Which of the following best describes the principles of the Washington Consensus?

Fiscal discipline, privatization, deregulation, and trade liberalization

What is a key argument of New Development Economics about market efficiency?

Market failures, like asymmetric information, cause underdevelopment

What does GDP fail to measure in terms of economic well-being?

Environmental degradation, income inequality, and unpaid labor

According to mainstream economics, markets are assumed to be:

Efficient, self-regulating, and tending toward equilibrium

What event led to the breakdown of the Bretton Woods system in the early 1970s?

The U.S. abandoning the gold standard and floating exchange rates

What role did the Bretton Woods system play in the global economy?

Established fixed exchange rates and institutions like IMF and World Bank

How does Keynesian economics differ from classical economics in addressing economic crises?

It emphasizes government intervention to stabilize demand and employment

What is the main idea behind Amartya Sen’s capability approach?

Development is about expanding people’s freedoms and opportunities

In mainstream economics, individuals are assumed to be:

Rational decision-makers who maximize utility

What was the main goal of Import Substitution Industrialization (ISI) in Latin America?

Replace imported goods with domestic production to reduce dependency

What did Gunnar Myrdal believe was essential to development?

Policy interventions to correct for social and economic inequalities

What is the middle-income trap in economic development?

When middle-income countries can’t progress due to structural issues

According to Joseph Schumpeter, what is “creative destruction”?

Process where innovation replaces old industries, driving economic progress

What is the "principal-agent problem" in the context of the Latin American debt crisis?

Lenders lacked knowledge of borrowers' behaviors, leading to moral hazard

What is the switching dilemma in Latin American economies?

Struggle to move from commodity growth to diversification due to elites

According to the Prebisch-Singer Hypothesis, why do peripheral countries face declining terms of trade?

Prices of primary goods fall faster than manufactured goods

Why does Ha-Joon Chang argue that free trade driving development is misleading?

Rich countries used protectionism before adopting free trade

What does the term feminization of poverty refer to?

Rising poverty among women from gender inequality and limited opportunities

How did Joan Robinson critique the role of finance in development?

She argued finance follows economic growth rather than leading it

What was Karl Marx's main critique of classical economics?

It didn't recognize capitalism's role in class conflict and exploitation

What was a key feature of Japan’s postwar economic development strategy?

State-led industrialization and strategic investment in key industries

How does heterodox economics view economic development?

A process shaped by institutions, culture, power, and social inequalities

What did Adam Smith mean by the "invisible hand"?

Markets, when left alone, self-regulate through individual self-interest

What is a key characteristic of the “Fifth Globalization Wave” (since 2008)?

It is dominated by speculative capital and financial globalization

What lesson can we learn about neoliberal globalization?

It has created new hierarchies, making inequality and exclusion persistent

Why does heterodox economics emphasize historical and social context in economic analysis?

Because decisions are shaped by power, institutions, and cultural factors

How did John Stuart Mill view the stationary state?

A desirable state focusing on well-being over constant growth

According to Adam Smith, what are the key sources of economic growth?

Capital accumulation, division of labor, and international trade

How is development similar to a belief system, according to Rist’s argument?

It relies on myths of progress and uses rituals to reinforce legitimacy

What does Keynes mean by fundamental uncertainty?

Unpredictable events make it impossible to assign probabilities to risks

Why is methodological pluralism important in economics?

Allows for different perspectives to understand complex economic phenomena

What is a core argument of Dependency Theory?

Underdevelopment results from the exploitation of peripheral countries

Which of the following best matches each theorist’s contribution to economic thought?

Rosa Luxemburg - Surplus absorption through imperialism

Which of the following is a major criticism of Ricardo’s theory of comparative advantage?

It assumes trade benefits all countries equally

What is Immanuel Wallerstein’s concept of hegemony in the world system?

One core nation dominates the global system, shaping economic rules

According to Ricardo, what happens in a "stationary state"?

Economic growth halts due to diminishing returns and rising rents

What is the role of asymmetric information in financial markets?

It creates inefficiencies because lenders cannot fully assess borrower risk

What is the role of monetary policy in Keynesian economics?

Regulate interest rates and credit, stimulating investment and demand

What is comparative advantage according to David Ricardo?

Specializing in goods with the lowest opportunity cost

How did Thomas Malthus view population growth in relation to economic development?

A potential threat that could outpace resource growth, leading to poverty

How did Brazil’s New Left approach differ from Argentina’s in the switching dilemma?

Brazil balanced interests, while Argentina’s policies led to instability

What is the relationship between economic growth and development?

Economic growth is necessary but not sufficient for development

What is a "coordination failure" in development economics?

When people or firms fail to work together, leading to suboptimal outcomes

What is the principle of effective demand in Keynesian economics?

Total demand in the economy determines the level of output and employment

Which of the following is a key tool of Keynesian monetary policy?

Setting interest rates to influence investment and economic activity

According to the lecture, what is the key ideological foundation of neoliberalism?

Free-market capitalism, deregulation, and privatization

The Human Development Report (1991) states that human development should include:

Access to income, employment, education, health, and political freedoms

What are conversion factors in the capability approach?

External factors that influence how resources are turned into opportunities

How did South Korea and Taiwan address coordination failures in their economies?

By investment subsidies, public enterprises, and administrative guidance

According to New Development Economics, what is the role of government in addressing market failures?

Government action is key to fixing inefficiencies and better resource use

What is a key limitation of using GDP as the sole measure of development?

GDP ignores inequalities and does not fully capture quality of life

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GLOBL 130 - Midterm Practice

51 termsStudBud Administration21 plays

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Questions 51

Answers

1
Which of the following best describes the principles of the Washington Consensus?
Promotion of social welfare programs and subsidies for domestic industries
Fiscal discipline, privatization, deregulation, and trade liberalization
Restriction of foreign direct investment and focus on self-sufficiency
More government intervention in the economy and protectionist policies
2
What is a key argument of New Development Economics about market efficiency?
Markets are always efficient, even in developing countries
Development depends solely on technological innovation
Economic growth is best achieved with no government intervention
Market failures, like asymmetric information, cause underdevelopment
3
What does GDP fail to measure in terms of economic well-being?
The total income earned by a country
The value of goods and services produced
The level of investment in an economy
Environmental degradation, income inequality, and unpaid labor
4
According to mainstream economics, markets are assumed to be:
Primarily shaped by social and institutional factors
Naturally unstable and require constant government intervention
Unpredictable and governed by non-economic forces
Efficient, self-regulating, and tending toward equilibrium
5
What event led to the breakdown of the Bretton Woods system in the early 1970s?
The rise of digital currencies
The U.S. abandoning the gold standard and floating exchange rates
The economic boom of the 1950s
The collapse of the Soviet Union
6
What role did the Bretton Woods system play in the global economy?
Allowed countries to decide their own policies without coordinantion
Established fixed exchange rates and institutions like IMF and World Bank
Introduced a pure gold standard for all countries.
Eliminated international trade barriers completely
7
How does Keynesian economics differ from classical economics in addressing economic crises?
It supports free markets to naturally adjust and fix crises
It emphasizes government intervention to stabilize demand and employment
It promotes reducing wages to balance the labor market
It relies on cutting government spending during downturns
8
What is the main idea behind Amartya Sen’s capability approach?
Development is about expanding people’s freedoms and opportunities
Well-being is determined by income and wealth accumulation
Happiness is solely based on consumption and material goods
Economic growth alone is the best measure of development
9
In mainstream economics, individuals are assumed to be:
Only concerned with sustainability and environmental protection
Biased and shaped by social influences
Primarily driven by cultural and historical factors
Rational decision-makers who maximize utility
10
What was the main goal of Import Substitution Industrialization (ISI) in Latin America?
Increase agricultural exports and reduce industrial imports
Promote free markets and limit government involvement
Attract more foreign investment and focus on exports
Replace imported goods with domestic production to reduce dependency
11
What did Gunnar Myrdal believe was essential to development?
Exclusive focus on export-led growth
Policy interventions to correct for social and economic inequalities
Focus on capital accumulation above all else
A laissez-faire approach allowing market forces to drive development
12
What is the middle-income trap in economic development?
When high-income countries struggle to maintain growth
When countries stay poor due to limited resources
When developed nations face stagnation because of government overreach
When middle-income countries can’t progress due to structural issues
13
According to Joseph Schumpeter, what is “creative destruction”?
The destruction of wealth caused by government intervention
The impact of inflation on savings
A cycle of economic collapse with no recovery
Process where innovation replaces old industries, driving economic progress
14
What is the "principal-agent problem" in the context of the Latin American debt crisis?
Governments eliminated financial uncertainty through perfect regulations
Lenders knew exactly how borrowers would use loans
Lenders lacked knowledge of borrowers' behaviors, leading to moral hazard
Borrowers always repaid loans without risk
15
What is the switching dilemma in Latin American economies?
Balancing commodity exports with global financial integration
Struggling to shift from rural to urban political systems
Conflict between urban labor demands and agricultural subsidies
Struggle to move from commodity growth to diversification due to elites
16
According to the Prebisch-Singer Hypothesis, why do peripheral countries face declining terms of trade?
Their manufactured goods aren’t competitive globally
They prioritize domestic markets over exports
Prices of primary goods fall faster than manufactured goods
They focus too much on capital-intensive industries
17
Why does Ha-Joon Chang argue that free trade driving development is misleading?
Developing countries always benefited from free trade
Free trade only worked in tech industries
Free trade was never used by any country
Rich countries used protectionism before adopting free trade
18
What does the term feminization of poverty refer to?
Equal poverty levels across genders caused by economic crises
Increased poverty rates as women enter low-wage, informal labor markets
More women in poverty due to male job losses
Rising poverty among women from gender inequality and limited opportunities
19
How did Joan Robinson critique the role of finance in development?
She argued that financial institutions don't influence economic development
She claimed markets function efficiently without government intervention
She argued finance follows economic growth rather than leading it
She believed that financial markets should be entirely privatized
20
What was Karl Marx's main critique of classical economics?
It overemphasized government intervention and ignored individual freedoms
It didn't recognize capitalism's role in class conflict and exploitation
It underestimated the benefits of free markets and global trade
It promoted population control as a solution to economic stagnation
21
What was a key feature of Japan’s postwar economic development strategy?
Dependence solely on foreign aid
State-led industrialization and strategic investment in key industries
Strict adherence to free-market policies with no government intervention
The complete elimination of trade barriers
22
How does heterodox economics view economic development?
A problem that only applies to poor countries
A simple matter of increasing GDP and trade
A process shaped by institutions, culture, power, and social inequalities
A purely technical issue that requires fixing through economic policie
23
What did Adam Smith mean by the "invisible hand"?
The role of religion in economic prosperity
Markets, when left alone, self-regulate through individual self-interest
Governments should directly regulate all economic transactions
Economic development requires strict government intervention
24
What is a key characteristic of the “Fifth Globalization Wave” (since 2008)?
It focuses on agricultural development in the Global South
It prioritizes state-led industrialization
It is centered around China's rise in manufacturing
It is dominated by speculative capital and financial globalization
25
What lesson can we learn about neoliberal globalization?
It has created new hierarchies, making inequality and exclusion persistent
It has led to the complete disappearance of poverty worldwide
It has made economic intervention by the state unnecessary
It has fully delivered on its promises of prosperity and equality
26
Why does heterodox economics emphasize historical and social context in economic analysis?
Because history determines all economic outcomes with no room for change
Because economic theories never change over time
Because decisions are shaped by power, institutions, and cultural factors
Because it rejects the use of mathematical models
27
How did John Stuart Mill view the stationary state?
A result of poor trade policies and weak markets
A negative outcome where growth stops and society declines
A temporary phase before economies collapse
A desirable state focusing on well-being over constant growth
28
According to Adam Smith, what are the key sources of economic growth?
Social welfare programs, public employment, and self-sufficiency
Population growth, increased taxation, and labor deregulation
Capital accumulation, division of labor, and international trade
Government intervention, reduced savings, and market protectionism
29
How is development similar to a belief system, according to Rist’s argument?
It relies on myths of progress and uses rituals to reinforce legitimacy
It is completely free from contradictions or failures
It is only a concern for policymakers and economists
It is an objective science with no ideological influence
30
What does Keynes mean by fundamental uncertainty?
Unpredictable events make it impossible to assign probabilities to risks
Economic models can always forecast future outcomes accurately
Future events can be predicted with high accuracy using data
Uncertainty only affects consumers, not investors
31
Why is methodological pluralism important in economics?
Promotes mainstream economic thinking as the only valid approach
Allows for different perspectives to understand complex economic phenomena
Eliminates the need for empirical data in economic research
Ensures that all economic theories agree with each other
32
What is a core argument of Dependency Theory?
Underdevelopment results from the exploitation of peripheral countries
Free markets will eventually lead all countries to develop
Underdevelopment is due to internal issues and lack of innovation
Global capitalism offers equal chances for all countries to develop
33
Which of the following best matches each theorist’s contribution to economic thought?
Joseph Schumpeter - Invisible hand guiding economic progress
Rosa Luxemburg - Surplus absorption through imperialism
Adam Smith - Theory of diminishing returns
Raúl Prebisch - Comparative advantage in trade
34
Which of the following is a major criticism of Ricardo’s theory of comparative advantage?
It ignores the benefits of specialization in production
It assumes trade benefits all countries equally
It suggests that governments should heavily regulate markets
It focuses too much on the role of government intervention in trade
35
What is Immanuel Wallerstein’s concept of hegemony in the world system?
Periphery nations control markets through resource exports
One core nation dominates the global system, shaping economic rules
Power balance between core and periphery through equal trade
A temporary global economic crisis
36
According to Ricardo, what happens in a "stationary state"?
International trade prevents economies from stagnating
The economy remains balanced, with equilibrium between labor and capital
Economic growth continues indefinitely with rising wages
Economic growth halts due to diminishing returns and rising rents
37
What is the role of asymmetric information in financial markets?
It ensures that only the best borrowers receive loans
It allows lenders and borrowers to make perfect decisions
It reduces uncertainty in financial transactions
It creates inefficiencies because lenders cannot fully assess borrower risk
38
What is the role of monetary policy in Keynesian economics?
Avoid influencing markets and let interest rates adjust naturally
Control inflation by limiting the money supply, regardless of unemployment
Increase taxes and reduce government deficits
Regulate interest rates and credit, stimulating investment and demand
39
What is comparative advantage according to David Ricardo?
Specializing in goods with the lowest opportunity cost
Producing more with fewer resources
Wealthy countries dominating trade
Economies thriving through self-sufficiency
40
How did Thomas Malthus view population growth in relation to economic development?
A neutral factor that had no significant effect on the economy
A driving force for innovation and industrial expansion
A necessary condition for achieving international trade dominance
A potential threat that could outpace resource growth, leading to poverty
41
How did Brazil’s New Left approach differ from Argentina’s in the switching dilemma?
Brazil confronted rural elites, while Argentina offered subsidies
Argentina focused on labor unions, while Brazil ignored urban sectors
Brazil balanced interests, while Argentina’s policies led to instability
Both solved the dilemma through redistributive policies
42
What is the relationship between economic growth and development?
Economic growth automatically leads to development
Development is entirely dependent on GDP growth
Economic growth and development are unrelated concepts
Economic growth is necessary but not sufficient for development
43
What is a "coordination failure" in development economics?
When people or firms fail to work together, leading to suboptimal outcomes
When economic growth occurs without financial investment
When market competition is too high
When government policies are too strict
44
What is the principle of effective demand in Keynesian economics?
Total demand in the economy determines the level of output and employment
Government spending has no impact on overall demand
Demand only matters in the short term, not for long-term growth
Supply automatically creates enough demand to ensure full employment
45
Which of the following is a key tool of Keynesian monetary policy?
Complete privatization of all industries
Fixing prices for all goods and services
Eliminating all government spending
Setting interest rates to influence investment and economic activity
46
According to the lecture, what is the key ideological foundation of neoliberalism?
Strong government regulation of the economy
Free-market capitalism, deregulation, and privatization
Protectionist trade policies
Centralized economic planning
47
The Human Development Report (1991) states that human development should include:
Access to income, employment, education, health, and political freedoms
A strict focus on GDP as the sole measure of progress
Only economic growth and financial stability
A centralized global economic model with no national variations
48
What are conversion factors in the capability approach?
External factors that influence how resources are turned into opportunities
Financial tools used to increase a person’s wealth and income
Policies that convert poverty into economic growth
Economic indicators that measure a country’s total output
49
How did South Korea and Taiwan address coordination failures in their economies?
By relying solely on foreign aid
By allowing free markets to operate without government interference
By limiting industrialization and focusing only on agriculture
By investment subsidies, public enterprises, and administrative guidance
50
According to New Development Economics, what is the role of government in addressing market failures?
Governments should only intervene in developed economies
Government action is key to fixing inefficiencies and better resource use
Governments should avoid intervening; markets self-correct
Government roles are limited to controlling inflation
51
What is a key limitation of using GDP as the sole measure of development?
GDP includes subjective experiences and happiness
GDP growth always leads to improved living standards for everyone
GDP accurately reflects people’s well-being in all cases
GDP ignores inequalities and does not fully capture quality of life

GLOBL 130 - Midterm Practice Flashcards | StudBud