Exam 3 Top Hat Questions

Carbon dioxide released into the atmosphere
a. creates external costs
b. could be reduced but may not be because of the free-rider problem
d. all of the above

climate change
a. could be slowed by putting a tax on carbon emissions.
b. impacts low-income countries more heavily than high-income countries
c. impacts coastal real estate more than any other sector of the economy.
d. both a and b

Which of the following statements is TRUE?
a. In the William Nordhaus optimal climate policy, the rise in global temperature remains below 2.5C forever.
b. The optimal discount rate for climate change policies should be based on the "impatience" of the current generation.
c. The optimal discount rate for climate change should be based on consumption smoothing between generations.
d. Both a and c

What prevents the world from reducing carbon emissions more rapidly?
a. The "price" of carbon dioxide emissions is far too low.
b. Investment in low-carbon technologies is inadequate because the innovations create large external benefits.
c. The free-rider problem hampers cooperation among countries on this problem.
d. all of the above

Which of the following statements about environmental issues in China is FALSE?
a. China burns more coal than the U.S., Europe, and Japan combined.
b. China has not employed pollution tax policies like Japan, Europe, and elsewhere.
c. Hardly any city dwellers in China breathe air that is considered safe by European standards.
d. None of the above

Which of the following statements about national wealth is FALSE?
a. It is a flow (like GDP), not a stock.
b. It includes natural, produced, and intangible capital.
c. Development that results in declining national wealth is not sustainable.
d. It has increased over time in East Asia and Latin America, but decreased in Sub-Saharan Africa.

Which of these statements about natural resources is TRUE?
a. As they become scarce, their prices rise, encouraging exploration for additional deposits.
b. As they become scarce, their prices rise, encouraging innovations that substitute more plentiful and cheaper resources.
c. Markets price "open-access" resources (e.g., the earth's atmosphere) efficiently.
d. Both A and B

Which of the following statements is FALSE?
a. The central bank controls the money supply and supervises the formal financial sector.
b. Excessive growth of the money supply leads to inflation, which was a serious problem in Latin America in the 80s and 90s.
c. To protect against political pressure to finance government spending by "printing money," the central bank must be independent of the ruling political party.
d. The central bank plays the leading role in financial intermediation (connecting savers and investors).

Why does the financial industry play an important role in economic growth and development?
a. It permits the movement of incomes forward or backward in time.
b. It allows individuals to manage risks by shifting them to others in a better position to hold them.
c. It helps to allocated savings to persons with the best investment ideas.
d. all of the above

For middle-income countries, the largest international capital flow is
a. foreign direct investment
b. foreign bank lending
c. foreign aid

Foreign direct investment (FDI) to developing countries is
a. a growing share of total FDI.
b. concentrated in a few large counties.
c. more stable than other private capital flows
d. all of the above

Why do the poor in low-income countries pay higher interest rates than the rich?
a. The poor borrow smaller amounts than the rich.
b. The cost of monitoring by lenders does not depend on the size of the loan.
c. The poor have no choice about who they borrow from.
d. both a and b

Micro-finance institutions like the Grameen Bank
a. make loans to the poor secured by collateral.
b. check the credit history of the individual borrowers.
c. encourage entrepreneurial activity among the poor.
d. lower the wages received by the employed poor.

How does Hernando de Soto think societies could expand access to financial capital in low- and middle-income countries?
a. Impose a ceiling on interest rates to make loans more affordable.
b. Create a system of property rights so that homes and other assets can be pledged as collateral to secure loans.
c. Match new entrepreneurs with mentors who have experience with getting loans from banks.

Which of the following statements is FALSE?
a. The U.S. gives the most total foreign aid of any country, but is not among the leaders in aid per capita.
b. Global official development assistance as a percent of GNI was higher in 2008 than in 1975.
c. Sub-Saharan Africa received more aid (by all measures) than any other region.
d. Afghanistan received the most foreign aid of any country in 2009.

Which of the following does NOT contribute to aid ineffectiveness?
a. In-kind aid (e.g., donating surplus grain)
b. Aid tied to purchases of goods from the donor country
c. Aid that pays for technical assistance to guide the use of aid
d. Limiting the number of aid projects undertaken (specialization)

Which of the following statements is TRUE?
a. Protestants are the religious group with the strongest commitment to thrift (saving and investment).
b. In the individualist to collectivist cultural spectrum, Peru represents the individualist end of the spectrum.
c. Economists long avoided cultural explanations for economic development because culture is difficult to measure.
d. Social norms are an example of formal institutions.

Which of the following statements is FALSE?
a. The used car market suffers from asymmetric information (the seller has information that the buyer lacks).
b. Health insurance markets suffer from adverse selection (buyers in the poorest health are the most inclined to buy).
c. We use entrance exams for used car dealers to overcome the asymmetric information problem.
d. We use return policies or warranties to overcome the asymmetric information problem.

Which of the following statements is TRUE?
a. Enforcement of property rights for everyone and constraints on the power of elites are characteristics of good institutions.
b. Political stability, the rule of law, and the security of individual rights help to explain differences in prosperity across countries.
c. The fraction of the population with a religious orientation helps to explain differences in prosperity across countries.
d. all of the above

Which of these statements is FALSE?
a. Income per capita in Islamic countries is lower than the world average.
b. In multi-religious countries with a substantial Muslim share, the Muslims tend to be poorer.
c. the Middle East has always been "underdeveloped" relative to Europe and the rest of the world.

What does Jared Rubin add to our understanding of the underdevelopment of the Middle East relative to the West?
a. It traces to differences in the bargaining power of elite groups that legitimize the exercise of power by the ruler.
b. The specific policies enacted by the ruler depend on which elites provide the legitimacy for the ruler to implement policies.
c. In the Middle East, the religious leaders had a comparative advantage in providing legitimacy, but their interests were in policies that were not conducive to development.
d. all of the above

What made the colonial experience different for some countries than others?
a. Where Europeans settled, they set up inclusive institutions (secure property rights, unbiased rule of law, and provision of public services to all).
b. Where Europeans did NOT settle, they set up extractive institutions (power concentrated in a small elite with few constraints on their power).
c. The settler colonies with inclusive institutions grew faster and overtook the countries with extractive institutions (the Great Reversal).
d. All of the above