Question

13. Foreign aid to low-income countries is most likely to succeed at _____.

	A.	making a country attractive to foreign investors
	B.	fighting high rates of inflation and unemployment
	C.	improving human capital development
	D.	reducing short-term suffering

14. Which statement best explains why low-income countries face difficulties achieving economic growth?

	A.	Runaway inflation continuously erodes consumers’ purchasing power.
	B.	Private saving is extremely low since incomes must be spent on necessities.
	C.	Households are unwilling to use their money for investment because of political instability.
	D.	The government uses a large portion of national wealth to provide basic services.

15. Which statement best explains why looking at the unemployment rate can be misleading when it comes to evaluating the economy of a low-income country?

	A.	Low-income countries typically have a large number of discouraged workers.
	B.	Unemployment benefits and other social safety net programs do not typically exist in low-income countries.
	C.	The natural unemployment rate in low-income countries is much higher than in middle- and high-income countries.
	D.	Many workers in low-income countries do not participate in the formal labor market.

Answer 1

14. Option D

Explanation: Foreign-aid hardly helps in any long-term economic development of a country.

15. Option B

Explanation: This reduces overall investment and capital accumulation.

16. Option D

Explanation: Most workers in the low-income countries are employed in the informal or unorganized sectors.