Articles Of Confederation Quiz Questions

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Article Quizzes & Trivia

Questions and Answers
  • 1. 

    In his "Lessons" article, Stiglitz argues that benefits of government interventions in East Asia are evident, given that growth frequently occured in precisely the industries that were targeted by government policies.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Stiglitz argues in his "Lessons" article that the benefits of government interventions in East Asia are not evident. He states that while growth did occur in industries targeted by government policies, it was often at the expense of other industries. Additionally, he argues that the interventions led to distortions in the market and created inefficiencies. Therefore, the correct answer is false.

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  • 2. 

     In his "Lessons" article, Stiglitz argues that key government policies that characterized the East Asian Miracle included all but which of the following?

    • A.

      Promotion of export-orientation through infrastructure and preferential access to capital

    • B.

      Exclusion of the private sector from non-productive areas like real estate

    • C.

      Investing in human capital development

    • D.

      Promotion of technology programs to provide research and development to the private sector

    • E.

      All of the above were said by Stiglitz to be key to the Asian Miracle

    Correct Answer
    B. Exclusion of the private sector from non-productive areas like real estate
    Explanation
    In his "Lessons" article, Stiglitz argues that key government policies that characterized the East Asian Miracle included promotion of export-orientation through infrastructure and preferential access to capital, investing in human capital development, and promotion of technology programs to provide research and development to the private sector. However, Stiglitz did not mention the exclusion of the private sector from non-productive areas like real estate as a key policy in the Asian Miracle.

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  • 3. 

    Which Asian country that grew more than 5 percent from 1970 to 1993 had the lowest level of income inequality inequality?  Which Asian country in this group had the highest?

    • A.

      Japan had the lowest and Malaysia had the highest

    • B.

      Japan had the lowest and Singapore had the highest

    • C.

      Indonesia had the lowest and Singapore had the highest

    • D.

      Bangladesh had the lowest and Philippines had the highest

    • E.

      None of the above

    Correct Answer
    C. Indonesia had the lowest and Singapore had the highest
  • 4. 

    According to Krugman's "Myth" piece, sustained growth in a nation's per capita income can only come about through which of the following?

    • A.

      A rise in output per unit of input

    • B.

      A rise in domestic savings rate

    • C.

      A dynamic entrepreneurial class

    • D.

      Government policy promoting export-oriented manufacturing 

    • E.

      None of the above

    Correct Answer
    A. A rise in output per unit of input
    Explanation
    According to Krugman's "Myth" piece, sustained growth in a nation's per capita income can only come about through a rise in output per unit of input. This means that the country needs to increase its productivity and efficiency in order to produce more output with the same amount of input. This can be achieved through technological advancements, innovation, and better utilization of resources. A rise in output per unit of input leads to increased production, which in turn leads to higher income levels for individuals in the country.

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  • 5. 

    Which of the following conclusions does Krugman endorse in his "Myth" piece about the East Asian Miracle?

    • A.

      There is a major diffusion of world technology in progress, and Western nations are losing their traditional advantage

    • B.

      The world's econonic center of gravity will inevitably shift to Asia

    • C.

      Asian successes demonstrate the superiority of economies with fewer civil liberties and more government planning than people in the West have been willing to accept

    • D.

      All of the above

    • E.

      None of the above

    Correct Answer
    E. None of the above
    Explanation
    In his "Myth" piece about the East Asian Miracle, Krugman does not endorse any of the conclusions mentioned. He does not argue for a major diffusion of world technology or the shift of the world's economic center of gravity to Asia. Additionally, he does not claim that Asian successes demonstrate the superiority of economies with fewer civil liberties and more government planning. Therefore, the correct answer is "None of the above."

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  • 6. 

    According to Porter in his "New global strategies" article, which component of his "National Diamond" is most likely to shape the product development paths of firms from a particular country?

    • A.

      Firm strategy, structure, and rivalry

    • B.

      Demand conditions

    • C.

      Related and supporting industries

    • D.

      Factor conditions

    • E.

      None of the above

    Correct Answer
    B. Demand conditions
    Explanation
    According to Porter's "National Diamond" framework, demand conditions are most likely to shape the product development paths of firms from a particular country. This means that the characteristics and demands of the domestic market play a significant role in driving innovation and product development strategies. Firms are likely to respond to the unique needs and preferences of their local customers, which can lead to the development of new products and technologies. Additionally, strong domestic demand can also create incentives for firms to invest in research and development, further driving product development.

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  • 7. 

    In Porter's "New global strategies" piece, which of the following does he argue is a constructive strategy for company wishing to be an innovation leader?

    • A.

      Lobbying against home country regulation that limit strategic options

    • B.

      Maintaining strong leverage over suppliers

    • C.

      Seeking out customers that are particularly difficult to serve well

    • D.

      Seeking out countries with low taxes and regulations

    • E.

      None of the above

    Correct Answer
    C. Seeking out customers that are particularly difficult to serve well
    Explanation
    In Porter's "New global strategies" piece, he argues that seeking out customers that are particularly difficult to serve well is a constructive strategy for a company wishing to be an innovation leader. By targeting customers with unique needs or challenges, a company can differentiate itself from competitors and develop innovative solutions to meet those specific demands. This approach allows the company to become a leader in serving these difficult customers and gain a competitive advantage in the market.

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  • 8. 

    Which of the following is an implication for government policy of Porter's company-level recommendations in his article on "New global strategies"?

    • A.

      Trade policy should limit imports in industries that are of strategic importance

    • B.

      Allocation of scarce financial resources should be guided by government so as to concentrate on domestically oriented industries

    • C.

      Multinational firms should be required to increase their domestic sourcing of key inputs in order help local support industries reach world class quality

    • D.

      Foreign investment should be limited in industries that are of strategic importance

    • E.

      None of the above

    Correct Answer
    E. None of the above
  • 9. 

    In his "Competitiveness" piece, Krugman argues that an increase in productivity in one country (e.g. China) will have which of the following effects on workers in other foreign countries that trade with it (e.g. Japan)?

    • A.

      Wages of workers in the other foreign countries are likely to fall

    • B.

      Wages of workers in the other foreign countries are likely to rise

    • C.

      Employment opportunities in the other foreign countries is likely to fall

    • D.

      Employment opportunities in the other foreign countries is likely to rise

    • E.

      None of the above

    Correct Answer
    E. None of the above
    Explanation
    In his "Competitiveness" piece, Krugman argues that an increase in productivity in one country (e.g. China) will not have any of the listed effects on workers in other foreign countries that trade with it (e.g. Japan). Therefore, the correct answer is "None of the above".

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  • 10. 

    In his "Competitiveness" piece, which of the following arguments does Krugman make about a country's trade balance and what it means for whether that country is successful?

    • A.

      A trade deficit is a sign of a national strength

    • B.

      A trade deficit is a sign of national strength, but only if sustained over an extended period (e.g. 5 or more years)

    • C.

      A trade surplus is a sign of national strength

    • D.

      A successful country is most likely to exhibit a trade balance

    • E.

      None of the above

    Correct Answer
    E. None of the above
  • 11. 

    In Krugman's "Competitiveness" piece, he shows evidence that which of the following types of sectors have the highest value-added per worker?

    • A.

      Labor-intensive manufacturing industries

    • B.

      High-technology industries

    • C.

      Capital-intensive industries

    • D.

      Export-oriented industries

    • E.

      None of the above

    Correct Answer
    C. Capital-intensive industries
    Explanation
    In Krugman's "Competitiveness" piece, he provides evidence that capital-intensive industries have the highest value-added per worker. This means that these industries generate more value or output for each worker employed compared to labor-intensive manufacturing industries, high-technology industries, and export-oriented industries. The term "capital-intensive" refers to industries that require a significant amount of capital investment, such as machinery, equipment, and infrastructure, to produce goods or services. Krugman's evidence suggests that these industries are more efficient and productive in utilizing their capital resources and therefore have a higher value-added per worker.

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  • 12. 

    Rodrik and Subramian (2003) test the impact of three factors on long-term economic growth.  What are they?

    • A.

      Culture, colonial influence, economic openness

    • B.

      Geography, culture, foreign investment

    • C.

      Geography, integration, institutions

    • D.

      Size of domestic market, quality of infrastructure, institutions

    • E.

      None of the above

    Correct Answer
    C. Geography, integration, institutions
    Explanation
    Rodrik and Subramian (2003) tested the impact of three factors on long-term economic growth: geography, integration, and institutions. This means that they examined how geographical factors, such as natural resources and climate, influenced economic growth. They also looked at the level of integration a country had in the global economy, including trade and investment flows. Lastly, they analyzed the role of institutions, such as the legal and political framework, in promoting or hindering economic growth.

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  • 13. 

    Rodrik and Subramian (2003) conclude from their econometric analysis that: 

    • A.

      The impact of institutions on national wealth is conditional on geography.

    • B.

      Only institutions have a direct positive effect on national wealth.

    • C.

      Integration has weak indirect effects on growth, but strong direct effect

    • D.

      All three main factors discussed in the paper have significant direct effects on national wealth.

    • E.

      None of the above

    Correct Answer
    B. Only institutions have a direct positive effect on national wealth.
    Explanation
    The correct answer suggests that according to Rodrik and Subramanian's econometric analysis, only institutions have a direct positive effect on national wealth. This means that the presence and quality of institutions, such as the rule of law, property rights, and governance, play a crucial role in determining a country's wealth. Other factors, such as geography and integration, may have indirect effects on growth, but institutions are the primary driver of national wealth.

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  • 14. 

    Which of these is NOT an economic institution considered by Rodrik and Subramian (2003):

    • A.

      Market-augmenting

    • B.

      Market-stabilizing

    • C.

      Market-creating

    • D.

      Market-regulating

    • E.

      Market-legitimizing

    Correct Answer
    A. Market-augmenting
    Explanation
    Rodrik and Subramanian (2003) discuss various economic institutions, including market-stabilizing, market-creating, market-regulating, and market-legitimizing institutions. However, they do not consider market-augmenting institutions.

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  • 15. 

    Rodrik and Subramian (2003) feel obligated to address the question of endogeneity in their analysis of the impact of institutions on growth: What is the specific endogeneity problem they are concerned about?

    • A.

      Resource endowments generate both good institutions and economic growth.

    • B.

      People migrate from poor to rich countries.

    • C.

      ​Highly contagious diseases would affect the extent of colonial activity and economic growth.

    • D.

      Institutions may cause growth, but richer countries can afford to create and maintain higher quality institutions.

    • E.

      None of the above.

    Correct Answer
    D. Institutions may cause growth, but richer countries can afford to create and maintain higher quality institutions.
    Explanation
    Rodrik and Subramian (2003) are concerned about the endogeneity problem of institutions causing growth. They argue that while institutions may have a positive impact on growth, it is also possible that richer countries are able to create and maintain higher quality institutions because they have more resources and wealth. This creates a potential bias in the analysis, as the relationship between institutions and growth may be influenced by the wealth of a country. Therefore, they feel obligated to address this endogeneity issue in their analysis.

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  • 16. 

    How do Rodrik and Subramian (2003) deal with the issue of endogeneity in their statistical analysis?

    • A.

      They carefully code and test each institution separately.

    • B.

      They don't say.

    • C.

      They use instruments used in previous research.

    • D.

      There are no statistical methods for dealing with the issue of endogeneity. 

    Correct Answer
    C. They use instruments used in previous research.
    Explanation
    Rodrik and Subramanian (2003) address the issue of endogeneity in their statistical analysis by utilizing instruments that have been previously used in research. This implies that they employ variables or factors that are known to have a causal relationship with the endogenous variable of interest but are not affected by it. By incorporating these instruments, they aim to mitigate the potential bias caused by endogeneity and strengthen the validity of their analysis.

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  • 17. 

    Rodrik and Subramian (2003) advocate a specific constellation of institutions that will achieve the optimum benefits.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Rodrik and Subramian (2003) do not advocate a specific constellation of institutions that will achieve the optimum benefits. Therefore, the statement is false.

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  • 18. 

    What does it mean when Rodrik and Subramanian say that geography is an exogenous factor in their analysis of the factors that shape national wealth?

    • A.

      Geography has no effect on national wealth.

    • B.

      Geography's effect on national wealth is indirect.

    • C.

      Geography is not itself shaped by national wealth.

    • D.

      Geography does not change over time.

    • E.

      None of the above.

    Correct Answer
    C. Geography is not itself shaped by national wealth.
    Explanation
    Rodrik and Subramanian argue that geography is an exogenous factor in their analysis, which means that it is not influenced or shaped by national wealth. In other words, the geographical characteristics of a country, such as its location, climate, natural resources, and terrain, are not determined by the level of national wealth. This implies that a country's wealth or poverty cannot be solely attributed to its geographical features, but rather to other endogenous factors such as governance, institutions, and policies.

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  • 19. 

    MacIntyre (2001) argues that a greater number of veto players leads to:

    • A.

      Higher likelihood of economic crisis

    • B.

      Greater policy risk for investors

    • C.

      Greater policy flexibility

    • D.

      ​greater policy stability

    • E.

      None of the above

    Correct Answer
    D. ​greater policy stability
    Explanation
    MacIntyre (2001) argues that a greater number of veto players leads to greater policy stability. This means that when there are more veto players, it becomes more difficult for any one individual or group to make significant changes to existing policies. This can lead to a more stable and predictable policy environment, as it requires a larger consensus to make any alterations. Therefore, the presence of more veto players can contribute to a higher level of policy stability in a given system.

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  • 20. 

    Which of the main four Southeast Asian country discussed in MacIntyre (2001) was least hard hit by the Southeast Asian crisis in the late 1990s?

    • A.

      ​Philippines

    • B.

      Thailand

    • C.

      Malaysia

    • D.

      Indonesia

    Correct Answer
    A. ​Philippines
    Explanation
    The Philippines was the least hard hit by the Southeast Asian crisis in the late 1990s. This can be inferred from the information provided in MacIntyre's (2001) discussion of the main four Southeast Asian countries.

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  • 21. 

    MacIntyre (2001) argues that, of the four main Southeast Asian countries, the country with the most veto points at the time of the crisis was:

    • A.

      ​Indonesia

    • B.

      Philippines

    • C.

      Malaysia

    • D.

      Thailand

    Correct Answer
    D. Thailand
    Explanation
    MacIntyre (2001) argues that Thailand had the most veto points among the four main Southeast Asian countries during the crisis. Veto points refer to the number of institutional actors or decision-making bodies that possess the power to block or veto policy changes. This suggests that Thailand had a more complex and fragmented political system compared to the other countries, with multiple actors having the ability to influence and hinder policy decisions.

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  • 22. 

    MacIntyre (2001) assigns two veto points for Malaysia to represent the dueling policy positions of Prime Minister Mahathir and his Finance Minister Anwar Ibrahim but reduces this to one when Mahathir had Anwar fired and arrested in the second half of 1998.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement is false because MacIntyre (2001) assigns two veto points for Malaysia to represent the dueling policy positions of Prime Minister Mahathir and his Finance Minister Anwar Ibrahim, regardless of Anwar's firing and arrest in the second half of 1998.

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  • 23. 

    MacIntyre (2001) argues that the intermediate number of veto points in the Philippines helps to explain why its economic growth and ability to attract foreign direct investment had been among the best in Southeast Asia over the past two decades.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The given statement is False. MacIntyre (2001) argues that the high number of veto points in the Philippines actually hinders its economic growth and ability to attract foreign direct investment. The presence of multiple veto points makes it difficult for the government to implement policies and reforms, leading to a slow and inefficient decision-making process. This can discourage foreign investors and hinder economic development. Therefore, the intermediate number of veto points in the Philippines does not help to explain its economic growth and ability to attract foreign direct investment.

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  • 24. 

    MacIntyre (2001) argues that Thailand's crisis began on July 2nd, 1997, when its pegged exchange rate collapsed.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    MacIntyre (2001) argues that Thailand's crisis did not begin on July 2nd, 1997, when its pegged exchange rate collapsed. The correct answer is False.

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  • 25. 

    MacIntyre (2001) argues that the Indonesian economy suffered from the fact that Suharto could unilaterally order strong and immediate action on any front.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    MacIntyre (2001) argues that the Indonesian economy suffered because Suharto had the power to make strong and immediate decisions without any input or checks from others. This suggests that Suharto's unilateral actions could have had negative consequences for the economy. Therefore, the statement "MacIntyre (2001) argues that the Indonesian economy suffered from the fact that Suharto could unilaterally order strong and immediate action on any front" is true.

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  • 26. 

    Stiglitz (2001) explains which of the following about the argument put forward by Krugman and Young about limited growth in Total Factor Productivity in Asia?

    • A.

      Their claim is that fast growing Asian countries got closer to the technology frontier because investments into education led to more domestic innovation.

    • B.

      Their claim is that fast growing Asian countries got closer to the technology frontier by investing into acquisition of technologies created in advanced economies.

    • C.

      Their claim is that fast growing Asian countries made very little progress in getting closer to the technological frontier.

    • D.

      Their claim is that fast growing Asian countries lack of progress in getting closer to the technology frontier caused the 1997 financial crisis.

    • E.

      None of the above.

    Correct Answer
    B. Their claim is that fast growing Asian countries got closer to the technology frontier by investing into acquisition of technologies created in advanced economies.
    Explanation
    Stiglitz (2001) explains that Krugman and Young argue that fast growing Asian countries achieved closer proximity to the technology frontier by investing in the acquisition of technologies developed in advanced economies. This implies that these countries were able to adopt and adapt existing technologies to drive their economic growth, rather than relying solely on domestic innovation. This explanation suggests that the transfer and adoption of advanced technologies played a crucial role in the rapid growth of these Asian countries.

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  • 27. 

    Stiglitz (2001) highlights the positive effect of a government postal savings program for people in the countryside in which fast growing Asian country?

    • A.

      Singapore

    • B.

      Malaysia

    • C.

      Japan

    • D.

      China

    • E.

      None of the above

    Correct Answer
    C. Japan
    Explanation
    Stiglitz (2001) highlights the positive effect of a government postal savings program for people in the countryside in Japan.

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  • 28. 

    Which of the following is NOT among the environmental conditions that Stiglitz (2001) emphasized as increasing the risks of the heavily bank-financed Asian Miracle economies?

    • A.

      Loss of human capital from the government due to higher salaries in the private sector.

    • B.

      Removal of restrictions on riskier bank lending, including into real estate.

    • C.

      Pressure from advanced economies and multilateral organizations to quickly liberalize capital markets.

    • D.

      All of the above.

    • E.

      None of the above.

    Correct Answer
    E. None of the above.
    Explanation
    Stiglitz (2001) emphasized that all of the mentioned environmental conditions increase the risks of the heavily bank-financed Asian Miracle economies. This means that none of the options listed are excluded as environmental conditions that contribute to the increased risks in these economies.

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  • 29. 

    Stiglitz (2001) argues that economic success in fast growing Asian economies led to their governments to become more confident and therefore to increase their role in guiding resource allocation.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Stiglitz (2001) argues that economic success in fast growing Asian economies did not lead to their governments becoming more confident and increasing their role in guiding resource allocation.

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  • 30. 

    Which of the following countries does Stiglitz (2001) claim had strategies that were relatively more focused on domestic investment rather than foreign investment?

    • A.

      Malaysia and Japan

    • B.

      Korea and Japan

    • C.

      Malaysia and Korea

    • D.

      All of the above

    • E.

      None of the above

    Correct Answer
    B. Korea and Japan
    Explanation
    Stiglitz (2001) claims that Korea and Japan had strategies that were relatively more focused on domestic investment rather than foreign investment.

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  • 31. 

    Which economy does Stiglitz (2001) argue did not have industrial policy of its own, but may have benefitted from the industrial policy of its neighbor and key trading partner?

    • A.

      Korea

    • B.

      Singapore

    • C.

      Malaysia

    • D.

      Thailand

    • E.

      None of the above

    Correct Answer
    E. None of the above
    Explanation
    Stiglitz (2001) argues that none of the mentioned economies (Korea, Singapore, Malaysia, and Thailand) had their own industrial policy, but they may have benefitted from the industrial policy of their neighbor and key trading partner.

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  • 32. 

    Which of the following is NOT one of the reasons cited in Stiglitz (2001) for why he thought growth in Asia after the crisis might not be as fast as growth before the crisis?

    • A.

      Growing inequalities would increasingly require government to focus more on redistribution of growth benefits instead of maximizing growth.

    • B.

      Opening up financial markets to foreign capital made it more difficult to pursue high leverage growth strategies and more likely that domestic companies would have to rely on their own internal funds for growth.

    • C.

      Governments did so much deregulating already in the lead up to the crisis and immediately after the crisis that there are not many more benefits to be had from further deregulation.

    • D.

      Stiglitz (2001) cites all of the above.

    • E.

      Stiglitz (2001) cites none of the above.

    Correct Answer
    C. Governments did so much deregulating already in the lead up to the crisis and immediately after the crisis that there are not many more benefits to be had from further deregulation.
    Explanation
    The reason cited in Stiglitz (2001) for why he thought growth in Asia after the crisis might not be as fast as growth before the crisis is that governments did so much deregulating already in the lead up to the crisis and immediately after the crisis that there are not many more benefits to be had from further deregulation.

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  • 33. 

    What is the main Dependent Variable used in Fisman (2001)?

    • A.

      Return on Assets

    • B.

      Revenues

    • C.

      Profits

    • D.

      Share price returns

    • E.

      All of the above

    Correct Answer
    D. Share price returns
    Explanation
    The main dependent variable used in Fisman (2001) is share price returns. This means that the study focuses on analyzing the changes in the price of shares over a particular period of time. The researcher is interested in understanding how various factors or independent variables might affect the fluctuations in share prices. By studying share price returns, the researcher can gain insights into the market's perception of a company's performance and its potential for future growth.

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  • 34. 

    How is political connectedness measured in Fisman (2001)?

    • A.

      Data on family ties to Suharto

    • B.

      A subjective index created by a consulting company

    • C.

      Data on cash payments to Suharto

    • D.

      Accounts of public appearances by firm managers with Suharto

    • E.

      None of the above

    Correct Answer
    B. A subjective index created by a consulting company
    Explanation
    The correct answer is "A subjective index created by a consulting company." In Fisman (2001), the measurement of political connectedness is done through a subjective index that was created by a consulting company. This index likely includes various factors and indicators that assess the level of political connections a firm has, such as relationships with politicians, access to government resources, or influence over policy-making processes. This subjective index provides a quantifiable measure of political connectedness, allowing for comparisons and analysis across different firms or industries.

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  • 35. 

    If you had insider information about Suharto's health during one of the health threat events studied in Fisman (2001) that allowed you to know that Suharto was not going to die, would you want to buy or sell shares in companies owned by the Salim Group?

    • A.

      Buy shares in companies owned by Salim Group

    • B.

      Sell shares in companies owned by Salim Group

    Correct Answer
    A. Buy shares in companies owned by Salim Group
    Explanation
    If you had insider information about Suharto's health and knew that he was not going to die, it would be advantageous to buy shares in companies owned by the Salim Group. This is because Suharto was a powerful figure in Indonesia and had significant influence over the economy. His continued good health would likely lead to stability and favorable conditions for businesses owned by the Salim Group. As a result, their shares would be expected to perform well, making it a profitable decision to buy them.

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  • 36. 

    Listed firms affiliated with the Bakrie brothers and Julius Tahija were given scores of one in the Castle Group measure of political connectedness used by Fisman (2001) because of their strong ties to Suharto.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The explanation for the given answer "False" is that the statement mentions that the listed firms affiliated with the Bakrie brothers and Julius Tahija were given scores of one in the Castle Group measure of political connectedness used by Fisman (2001) because of their strong ties to Suharto. However, without any additional information or context, it is not possible to determine the accuracy of this statement. Therefore, the answer is false as we cannot confirm the given statement's validity.

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  • 37. 

    Fisman (2001) interprets the finding that firms categorized as having weaker ties to Suharto were harmed less by rumors of threats to Suharto's health as evidence that these firms enjoyed less political advantages under Suharto's rule.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The explanation for the given correct answer is that Fisman (2001) found that firms with weaker ties to Suharto were less affected by rumors of threats to his health. This suggests that these firms did not enjoy as many political advantages under Suharto's rule, as they were not as dependent on his support and therefore were not as vulnerable to potential instability in his regime.

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  • 38. 

    The fact that Indonesia has a huge population that is spread across many islands and, more importantly, many provinces led by powerful local leaders made it an ideal setting for the Fisman (2001) study of the value of political connections.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The explanation for the answer "False" is that the given statement suggests that Indonesia's large population and decentralized governance structure makes it an ideal setting for studying the value of political connections. However, the answer is false because the statement does not provide any evidence or reasoning to support this claim. It is important to critically evaluate the information provided and not assume that a certain condition automatically makes a setting ideal for a specific study.

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  • 39. 

    Fisman and Khanna (2004) write that: "Economic theory predicts that private enterprise should step in to provide these basic services where it is economically efficient to do so."  Their point is that economists expect that private firms will step in to provide services often provided by government in other countries when which of the following is true?

    • A.

      It serves the interests of the country

    • B.

      The firms have more skilled workers than the government

    • C.

      It helps the firms to make more money

    • D.

      Government gives the firms monopoly power

    Correct Answer
    C. It helps the firms to make more money
    Explanation
    Private firms are expected to step in and provide basic services when it helps them to make more money. This is because economic theory suggests that private enterprises are driven by profit motives and will only engage in activities that are economically efficient and profitable for them. If providing these services can generate more revenue for the firms, they are more likely to take on the responsibility rather than the government.

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  • 40. 

    Among the explanations offered by Indian managers and executives in Fisman and Khanna (2004) for why group affiliated firms are more likely to locate in underdeveloped states, which of the following do the authors say is not consistent with their core hypothesis that this happens because these firms were good at overcoming market failures.

    • A.

      Weak local markets for financing

    • B.

      Weak local development of supporting industries

    • C.

      Weak local development of infrastructure

    • D.

      Weak local markets for human resources

    • E.

      All of the above explanations are consistent with the core hypothesis in Fisman and Khanna (2004)

    Correct Answer
    E. All of the above explanations are consistent with the core hypothesis in Fisman and Khanna (2004)
    Explanation
    The authors state that all of the explanations offered by Indian managers and executives in Fisman and Khanna (2004) are consistent with their core hypothesis that group affiliated firms are more likely to locate in underdeveloped states because these firms are good at overcoming market failures. This means that weak local markets for financing, weak local development of supporting industries, weak local development of infrastructure, and weak local markets for human resources all contribute to the likelihood of group affiliated firms locating in underdeveloped states.

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  • 41. 

    Fisman and Khanna (2004) build a score representing the development of each Indian state composed of all of the following components EXCEPT which of the following?

    • A.

      Industrial output

    • B.

      Power generation

    • C.

      Telecommunications

    • D.

      Transportation

    • E.

      Social services

    Correct Answer
    A. Industrial output
    Explanation
    Fisman and Khanna (2004) constructed a score to measure the development of each Indian state. This score was based on various components such as power generation, telecommunications, transportation, and social services. However, industrial output was not included as one of the components in their score.

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  • 42. 

    According to Fisman and Khanna (2004), which of the  following types of firm owner is more focused on underdeveloped regions of India?

    • A.

      Indian business groups

    • B.

      Indian government

    • C.

      Foreign multinationals

    • D.

      Fisman and Khanna (2004) only directly examine the location choices of business groups in India

    Correct Answer
    B. Indian government
    Explanation
    Fisman and Khanna (2004) directly examine the location choices of business groups in India, suggesting that Indian business groups are more focused on underdeveloped regions of India. Therefore, the answer "Indian government" is incorrect as it is not supported by the study. Foreign multinationals are also not mentioned in the study, so they cannot be considered the correct answer.

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  • 43. 

    Fisman and Khanna (2004) provide evidence that Indian business groups help to make underdeveloped regions more attractive to other investors.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement suggests that Fisman and Khanna (2004) provide evidence that Indian business groups help to make underdeveloped regions more attractive to other investors. However, the correct answer is False. The explanation for this answer could be that Fisman and Khanna (2004) do not provide evidence supporting the idea that Indian business groups make underdeveloped regions more attractive to other investors. It is possible that their research findings contradict or do not support this claim.

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  • 44. 

    Fisman and Khanna (2004) test their theory with a Dependent Variable measuring whether or not a business group entered a particular Indian state.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The given answer is False because the explanation states that Fisman and Khanna (2004) tested their theory with a Dependent Variable measuring whether or not a business group entered a particular Indian state. This implies that the theory was tested based on the presence or absence of business groups in a state, not whether or not they entered a state.

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  • 45. 

    Which of the below statements is not supported by statistical evidence presented in Stuart and Wang (2016)?

    • A.

      Politically connected entrepreneurs pay more in profit taxes than entrepreneurs without political connections.

    • B.

      Politically connected entrepreneurs are more likely to misreport their profits to the Chinese government than entrepreneurs without political connections.

    • C.

      Politically connected entrepreneurs are more likely to receive innovation grants from the government than entrepreneurs without political connections.

    • D.

      None of the above statements is supported in Stuart and Wang (2016).

    • E.

      All of the above statements are supported in Stuart and Wang (2016).

    Correct Answer
    A. Politically connected entrepreneurs pay more in profit taxes than entrepreneurs without political connections.
    Explanation
    The correct answer is "Politically connected entrepreneurs pay more in profit taxes than entrepreneurs without political connections." This statement is not supported by statistical evidence presented in Stuart and Wang (2016). The study does not provide any data or findings that suggest politically connected entrepreneurs pay more in profit taxes compared to their counterparts without political connections.

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  • 46. 

    Stuart and Wang (2016) show statistical evidence that investment by a venture capital firm has which of the following effects on the likelihood of fraudulent behavior by Chinese firms?

    • A.

      VC investment increases the likelihood of fraudulent behavior by Chinese firms.

    • B.

      VC investment decreases the likelihood of fraudulent behavior by Chinese firms.

    • C.

      VC investment does not have a clear effect on the likelihood of fraudulent behavior by Chinese firms.

    Correct Answer
    A. VC investment increases the likelihood of fraudulent behavior by Chinese firms.
    Explanation
    The correct answer suggests that according to Stuart and Wang (2016), there is statistical evidence showing that investment by a venture capital firm increases the likelihood of fraudulent behavior by Chinese firms.

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  • 47. 

    The findings on financial reporting by Chinese firms in Stuart and Wang (2016) provide support for which of the following arguments?

    • A.

      State-owned enterprises in China are more profitable than Chinese private companies.

    • B.

      Venture capital firms in China are misreporting their earnings to the Chinese government.

    • C.

      Chinese entrepreneurs with political connections have less fear of being punished for misreporting their finances to Chinese government offices.

    • D.

      University backed entrepreneurs are more likely to commit fraud in China.

    • E.

      None of the above.

    Correct Answer
    C. Chinese entrepreneurs with political connections have less fear of being punished for misreporting their finances to Chinese government offices.
    Explanation
    The correct answer suggests that the findings in Stuart and Wang (2016) support the argument that Chinese entrepreneurs with political connections have less fear of being punished for misreporting their finances to Chinese government offices. This implies that there may be a lack of accountability and enforcement for those with political connections, allowing them to engage in fraudulent financial reporting without significant consequences.

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  • 48. 

    Stuart and Wang (2016) provide statistical support for which of the following statements about China's Innofund program?

    • A.

      Grants are more likely to go to funds operating in industries highlighted by China's government as important to the country's economic development.

    • B.

      Grants are more likely to go to entrepreneurs who are personally more dedicated to the country's economic development.

    • C.

      Grants are more likely to go to entrepreneurs in industries closer to the global innovation frontier.

    • D.

      Grants are more likely to go to entrepreneurs who report different profit levels to different government ministries in China.

    • E.

      None of the above.

    Correct Answer
    D. Grants are more likely to go to entrepreneurs who report different profit levels to different government ministries in China.
    Explanation
    Stuart and Wang (2016) provide statistical support for the statement that grants are more likely to go to entrepreneurs who report different profit levels to different government ministries in China. This suggests that entrepreneurs who manipulate their reported profit levels may have a higher chance of receiving grants from the Innofund program.

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  • 49. 

    The Economist "paper tiger" article claims all but which of the following to be true in China?

    • A.

      The private sector contributes about two thirds of China's GDP.

    • B.

      The return on assets of private firms in China is higher than that of state owned firms.

    • C.

      Private Chinese firms are able to invest in a wider range of eocnoimc sectors than foreign firms are in China.

    • D.

      All of the above.

    • E.

      None of the above.

    Correct Answer
    C. Private Chinese firms are able to invest in a wider range of eocnoimc sectors than foreign firms are in China.
    Explanation
    Private Chinese firms are not able to invest in a wider range of economic sectors than foreign firms in China.

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  • 50. 

    In Henisz (2000), the way that political hazards influence the choice of multinationals to enter a country through minority or majority ownership is tested using variables that are calculated at which of the following levels of analysis? 

    • A.

      Country-specific venture

    • B.

      Multinational firm

    • C.

      Local country-specific venture partner

    • D.

      Host country

    • E.

      None of the above

    Correct Answer
    D. Host country
    Explanation
    The correct answer is host country. In Henisz (2000), the study examines how political hazards affect the decision of multinational corporations to enter a country through minority or majority ownership. The variables used in the analysis are calculated at the level of the host country. This suggests that the study focuses on understanding how political factors within the country influence the choice of ownership structure for multinational corporations.

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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 30, 2016
    Quiz Created by
    Wenkai92
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