Dependency Theory Assumes That Export Industries in a Poor Country

question 96

Multiple Choice

Dependency theory assumes that export industries in a poor country have small multiplier effects throughout the rest of the economy. Which of the following is a policy implication of this assumption?

• A) Trade based on comparative advantage cannot benefit poor nations.
• B) Governments of poor nations should take whatever steps are necessary to prevent the repatriation of profits earned by multinational corporations operating in their countries.
• C) Production should be undertaken by the public sector and not the private sector.
• D) These countries should pursue policies of self-reliance such as import-substitution policies rather than export-led policies.

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Definitions:

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments not included in cash equivalents.

Cash Outflow

The movement of money out of a business, typically as expenses or investments, resulting in a decrease in the company’s cash and cash equivalents.

Repay Principal

The process of paying back the original amount of money borrowed, not including interest, from a lender or creditor.

Paying Wages

The process of compensating employees for their labor, typically calculated by the hour, day, or based on output.