Question

QUESTION 37

Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary Fund

		make loans to the riskiest nations so that private investors will not be tempted to take a risk.
		not make loans to risky nations because there is a high demand for funds from safer nations.
		loan only to countries that have free elections.
		impose tougher preconditions on borrowers. QUESTION 38 The three sources of private direct investment in developing nations are bank loans, portfolio investments, and foreign direct investments. bank loans, government loans, and Eurobond issues. portfolio loans, IMF loans, and government loans. foreign direct investment, government loans, and Eurobond issues. QUESTION 39 Countries with the highest degrees of governmental bureaucratic inefficiency index typically are nations with the highest real GDP per capita. normally have the highest measured levels of economic freedom. normally have the lowest measured levels of dead capital. typically are nations with the lowest real GDP per capita. QUESTION 40 The purchase of less than 10 percent of the shares of ownership in a foreign company is referred to as a negligible investment. foreign indirect investment. foreign direct investment. portfolio investment. QUESTION 41 Those who advocate a role for the World Bank in establishing systems of well- defined property and contract rights in developing nations would argue that such changes would make these economies more productive. asymmetric information is currently not a problem in these countries. such changes would eliminate the need for long-term capital funding. such changes would eliminate the need for short-term loans.

Answer 1

QUESTION 37

Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary Fund

Answer: impose tougher preconditions on borrowers.

(imposition tough conditions would deter wilful defaulter countries. )

QUESTION 38

The three sources of private direct investment in developing nations are

Answer: bank loans, portfolio investments, and foreign direct investments.

(These are most important source of investments in developing countries)

QUESTION 39

Countries with the highest degrees of governmental bureaucratic inefficiency index

Answer: typically are nations with the lowest real GDP per capita.

(Such countries are saddled with rampant corruption and tend to misuse public resources. population growth rate is high in these countries, so per capital income also tends to be low)

QUESTION 40

The purchase of less than 10 percent of the shares of ownership in a foreign company is referred to as a

Answer: portfolio investment.

( According to international norm, investment less than 10 % is regarded as the portfolio investment while investment more than 10 % goes by the name of foreign direct investment)

QUESTION 41

Those who advocate a role for the World Bank in establishing systems of well- defined property and contract rights in developing nations would argue that

Answer: such changes would make these economies more productive.