All Free Economics MCQs with Answers

• A. monopolistic business from abroad
• B. reactionary ruling coalitions
• C. weak domestic middle class
• D. All of the above

Explanation: Baran linked underdevelopment to foreign monopolistic interests, reactionary ruling coalitions, and the weakness of an independent…

• A. Supply
• B. infrastructure
• C. agriculture
• D. services

Explanation: Rosenstein-Rodan's big-push theory treats infrastructure as a major indivisibility: roads, power, transport, and related facilities…

• A. a country is poor because it has lower productivity but high savings
• B. as countries grow richer they save less
• C. poverty perpetuates itself in mutually reinforcing circles on supply and demand sides
• D. market size is large in LDCs

Explanation: The vicious-circle theory says low income causes low saving and investment, which keeps productivity and income low; weak demand…

• A. directly related to savings and inversely related to the capital/output ratio
• B. directly related to the capital/output ratio and inversely related to savings
• C. indirectly related to savings and the capital/output ratio
• D. directly related to savings and the capital/output ratio

Explanation: In the Harrod-Domar model, the growth rate is approximately g = s/v, where s is the saving rate and v is the capital-output ratio.

• A. based on an alliance between landowners and peasants
• B. based on an alliance between peasants and the foreign bourgeoisie
• C. transferred from one elite to another when revolution occurs
• D. derived from domestic opponents of nationalism

Explanation: A criticism of Baran's thesis is that revolutionary change may replace one ruling elite with another rather than transferring power…

• A. the difficulty of testing the stages scientifically
• B. conditions for takeoff are contradicted by historical evidence
• C. characteristics of one stage are not unique to that stage
• D. All of the above are correct

Explanation: Rostow's stages have been criticised because they are difficult to test, historical evidence does not consistently support the proposed…

• A. with an average product of labor in agriculture that is negative
• B. with a downward-sloping supply curve of labor
• C. with a marginal productivity of labor zero or negligible in industry
• D. with a traditional agricultural sector and an industrial capitalist sector

Explanation: The Lewis dual-sector model begins with a traditional subsistence agricultural sector alongside a modern industrial capitalist sector.

• A. balanced growth
• B. capitalization
• C. elasticity of capital
• D. indivisibilities

Explanation: Balanced growth means applying investment simultaneously across a broad range of industries so that each sector creates demand for the…

• A. The preconditions for takeoff, the takeoff, the drive to maturity and the age of creative destruction
• B. The traditional society the preconditions for takeoff, the takeoff, the drive to maturity and the age of high mass consumption
• C. the preconditions for consumption the replication the drive to maturity and the age of high mass consumption
• D. the learning curve the age of high mass consumption post takeoff, and the drive to maturity

Explanation: Rostow's five stages are traditional society, preconditions for takeoff, takeoff, drive to maturity, and the age of high mass consumption.

• A. The French Revolution
• B. The rise of industrial and capitalist production
• C. Political and labor revolts
• D. a growing spiritual rationalism

Explanation: Marx's historical materialism was influenced by revolutionary politics, industrial capitalism, and political and labour struggles.

• A. Adam Smith
• B. Thomas R. Malthus
• C. John Stuart Mill
• D. John Maynard Keynes

Explanation: Smith, Malthus, and John Stuart Mill are central figures of classical economics.

• A. neoclassicism
• B. Marxism
• C. Rostow's model
• D. classical appraoch

Explanation: During the conservative policy period of the 1980s and 1990s, neoclassical approaches emphasizing markets, incentives, and limited…

• A. LDCs are overpopulated
• B. labor contributes nothing to output in LDCs
• C. the marginal products of labor is closed to zero in LDCs
• D. urban unemployment is high in LDCs

Explanation: Surplus-labour models, especially the Lewis model, assume that a developing economy has excess labour whose marginal product is zero or…

• A. growing government assistance create addiction to welfare programs
• B. low income levels create pressure for money creation
• C. low income levels create pressure for cheap imports
• D. low per capita incomes creates low savings that keep incomes low

Explanation: The vicious circle of poverty links low income with low saving and investment, which limits capital formation and keeps productivity and…

• A. technology levels do not allow for self sufficiency
• B. it was previously too poor to save and invest
• C. underemployment is too widespread
• D. resource allocation is poor

Explanation: On the supply side, poverty persists because low past incomes prevented sufficient saving and investment, leaving the economy with little…

• A. much available data contradicts his thesis about the takeoff stage
• B. there is no explanation of why growth occurs after takeoff
• C. his hypothesis of the stages of growth is difficult to test empirically
• D. All of the above are correct

Explanation: Rostow's theory has been criticized because the takeoff concept is difficult to verify empirically, historical evidence does not…

• A. lower
• B. higher
• C. about the same height
• D. None of the above

Explanation: Developing countries commonly use higher import tariffs to protect emerging domestic industries from foreign competition, whereas advanced…

• A. has been a matter of low priority for the Chinese government
• B. was achieved in the early 1950s
• C. has been opposed by a number of labor and human rights organizations in other countries
• D. has had negligible effect on trade between china and the United States

Explanation: China joined the WTO in 2001 after lengthy negotiations, and the accession was opposed by some labor and human-rights organizations…

• A. flying geese
• B. import substitution
• C. export orientation
• D. commodity expansion

Explanation: The flying-geese pattern describes later-developing countries following the industrial and technological path previously taken by more…

• A. inelastic demand for these products in advanced countries
• B. large increases in the supplies of these products on world markets because of export expansion policies
• C. sluggish demand for these products in advanced countries
• D. All of the above

Explanation: Agricultural commodities and raw materials often have sluggish or income-inelastic demand, while export expansion can increase world…