about 2% per year, multiplying per capita GDP by a factor of five would take about:

A. 50 years.
B. 80 years.
C. 30 years.
D. 70 years.

Answer: B Reference:

Explanation:

Type: Multiple Choice

*24.* Because China and the East Asian tigers are _________________________, their economies have all experienced rapid economic growth rates.

A. rely on using technology developed by technological leaders
B. overly reliant on a legacy of government economic controls
C. the highest savers in the world, often saving one-third or more of GDP
D. technologically disconnected, they encourage their firms to participate in world markets

Answer: C Reference:

Explanation:

Type: Multiple Choice

*25.* Many _____________ countries have a legacy of government economic controls.

A. converging
B. technologically disconnected
C. Sub-Saharan
D. high-income

Answer: A Reference:

Explanation:

Type: Multiple Choice

*26.* Policies that provide governments with economic controls should be evaluated on their __________________________________, not on the basis of the promises of their supporters or the theories of economists.

A. ability to be dismantled quickly over time
B. acceptance by market-oriented economists
C. actual effects, which can be positive or negative
D. ability to act as a critical ingredient for faster growth

Answer: C Reference:

Explanation:

Type: Multiple Choice

*27.* While governments will play a different role across countries, all the ________________ economies have found that increasing ____________________ for firms and workers has been a critical ingredient in the recipe for faster growth.

A. technologically disconnected; focus on raising human capital
B. converging; market-oriented incentives
C. technologically disconnected; focus on increasing technology
D. high-income; retained revenue and wages

Answer: B Reference:

Explanation:

Type: Multiple Choice

*28.* What do Africa, southern Mexico, and tropical areas of Central America and Brazil all share in common?

A. high per capita GDPs
B. rapid growth rates
C. command economies
D. technological exclusion

Answer: D Reference:

Explanation:

Type: Multiple Choice

*29.* Along with the general growth-oriented agenda, some central Asian nations need an improved infrastructure of _________________, along with research into ___________ focused on their particular economic realities.

A. market-oriented institutions; economic and legal stability
B. communication and transportation; technology
C. foreign aid; foreign investment
D. health and medical research; foreign aid

Answer: B Reference:

Explanation:

Type: Multiple Choice

*30.* ___________________________ in high-income countries is caused by the economy being in a recession.

A. A cyclical standard of living
B. The natural rate of unemployment
C. Cyclical unemployment
D. A natural literacy rate

Answer: C Reference:

Explanation:

Type: Multiple Choice

*31.* A foreign aid donor has provided technology to help farmers in an undeveloped country to be more productive. If that country’s government reacts to political pressure by urban food consumers by imposing price ceilings on farm products,

A. foreign investors will be more likely to provide funds for profitable activities.
B. it will create a reasonably stable market-oriented macroeconomic climate.
C. it will prove technologically disconnected countries need a full economic growth agenda.
D. the farmers receiving the technology will still be unable to make a living.

Answer: D Reference:

Explanation:

Type: Multiple Choice

*32.* Unemployment rates in the nations of Europe have typically been ____________ than in the United States.

A. higher
B. lower
C. the same
D. better

Answer: A Reference:

Explanation:

Type: Multiple Choice

*33.* In low and middle-income countries, workers who are not connected to a labor market are often unable to:

A. collect old-age payments.
B. receive social benefits.
C. be “officially” employed.
D. specialize very much.

Answer: D Reference:

Explanation:

Type: Multiple Choice

*34.* In the global economy, some nations are open to international trade, while others use tariffs and import quotas to limit the impact of trade. Which of the following is a reasonable conclusion that you can draw from this statement?

A. differences in economic institutions exist among nations
B. no nation intentionally aims for an unsustainable trade imbalance
C. nations have similar priorities and similar economic situations
D. economic growth is built on a foundation of trade improvements

Answer: A Reference:

Explanation:

Type: Multiple Choice Category: Evaluate

*35.* It is sometimes necessary for a _________________ economy to live with a degree of uncertainty over _______________ that would be politically unacceptable in the high-income economies.

A. developing; unemployment
B. converging; inflation
C. disconnected; fundamentals of growth
D. converging; trade imbalances

Answer: B Reference:

Explanation:

Type: Multiple Choice

*36.* In the U.S., international trade raises many _______________ that are the same as issues raised by ________________________ in the domestic economy.

A. monetary policy issues; real productivity gains
B. fiscal policy issues; trade-offs that control inflation
C. public policy issues; competitive market forces
D. public policy issues; workers’ demands for long-term benefits

Answer: C Reference:

Explanation:

Type: Multiple Choice

*37.* Which of the following will have the greatest influence on shifting the aggregate supply curves of high-income countries to the right?

A. a market-driven economy
B. investment in human capital
C. risk of exchange rate fluctuations
D. growth-oriented public policy

Answer: D Reference:

Explanation:

Type: Multiple Choice

*38.* In 2010, many high-income countries will be focused on the short-term economic horizon due to aggressive and often controversial steps governments took to jump-start these economies out of severe recession. Considering the economic challenges that result from these policies, which of the following actions would be most advisable?

A. extricate themselves from the recession and the policies adopted in fighting that recession
B. to continue to temporarily disregard the foundations for future long-term growth
C. find niches that they are well-suited to fill in the global networks of economic production
D. build upon or copy technologies and industries developed by other technology leaders

Answer: A Reference:

Explanation:

Type: Multiple Choice

*39.* In a number of middle to low-income economies around the world, governments may run an expansionary policy of huge and sustained budget deficits. This policy

A. uses the central bank as a mechanism for making loans to politically favored firms.
B. will begin a cycle of heavy reliance on economic growth from a few exported products.
C. counters inflation without regard to the shift to the left in aggregate demand.
D. will shift aggregate demand to the right, so that output is beyond the potential GDP level.

Answer: D Reference:

Explanation:

Type: Multiple Choice

*40.* Most contracts, wage levels, and interest rates are either indexed to inflation, or involve using the currency of another country to sidestep the problem of inflation in some converging economies. Following these policies caused

A. the net flow of foreign investment in and out of the economy reached zero
B. solid levels of economic growth for sustained periods of time with 10-30% inflation
C. a moderate but substantial current account trade imbalance to control inflation
D. indexed inflation policy trade-offs that led to substantial restrictions on trade

Answer: B Reference:

Explanation:

Type: Multiple Choice

*41.* Of all the arguments for placing limitations on trade, which of the following would most likely be characterized as being the most controversial among economists?

A. bank/financial sector regulation argument
B. floating currency argument
C. the infant industry argument
D. quantitative easing argument

Answer: C Reference:

Explanation:

Type: Multiple Choice

*42.* In any economy functioning at potential GDP, there are occasions when the short-term aggregate supply curve unexpectedly shifts, causing inflationary pressures. Which of the following is considered to be a common cause of this type of shift?

A. overoptimistic lending by banks
B. sudden rise in input prices
C. a surge of export sales
D. a wave of government spending

Answer: B Reference:

Explanation:

Type: Multiple Choice

*43.* If an economy has a high level of trade in goods and services relative to GDP and its exports and imports are balanced, what value will the net flow of foreign investment be?

A. unchanged
B. lower
C. higher
D. zero

Answer: D Reference:

Explanation:

Type: Multiple Choice

*44.* With regard to the major issues involving trade imbalances, which of the following explains why smaller countries around the world should take some steps to limit flows of international capital?

A. to counter cyclical unemployment
B. to reduce susceptibility to economic whiplash
C. to maintain the natural rate of unemployment
D. to achieve real productivity gains

Answer: B Reference:

Explanation:

Type: Multiple Choice

*45.* Why do smaller economies around the world typically face more volatile inflation?

A. they can be unsettled by international movements of capital and goods
B. they address inflation concerns without restricting trade and thus lose benefits
C. businesses are distracted from focusing on real productivity gains
D. the fundamentals of growth are the same in every country

Answer: A Reference:

Explanation:

Type: Multiple Choice

*46.* Despite many negative feelings, a number of governments have decided that reducing barriers to trade is at least potentially beneficial to their economy. Which of the following is an example of countries reducing barriers through free trade?

A. NAFTA
B. NATO
C. G20
D. GTO

Answer: A Reference:

Explanation:

Type: Multiple Choice

*47.* The U.S. trade deficit can disappear without raising legitimate concerns over disruption to the economy if:

A. the U.S. immediately ceases trade with all foreign countries.
B. domestic savings rates increases and foreign investment gradually decreases.
C. all tariffs are doubled and import quotas are reduced by half.
D. foreign investors sell their U.S. dollar investments and stop investing in the U.S. economy.

Answer: B Reference:

Explanation:

Type: Multiple Choice

*48.* A trade balance can be quickly defined as the gap between _____________, which are also included in the current account balance along with _______________________.

A. supply and demand; investment income and unilateral transfers
B. supply and demand; stocks and bonds
C. exports and imports; investment income and unilateral transfers
D. exports and imports; stocks and bonds

Answer: C Reference:

Explanation:

Type: Multiple Choice

*Essay Questions*

*1.* In thinking about how nations around the world should pursue the goal of raising their standard of living, economists find it useful to divide those nations into three groups. Identify and briefly describe each group, and include examples of nations that would be classified within each particular group.

The three groups are: (1) high-income countries or technology leaders, which includes high-income countries like the United States, Canada, Japan, and western Europe; (2) middle-income countries or converging countries, which includes China and India, have shown some ability, even if not always sustained, to catch up to the technology leaders; and (3) low-income countries or economically-challenged countries, which include most African nations, are a group representing perhaps a third of the world’s population, which have lagged behind economically.

Reference:

Explanation:

*2.* Using their group designation, identify the problem relating to growth policies associated with high-income countries and discuss the focus of main public policies targeted at addressing this problem.

For technological leaders, the problem of economic growth is to push continually for a more educated workforce that can create, invest in and apply new technologies.

The main public policies targeted at addressing this problem used by technological leader nations are fiscal policies focused on investment, including investment in human capital, in technology, and in physical plant and equipment.

Reference:

Explanation:

*3.* Identify and briefly describe the most controversial of all of the arguments for limitations on trade among economists.

Of all of the arguments for limitations on trade, the most controversial one among economists is the infant industry argument; that is, subsidizing or protecting new industries for a time until they become established.

Reference:

Explanation:

*4.* Discuss the underlying causes of both China and the East Asian tigers’ rapid economic growth in recent decades.

The underlying causes of China and the East Asian tigers’ rapid economic growth in recent decades begin with the fact that each of these countries invested heavily in human capital, first building up primary-level education and then expanding secondary-level education, with a particular focus on encouraging the math and science skills that are useful in engineering and business.

They also made a concerted effort to seek out applicable technology, both by sending students and government commissions abroad to look at the most efficient industrial operations elsewhere and by opening up to foreign companies that wished to build plants in their countries.

This combination of technology, human capital, and physical capital, combined with the incentives of a market-oriented economic context, proved an extremely powerful stimulant to growth.

Reference:

Explanation:

*5.* Briefly discuss the expected pattern of trade imbalances in relation to concerns over international flows of capital, including what the pattern is expected to be, the nations that will be affected, and what the affects mean to those nations.

The expected pattern of trade imbalances in the world economy is that high-income economies will run trade surpluses, which means they will experience an net outflow of capital to foreign destinations, while low- and middle-income economies will run trade deficits, which means that they will experience a net inflow of foreign capital.

Reference:

Explanation:

*6.* Identify and briefly discuss the major issues involving trade imbalances.

There are two major issues involving trade imbalances. One is what will happen with the large U.S. trade deficits, and whether they will come down gradually or with a rush. The other is whether smaller countries around the world should take some steps to limit flows of international capital, in the hope that they will not be quite so susceptible to economic whiplash from international financial capital flowing in and out of their economies.

Reference:

Explanation:

*7.* Provide an example of how monies for a health care program from a foreign aid donor can be misused by the government receiving those funds.

An example of how monies from a foreign aid donor for a health care program can be misused is when the government of the recipient country cuts back its own spending on health care and instead spends that money on weapons used for attacking another country or persecuting a disfavored group in its own country?

Reference:

Explanation:

*8.* Briefly contrast the causes of cyclical unemployment with the natural rate of unemployment and what is involved in addressing each.

In the case of cyclical unemployment, for example, aggregate demand falls behind aggregate supply. In the case of the natural rate of unemployment, government regulations create a situation where otherwise-willing employers become unwilling to hire otherwise-willing workers. Cyclical unemployment can be addressed by expansionary fiscal and monetary policy. The natural rate of unemployment can be harder to deal with, because it involves thinking carefully about the trade-offs involved in laws that affect employment and hiring.

Reference:

Explanation:

*9.* Briefly explain how economists believe it is possible to raise the standard of living for everyone in the world.

Economists believe that it is possible for the division of labor, operating through the interconnected web of market transactions, to raise the standard of living for everyone in the world.

Reference:

Explanation:

*10.* Identify the fundamentals of economic growth that are commonly shared among the world’s nations and briefly explain how each economic group of nations will focus their future efforts in relation to these fundamentals.

The fundamentals of growth are the same in every country: that is, improvements in human capital, physical capital, and technology interacting in the context of a market-oriented economy. Countries that are high-income technology leaders will tend to focus more on developing and using new technology. Countries that are converging economies will focus more on increasing human capital and becoming more interconnected to the technology and markets in the global economy. Low-income, technologically disconnected countries have many needs, but they also face the challenge of becoming reliably connected to the rest of the global economy and finding the technologies that work best for them.

Reference:

Explanation:

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