Question

Study the following statements. Evaluate whether these statements are TRUE or FALSE (0.5 X 20 = 10 points

16. One of the key functions of the International Monetary Fund (IMF) is to manage and regulate the flow of international trade.

17. According to the neoliberal approach, the costs of state intervention to fix market failures are generally lower than the benefits.

18. Comparisons of real income or material well-being across countries are difficult because countries have very different prices and economic structures. Market Exchange Rates (FX) provides a more accurate comparison than does Purchasing Power Parity (PPP).

19. In modernization theory, development is understood as a process of social change whereby less developed societies acquired characteristics common to more developed societies.

20. According to the dependency theory, development and underdevelopment exist in a relationship of structural symbiosis: The structure of the global system serves to perpetuate underdevelopment and inequality in the periphery as a precondition for development in the center.

Answer 1

Ans 16

The given statement that one of the main function of the International Monetary Fund (IMF) is to manage and regulate the flow of international trade is True. Since International Monetary Fund system monitors the economic and financial policies of its member countries by tracking economic developments on a global basis. It also constantly consult with the member countries and provide them with macroeconomic and financial policy advice thus strengthening the weaker countries economies and promoting International trade by stabilizing the global monetary system.

Ans 17

The given statement that under the neoliberal approach, the costs of state intervention to fix market failures are generally lower than the benefits is False. Since neoliberal approach states that the government interventions for fixing the market failures instead increases the market failures thus increasing the economic cost as compared to the econmic benefits. As neoliberal approach emphsises on deregulation, free trade, and privitization.

Ans 18

The given statement that Market Exchange Rates (FX) provides a more accurate comparison than does Purchasing Power Parity (PPP) is False. Since Purchasing Power Parity exchange rates provide a longer run measure of the exchange rate thats why it is used for cross country comparisons of Gross Domestic Product as compared to Market Exchange Rate which varies on day to day depending on the supply and demand in foreign exchange markets.

Ans 19

The given statement that in modernization theory, development is understood as a process of social change whereby less developed societies acquired characteristics common to more developed societies is True. Since  modernization is the process in which the economic development takes place which can be observed through the social changes in the society in the form of new technology , higher stndard of living ,and modern practises .

Ans 20

The given statement that  according to the dependency theory, development and underdevelopment exist in a relationship of structural symbiosis is True. Since it is a vicious circle that divides the world economy in to rich and poor periphery. It also states that economic events in the country that encourage developing countries to depend upon the support of more advanced nations. As the underdeveloped countries provides raw material and labour on the world market that is to developed economies which transform them into finished products and are purchased by the underdeveloped countries at higher prices.