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Chapter 37 Test BankStudent: ___________________________________________________________________________

1. The minimally adequate living standard for a U.S. family of four is known as the A. Global poverty standard. B. Millennium Poverty Goal. C. United Nations Poverty Goal. D. U.S. poverty threshold.

2. In 1963 the U.S. poverty standard was equal to A. $22,000 per year. B. $10,000 per year. C. $3,000 per year. D. $1,000 per year.

3. In 2014 inflation adjusted U.S. poverty threshold was A. The cost of food and shelter but not other necessities for an individual. B. The dollar measure of output produced by an individual. C. An annual income of less than $10,000 for a family of two. D. An annual income of less than $29,000 for a family of four.

4. Which of the following explains why the U.S. poverty threshold increased from $3,000 per year in 1963 to $29,000 per year in 2014? A. Americans are more spoiled now than they were in 1963. B. The threshold includes more luxury items now than it did in 1963. C. Inflation has caused the price for basic necessities to increase since 1963. D. The government has become more benevolent than it was in 1963.

5. An annual income of less than $29,000 is A. In-kind income. B. Below the poverty threshold. C. Extreme poverty. D. The poverty rate.

6. The poverty rate is A. The percentage of the population that is counted as poor. B. The income needed for an individual to be above the poverty line. C. The percentage of the population that receives food stamps. D. An annual income of less than $29,000 for a family of four in 2014.

7. According to official U.S. statistics, the U.S. poverty rate has been approximately _____ percent for the last 40 years. A. 5 to 18 B. 12 to 20 C. 4 to 13 D. 11 to 15

8. The direct transfer of goods and services rather than cash is known as A. In-kind transfers. B. Transfer payments. C. Welfare income. D. Poverty support.

9. Which of the following is not an example of in-kind transfers? A. Food stamps. B. Social Security payments. C. Medicaid benefits. D. Housing subsidies.


10. In-kind transfers include the direct transfer of A. Cash rather than goods. B. Cash rather than medical services. C. Goods and services rather than cash. D. Education rather than housing.

11. In-kind transfers include A. Transfer payments and food stamps. B. Public housing and Medicare. C. Medicaid and unemployment benefits. D. Social Security benefits and housing subsidies.

12. What is not included in America's poverty count? A. High school dropouts. B. Immigrants. C. Teen moms. D. In-kind transfers.

13. Which of the following statements is true? A. American poverty is less severe than global poverty. B. American poverty standards are below world poverty standards. C. Approximately 25 percent of Americans live in poverty. D. American poverty is defined by homelessness and malnutrition.

14. When compared to those in poor countries, poor people in the United States receive A. About the same amount of goods and services. B. Somewhat fewer goods and services. C. Far fewer goods and services. D. Far more goods and services.

15. U.S. poverty is more about _______ deprivation than _______ deprivation. A. meaningful; mild B. insignificant; relative C. relative; absolute D. absolute; significant

16. Which of the following is an indicator of how much output the average person would get if all output were divided up evenly among the population? A. GDP deflator. B. Nominal GDP. C. Per capita GDP. D. Real GDP.

17. The best measure of average income for a country is A. Real GDP. B. Per capita GDP. C. The economic growth rate. D. The capital stock of the economy.

18. The World Bank defines severe poverty as A. An income level of less than $1.25 per person per day. B. An income level of less than $2.00 per person per day. C. An income level that does not allow an individual to buy basic necessities. D. An extreme lack of food.

19. Which of the following statements is true? A. U.S. GDP per capita is five times larger than the world average. B. According to world standards, 12 percent of Americans are poor. C. The poorest nations of the world have average incomes of $5,000. D. "Extreme poverty" refers to an income of less than $2 per day.

20. U.S. per capita GDP is roughly how much larger than the world average? A. Twice as large. B. Three times as large.


C. Four times as large. D. Five times as large.


21. Over three-fourths of the world's population lives in households that have an average income of less than _____ per year. A. $10,000 B. $4,000 C. $2,000 D. $1,000

22. According to the World Bank, "extreme" poverty is defined as an income per person of less than A. $29,000 per year. B. $5,000 per year. C. $2 per day. D. $1.25 per day.

23. The World Bank defines _______ poverty as an income of less than $1.25 per day per person. A. extreme B. severe C. extraordinary D. relentless

24. According to the World Bank, "severe" poverty is defined as an income per person of less than A. $8 per day. B. $5 per day. C. $2 per day. D. $1.25 per day.

25. The World Bank defines _______ poverty as an income of less than $2 per day per person. A. exceptional B. severe C. extreme D. significant

26. According to the World Bank, over 1 billion people are classified as being in _______ poverty. A. subsistence B. severe C. tremendous D. extreme

27. According to the World Bank, _______ people are classified as being in severe poverty. A. 100,000 million B. 500,000 million C. over 1 billion D. 2.5 billion

28. According to the World Bank, nearly 3 billion people are classified as being in _______ poverty. A. severe B. harsh C. overwhelming D. extreme

29. Over half of the people who live in extreme poverty in the world live in A. Nigeria and China. B. China and India. C. Bangladesh and El Salvador. D. Haiti and India.

30. Which of the following countries has the greatest percentage of people living in extreme poverty? A. India. B. China. C. Congo. D. Bolivia.

31. Which of the following is not associated with global poverty? A. Lack of medical care. B. Low mortality rates.


C. Malnourishment. D. Lack of proper clothing.


32. Which of the following is associated with global poverty? A. Lack of prenatal care. B. Immunization against preventable diseases. C. Low infant mortality rates. D. Opportunities for education.

33. Which of the following is not associated with global poverty? A. The inequality trap. B. Long life expectancy. C. Lack of education. D. Prevalence of HIV.

34. Upward mobility for those in poverty is A. More likely for people in rich nations than in poor nations. B. More likely for people in poor nations than in rich nations. C. Equally likely for people in rich nations and poor nations. D. Not likely to happen at all because most people live in a caste system.

35. The United Nations'goal of reducing the global rate of extreme poverty to 15 percent by 2015 is known as the A. Global Poverty Goal. B. Millennium Poverty Goal. C. United Nations'Poverty Goal. D. World Poverty Goal.

36. The Millennium Poverty Goal is the United Nations'goal of reducing the global rate of extreme poverty to ___ percent by 2015. A. 15 B. 10 C. 5 D. 0

37. The U.N.'s Millennium Poverty Goal is to A. Keep the number of people in poverty at a constant level. B. Cut the percentage of people in extreme poverty in half worldwide. C. Cut the absolute number of people in extreme poverty in half worldwide. D. Reduce the percentage of people in severe poverty in the poorest nations.

38. The general approaches to global poverty reduction include all of the following except A. Within-nation redistribution of income. B. Across-nation redistribution of income. C. Government growth. D. Economic growth.

39. The general approaches to global poverty reduction include all of the following except A. Economic growth that raises average incomes. B. Redistribution of incomes across nations. C. Redistribution of incomes within countries. D. An increase in government control of resources.

40. Income inequality is A. Not an issue for wealthy countries such as the United States and Germany. B. A global issue because the poorest tenth of the population gets 20-30 percent of total income. C. Often greatest in the poorest countries such as Namibia and Botswana. D. Not an issue in the United States because of the progressive federal tax system.

41. Which of the following is true about income inequality? A. Inequality tends to be greatest in the poorest countries. B. Inequality is not an issue for developed countries. C. Inequality tends to get worse as a country develops. D. Inequality tends to diminish as the population increases.

42. In which of the following would the richest tenth of the population be most likely to receive the highest percentage of the country's income? A. Namibia.


B. The United States. C. The United Kingdom. D. Japan.


43. In which of the following would the richest tenth of the population be most likely to receive the highest percentage of the country's income? A. Sweden. B. Botswana. C. Germany. D. Canada.

44. Income inequalities are greatest in A. Developed countries such as Japan. B. Rich countries such as the United States. C. Poor countries such as Namibia. D. Countries with high levels of GDP.

45. The U.N.'s Millennium Aid Goal is to raise foreign aid levels to ____ percent of donor country GDP. A. 0.4 B. 0.7 C. 10.0 D. 15.0

46. Which of the following countries meets or exceeds the U.N.'s Millennium Aid Goal of 0.7 percent of donor country GDP? A. The United States. B. Canada. C. France. D. Denmark.

47. Which of the following countries meets or exceeds the U.N.'s Millennium Aid Goal of 0.7 percent of donor country GDP? A. Norway. B. Australia. C. The United Kingdom. D. Japan.

48. The U.N.'s Millennium Aid Goal focuses on aid in the form of A. Money from rich donor countries. B. Money from nongovernmental organizations. C. Redistributions within poor countries. D. A loan from the United Nations.

49. Which of the following is least likely to reduce poverty? A. Redirecting resources within the poor nation away from the military. B. Raising taxes within the poor nation. C. Receiving foreign aid from rich donor countries. D. Receiving aid from private charities or NGOs.

50. The United States gives ___________ percent of its total output to foreign aid A. 0.28 B. 0.19 C. 0.7 D. 0.4

51. Economic growth A. Refers to an increase in output. B. Causes the production possibilities curve to shift inward. C. Means that capacity has decreased in the short run. D. Cannot be sustained over time.

52. An increase in output or real GDP is A. The inequality trap. B. Productivity growth. C. Economic growth. D. The Millennium Poverty Goal.


53. Which of the following is not true concerning economic growth? A. It is an increase in real GDP. B. It can be sustained in the short run but not the long run. C. It means that the production possibilities have expanded. D. It's the result of more resources or better technology.

54. An increase in production possibilities is known as A. Predictable growth. B. Factor expansion. C. Upward mobility. D. Economic growth.

55. Between 2000-2009, the highest economic growth rates in the world have occurred in A. The United States. B. China. C. India. D. Nigeria.

56. The reduction in world poverty from 1990 to 2014 was due almost entirely to the decrease in poverty in A. Canada. B. Mali. C. China. D. Ethiopia.

57. One of the keys to reducing poverty is A. Government control of resources. B. The redistribution of existing incomes. C. Increased population growth. D. Increased economic growth.

58. Which of the following is a critical key to reducing poverty in the poorest nations? A. Reduced population growth. B. Reduced human capital. C. Government ownership of resources. D. Redistribution of existing income within the nation.

59. Per capita GDP will definitely increase if A. GDP increases more rapidly than population. B. GDP and population increase at the same rate. C. Population increases more rapidly than GDP. D. Population and GDP decrease at the same rate.

60. Per capita GDP will definitely fall when A. Population increases. B. GDP decreases. C. The labor force decreases. D. The population growth rate exceeds the economic growth rate.

61. Poverty is most likely to decrease if A. Population and the economic growth rate both decrease. B. The population decreases and GDP stays constant. C. Population grows more rapidly than GDP. D. The size of the labor force decreases.

62. Poverty is most likely to decrease when A. Population increases regardless of what happens to economic growth. B. GDP increases regardless of what happens to population growth. C. Population growth exceeds economic growth. D. Economic growth exceeds population growth.

63. The knowledge and skills possessed by the workforce is known as A. Human finance. B. Investment capital. C. Human capital.


D. The inequality trap.


64. In order for the existing workforce to be more productive, there needs to be A. An increase in population. B. An increase in human capital. C. A redistribution of income within the nation. D. A decrease in economic growth.

65. Institutional barriers that impede human and physical capital investment are known as A. The discouraged worker gap. B. An inequality trap. C. The human capital effect. D. An illiteracy trap.

66. If women are not allowed to vote or inherit wealth but men are, this is an example of A. The liquidity trap. B. The disadvantaged trap. C. A gender trap. D. An inequality trap.

67. If women are prohibited or discouraged from attending school but men are allowed to attend, this is an example of A. An inequality trap. B. A human capital gap. C. A gender gap. D. A redistribution of capital.

68. Which of the following is not a true barrier to human capital development in poor nations? A. Prohibitive costs to meet basic needs. B. Inequality trap. C. Illiteracy. D. Access to health care professionals.

69. Which of the following is not important for the development of human capital? A. Immunizations and basic health care. B. High levels of military spending. C. Access to water and sanitation. D. Educational opportunities.

70. In order to have adequate water access, based on the World Bank definition, there should be A. Indoor plumbing in at least one-quarter of the homes in a country. B. A private water pipe outside everyone's home. C. A protected public water pipe within half a mile of everyone's home. D. A public lake or stream within a mile of everyone's home.

71. According to Rostow's five stages of development, which of the following is characteristic of Stage 1? A. Increased agricultural productivity. B. Low productivity. C. Growth-enhancing policies. D. Emergence of an entrepreneurial class.

72. According to Rostow's five stages of development, which of the following happens during Stage 1? A. Improved infrastructure. B. Increased saving and investment. C. More industrialization. D. Subsistence agriculture.

73. According to Rostow's five stages of development, which of the following is characteristic of Stage 5? A. High per capita GDP attained and available to most people. B. Dependence on subsistence agriculture. C. Rapid industrialization. D. Emergence of an entrepreneurial class.

74. According to Rostow's five stages of development, which of the following happens during Stage 3? A. Low productivity. B. Little infrastructure.


C. Increased saving and investment. D. Subsistence agriculture.


75. In order to increase productivity and economic growth, poor nations need A. Increased capital investment. B. A large military. C. A strong dictator. D. Increased consumption.

76. China has experienced particularly high rates of economic growth as a result of A. High rates of consumer spending. B. High rates of capital investment. C. High rates of government spending. D. Low rates of saving.

77. Which of the following will not increase the opportunity for internal financing of capital? A. Improved banking facilities. B. Saving incentives. C. Seizing of private banks by the government. D. Transparent capital markets.

78. The investment rate is the percentage of total output allocated to A. Saving. B. Consumer retirement accounts. C. Education and training for the workforce. D. The production of new plants, equipment, and structures.

79. The percentage of total output allocated to the production of new plants, equipment, and structures is the A. Investment rate. B. Savings rate. C. Corporate allocation rate. D. Entrepreneurial rate.

80. The granting of small, unsecured loans to small businesses and entrepreneurs is known as A. Extreme finance. B. Microfinance. C. Growth finance. D. Long-term finance.

81. Which of the following is not an example of microfinance? A. A loan to a farmer for a goat that will give milk that the farmer can sell. B. A loan to a small restaurant owner to buy a refrigerator. C. A loan to a U.S.-owned electronics company to expand overseas. D. A loan to a woman to buy a sewing machine to make clothes to sell.

82. Which of the following is not an example of microfinance? A. A loan to a restaurant owner for an indoor grill. B. A loan to a bakery for a machine to mix dough. C. A loan to a small farmer for fertilizer. D. A loan to an executive for a retirement home.

83. In the poorest nations, agriculture is likely to contribute as much as ______ percent to total output. A. 10 B. 30 C. 60 D. 85

84. Which of the following does not contribute to low farm productivity in poor nations? A. Lack of effort. B. Inferior technology. C. Lack of machinery. D. Limited infrastructure.

85. In order for poor nations to grow out of Stage 1, farm productivity must rise beyond subsistence levels so that workers can A. Take longer vacations. B. Move to jobs in other industries.


C. Stop worrying about the weather. D. Retire at a younger age.


86. Output per unit of input measures A. Productivity. B. The inequality trap. C. Per capita GDP. D. The investment rate.

87. Output per labor-hour is used to measure the ________ of labor. A. effort B. intelligence C. productivity D. seriousness

88. Which of the following contributes to an institutional structure that promotes economic growth? A. Comparative advantage. B. The inequality trap. C. Technology. D. Property rights.

89. Which of the following does not contribute to an institutional structure that promotes economic growth? A. Policy uncertainty. B. A pro-business environment. C. Well-defined property rights. D. Entrepreneurial incentives.

90. Which of the following does not contribute to a pro-business climate for investors? A. Secure property rights. B. Minimal government regulation. C. Legalized profit. D. High tax rates.

91. In general, countries with well-defined property rights, less government regulation, and lower taxes have A. More corruption and crime. B. Higher per capita incomes. C. Higher rates of economic growth for the entire population. D. Higher rates of investment.

92. Which of the following statements is true concerning comparative advantage? A. Poor nations typically have a comparative advantage in high-tech but not agricultural goods. B. Poor nations typically have a comparative advantage in agricultural but not high-tech goods. C. Poor nations typically have a comparative advantage in the production of all goods. D. Rich nations typically have a comparative advantage in the production of all goods.

93. The ability of a country to produce a specific good at a lower opportunity cost than its trading partners is known as A. The inequality trap. B. The human advantage. C. Comparative advantage. D. Absolute advantage.

94. Poor nations typically have a competitive advantage in agricultural goods because of A. Entrepreneurial incentives. B. Plenty of land. C. High productivity. D. Low labor costs.

95. A limit on the quantity of a good that may be imported in a given time period is A. An import quota. B. A tariff. C. A comparative advantage. D. An import allocation.

96. Import quotas have a negative impact on poor nations because they make it difficult for poor nations to A. Sell agricultural goods to each other. B. Sell agricultural goods to rich nations.


C. Receive foreign aid from rich nations. D. Develop a pro-business environment.


97. Women in poor countries are more likely to experience all of the following except A. Restricted property rights. B. Prohibitions against voting. C. Being paid less than men. D. Being prohibited from bringing a dowry to a marriage.

98. According to Hernando de Soto, poor countries should focus their development policies on all of the following except A. Reducing bureaucratic barriers. B. Encouraging private ownership. C. Increasing taxes on private companies. D. Improving infrastructure to facilitate business activity.

99. Which of the following is not part of Hernando de Soto's The Other Path? A. Improving infrastructure. B. Encouraging the "underground" economy. C. Reducing taxes. D. Enforcing laws to safeguard private income.

100. De Soto's The Other Path encourages poor countries to use their development policies to do all of the following except A. Encourage population growth. B. Reduce regulations. C. Enforce laws to safeguard property. D. Encourage entrepreneurship.

101. In his book The Other Path, de Soto suggests that the key to economic development is A. Entrepreneurship and market forces. B. Government control of resources. C. Transactions within the "official" economy. D. Limiting capitalism and profit takers.

102. A World View article, "Glaring Inequalities," says that income inequality tends to diminish as a nation develops. The distribution of income answers the ________ question. A. HOW MUCH B. WHERE C. FOR WHOM D. WHY

103. One World View article is titled "Glaring Inequalities." Of the countries listed, the greatest inequality in the distribution of income is likely to occur in A. Namibia. B. The United States. C. Canada. D. Sweden.

104. One World View article is titled "Glaring Inequalities." Of the countries listed, the least inequality in the distribution of income is likely to occur in A. United States. B. Botswana. C. Japan. D. South Africa.

105. A World View article, "The Female ‘Inequality Trap,'" says that in many poor nations the "… returns on female human capital investment is low." When women are not allowed to work outside the home or to receive an education, this is referred to asA. A productivity trap. B. A prejudice gap. C. A justice gap. D. An inequality trap.

106. One World View article in the text is titled "Dying for a Drink of Clean Water." By 2015 the U.N.'s Millennium water goal expects to reduce the percentage of people in the world without safe drinking water by A. 10 percent.


B. 25 percent. C. 50 percent. D. 98 percent.


107. According to Bill Gates, from the World View article titled "The Way We Give: Philanthropy Can Step In Where Market Forces Don't," more than 90 percent of the money devoted to health research is spent on those who A. Have malaria. B. Are the healthiest. C. Live in developing countries. D. Are balding.

108. According to the World View article titled "The Way We Give: Philanthropy Can Step In Where Market Forces Don't," in which of the following ways does philanthropy not improve the market outcome? A. Draw in experts including universities. B. Give awards. C. Make novel arrangements with private companies. D. Require firms to research new and improved health care solutions.

109. According to the World View titled "Muhammad Yunus: Microloans," who won the Nobel Peace Prize for developing microcredit? A. Vice President Al Gore. B. Adam Smith. C. Professor Robert Schiller. D. Professor Muhammad Yunus.

110. According to the World View titled "Jeffrey Sachs: Big Money, Big Plans," how does Columbia University economics professor Jeffrey Sachs expect global poverty rates to be reduced by half by 2015? ARich nations must double their foreign aid flows now and then double them again in 10 years, while poor nations . must develop full-scale, comprehensive plans for poverty reduction. B. Rich nations must quadruple their foreign aid flows now, and poor nations need to be more accepting of help. C.Rich nations must double their foreign aid flows now and develop full-scale, comprehensive plans for the poor

countries to reduce poverty. D. Poor nations must develop full-scale, comprehensive plans for poverty reduction without the help of rich nations.

111. The official U.S. poverty standard was set in 1963 at $3,000 per year for a family of four. True False

112. The U.S. inflation adjusted poverty threshold in 2014 was set at $35,000 per year for a family of four. True False

113. According to the official U.S. threshold, 35 percent of Americans live in poverty. True False

114. The U.S. government counts both cash income and in-kind transfers when determining the poverty rate. True False

115. In-kind transfers include housing subsidies and food stamps. True False

116. If the U.S. government considers the value of in-kind transfers, the U.S. poverty rate decreases. True False

117. American poverty is more about absolute deprivation, and poverty in the rest of the world is more about relative deprivation. True False

118. The World Bank defines extreme poverty as income of less than $1.25 per day per person. True False

119. According to the World Bank definitions, there are more people in the world living in extreme poverty than there are living in severe poverty. True False

120. According to the World Bank, almost 2.5 billion people are classified as being in severe poverty. True False

121. Over half of the people in the world who live in extreme poverty live in China and India combined. True False


122. Poverty is considered to be more permanent in the United States than it is in other nations. True False


123. The U.N. has established a Millennium Poverty Goal of cutting in half by 2015 the number of people in extreme global poverty. True False

124. The U.N.'s Millennium Poverty Goal is to reduce the global rate of extreme poverty to 15 percent by 2015, but it will not have much impact on the number of people in poverty. True False

125. The two general approaches to reducing global poverty include the redistribution of incomes and economic growth.

True False

126. The redistribution of private income and wealth within poor nations is sufficient to eliminate global poverty. True False

127. The U.N.'s Millennium Aid Goal is for nations to increase their foreign aid levels to 0.7 percent of donor country GDP. True False

128. Currently most developed countries meet or exceed the U.N.'s Millennium Aid Goal for donor country GDP. True False

129. Denmark and Norway are two countries that currently exceed the U.N.'s Millennium Aid Goal for donor country’s contribution of GDP. True False

130. If all developed countries were willing to meet the U.N.'s Millennium Aid Goal for foreign aid, this would eliminate global poverty. True False

131. Economic growth is the key to ending global poverty. True False

132. Because poverty is so pervasive, poor countries are not able to experience economic growth. True False

133. The standard of living for poor countries will not increase if the population growth exceeds economic growth. True False

134. If women are not allowed to own property or inherit wealth but men are, this is an example of comparative advantage. True False

135. An inequality trap has a negative impact on human capital development. True False

136. Lack of access to sanitation and inadequate medical care have a negative impact on the development of human capital. True False

137. According to Rostow's stages of economic development, in order to move beyond Stage 1, a poor country must improve education and health care for the masses. True False

138. Providing basic health care and education for poor countries is cost-prohibitive. True False

139. By reducing consumption expenditures, poor nations should be able to completely finance their own capital investment. True False

140. According to Rostow's stages of economic development, poor nations must increase their farm productivity so that some workers can leave farming and move into other industries. True False


141. For poor countries, a lack of capital and poorly developed infrastructure contribute to low farm productivity. True False


142. Well-established property rights and a pro-business climate are a step in the right direction, but ultimately they do little to encourage economic growth. True False

143. Free trade with other countries allows poor nations the opportunity to exploit their comparative advantage in agricultural goods. True False

144. In his book The Other Path, de Soto suggests that countries will grow more quickly if governments limit entrepreneurship. True False

145. In his book The Other Path, de Soto suggests that countries will grow more quickly if bureaucratic barriers to free enterprise are reduced. True False

146. Developing infrastructure and ensuring that property rights will be protected can help a poor country grow more quickly according to de Soto's book The Other Path. True False

147. The developing world has been adamant that rich nations abandon farm subsidies in order to get a global trade deal both sides say they want. True False

148. Explain the difference between poverty in the United States and poverty in the rest of the world.

149. What is the U.N.'s goal for foreign aid to poor countries? Are most countries currently meeting this goal? Explain.

150. How do population growth and economic growth impact global poverty?

151. What is human capital, and what factors contribute to human capital development?


152. What is microfinance, and how can it contribute to economic growth?


Chapter 37 Test Bank Key1. The minimally adequate living standard for a U.S. family of four is known as the

A. Global poverty standard. B. Millennium Poverty Goal. C. United Nations Poverty Goal. D. U.S. poverty threshold. In 1963 it was determined that $1,000 per year was needed to purchase a 'minimally adequate'diet for a family of four. It was estimated that other basic necessities like housing, clothes, transportation, and so forth would cost twice as much as the food staples. So the government concluded that a budget of $3,000 per year would fund a 'minimally adequate'living standard for a U.S. family of four. That standard became the official U.S. poverty threshold in 1963.

AACSB: Reflective ThinkingAccessibility: Keyboard Navigation

Blooms: RememberDifficulty: 01 Easy

Learning Objective: 37-01 How U.S. and global poverty are defined.Topic: AMERICAN POVERTY

2. In 1963 the U.S. poverty standard was equal to A. $22,000 per year. B. $10,000 per year. C. $3,000 per year. D. $1,000 per year. In 1963 it was determined that $1,000 per year was needed to purchase a 'minimally adequate'diet for a family of four. It was estimated that other basic necessities like housing, clothes, transportation, and so forth would cost twice as much as the food staples. So the government concluded that a budget of $3,000 per year would fund a 'minimally adequate'living standard for a U.S. family of four. That standard became the official U.S. poverty threshold in 1963.




3. In 2014 inflation adjusted U.S. poverty threshold was A. The cost of food and shelter but not other necessities for an individual. B. The dollar measure of output produced by an individual. C. An annual income of less than $10,000 for a family of two. D. An annual income of less than $29,000 for a family of four. Since 1963 prices have risen every year. As a result, the price of the poverty 'basket'has risen as well. In 2014 it cost roughly $29,000 to purchase those same basic necessities for a family of four that cost only $3,000 in 1963.




4. Which of the following explains why the U.S. poverty threshold increased from $3,000 per year in 1963 to $29,000 per year in 2014? A. Americans are more spoiled now than they were in 1963. B. The threshold includes more luxury items now than it did in 1963. C. Inflation has caused the price for basic necessities to increase since 1963. D. The government has become more benevolent than it was in 1963.Since 1963 prices have risen every year. As a result, the price of the poverty 'basket'has risen as well. In 2014 it cost roughly $29,000 to purchase those same basic necessities for a family of four that cost only $3,000 in 1963.





5. An annual income of less than $29,000 is A. In-kind income. B. Below the poverty threshold.C. Extreme poverty. D. The poverty rate. In 1963 it was determined that $1,000 per year was needed to purchase a 'minimally adequate'diet for a family of four. It was estimated that other basic necessities like housing, clothes, transportation, and so forth would cost twice as much as the food staples. So the government concluded that a budget of $3,000 per year would fund a 'minimally adequate'living standard for a U.S. family of four. That standard became the official U.S. poverty threshold in 1963.




6. The poverty rate is A. The percentage of the population that is counted as poor. B. The income needed for an individual to be above the poverty line. C. The percentage of the population that receives food stamps. D. An annual income of less than $29,000 for a family of four in 2014. The poverty rate is the percentage of the population with household income falling below the poverty threshold.




7. According to official U.S. statistics, the U.S. poverty rate has been approximately _____ percent for the last 40 years. A. 5 to 18 B. 12 to 20 C. 4 to 13 D. 11 to 15According to the Census Bureau, the official U.S. poverty rate has been in a narrow range of 11-15 percent for the last 40 years.




8. The direct transfer of goods and services rather than cash is known as A. In-kind transfers. B. Transfer payments. C. Welfare income. D. Poverty support. In-kind transfers are direct transfers of goods and services rather than cash, such as food stamps, Medicaid benefits, and housing subsidies.




9. Which of the following is not an example of in-kind transfers? A. Food stamps. B. Social Security payments.C. Medicaid benefits. D. Housing subsidies. In-kind transfers are direct transfers of goods and services rather than cash, such as food stamps, Medicaid benefits, and housing subsidies.

AACSB: Reflective Thinking


Accessibility: Keyboard NavigationBlooms: UnderstandDifficulty: 02 Medium



10. In-kind transfers include the direct transfer of A. Cash rather than goods. B. Cash rather than medical services. C. Goods and services rather than cash. D. Education rather than housing. In-kind transfers are direct transfers of goods and services rather than cash, such as food stamps, Medicaid benefits, and housing subsidies.




11. In-kind transfers include A. Transfer payments and food stamps. B. Public housing and Medicare. C. Medicaid and unemployment benefits. D. Social Security benefits and housing subsidies. In-kind transfers are direct transfers of goods and services rather than cash, such as food stamps, Medicaid benefits, and housing subsidies.


Blooms: UnderstandDifficulty: 02 Medium


12. What is not included in America's poverty count? A. High school dropouts. B. Immigrants. C. Teen moms. D. In-kind transfers.In-kind transfers allow 'poor'families to enjoy a higher living standard than their cash incomes imply. Adding those transfers to cash incomes would bring the U.S. poverty count down into the 9-11 percent range since currently only cash income is considered.




13. Which of the following statements is true? A. American poverty is less severe than global poverty. B. American poverty standards are below world poverty standards. C. Approximately 25 percent of Americans live in poverty. D. American poverty is defined by homelessness and malnutrition. America's poor families themselves report few acute problems in everyday living. American poverty isn't synonymous with homelessness, malnutrition, chronic illness, or even social isolation. However, 12.5 percent of the U.S. population falls below the official American poverty threshold, and virtually no American household has an income below the global poverty threshold. Finally, a growing economy like the U.S. economy allows average incomes to rise(relative deprivation versus absolute deprivation).





14. When compared to those in poor countries, poor people in the United States receive A. About the same amount of goods and services. B. Somewhat fewer goods and services. C. Far fewer goods and services. D. Far more goods and services.Even those families who remain 'poor'after counting in-kind transfers aren't necessarily destitute. Over 40 percent of America's 'poor'families own their homes, 70 percent own a car or truck, and 30 percent own at least two vehicles. Telephones, color TVs, dishwashers, clothes dryers, air conditioners, and microwave ovens are commonplace in America's poor households.




15. U.S. poverty is more about _______ deprivation than _______ deprivation. A. meaningful; mild B. insignificant; relative C. relative; absolute D. absolute; significant Poverty in the rest of the world is much different from poverty in America. American poverty is more about relative deprivation than absolute deprivation. In the rest of the world, poverty is mostly about absolute deprivation.

AACSB: AnalyticAccessibility: Keyboard Navigation

Blooms: AnalyzeDifficulty: 03 Hard

Learning Objective: 37-01 How U.S. and global poverty are defined.Topic: GLOBAL POVERTY

16. Which of the following is an indicator of how much output the average person would get if all output were divided up evenly among the population? A. GDP deflator. B. Nominal GDP. C. Per capita GDP. D. Real GDP.Per capita GDP is an indicator of how much output (or income) the average person would get if all output were divided up evenly among the population.




17. The best measure of average income for a country is A. Real GDP. B. Per capita GDP.C. The economic growth rate. D. The capital stock of the economy. Per capita GDP is an indicator of how much output (or income) the average person would get if all output were divided up evenly among the population.





18. The World Bank defines severe poverty as A. An income level of less than $1.25 per person per day. B. An income level of less than $2.00 per person per day. C. An income level that does not allow an individual to buy basic necessities. D. An extreme lack of food. The World Bank defines extreme poverty as an income level less than $1.25 per day, and severe poverty as an income level of less than $2.00 per person per day (inflation adjusted).




19. Which of the following statements is true? A. U.S. GDP per capita is five times larger than the world average. B. According to world standards, 12 percent of Americans are poor. C. The poorest nations of the world have average incomes of $5,000. D. "Extreme poverty" refers to an income of less than $2 per day. By global standards, the United States is unquestionably a very productive and therefore wealthy nation. U.S. GDP per capita is five times larger than the world average. By American standards, virtually all the people in the poorest nations with average income under $4,000 would be poor. By their standards, no American would be poor. Extreme poverty refers to income of less than $1.25 per day.




20. U.S. per capita GDP is roughly how much larger than the world average? A. Twice as large. B. Three times as large. C. Four times as large. D. Five times as large. By global standards, the United States is unquestionably a very rich nation. U.S. GDP per capita is five times larger than the world average.




21. Over three-fourths of the world's population lives in households that have an average income of less than _____ per year. A. $10,000 B. $4,000C. $2,000 D. $1,000 Over three-fourths of the world's population lives in what the World Bank calls 'low-income'or 'lower-middle-income'nations. In those nations the average income is under $4,000 a year, less than one-tenth of America's per capita GDP.





22. According to the World Bank, "extreme" poverty is defined as an income per person of less than A. $29,000 per year. B. $5,000 per year. C. $2 per day. D. $1.25 per day.Because national poverty lines are so diverse and culture-bound, the World Bank decided to establish a uniform standard for assessing global poverty. And it set the bar amazingly low. In fact, the World Bank regularly uses two thresholds: $1.25 per day for extreme poverty and a higher $2 per day standard for severe poverty (inflation adjusted).




23. The World Bank defines _______ poverty as an income of less than $1.25 per day per person. A. extreme B. severe C. extraordinary D. relentless Because national poverty lines are so diverse and culture-bound, the World Bank decided to establish a uniform standard for assessing global poverty. And it set the bar amazingly low. In fact, the World Bank regularly uses two thresholds: $1.25 per day for extreme poverty and a higher $2 per day standard for severe poverty.




24. According to the World Bank, "severe" poverty is defined as an income per person of less than A. $8 per day. B. $5 per day. C. $2 per day. D. $1.25 per day.Because national poverty lines are so diverse and culture-bound, the World Bank decided to establish a uniform standard for assessing global poverty. And it set the bar amazingly low. In fact, the World Bank regularly uses two thresholds: $1.25 per day for extreme poverty and a higher $2 per day standard for severe poverty.




25. The World Bank defines _______ poverty as an income of less than $2 per day per person. A. exceptional B. severeC. extreme D. significant Because national poverty lines are so diverse and culture-bound, the World Bank decided to establish a uniform standard for assessing global poverty. And it set the bar amazingly low. In fact, the World Bank regularly uses two thresholds:$1.25 per day for extreme poverty and a higher $2 per day standard for severe poverty.





26. According to the World Bank, over 1 billion people are classified as being in _______ poverty. A. subsistence B. severe C. tremendous D. extremeOn the basis of household surveys in over 100 nations, the World Bank classifies over a billion people as being in extreme poverty (<$1.25/day) and nearly 3 billion people as being in severe poverty (<$2/day).




27. According to the World Bank, _______ people are classified as being in severe poverty. A. 100,000 million B. 500,000 million C. over 1 billion D. 2.5 billionOn the basis of household surveys in over 100 nations, the World Bank classifies over a billion people as being in extreme poverty (<$1.25/day) and nearly 3 billion people as being in severe poverty (<$2/day).



Learning Objective: 37-02 How many people in the world are poor.Topic: GLOBAL POVERTY

28. According to the World Bank, nearly 3 billion people are classified as being in _______ poverty. A. severe B. harsh C. overwhelming D. extreme On the basis of household surveys in over 100 nations, the World Bank classifies over a billion people as being in extreme poverty (<$1.25/day) and nearly 3 billion people as being in severe poverty (<$2/day).




29. Over half of the people who live in extreme poverty in the world live in A. Nigeria and China. B. China and India.C. Bangladesh and El Salvador. D. Haiti and India. Concentrations of extreme poverty are alarmingly high in dozens of smaller, less developed nations like Mali, Haiti, and Zambia, where average incomes are also shockingly low. However, the greatest number of extremely poor people reside in the world's largest countries. China and India alone contain a third of the world's population and half of the world's extreme poverty.





30. Which of the following countries has the greatest percentage of people living in extreme poverty? A. India. B. China. C. Congo.D. Bolivia.Concentrations of extreme poverty are alarmingly high in dozens of smaller, less developed nations like Congo, Nigeria, and Zambia, where average incomes are also shockingly low. However, the greatest number of extremely poor people reside in the world's largest countries. China and India alone contain a third of the world's population and half of the world's extreme poverty.




31. Which of the following is not associated with global poverty? A. Lack of medical care. B. Low mortality rates.C. Malnourishment. D. Lack of proper clothing. Poverty causes people to be hungry, malnourished, ill-clothed, dirty, and unhealthy. It also increases infant mortality and shortens life expectancy rates.




32. Which of the following is associated with global poverty? A. Lack of prenatal care. B. Immunization against preventable diseases. C. Low infant mortality rates. D. Opportunities for education. In low-income countries, pregnant women often fail to get enough nutrition or medical attention, and only a third of all births are attended by a skilled health practitioner.




33. Which of the following is not associated with global poverty? A. The inequality trap. B. Long life expectancy.C. Lack of education. D. Prevalence of HIV. Poverty causes people to be hungry, malnourished, ill-clothed, and unhealthy. It also increases infant mortality and shortens life expectancy rates.




34. Upward mobility for those in poverty is A. More likely for people in rich nations than in poor nations. B. More likely for people in poor nations than in rich nations. C. Equally likely for people in rich nations and poor nations. D. Not likely to happen at all because most people live in a caste system. Global poverty is not only more desperate than American poverty, but also more permanent because in some of the poorest nations in the world output grows more slowly than the population, intensifying the competition for resources.



35. The United Nations'goal of reducing the global rate of extreme poverty to 15 percent by 2015 is known as the A. Global Poverty Goal. B. Millennium Poverty Goal.C. United Nations'Poverty Goal. D. World Poverty Goal. The U.N. established a Millennium Poverty Goal of cutting the incidence of extreme global poverty in half by 2015 (from 30 percent in 1990 to 15 percent in 2015).



Learning Objective: 37-03 What factors impede or promote poverty reduction.Topic: GOALS AND STRATEGIES

36. The Millennium Poverty Goal is the United Nations'goal of reducing the global rate of extreme poverty to ___ percent by 2015. A. 15 B. 10 C. 5 D. 0 The U.N. established a Millennium Poverty Goal of cutting the incidence of extreme global poverty in half by 2015 (from 30 percent in 1990 to 15 percent in 2015).




37. The U.N.'s Millennium Poverty Goal is to A. Keep the number of people in poverty at a constant level. B. Cut the percentage of people in extreme poverty in half worldwide.C. Cut the absolute number of people in extreme poverty in half worldwide. D. Reduce the percentage of people in severe poverty in the poorest nations. The U.N. established a Millennium Poverty Goal of cutting the incidence of extreme global poverty in half by 2015 (from 30 percent in 1990 to 15 percent in 2015).




38. The general approaches to global poverty reduction include all of the following except A. Within-nation redistribution of income. B. Across-nation redistribution of income. C. Government growth. D. Economic growth.In principle, the two general approaches to global poverty reduction are redistribution of incomes within and across nations and economic growth that raises average incomes.




39. The general approaches to global poverty reduction include all of the following except A. Economic growth that raises average incomes. B. Redistribution of incomes across nations. C. Redistribution of incomes within countries. D. An increase in government control of resources.In principle, the two general approaches to global poverty reduction are redistribution of incomes within and across nations and economic growth that raises average incomes.



40. Income inequality is A. Not an issue for wealthy countries such as the United States and Germany. B. A global issue because the poorest tenth of the population gets 20-30 percent of total income. C. Often greatest in the poorest countries such as Namibia and Botswana. D. Not an issue in the United States because of the progressive federal tax system. Inequality tends to diminish as a country develops. In poor nations, the richest tenth of the population typically gets 40-50 percent of all income; in Namibia and Botswana the inequality is greater, with the richest tenth receiving 65 and 51 percent of all income, respectively.



Learning Objective: 37-03 What factors impede or promote poverty reduction.Topic: INCOME REDISTRIBUTION

41. Which of the following is true about income inequality? A. Inequality tends to be greatest in the poorest countries. B. Inequality is not an issue for developed countries. C. Inequality tends to get worse as a country develops. D. Inequality tends to diminish as the population increases. Inequality tends to diminish as a country develops. In poor nations, the richest tenth of the population typically gets 40-50 percent of all income; in Namibia and Botswana the inequality is greater, with the richest tenth receiving 65 and 51 percent of all income, respectively.




42. In which of the following would the richest tenth of the population be most likely to receive the highest percentage of the country's income? A. Namibia. B. The United States. C. The United Kingdom. D. Japan. Inequality tends to diminish as a country develops. In poor nations, the richest tenth of the population typically gets 40-50 percent of all income; in Namibia, South Africa, and Botswana the inequality is greater, with the richest tenth receiving 55, 52, and 51 percent of all income, respectively.




43. In which of the following would the richest tenth of the population be most likely to receive the highest percentage of the country's income? A. Sweden. B. Botswana.C. Germany. D. Canada. Inequality tends to diminish as a country develops. In poor nations, the richest tenth of the population typically gets 40-50 percent of all income; in Namibia and Botswana the inequality is greater, with the richest tenth receiving 55 and 51 percent of all income, respectively.





44. Income inequalities are greatest in A. Developed countries such as Japan. B. Rich countries such as the United States. C. Poor countries such as Namibia. D. Countries with high levels of GDP. Inequality tends to diminish as a country develops. In poor nations, the richest tenth of the population typically gets 40-50 percent of all income; in Namibia and Botswana the inequality is greater, with the richest tenth receiving 65 and 51 percent of all income, respectively.




45. The U.N.'s Millennium Aid Goal is to raise foreign aid levels to ____ percent of donor country GDP. A. 0.4 B. 0.7C. 10.0 D. 15.0 Developed nations have set a goal of delivering more aid. The United Nations'Millennium Aid Goal is to raise foreign aid levels to 0.7 percent of donor country GDP.




46. Which of the following countries meets or exceeds the U.N.'s Millennium Aid Goal of 0.7 percent of donor country GDP? A. The United States. B. Canada. C. France. D. Denmark.Although the United States is by far the world's largest aid donor, its aid equals only 0.16 percent of U.S. total output. Canada, France, and Denmark donate 0.29, 0.38, and 0.81 percent of their total output, respectively.




47. Which of the following countries meets or exceeds the U.N.'s Millennium Aid Goal of 0.7 percent of donor country GDP? A. Norway. B. Australia. C. The United Kingdom. D. Japan. Developed nations have set a goal of delivering more aid. The United Nations'Millennium Aid Goal is to raise foreign aid levels to 0.7 percent of donor country GDP. Norway donates 0.93 percent of its total output.





48. The U.N.'s Millennium Aid Goal focuses on aid in the form of A. Money from rich donor countries. B. Money from nongovernmental organizations. C. Redistributions within poor countries. D. A loan from the United Nations. The United Nations'Millennium Aid Goal is to raise foreign aid levels to 0.7 percent of donor country GDP. Although the United States is by far the world's largest aid donor, its aid equals only 0.19 percent of U.S. total output.




49. Which of the following is least likely to reduce poverty? A. Redirecting resources within the poor nation away from the military. B. Raising taxes within the poor nation. C. Receiving foreign aid from rich donor countries. D. Receiving aid from private charities or NGOs. Historically, nations have often been forced to reverse land, tax, and property reforms because they have slowed economic growth and reduced average incomes.




50. The United States gives ___________ percent of its total output to foreign aid A. 0.28 B. 0.19C. 0.7 D. 0.4 While the United Nations Millennium aid goal is for nations to increase their foreign aid to 0.7 percent of output, the United States contributes only 0.2 percent of its annual output.




51. Economic growth A. Refers to an increase in output. B. Causes the production possibilities curve to shift inward. C. Means that capacity has decreased in the short run. D. Cannot be sustained over time. Economic growth is an increase in output (real GDP) that is reflected by an expansion of a nation's production possibilities.



Learning Objective: 37-03 What factors impede or promote poverty reduction.Topic: ECONOMIC GROWTH

52. An increase in output or real GDP is A. The inequality trap. B. Productivity growth. C. Economic growth. D. The Millennium Poverty Goal. Economic growth is an increase in output (real GDP) that is reflected by an expansion of a nation's production possibilities.




53. Which of the following is not true concerning economic growth? A. It is an increase in real GDP. B. It can be sustained in the short run but not the long run.C. It means that the production possibilities have expanded. D. It's the result of more resources or better technology. Economic growth is an increase in output (real GDP) that is reflected by an expansion of a nation's production possibilities. An increase in resources, capital, or technology can create economic growth.




54. An increase in production possibilities is known as A. Predictable growth. B. Factor expansion. C. Upward mobility. D. Economic growth. Economic growth is an increase in output (real GDP) that is reflected by an expansion of a nation's production possibilities.




55. Between 2000-2009, the highest economic growth rates in the world have occurred in A. The United States.B. China.C. India. D. Nigeria. Since 1990, China has been the world's fastest-growing economy, with annual GDP growth rates routinely in the 8-10 percent range. This sensational growth not only has raised average incomes but also has dramatically reduced the incidence of poverty.




58. The reduction in world poverty from 1990 to 2014 was due almost entirely to the decrease in poverty in A. Canada. B. Mali. C. China. D. Ethiopia.The observed success in reducing global poverty from 30 percent in 1990 to 21 percent in 2014 was almost entirely due to the decline in Chinese poverty. By contrast, slow economic growth in Africa, Latin America, and South Asia increased their respective poverty populations.




57. One of the keys to reducing poverty is A. Government control of resources. B. The redistribution of existing incomes. C. Increased population growth. D. Increased economic growth.The 'key'to ending global poverty is, of course, economic growth. Redistributing existing incomes doesn't do the job; total income has to increase.



59. Which of the following is a critical key to reducing poverty in the poorest nations? A. Reduced population growth. B. Reduced human capital. C. Government ownership of resources. D. Redistribution of existing income within the nation. Reducing population growth rates in the poorest nations is one of the critical keys to reducing global poverty.




59. Per capita GDP will definitely increase if A. GDP increases more rapidly than population. B. GDP and population increase at the same rate. C. Population increases more rapidly than GDP. D. Population and GDP decrease at the same rate. Per capita GDP is equal to GDP divided by the population. Therefore, if GDP is rising faster than the population, per capita GDP must be rising.




60. Per capita GDP will definitely fall when A. Population increases. B. GDP decreases. C. The labor force decreases. D. The population growth rate exceeds the economic growth rate.Per capita GDP is equal to GDP divided by the population. Therefore, if GDP is rising more slowly than the growth in the population, per capita GDP must be falling.




61. Poverty is most likely to decrease if A. Population and the economic growth rate both decrease. B. The population decreases and GDP stays constant. C. Population grows more rapidly than GDP. D. The size of the labor force decreases. Per capita GDP is equal to GDP divided by the population. Therefore, if GDP is constant while the population is falling, per capita GDP or average incomes must be rising and poverty is likely to decrease.



Learning Objective: 37-02 How many people in the world are poor.Topic: ECONOMIC GROWTH

62. Poverty is most likely to decrease when A. Population increases regardless of what happens to economic growth. B. GDP increases regardless of what happens to population growth. C. Population growth exceeds economic growth. D. Economic growth exceeds population growth.Per capita GDP is equal to GDP divided by the population. Therefore, if GDP is rising faster than the population, per capita GDP must be rising and poverty is likely to decrease. In the poorest countries, population is still increasing rapidly, making it difficult to raise living standards. Per capita (average) incomes decline in many poor countries (such as Zimbabwe and Haiti) when population growth is greater than economic growth.




63. The knowledge and skills possessed by the workforce is known as A. Human finance. B. Investment capital. C. Human capital. D. The inequality trap. Human capital is the knowledge and skills possessed by the workforce. The current amount of human capital determines the productivity of the workforce.




64. In order for the existing workforce to be more productive, there needs to be A. An increase in population. B. An increase in human capital.C. A redistribution of income within the nation. D. A decrease in economic growth. Human capital is the knowledge and skills possessed by the workforce. An increase in human capital increases the productivity of the workforce.




65. Institutional barriers that impede human and physical capital investment are known as A. The discouraged worker gap.B. An inequality trap.C. The human capital effect. D. An illiteracy trap. An inequality trap is a system of institutional barriers that impede human and physical capital investment, particularly by the poorest segments of society. Those barriers may include restricted property rights, being prohibited or discouraged from working outside the home, or being prohibited or discouraged from going to school.




66. If women are not allowed to vote or inherit wealth but men are, this is an example of A. The liquidity trap. B. The disadvantaged trap. C. A gender trap. D. An inequality trap.An inequality trap is a system of institutional barriers that impede human and physical capital investment, particularly by the poorest segments of society. Those barriers may include restricted property rights, being prohibited from working outside the home or going to school, and not being able to vote or inherit wealth.





148. If women are prohibited or discouraged from attending school but men are allowed to attend, this is an example of

An inequality trap. A human capital gap. A gender gap. A redistribution of capital.

An inequality trap is a system of institutional barriers that impede human and physical capital investment, particularly by the poorest segments of society. Those barriers may include restricted property rights, being prohibited or discouraged from working outside the home, or being prohibited or discouraged from going to school.




68. Which of the following is not a true barrier to human capital development in poor nations? A. Prohibitive costs to meet basic needs. B. Inequality trap. C. Illiteracy. D. Access to health care professionals. An inequality trap is a system of institutional barriers that impede human and physical capital investment, particularly by the poorest segments of society. Those barriers may include restricted property rights, being prohibited or discouraged from working outside the home, or being prohibited or discouraged from going to school.




69. Which of the following is not important for the development of human capital? A. Immunizations and basic health care. B. High levels of military spending.C. Access to water and sanitation. D. Educational opportunities. Education, health care, and infrastructure such as access to safe water and sanitation are the most basic foundations for the development of human capital and therefore economic growth.




70. In order to have adequate water access, based on the World Bank definition, there should be A. Indoor plumbing in at least one-quarter of the homes in a country. B. A private water pipe outside everyone's home. C. A protected public water pipe within half a mile of everyone's home. D. A public lake or stream within a mile of everyone's home.The World Bank defines 'adequate water access'as a protected water source of at least 20 liters per person a day within one kilometer of the home dwelling. We're not limited to indoor plumbing with this definition: a public water pipe a half-mile from one's home is considered adequate.





71. According to Rostow's five stages of development, which of the following is characteristic of Stage 1? A. Increased agricultural productivity. B. Low productivity.C. Growth-enhancing policies. D. Emergence of an entrepreneurial class. Walt Rostow distinguished five sequential stages of economic development, with Stage 1 being a traditional society with rigid institutions, low productivity, little infrastructure, and dependence on subsistence agriculture.




72. According to Rostow's five stages of development, which of the following happens during Stage 1? A. Improved infrastructure. B. Increased saving and investment. C. More industrialization. D. Subsistence agriculture.Walt Rostow distinguished five sequential stages of economic development, with Stage 1 being the traditional society with rigid institutions, low productivity, little infrastructure, and dependence on subsistence agriculture.




73. According to Rostow's five stages of development, which of the following is characteristic of Stage 5? A. High per capita GDP attained and available to most people. B. Dependence on subsistence agriculture. C. Rapid industrialization. D. Emergence of an entrepreneurial class. Walt Rostow distinguished five sequential stages of economic development, with high per capita GDP attained and accessible to most of population and therefore high mass consumption being characteristic of the final stage.




74. According to Rostow's five stages of development, which of the following happens during Stage 3? A. Low productivity. B. Little infrastructure. C. Increased saving and investment. D. Subsistence agriculture.Walt Rostow distinguished five sequential stages of economic development, with Stage 3 being the takeoff into sustained growth stage. Increased saving and investment, rapid industrialization, and growth-enhancing policies occur during Stage 3.




75. In order to increase productivity and economic growth, poor nations need A. Increased capital investment. B. A large military. C. A strong dictator. D. Increased consumption. Education, health care, and infrastructure such as access to safe water and sanitation are the most basic foundations for the development of human capital and therefore economic growth.



76. China has experienced particularly high rates of economic growth as a result of A. High rates of consumer spending. B. High rates of capital investment.C. High rates of government spending. D. Low rates of saving. China spent two decades trying to raise consumption standards before it gave higher priority to investment. Once it did so, however, economic growth accelerated sharply.




77. Which of the following will not increase the opportunity for internal financing of capital? A. Improved banking facilities. B. Saving incentives. C. Seizing of private banks by the government. D. Transparent capital markets.Pervasive poverty in poor nations sharply limits the potential for increased savings. Nevertheless, governments can encourage more saving with improved banking facilities, transparent capital markets, and education and saving incentives.




78. The investment rate is the percentage of total output allocated to A. Saving. B. Consumer retirement accounts. C. Education and training for the workforce. D. The production of new plants, equipment, and structures.The investment rate is the percentage of total output (GDP) allocated to the production of new plants, equipment, and structures.




79. The percentage of total output allocated to the production of new plants, equipment, and structures is the A. Investment rate. B. Savings rate. C. Corporate allocation rate. D. Entrepreneurial rate. The investment rate is the percentage of total output (GDP) allocated to the production of new plants, equipment, and structures.




80. The granting of small, unsecured loans to small businesses and entrepreneurs is known as A. Extreme finance. B. Microfinance.C. Growth finance. D. Long-term finance. Microfinance is the granting of small ('micro'), unsecured loans to small business and entrepreneurs. Financing small equipment or inventory for an entrepreneur can get a new business rolling. Such microfinance can be a critical key to escaping poverty.



81. Which of the following is not an example of microfinance? A. A loan to a farmer for a goat that will give milk that the farmer can sell. B. A loan to a small restaurant owner to buy a refrigerator. C. A loan to a U.S.-owned electronics company to expand overseas. D. A loan to a woman to buy a sewing machine to make clothes to sell.Microfinance is the granting of small ('micro'), unsecured loans to small business and entrepreneurs. Financing small equipment or inventory for an entrepreneur can get a new business rolling. Such microfinance can be a critical key to escaping poverty.




82. Which of the following is not an example of microfinance? A. A loan to a restaurant owner for an indoor grill. B. A loan to a bakery for a machine to mix dough. C. A loan to a small farmer for fertilizer. D. A loan to an executive for a retirement home.Microfinance is the granting of small ('micro'), unsecured loans to small business and entrepreneurs. Financing small equipment or inventory for an entrepreneur can get a new business rolling. Such microfinance can be a critical key to escaping poverty.




83. In the poorest nations, agriculture is likely to contribute as much as ______ percent to total output. A. 10 B. 30 C. 60D. 85Agricultural shares in the range of 35-60 percent are common in the poorest nations. By contrast, only 1 percent of America's output now comes from farms.




84. Which of the following does not contribute to low farm productivity in poor nations? A. Lack of effort. B. Inferior technology. C. Lack of machinery. D. Limited infrastructure. What keeps poor nations so dependent on agriculture is their incredibly low productivity. Subsistence farmers are often forced to plow their own fields by hand with wooden plows. Irrigation systems are primitive, and farm machinery is scarce or nonexistent.





85. In order for poor nations to grow out of Stage 1, farm productivity must rise beyond subsistence levels so that workers can A. Take longer vacations. B. Move to jobs in other industries.C. Stop worrying about the weather. D. Retire at a younger age. To grow their economies-to rise out of Stage 1-poor nations have to invest in agricultural development. Farm productivity has to rise beyond subsistence levels so that workers can migrate to other industries and expand production possibilities.




86. Output per unit of input measures A. Productivity. B. The inequality trap. C. Per capita GDP. D. The investment rate. Productivity is the measurement of output per unit of input-for example, output per labor-hour.




87. Output per labor-hour is used to measure the ________ of labor. A. effort B. intelligence C. productivity D. seriousness Productivity is the measurement of output per unit of input-for example, output per labor-hour.




88. Which of the following contributes to an institutional structure that promotes economic growth? A. Comparative advantage. B. The inequality trap. C. Technology. D. Property rights.Land, property, and contract rights have to be established before farmers will voluntarily improve their land or invest in agricultural technology.




89. Which of the following does not contribute to an institutional structure that promotes economic growth? A. Policy uncertainty. B. A pro-business environment. C. Well-defined property rights. D. Entrepreneurial incentives. Land, property, and contract rights have to be established before farmers will voluntarily improve their land or invest in agricultural technology. Unleashing the 'animal spirits'of the marketplace is also critical. People respond to incentives. If farmers see the potential for profit-and the opportunity to keep that profit-they willpursue productivity gains with more vigor. Finally, pro-business climates encourage the capital investment, the entrepreneurship, and the human capital investment that drive economic growth.



90. Which of the following does not contribute to a pro-business climate for investors? A. Secure property rights. B. Minimal government regulation. C. Legalized profit. D. High tax rates.To encourage capital investment and entrepreneurship, governments have to ensure a secure and supportive business climate. Investors and business start-ups want to know what the rules of the game are and how they will be enforced. They also want assurances that contracts will be enforced and that debts can be collected.They want their property protected from crime and government corruption. They want minimal interference from government regulation and taxes.




91. In general, countries with well-defined property rights, less government regulation, and lower taxes have A. More corruption and crime. B. Higher per capita incomes. C. Higher rates of economic growth for the entire population. D. Higher rates of investment.To encourage capital investment and entrepreneurship, governments have to ensure a secure and supportive business climate. Investors and business start-ups want to know what the rules of the game are and how they will be enforced. They also want assurances that contracts will be enforced and that debts can be collected.They want their property protected from crime and government corruption. They want minimal interference from government regulation and taxes.




92. Which of the following statements is true concerning comparative advantage? A. Poor nations typically have a comparative advantage in high-tech but not agricultural goods. B. Poor nations typically have a comparative advantage in agricultural but not high-tech goods. C. Poor nations typically have a comparative advantage in the production of all goods. D. Rich nations typically have a comparative advantage in the production of all goods. Poor nations typically have a comparative advantage in the production of agricultural products. Their farm productivity may be low, but their low labor costs keep their farm output competitive.




93. The ability of a country to produce a specific good at a lower opportunity cost than its trading partners is known as A. The inequality trap. B. The human advantage. C. Comparative advantage. D. Absolute advantage.Comparative advantage is the ability of a country to produce a specific good at a lower opportunity cost than its trading partners.





94. Poor nations typically have a competitive advantage in agricultural goods because of A. Entrepreneurial incentives. B. Plenty of land. C. High productivity. D. Low labor costs.Poor nations typically have a comparative advantage in the production of agricultural products. Their farm productivity may be low, but their low labor costs keep their farm output competitive.




95. A limit on the quantity of a good that may be imported in a given time period is A. An import quota. B. A tariff. C. A comparative advantage. D. An import allocation. An import quota is a limit on the quantity of a good that may be imported in a given time period.




96. Import quotas have a negative impact on poor nations because they make it difficult for poor nations to A. Sell agricultural goods to each other. B. Sell agricultural goods to rich nations.C. Receive foreign aid from rich nations. D. Develop a pro-business environment. To protect their own farmers from global competition, rich nations erect trade barriers to stem the inflow of Third World products. The United States, for example, enforces an import quota on foreign sugar. This trade barrier has fostered a high-cost domestic beet sugar industry, while denying poor nations the opportunity to sell more sugar and grow their economies faster.




97. Women in poor countries are more likely to experience all of the following except A. Restricted property rights. B. Prohibitions against voting. C. Being paid less than men. D. Being prohibited from bringing a dowry to a marriage.Women in poor countries can be restricted from owning property and voting and are paid less than men. In addition, they often must bring dowries with them to secure their marriages.


Blooms: RememberDifficulty: 02 Medium

Learning Objective: 37-02 How many people in the world are poor.Topic: ECONOMIC GROWTH


98. According to Hernando de Soto, poor countries should focus their development policies on all of the following except A. Reducing bureaucratic barriers. B. Encouraging private ownership. C. Increasing taxes on private companies.D. Improving infrastructure to facilitate business activity.De Soto concluded that countries could grow more quickly if governments encouraged rather than suppressed entrepreneurial resources. In his best-selling book, The Other Path, he urged poor countries to refocus their development policies. This 'other path'entails improving the business climate by reducing bureaucratic barriers to free enterprise, spreading private ownership, developing and enforcing legal safeguards for property, income, and wealth, and developing infrastructure that facilitates business activity.



Learning Objective: 37-03 What factors impede or promote poverty reduction.Topic: THE ECONOMY TOMORROW

99. Which of the following is not part of Hernando de Soto's The Other Path? A. Improving infrastructure. B. Encouraging the "underground" economy.C. Reducing taxes. D. Enforcing laws to safeguard private income. De Soto concluded that countries could grow more quickly if governments encouraged rather than suppressed entrepreneurial resources. In his best-selling book, The Other Path, he urged poor countries to refocus their development policies. This 'other path'entails improving the business climate by reducing bureaucratic barriers to free enterprise, spreading private ownership, developing and enforcing legal safeguards for property, income, and wealth, and developing infrastructure that facilitates business activity.




100. De Soto's The Other Path encourages poor countries to use their development policies to do all of the following except A. Encourage population growth. B. Reduce regulations. C. Enforce laws to safeguard property. D. Encourage entrepreneurship. De Soto concluded that countries could grow more quickly if governments encouraged rather than suppressed entrepreneurial resources. In his best-selling book, The Other Path, he urged poor countries to refocus their development policies. This 'other path'entails improving the business climate by reducing bureaucratic barriers to free enterprise, spreading private ownership, developing and enforcing legal safeguards for property, income, and wealth, and developing infrastructure that facilitates business activity.




101. In his book The Other Path, de Soto suggests that the key to economic development is A. Entrepreneurship and market forces. B. Government control of resources. C. Transactions within the "official" economy. D. Limiting capitalism and profit takers. De Soto concluded that countries could grow more quickly if governments encouraged rather than suppressed entrepreneurial resources. In his best-selling book, The Other Path, he urged poor countries to refocus their development policies. This 'other path'entails improving the business climate by reducing bureaucratic barriers to free enterprise, spreading private ownership, developing and enforcing legal safeguards for property, income, and wealth, and developing infrastructure that facilitates business activity.


Blooms: Analyze


Difficulty: 03 HardLearning Objective: 37-03 What factors impede or promote poverty reduction.

Topic: THE ECONOMY TOMORROW


102. A World View article, "Glaring Inequalities," says that income inequality tends to diminish as a nation develops. The distribution of income answers the ________ question. A. HOW MUCH B. WHERE C. FOR WHOM D. WHYThe FOR WHOM question is reflected in the distribution of income. Although the U.S. income distribution is very unequal, inequalities loom even larger in most poor countries.



Learning Objective: 37-03 What factors impede or promote poverty reduction.Topic: WORLD VIEW

103. One World View article is titled "Glaring Inequalities." Of the countries listed, the greatest inequality in the distribution of income is likely to occur in A. Namibia. B. The United States. C. Canada. D. Sweden. Inequality tends to diminish as a country develops. In poor nations, the richest tenth of the population typically gets 40-50 percent of all income; in Namibia and Botswana the inequality is greater, with the richest tenth receiving 55 and 51 percent of all income, respectively.




104. One World View article is titled "Glaring Inequalities." Of the countries listed, the least inequality in the distribution of income is likely to occur in A. United States. B. Botswana. C. Japan.D. South Africa.Inequality tends to diminish as a country develops. In Japan and Sweden, the richest tenth of the population typically gets 22 percent of all income.

AACSB: Analytic Accessibility: Keyboard Navigation Blooms:

Analyze Difficulty: 03 Hard

Learning Objective: 37-03 What factors impede or promote poverty reduction. Topic: WORLD VIEW

105. A World View article, "The Female ‘Inequality Trap,'" says that in many poor nations the "… returns on female human capital investment is low." When women are not allowed to work outside the home or to receive an education, this is referred to asA. A productivity trap. B. A prejudice gap. C. A justice gap. D. An inequality trap.Social practices that keep women home and uneducated create an 'inequality trap'that keeps returns on female human capital investment low. Without adequate education or training, they can't get productive jobs. Without access to good jobs, they have no incentive to get an education or training. This kind of vicious cycle creates an inequality trap that keeps women and their communities poor.





106. One World View article in the text is titled "Dying for a Drink of Clean Water." By 2015 the U.N.'s Millennium water goal expects to reduce the percentage of people in the world without safe drinking water by A. 10 percent. B. 25 percent. C. 50 percent. D. 98 percent.Access to safe water and sanitation is one of the most basic foundations for economic growth. The U.N.'s Millennium (2015) water goal is to reduce by half the percentage of people without safe water.




107. According to Bill Gates, from the World View article titled "The Way We Give: Philanthropy Can Step In Where Market Forces Don't," more than 90 percent of the money devoted to health research is spent on those who A. Have malaria. B. Are the healthiest.C. Live in developing countries. D. Are balding. Millions of children in poor countries die from diseases that have been eliminated in this country. Yet more than 90 percent of the money devoted to health research is spent on those who are the healthiest. About $1 billion is spent each year to combat baldness.




108. According to the World View article titled "The Way We Give: Philanthropy Can Step In Where Market Forces Don't," in which of the following ways does philanthropy not improve the market outcome? A. Draw in experts including universities. B. Give awards. C. Make novel arrangements with private companies. D. Require firms to research new and improved health care solutions.When markets fail to provide for basic human needs, additional institutions and incentives may be needed. Philanthropy can step in when market forces aren't doing the job. It can draw in experts. It can give awards, it can make novel arrangements with private companies, and it can partner with universities. Every year the platform of science that we have to do this on gets better.




109. According to the World View titled "Muhammad Yunus: Microloans," who won the Nobel Peace Prize for developing microcredit? A. Vice President Al Gore. B. Adam Smith. C. Professor Robert Schiller. D. Professor Muhammad Yunus.Professor Muhammad Yunus recognized that millions in his country were trapped in poverty because they were unable to scrape together the tiny sums they needed to buy productive essentials such as a loom, a plow, an ox, or a rod. So he gave small loans to his poor neighbors, secured by nothing more than their promise to repay.





110. According to the World View titled "Jeffrey Sachs: Big Money, Big Plans," how does Columbia University economics professor Jeffrey Sachs expect global poverty rates to be reduced by half by 2015? A Rich nations must double their foreign aid flows now and then double them again in 10 years, while poor . nations must develop full-scale, comprehensive plans for poverty reduction. B. Rich nations must quadruple their foreign aid flows now, and poor nations need to be more accepting

of help. C. Rich nations must double their foreign aid flows now and develop full-scale, comprehensive plans for the

poor countries to reduce poverty. D. Poor nations must develop full-scale, comprehensive plans for poverty reduction without the help of rich

nations. World poverty can't be eliminated without committing far more resources. Jeff Sachs favors an externally financed, comprehensive Big Plan approach.




111. The official U.S. poverty standard was set in 1963 at $3,000 per year for a family of four. TRUE In 1963 it was determined that $1,000 per year was needed to purchase a 'minimally adequate'diet for a family of four. It was estimated that other basic necessities like housing, clothes, transportation, and so forth would cost twice as much as the food staples. So they concluded that a budget of $3,000 per year would fund a 'minimally adequate'living standard for a U.S. family of four. That standard became the official U.S. poverty threshold in 1963.




112. The U.S. inflation adjusted poverty threshold in 2014 was set at $35,000 per year for a family of four. FALSE The poverty threshold in the United States was set at an annual income of $29,000 for a family of four.




113. According to the official U.S. threshold, 35 percent of Americans live in poverty. FALSE The Census Bureau counted over 40 million Americans as 'poor'in 2014 according to the official U.S. thresholds (as adjusted for family size). This was one out of eight U.S. households, for a poverty rate of roughly 15 percent.



Learning Objective: 37-02 How many people in the world are poor.Topic: AMERICAN POVERTY

114. The U.S. government counts both cash income and in-kind transfers when determining the poverty rate. FALSE In-kind transfers allow poor families to enjoy a higher living standard than their cash incomes imply. Adding those transfers to cash incomes would bring the U.S. poverty count down into the 9-11 percent range because currently only cash income is considered.





115. In-kind transfers include housing subsidies and food stamps. TRUE In-kind transfers are direct transfers of goods and services rather than cash, such as food stamps, Medicaid benefits, and housing subsidies.




116. If the U.S. government considers the value of in-kind transfers, the U.S. poverty rate decreases. TRUE In-kind transfers allow poor families to enjoy a higher living standard than their cash incomes imply. Adding those transfers to cash incomes would bring the U.S. poverty count down into the 9-11 percent range because currently only cash income is considered.



Learning Objective: 37-03 What factors impede or promote poverty reduction.Topic: AMERICAN POVERTY

117. American poverty is more about absolute deprivation, and poverty in the rest of the world is more about relative deprivation. FALSE Poverty in the rest of the world is much different from poverty in America. American poverty is more about relative deprivation than absolute deprivation. In the rest of the world, poverty is entails absolute deprivation.




118. The World Bank defines extreme poverty as income of less than $1.25 per day per person. TRUE By global standards, the United States is unquestionably a very rich nation. U.S. GDP per capita is five times larger than the world average. By American standards, virtually all the people in the poorest nations with average income under $4,000 would be poor. By their standards, few Americans would be poor. Extreme poverty refers to income of less than $1.25 per day.




119. According to the World Bank definitions, there are more people in the world living in extreme poverty than there are living in severe poverty. FALSE On the basis of household surveys in over 100 nations, the World Bank classifies over a billion people as being in extreme poverty (<$1.25/day) and nearly 3 billion people as being in severe poverty (<$2/day).




120. According to the World Bank, almost 2.5 billion people are classified as being in severe poverty. TRUE On the basis of household surveys in over 100 nations, the World Bank classifies over a billion people as being in extreme poverty (<$1.25/day) and 2.4 billion people as being in severe poverty (<$2/day).


Blooms: Understand


Difficulty: 02 MediumLearning Objective: 37-02 How many people in the world are poor.

Topic: GLOBAL POVERTY


121. Over half of the people in the world who live in extreme poverty live in China and India combined. TRUE Concentrations of extreme poverty are alarmingly high in dozens of smaller, less developed nations like Mali, Haiti, and Zambia, where average incomes are also shockingly low. However, the greatest number of extremely poor people reside in the world's largest countries. China and India alone contain a third of the world's population and half of the world's extreme poverty.




122. Poverty is considered to be more permanent in the United States than it is in other nations. FALSE Global poverty is not only more desperate than American poverty, but also more permanent because in some of the poorest nations in the world, output grows more slowly than the population, intensifying the competition for resources.




123. The U.N. has established a Millennium Poverty Goal of cutting in half by 2015 the number of people in extreme global poverty. FALSE The U.N. established a Millennium Poverty Goal of cutting the incidence of extreme global poverty in half by 2015 (from 30 percent in 1990 to 15 percent in 2015).



Learning Objective: 37-02 How many people in the world are poor.Topic: GOALS AND STRATEGIES

124. The U.N.'s Millennium Poverty Goal is to reduce the global rate of extreme poverty to 15 percent by 2015, but it will not have much impact on the number of people in poverty. TRUE The U.N. established a Millennium Poverty Goal of cutting the incidence of extreme global poverty in half by 2015 (from 30 percent in 1990 to 15 percent in 2015). Even that seemingly modest goal wouldn't greatly decrease the number of people in poverty. The world's population keeps growing by over 80-100 million people a year. By the year 2015, there will be close to 7.2 billion people on this planet. Fifteen percent of that population would still leave over a billion people in extreme global poverty.



Learning Objective: 37-02 How many people in the world are poor.Topic: GOALS AND STRATEGIES

125. The two general approaches to reducing global poverty include the redistribution of incomes and economic growth. TRUE In principle, the two general approaches to global poverty reduction are redistribution of incomes within and across nations and economic growth that raises average incomes.





126. The redistribution of private income and wealth within poor nations is sufficient to eliminate global poverty. FALSE Countries like Tanzania, Nigeria, Haiti, Zambia, and Madagascar also have such low average incomes that outright redistribution doesn't hold great hope for income gains by the poor. Tanzania's poorest households would be better off, but the gains wouldn't be spectacular: the average income in Tanzania is less than $1,200 a year.




127. The U.N.'s Millennium Aid Goal is for nations to increase their foreign aid levels to 0.7 percent of donor country GDP. TRUE Developed nations have set a goal of delivering more aid. The United Nations'Millennium Aid Goal is to raise foreign aid levels to 0.7 percent of donor country GDP.




128. Currently most developed countries meet or exceed the U.N.'s Millennium Aid Goal for donor country GDP. FALSE Developed nations have set a goal of delivering more aid. The United Nations'Millennium Aid Goal is to raise foreign aid levels to 0.7 percent of donor country GDP. Few rich nations now come close to this goal. For all developed nations, the aid ratio averages around 0.29 percent-just over a third of the U.N. goal.




129. Denmark and Norway are two countries that currently exceed the U.N.'s Millennium Aid Goal for donor country’s contribution of GDP. TRUE Developed nations have set a goal of delivering more aid. The United Nations'Millennium Aid Goal is to raise foreign aid levels to 0.7 percent of donor country GDP. Norway donates 0.93 percent of their total output.




130. If all developed countries were willing to meet the U.N.'s Millennium Aid Goal for foreign aid, this would eliminate global poverty. FALSE Even tripling foreign aid would generate only $100 a year for each of the nearly 3 billion people now in global poverty. That figure is optimistic because it assumes all aid is distributed to the poor in a form (e.g., food, clothes, and medicine) that directly addresses their basic needs.




131. Economic growth is the key to ending global poverty. TRUE The key to ending global poverty is, of course, economic growth. Redistributing existing incomes doesn't do the job; total income has to increase.



132. Because poverty is so pervasive, poor countries are not able to experience economic growth. FALSE The potential of economic growth to reduce poverty in poor nations is impressive. China has demonstrated just how effective economic growth can be in reducing poverty. Since 1990, China has been the world's fastest-growing economy, with annual GDP growth rates routinely in the 8-10 percent range.




133. The standard of living for poor countries will not increase if the population growth exceeds economic growth.

TRUE In the poorest countries, population is still increasing rapidly, making it difficult to raise living standards. Per capita (average) incomes decline in many poor countries (such as Zimbabwe and Haiti) when population growth is greater than economic growth.




134. If women are not allowed to own property or inherit wealth but men are, this is an example of comparative advantage. FALSE An inequality trap is a system of institutional barriers that impede human and physical capital investment, particularly by the poorest segments of society.




135. An inequality trap has a negative impact on human capital development. TRUE An inequality trap is a system of institutional barriers that impede human and physical capital investment, particularly by the poorest segments of society.




136. Lack of access to sanitation and inadequate medical care have a negative impact on the development of human capital. TRUE Education, health care, and infrastructure such as access to safe water and sanitation are the most basic foundations for the development of human capital and therefore economic growth.




137. According to Rostow's stages of economic development, in order to move beyond Stage 1, a poor country must improve education and health care for the masses. TRUE Walt Rostow distinguished five sequential stages of economic development, with Stage 2 being preconditions for takeoff. Improved institutional structures such as education and health care, increased agricultural productivity, and emergence of an entrepreneurial class are essential to move through the stages of economic development.



138. Providing basic health care and education for poor countries is cost-prohibitive. FALSE The amount of money needed to meet the basic needs of poor nations is surprisingly modest. The challenge for poor nations is to get the necessary resources applied to their basic needs.




139. By reducing consumption expenditures, poor nations should be able to completely finance their own capital investment. FALSE Pervasive poverty in poor nations sharply limits the potential for increased savings. Nevertheless, governments can encourage more saving with improved banking facilities, transparent capital markets, and education and saving incentives.




140. According to Rostow's stages of economic development, poor nations must increase their farm productivity so that some workers can leave farming and move into other industries. TRUE Walt Rostow distinguished five sequential stages of economic development, with Stage 2 including the improvement of institutional structure, increased agricultural productivity, and emergence of an entrepreneurial class in other industries.




141. For poor countries, a lack of capital and poorly developed infrastructure contribute to low farm productivity. TRUE To grow their economies-to rise out of Stage 1-poor nations have to invest in agricultural development. Farm productivity has to rise beyond subsistence levels so that workers can migrate to other industries and expand production possibilities.




142. Well-established property rights and a pro-business climate are a step in the right direction, but ultimately they do little to encourage economic growth. FALSE Land, property, and contract rights have to be established before farmers will voluntarily improve their land or invest in agricultural technology. Unleashing the 'animal spirits'of the marketplace is also critical. People respond to incentives. If farmers see the potential for profit-and the opportunity to keep that profit-they will pursue productivity gains with more vigor. Finally, pro-business climates encourage the capital investment, the entrepreneurship, and the human capital investment that drive economic growth.





143. Free trade with other countries allows poor nations the opportunity to exploit their comparative advantage in agricultural goods. TRUE Poor nations need export markets. Export sales generate the hard currency (dollars, euros, and yen) that is needed to purchase capital equipment in global markets. Export sales also allow farmers in poor nations to expand production, exploit economies of scale, and invest in improved technology.




144. In his book The Other Path, de Soto suggests that countries will grow more quickly if governments limit entrepreneurship. FALSE De Soto concluded that countries could grow more quickly if governments encouraged rather than suppressed entrepreneurial resources. In his best-selling book, The Other Path, he urged poor countries to refocus their development policies. This 'other path'entails improving the business climate by reducing bureaucratic barriers to free enterprise, spreading private ownership, developing and enforcing legal safeguards for property, income, and wealth, and developing infrastructure that facilitates business activity.




145. In his book The Other Path, de Soto suggests that countries will grow more quickly if bureaucratic barriers to free enterprise are reduced. TRUE De Soto concluded that countries could grow more quickly if governments encouraged rather than suppressed entrepreneurial resources. In his best-selling book, The Other Path, he urged poor countries to refocus their development policies. This 'other path'entails improving the business climate by reducing bureaucratic barriers to free enterprise, spreading private ownership, developing and enforcing legal safeguards for property, income, and wealth, and developing infrastructure that facilitates business activity.




146. Developing infrastructure and ensuring that property rights will be protected can help a poor country grow more quickly according to de Soto's book The Other Path. TRUE De Soto concluded that countries could grow more quickly if governments encouraged rather than suppressed entrepreneurial resources. In his best-selling book, The Other Path, he urged poor countries to refocus their development policies. This 'other path'entails improving the business climate by reducing bureaucratic barriers to free enterprise, spreading private ownership, developing and enforcing legal safeguards for property, income, and wealth, and developing infrastructure that facilitates business activity.




147. The developing world has been adamant that rich nations abandon farm subsidies in order to get a global trade deal both sides say they want. TRUE Poor nations need access to markets in rich nations in order to encourage investment in domestic production. They demand 'trade, not aid.'


Blooms: Remember


Difficulty: 01 EasyLearning Objective: 37-03 What factors impede or promote poverty reduction.

Topic: ECONOMIC GROWTH


149. Explain the difference between poverty in the United States and poverty in the rest of the world.

Poverty in the United States is about relative deprivation, meaning that poor people have much less than the average American. However, the U.S. poor are much better off than the poor in other countries, where poverty is about absolute deprivation. In addition, compared to global poverty, poverty in the United States is less permanent.

AACSB: Reflective ThinkingBlooms: UnderstandDifficulty: 02 Medium


149. What is the U.N.'s goal for foreign aid to poor countries? Are most countries currently meeting this goal? Explain.

The U.N.'s Millennium Aid Goal is to raise foreign aid to 0.7 percent of donor country GDP. Currently most rich nations are not meeting the goal. The average contribution for developed countries is 0.29 percent of GDP. The United States, the United Kingdom, Japan and others contribute billions of dollars in aid each year, yet they are well below the goal set by the U.N. However, Denmark is a nation where donor country GDP exceeds the percentage set by the U.N.

AACSB: AnalyticBlooms: Analyze

Difficulty: 03 HardLearning Objective: 37-03 What factors impede or promote poverty reduction.

Topic: GOALS AND STRATEGIES150. How do population growth and economic growth impact global poverty?

Poverty has to do with how much output individuals have access to or the standard of living for a country. Economic growth, which is an increase in output or real GDP, is important in reducing poverty, but population growth also plays a role. If GDP increases more rapidly than the population, then the value of output divided by the population (per capita GDP) rises. If GDP increases, but at a slower rate than the population, there is less output available per person and per capita GDP falls. This is a common problem in poor countries where the population growth rates are typically much higher than in rich countries.

AACSB: AnalyticBlooms: Analyze

Difficulty: 03 HardLearning Objective: 37-01 How U.S. and global poverty are defined.

Topic: GLOBAL POVERTY151. What is human capital, and what factors contribute to human capital development?

Human capital refers to the knowledge and skills possessed by the workforce. Education and training add to human capital and make people more productive. Basic health care also allows workers to become more productive. This includes access to clean water, adequate sanitation, and immunizations against common diseases plus the availability of health care professionals.

AACSB: Reflective ThinkingBlooms: UnderstandDifficulty: 02 Medium


152. What is microfinance, and how can it contribute to economic growth?

Microfinance is the granting of small, unsecured loans to small businesses and entrepreneurs. In poor nations it is very difficult for people to save money to invest in their business or livelihood. Yet capital investment is key to economic growth. A small loan that allows a farmer to purchase better seed or lets a small restaurant owner buy an indoor grill can make a big difference in productivity. Little by little this accumulates into increased output or economic growth.

AACSB: Analytic



Learning Objective: 37-01 How U.S. and global poverty are defined.Topic: ECONOMIC GROWTH

From https://testbankgo.eu/p/Test-Bank-for-The-Economy-T


Chapter 37 Test Bank SummaryCategory # of Questions

AACSB: Analytic 27AACSB: Reflective Thinking 125Accessibility: Keyboard Navigation 147Blooms: Analyze 27Blooms: Remember 54Blooms: Understand 71Difficulty: 01 Easy 53Difficulty: 02 Medium 72Difficulty: 03 Hard 27Learning Objective: 37-01 How U.S. and global poverty are defined. 43Learning Objective: 37-02 How many people in the world are poor. 9Learning Objective: 37-03 What factors impede or promote poverty reduction. 100Topic: AMERICAN POVERTY 20Topic: ECONOMIC GROWTH 66Topic: GLOBAL POVERTY 28Topic: GOALS AND STRATEGIES 9Topic: INCOME REDISTRIBUTION 16Topic: THE ECONOMY TOMORROW 4Topic: WORLD VIEW 9

test bank go!---all free!!€¦ · web viewamerican poverty standards are below world poverty...

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