MCQs of Economics - Balance of Payments, Aid and Foreign Investment – Multiple Choice Question

Question 1 of 19

1. Question

Dani Rodrik points out that

an economy more open to foreign trade and investment faces a more inelastic demand for unskilled workers
employers and consumers can more readily replace domestic workers with foreign workers by investing abroad or buying imports
globalization increases job insecurity
financial liberalization in LDCs leads to collapse of the economy

Question 2 of 19

2. Question

Which of the following statement is NOT true about OECD aid?

During the 1980s OECD countries contributed four fifths of the world's bilateral official development assistance to LDCs
In the early 1990s the OECD contributed 98 percent of all aid
The OECD aid increased fro $6.9 billion in 1970 to $8.9 billion in 2001
In 2001, only Denmark Norway , Sweden, the Netherlands, and Luxembourg exceeded the aid target for LDCs

Question 3 of 19

3. Question

Japan’s programs
I- are understaffed politically muddled and administratively complex
II- are biased toward Asia
III- go primarily to leas developed countries in Africa
IV- focus on loans and the grant element of aid is low

I, II and III
I, II and IV
II, III and IV
I, II , III and IV

Question 4 of 19

4. Question

Aid or official development assistance (ODA) includes
I- developments grants
II- loans with at least 25 percent grant element
III- military assistance
IV- technical cooperation

I and II only
I, II and III only
I, II and IV only
I, II , III and IV only

Question 5 of 19

5. Question

I = S + F
The equation above states that a country can increase its new capital formation (or investment) through is

own domestic savings and by inflows of capital from abraod
stock market and fiscal policy
savings from abroad and financial outflow
savings and financial liberalization

Question 6 of 19

6. Question

MNCs can help the developing country to
I- Finance a savings gap or balance of payments deficit
II- Obtain foreign technology by adapting existing processes
III- Generate appropriate technology by adapting existing processes
IV- Employ domestic labor, especially in skilled jobs

I and II only
III and IV only
I , II and III only
I, II , III and IV

Question 7 of 19

7. Question

An annual summary of country’s international economic and financial transactions is

the capital account
the international balance of payments statements
the long term current account
the trade account

Question 8 of 19

8. Question

Hollis Chenery and Alan Strout identity three development stages in which growth proceeds at the highest rate permitted by the most limiting factors These factors are
I- the skill limit
II- the savings gap
III- the fiscal gap
IV- the foreign exchange gap

I and II only
II and IV only
I , II and III only
I, II and IV only

Question 9 of 19

9. Question

Some economists and third-world policy makers criticize MNCs arguing that they have a negative effect on the developing country because they
I- increasing the LDC’s technological dependence on foreign sources resulting in less technological innovation by local workers
II- Hamper local entrepreneurship and investment in infant industries
III- increase unemployment rates from unsuitable technology
IV- Restrict subsidiary exports when they undercut the market of the parent company

I and II only
III and IV only
I, II and III only
I, II , III and iV

Question 10 of 19

10. Question

Barro and Lee find that ceteris paribus, IMF lending has

negative effect on economic growth during the simultaneous five-year period but has a significantly positive effect on growth in the subsequent five years
no effect on economic growth during the simultaneous five-year period but has a significantly negative effect on growth in the subsequent five years
a significantly positive effect on growth in the subsequent five years
an exponentially negative effect on growth ten years

Question 11 of 19

11. Question

Carmen Reinhart and Kenneth Rogoff explain the paradox of capital flows from poor to rich countries by

the brain drain from from LDCs to DCs
the price role of political and credit-market risk in many LDCs
the law of increasing returns that implies that the marginal productivity of capital is higher in LDCs
the fat that the DC capital market is perfectly competitive

Question 12 of 19

12. Question

The IMF is an agency charged with providing

technical assistance to stock market and financial market problems
loans for post-World War II reconstruction
short-term credit for international balance of payments defiits
bonds denominated in U.S dollars as a loan to LDCs

Question 13 of 19

13. Question

The U.S real food aid, as well as food reserves dropped from the 1960s to the 1980s partly because

the transportation and storage cost increased tremendously
proponents of basic-needs attainment opposed food-aid
U.S farm interests wanted to reduce surplus grain stocks
agricultural production suffered excessively due to weather changes

Question 14 of 19

14. Question

In a portfolio investment

investors are directly involved in managing the operations
as in direct investment investors export goods and services abroad
investors transfer the technology to local investors
investors have no control over operations

Question 15 of 19

15. Question

For Harvard’s Dani Rodrik Globalization involves

decreasing autonomy of the nation-state involves
the increasing international integration of markets for goods services and capital
changes of a traditional culture of a country to a western culture
giving aid to poor countries to improve their economy politics and social status

Question 16 of 19

16. Question

Columbia’s Jagdish Bhagwati criticizes United States administrations inability to distinguish between benefits of free trade

and the dangers of free capital movements for LDCs with poorly developed financial institutions
and the dangers of a trade deficit
and the external openness of income growth among the poorest 40 percent of LDCs
and MNC domination and its effects on income distribution

Question 17 of 19

17. Question

U.S total official development assistance to developing countries is

lowest among the OECD countries
higher currently than it was in the 1960s and 1970s
is equivalent to Holland's aid
None of the above statements is true

Question 18 of 19

18. Question

The balance on current account
I- equals the absolute value of the balance on capital account
II- is financed by savings
III- is net grants minus remittances
IV- includes goods services and unilateral transfers

I and II only
II and III only
I and IV only
None of the above

Question 19 of 19

19. Question

Bilateral aid

is technical aid given by IMF
is given directly by one country to another
is aid with repayment in inconvertible currency
is a loan at bankers' standards

MCQs of Economics – Balance of Payments, Aid and Foreign Investment

Economics - Balance of Payments, Aid and Foreign Investment

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