Closing the Development Gap

1. What is the primary goal of foreign direct investment (FDI)?

• To provide charity to low-income countries

• To buy property or invest in another country's infrastructure

• To influence political decisions in another country

• To promote cultural exchange

Answer explanation

The primary goal of foreign direct investment (FDI) is to buy property or invest in another country's infrastructure, making it the correct choice.

2. How can aid potentially be wasted?

• Through fair trade

• By investing in infrastructure

• By corrupt governments

• Through microfinance loans

Answer explanation

Aid can potentially be wasted by corrupt governments who misuse or embezzle the funds intended for development and relief efforts.

3. What is a potential downside of fair trade for producers?

• They receive a fair price for their goods

• Only a small proportion of the price reaches them

• It encourages industrial development

• It leads to better access to technology

Answer explanation

Fair trade may result in only a small proportion of the price reaching producers, which is a potential downside for them.

4. What is intermediate technology?

• High-end, expensive technology

• Simple, affordable tools and systems

• Loans given to people in low-income countries

• Money given by a charity or foreign government

Answer explanation

Intermediate technology refers to simple, affordable tools and systems, making it the correct choice.

5. What is a potential risk associated with microfinance loans?

• They can lead to debt for borrowers

• They always lead to successful businesses

• They prevent industrial development

• They cancel a country's debt

Answer explanation

Microfinance loans can lead to debt for borrowers, making it a potential risk associated with them.

6. What is the main benefit of debt relief?

• It increases a country's debt

• It allows a country to spend more on development

• It provides employment opportunities

• It supports fair trade movements

Answer explanation

Debt relief allows a country to spend more on development, which is the main benefit.

7. What is the effect of industrial development on a country's economy?

• It decreases Gross National Income (GNI)

• It increases dependency on agriculture

• It boosts GNI and development as productivity increases

• It leads to a decrease in employment

Answer explanation

Industrial development boosts GNI and development as productivity increases, leading to overall economic growth.

8. What is the multiplier effect in the context of industrial development?

• A decrease in individual wealth

• A circular process that leads to more investment opportunities

• A process that increases a country's debt

• A term related to microfinance loans

Answer explanation

The multiplier effect refers to a circular process that leads to more investment opportunities, rather than a decrease in individual wealth, increasing a country's debt, or microfinance loans.

9. How does tourism benefit a low-income country?

• By providing short-term aid

• By leading to infrastructure and service improvements

• By encouraging fair trade

• By increasing the country's debt

Answer explanation

Tourism benefits a low-income country by leading to infrastructure and service improvements, which can help in economic development and poverty reduction.

10. What is the difference between long-term aid and short-term aid?

• Long-term aid is given in response to natural disasters

• Short-term aid supports development projects

• Long-term aid supports development projects

• There is no difference; they are the same

Answer explanation

Long-term aid supports development projects, while short-term aid is given in response to natural disasters.