Topic Questions (MCQ – HARD): Developing and Developed Countries – 3auk

What is the primary factor contributing to high inflation rates in many developing economies?

Current account deficits

Fiscal deficits

Low unemployment rates

Overvalued exchange rates

A developing economy receives an increase in foreign direct investment.

What is the probable impact on its trade balance in goods and its balance in services?

Trade balance in goods: improve; balance in services: improve

Trade balance in goods: improve; balance in services: worsen

Trade balance in goods: worsen; balance in services: improve

Trade balance in goods: worsen; balance in services: worsen

How is the inflow of migrant labor from developing economies likely to affect economic growth and the rate of inflation in developed economies?

Economic growth increases; inflation rate increases

Economic growth increases; inflation rate decreases

Economic growth decreases; inflation rate increases

Economic growth decreases; inflation rate decreases

What is a possible explanation for the tendency of the terms of trade of most developing economies to deteriorate over time?

Their currencies are overvalued in foreign exchange markets.

They impose higher barriers on imports than developed economies.

They produce a wider range of goods than developed economies.

They produce goods with a low income elasticity of demand.

A developing country witnesses a significant increase in labor productivity.

What is the likely outcome of this situation?

an increase in the country's nominal exchange rate

a decrease in the country's balance of trade deficit

a decrease in the country's inflation rate

a rise in the country's relative labor costs

Which of the following is not a valid economic argument for developing economies pursuing a policy of import substitution?

to focus on industrialization as a foundation for export-led growth

to exploit their surplus of labor and produce labor-intensive manufactured goods

to enhance opportunities for exporting goods in which they already possess a comparative advantage

to decrease reliance on a limited range of primary products

Which action aligns with a 'trade not aid' policy?

eliminating subsidies provided to producers in developed economies

promoting the operations of non-governmental organizations (NGOs) in developing countries

restricting the operations of multinational companies (MNCs) from developed economies

decreasing the magnitude of import quotas on goods from developing countries

What is the most likely outcome of an increase in the dependency ratio?

a decline in GDP per capita

a decline in labor efficiency

an expansion of the labor force

a rise in unemployment

According to the United Nations, the total external debt of developing countries has been increasing by approximately $425 billion annually.

Which factor is least likely to have contributed to this trend?

Discouragement of foreign direct investment due to political instability

Expansion of government subsidies for the growth of tourism sectors

Multinational companies pulling out due to delays in government contract awards

Deterioration of terms of trade with developed economies