1. Why are some development organizations made up of multiple member-nations?
because development projects are always a massive undertaking
because some of the problems facing the world are too large in scope to be handled by a single country
because it takes a lot of countries to oppose the United States
because the United Nations was the world’s first development organization and it’s made up of nearly 200 member-nations
2. Which of the following statements about purchasing power parity (PPP) is true?
Purchasing power parity is an attempt to compare exchange rates on a country’s black market with official, government-backed exchange rates.
To adjust for purchasing power parity, prices in a country are compared against Spanish pesos.
If we say that someone “lives on less than a dollar a day,” what we mean is that the person lives on an amount of his local currency whose total value is less than a U.S. dollar.
Purchasing power parity means that a steak in Russia will be the exact same price as a steak in Thailand.
3. Generally speaking, which of the following BEST describes the objective of nongovernmental organizations (NGOs)?
to maximize corporate profits
to advance various social causes (education, clean water, political reform, etc.)
to enforce the policies of the government the NGO is hired by
to combat governments in the developed world on behalf of developing countries
4. The World Bank considers a country “developing” if which of the following is true?
The country has little or no industrial diversification.
The country has a low rate of literacy.
The country has a high rate of inflation.
The country has a low- or middle-income economy.
5. Which of the following statements BEST expresses the beliefs of social-conflict theory?
There is a smaller risk of social conflict in North America than in other areas of the world.
The history of the world is the history of the powerful dominating the weak.
The Soviet Union is the world’s model for successful development.
The best way for countries to develop is to follow the model of wealthy developed countries
6. To opponents of lending to poor countries, which of the following is a typical result of providing loans?
The countries taking out the loans are likely to become “addicted” to credit.
The countries taking out the loans are likely to become financially empowered.
The countries taking out the loans are likely to embezzle all of the money.
The countries taking out the loans are likely to improve their economy, but very slowly
7. Which of the following describes “dependency theory”?
the notion that developed nations are obligated to provide for poor nations
the notion that poor nations should become dependent on one another
the notion that developing nations are kept poor because of their reliance on wealthier nations
the notion that international financial institutions are dependent on their member states for legitimacy
8. Countries in need of economic reform are often advised to devalue their currencies. This measure, however, is usually strongly opposed. Why?
Devaluation often leads to dependence on other countries.
Devaluation often makes imports much cheaper.
Devaluation often leads to a cycle of inflation.
Devaluation often increases labor costs.
9. Countries that take on IMF loans typically use the money to do which of the following?
develop new weapons systems
increase their foreign influence
invest in high-risk, high-reward stocks
make up for budget shortages
10. Which of the following actions is likely to fall under the responsibility of the World Bank, as opposed to the International Monetary Fund (IMF)?
helping the Cambodian treasury to avoid default
publishing an analysis of the labor market in the Philippines
financing a dam in Argentina
advising the Liberian government on tax reform
11. Which of the following is the strongest safeguard against civil war?
the presence of multiple strong militias
steady economic growth
strong executive leadership in the government
the dominance of a particular ethnic group
12. Which of the following factors is LEAST likely to increase chances of civil war in a developing country?
a low national income
slow growth, stagnation, or decline in the country’s economy
an economy centered on exporting valuable natural resources
large income inequality among the country’s citizens
13. Which of the following BEST predicts that a country will have a civil war?
The country is repressive.
The country has a large amount of ethnic diversity.
The country has had a civil war within the past ten years.
The culture of the country is based in violence and war is not seen as undesirable
14. During a civil war, which of the following groups typically suffer the most casualties?
peacekeepers
civilians
rebels
government soldiers
15. Why does the presence of valuable natural resources in a developing country often wind up hindering the development of the country’s economy?
Natural resources from poor nations are worth less on the international market.
Complicated tax policies often make the resources too expensive to be worth developing.
The country’s natural resources are targeted by just a few powerful people in the country, who keep the majority of their profits for themselves.
Countries with valuable resources are often forced by multinational corporations to sign predatory deals, leaving the countries with only a pittance.
16. When a country’s government is controlled by a small group of people who also control most of the country’s businesses, the ruling class is likely to do which of the following?
create laws that benefit everyone in the country equally
reduce the size and power of the government
use the power of government to reduce concentrations of wealth
utilize payoffs and contributions in exchange for political favors and vice versa
17. How can developed countries assist developing countries in reforming weak institutions? Choose the BEST answer.
by paying for the campaigns of pro-Western politicians in developing countries
by helping developing countries adopt good government policies
by suing extractive governments at the International Criminal Court
by financing rebel groups that claim to share the philosophy of wealthy countries
18. Which of the following are the actions of an extractive state?
awarding government contracts to the winners of transparent auctions
steering lucrative government contracts to political loyalists
forcing members of Congress to disclose their business ties
ensuring police force compliance with anti-bribe laws
19. Which of the following statements BEST describes the relationship between weak institutions and a country’s distribution of wealth?
In countries with weak institutions, the economy is freer, so anyone is able to get rich whether lower or upper class.
In countries with weak institutions, the majority of wealth usually winds up in the hands of a few elites.
In countries with weak institutions, most of the wealth is extracted out by wealthy nations such as Japan and France.
In countries with weak institutions, there is almost always total anarchy, so nobody has any chance to amass wealth
20. Which of the following is a sign that a country has weak institutions? Choose the BEST answer.
It has frequent political protests.
Rents in its cities are very high.
Its inflation rate is strongly controlled.
Its economy is controlled by the politically connected.
Part 2
1. Why there is so little formal work in Peña Blanca?
It is a resort town that exists mostly to provide seasonal service to tourists.
The town’s political problems have spilled over to its economy.
Town residents prefer to freelance.
It is a poor, rural town whose economy and infrastructure are not strong enough to support regular jobs.
2. What was the goal of the Bretton Woods conference in 1944?
to finance agricultural projects in Latin America
to draft a defense pact against the Soviet Union
to craft a new environmental treaty
to prevent a future economic collapse through international cooperation
3. Approximately what percentage of the world is impoverished?
50 percent
15 percent
25 percent
75 percent
4. When numbers are adjusted for purchasing power parity it means that which of the following is true?
What you can buy for $10 in the U.S. is equivalent to what citizens of another country can buy for $10 U.S. in their country.
Every country in the world uses U.S. dollars in their economies.
A Big Mac in two different countries will cost exactly the same.
15 units of local currency (such as kwachas) are equal to 15 U.S. dollars.
5. What does the term Global South refer to?
sub-Saharan Africa
the geographic area of the world where most developing countries are located
the poorest areas of the developing world
the Southern Hemisphere
6. According to Moustafa Bassiouny, the economist interviewed in the clip, what effect do subsidies have on the Egyptian government’s finances?
They have had a negligible effect on the country’s finances.
They have helped raise the government’s revenue.
They are a major cause of the country’s deficit.
They have forced the resignation of the Minister of Finance.
7. What does it mean if a country has a “fixed” exchange rate?
the value of the country’s currency is tied to the value of another currency
the value of the country’s currency is “fixed” to an arbitrary value that is adjusted every year
the value of the country’s currency is “fixed” by the IMF
the value of the country’s currency is tied to the New York Stock exchange
8. How much of the Egyptian budget goes toward subsidies?
one half
one third
one quarter
three quarters
9. What measure have developing countries been taking to make up for the money they lost due to the recession?
creating new and improved trade partnerships
boycotting the United Nations
waging war with their neighbors in order to gain new assets
borrowing even more money
10. Which of the following was a consequence of poor countries’ “monetization” of their deficits?
national budgets were balanced
inflation decreased rapidly
citizens’ purchasing power decreased
the divide between government revenue and expenditures narrowed
11. Which of the following BEST explains why uneducated and poor young men may be attracted to rebel groups?
They are seeking some sort of leadership figure.
They see no value in ordinary methods of climbing out of poverty.
They are seeking to avenge injustices done to their communities.
They are captivated by the chance for power that a rebel group offers.
12. Civil war impacts a nation’s economy. On average, a seven-year war will have what effect on a country’s income per person?
It will be one-third of the level it would have been in peacetime.
It will be half of what it would have been in peacetime.
It will be 15 percent lower than it would have been in peacetime.
It will be higher than it would have been in peacetime.
13. How does modern civil war differ from war in the early 20th century?
In modern civil wars rebel movements almost never have leaders, but in early 20th-century wars rebel movements were highly organized.
In modern civil wars around 90 percent of casualties are usually civilians, but in early 20th-century wars less than ten percent were civilians.
In modern civil wars most fighters use knives, but in early 20th-century wars firearms were much more common.
In modern civil wars rebels enjoy large popular support, but in early 20th-century wars rebels had almost no popular support.
14. Which of the following statements about the relationship between countries’ incomes and their prospects for sustained peace is TRUE?
The prospect for sustained peace after civil war is the same for high-income and low-income countries.
High-income countries are more likely to relapse into civil war than countries with low incomes.
Low-income countries are more likely to relapse into civil war than countries with high incomes.
There is no relationship between a country’s income and its likelihood of relapsing into civil war.
15. According to the video, why have Radio Mogadishu journalists been living at the broadcasting company’s headquarters?
The Al-Shabaab militia has repeatedly threatened to kill them.
They are fleeing famine.
They cannot afford to live elsewhere.
They want to be in the heart of the city as new political events unfold.
16. Which of the following is true about Sierra Leone?
(under “People and Society”) It has one of the world’s lowest maternal mortality rates.
(under “Introduction”) Around a third of its population was displaced during the civil war that ended in 2002.
(under “People and Society”) Less than 10 percent of its population lives in urban areas.
(under “Economy”) Automobile manufacturing is one of its primary industries.
17. When a nation is ruled by one large party, there is a tendency to see which of the following outcomes?
an alliance between the incumbents and election officials to ensure incumbents are reelected
mutually beneficial compromises to keep real challenges from emerging
a complete inability to develop widespread dissatisfaction with the status quo
regulation and legislation intended to reward opposition and punish supporters
18. Extractive institutions tend to arise in which kinds of nations?
nations that have political power concentrated in the hands of a small group
nations that have political instability
nations that have laissez-faire economic policies
nations that are poor
19. Which of the following is true about North Korea?
(under “Economy”) Its GDP per capita (PPP) puts it among the richest third of all countries.
(under “Government”) It is a democracy.
(under “People and Society”) Its life expectancy is higher than the life expectancy in South Korea (~80 years).
(under “Economy”) One of its most important industries is military products.
20. Historically speaking, when a country has been unable or unwilling to reform its extractive institutions, how have its citizens reacted, according to Acemoglu?
by peacefully protesting
by rebelling
by leaving the country
by appealing to religious authorities
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