Question 1 Which of the following weakens a country’s rule of law?

Question 1 Which of the following weakens a country’s rule of law?

a. Formalizing laws into written codes.

b. Centralizing political power into the executive branch.

c. Making government records open to scrutiny by citizens.

d. Granting citizens certain fundamental rights.

Question 2 Which of the following policies would be broadly supported by most economists?

a. Tax cuts to shrink the government.

b. Tax hikes to increase the government.

c. Dollarization.

d. Commitment to low and stable inflation.

Question 3 Which economic system shrank and then grew in prominence in the 20th century?

a. Socialism.

b. Communism.

c. Feudalism.

d. Capitalism.

Question 4 Why was the Soviet Union so poor relative to the U.S.?

a. Mostly because of low physical capital per worker.

b. Mostly because of low human capital per worker.

c. Mostly because they used out-of-date technologies.

d. Mostly because of policies that lowered efficiency.

Question 5 What is the main lesson learned from comparing the distribution of firm-level productivity

among the U.S., India, and China?

a. Average productivity is higher in the U.S. than in India or China.

b. Average productivity is higher in China than in the U.S. or India.

c. Productivity is more dispersed in the U.S., indicating higher rates of innovation.

d. Productivity is less dispersed in the U.S., indicating greater competition.

Question 6 What drove the increase in productivity in the U.S. iron ore mining industry in the U.S. in

the 1980s?

a. Technological improvements in mine machinery.

b. Relaxation of restrictive labor rules.

c. Re-allocation of labor from less productive sectors.

d. Government regulations that created a mining monopoly.

Question 7 Why do economists not compare corruption across countries using direct observation of

bribe-taking?

a. Because bribe-taking is not necessarily a form of corruption.

b. Because the dollar value of bribes is a poor measure of the cost of corruption.

c. Because direct observation data is not usually available across countries.

d. All of the above.

Question 8 According to the simple theory presented in class, which of the following would lower the

chances of a government officially asking for a bribe?

a. Lowering the official’s wage.

b. An increase in the wages at non-government jobs.

c. A decrease in the probability of detection of corruption.

d. An increase in the stigma of bribe-taking.

Question 9 What was the main point of the Anglo-Leasing Scandal?

a. It was the largest such scandal in Kenyan history.

b. It was actually a symptom of kleptocracy.

c. It revealed the value of a firm’s political connections.

d. It led to the formation of an influential anti-corruption office.

Question 10 What area of governance does an autocracy sometimes perform well on?

a. Government selection.

b. Constraints and checks.

c. Accountability.

d. Time consistency.

Question 11 Which of the following promotes accountability by the government?

a. Separation of powers to multiple branches of the government.

b. Separation of powers between federal and state levels.

c. Laws compelling disclosure of government information.

d. Low tax levels.

Question 12 What factor limits the ability of a stable autocracy to undertake effective extraction?

a. The concern that growth may increase demand for regime change.

b. The desire to provide transparency and accountability.

c. The inability to pass time-consistent policies.

d. Constraints on the executive.

Section 2: Short Answer. 20 points each, 40 points total

Question 1 What are the major costs of kleptocracy?

Question 2 What are the advantages and disadvantages of the political institutions of democracy?

Explanation & Answer

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