Advanced International Economics
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Course Introduction
Advanced International Economics delves into the theories and empirical methods that explain the complex interactions among nations in the global economy. The course examines advanced topics such as trade policy analysis, international monetary systems, exchange rate dynamics, and international capital flows. Students explore the effects of globalization, the impact of economic integration and institutions, and the challenges of economic policy coordination among countries. Emphasis is placed on the application of mathematical modeling and quantitative techniques to analyze international economic issues, preparing students to critically assess current events and policy debates in the field.
Recommended Textbook
International Economics 16th Edition by Robert Carbaugh
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17 Chapters
2660 Verified Questions
2660 Flashcards
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Page 2
Chapter 1: The International Economy and Globalization
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Sample Questions
Q1) Economic interdependence occurs through
A) trade
B) labor migratin
C) capital flows
D) all of these
Answer: D
Q2) Regarding the applicability of free trade to cigarettes,it is correct to say:
A) the rules of free trade apply to cigarettes
B) the rules of free trade should not apply to cigarettes
C) a and b are the topic of current debate
D) there are special rules applying to cigarettes world-wide
Answer: C
Q3) Multilateral trade negotiations have led to
A) Continued trade liberalization
B) Financial liberalization
C) Increased investment
D) All of the above
Answer: D
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Chapter 2: Foundations of Modern Trade Theory: Comparative Advantage
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Sample Questions
Q1) The British economist,G.MacDougall compared the labor productivity ratios and export ratios for the United Kingdom and the United States in order to test
A) Adam Smith's principle of absolute advantage
B) David Hume's price specie flow mechanism
C) David Ricardo's principle of comparative advantage
D) William Benoit's theory of mercantilism
Answer: C
Q2) Which of the following trade theories asserts that within the outer limits of the terms of trade,the actual terms of trade is determined by the relative strength of each country's demand for the other country's product?
A) theory of reciprocal demand
B) overlapping demand theory
C) theory of income determination
D) theory of negative externalities
Answer: A
Q3) Is it possible to add up the preferences of all consumers in an entire nation?
Answer: No.It is impossible to make interpersonal comparisons of satisfaction,and thus it is not possible to add up preferences.
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Chapter 3: Sources of Comparative Advantage
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Sample Questions
Q1) Which trade theory suggests that a newly produced good,once exported,could ultimately end up being imported as the technology is transferred to lower- cost nations?
A) Factor endowment theory
B) Product life cycle theory
C) Overlapping demand theory
D) Comparative advantage theory
Answer: B
Q2) The theory of overlapping demands asserts that trade in manufactured goods is stronger the less similar the demand structures of two countries.
A)True
B)False
Answer: False
Q3) Most developing countries have pollution-control laws and enforcement policies that are more stringent than those of the major industrial countries.
A)True
B)False
Answer: False
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Chapter 4: Tariffs
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Sample Questions
Q1) Suppose that the United States eliminates its tariff on steel imports,permitting foreign-produced steel to enter the U.S.market.Steel prices to U.S.consumers would be expected to:
A) Increase,and the foreign demand for U.S.exports would increase
B) Decrease,and the foreign demand for U.S.exports would increase
C) Increase,and the foreign demand for U.S.exports would decrease
D) Decrease,and the foreign demand for U.S.exports would decrease
Q2) The imposition of tariffs on imports results in deadweight welfare losses for the home economy.These losses consist of the:
A) Protective effect plus consumption effect
B) Redistribution effect plus revenue effect
C) Revenue effect plus protective effect
D) Consumption effect plus redistribution effect
Q3) When a manufacturing firm uses some imported inputs in the production process,the appropriate measure of protection is the nominal tariff.
A)True
B)False
Q4) How can tariffs be justified?
Q5) Can import duties have unintended side effects?
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Chapter 5: Nontariff Trade Barriers
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Sample Questions
Q1) Suppose the United States and Japan enter into a voluntary export agreement in which Japan imposes an export quota on its automakers.The largest share of the export quota's "revenue effect" would tend to be captured by:
A) The U.S.government
B) Japanese automakers
C) American auto consumers
D) American autoworkers
Q2) Local content laws are consistent with the principle of import substitution,in which domestic production replaces the importation of goods from abroad.
A)True
B)False
Q3) Consider Figure 5.3.At the free-trade price of $0.60 per pound,Sweden's consumer surplus totals $____ and producer surplus totals $____.
A) $10.80,$2.40
B) $14.60,$3.90
C) $24.20,$1.80
D) $32.40,$2.30
Q4) What is the price-based definition of dumping?
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Chapter 6: Trade Regulations and Industrial Policies
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Sample Questions
Q1) Assume that the United States imports chemicals from Germany.Trade theory predicts that if the German government grants an export subsidy to its chemical firms,the overall welfare of the United States will increase.
A)True
B)False
Q2) The result of normal trade relations (the most favored nation clause) is
A) a discriminatory tariff structure
B) a nondiscriminatory tariff structure
C) an increase of all tariff rates between all nations
D) an elimination of all tariff rates for all nations
Q3) Under the World Trade Organization,the most recent round of multilateral trade negotiations was the
A) Uruguay Round
B) Doha Round
C) Nixon Round
D) Kennedy Round
Q4) The Smoot-Hawley Tariff Act of 1930 cut U.S.import tariffs to record low levels.
A)True
B)False
Q5) Has industrial policy contributed significantly to Japan's economic growth?
Page 8
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Chapter 7: Trade Policies for the Developing Nations
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Sample Questions
Q1) According to the theory of optimal currency areas,there are gains to be achieved from sharing a currency across national boundaries.These gains include
A) more uniform prices and lower transactions costs
B) greater certainty for investors and enhanced competition
C) a single monetary policy run by an independent central bank
D) all of the above
Q2) For most developing countries,the majority of their exports consists of
A) capital-intensive agricultural products
B) capital intensive manufactured products
C) financial and legal services
D) primary products
Q3) Once a cartel establishes its profit-maximizing price:
A) Entry into the industry of new competitors will not affect the cartel's profits
B) Output changes by cartel members have no effect on the market price
C) Each cartel member is tempted to cheat on the cartel price in order to add to its profit
D) All cartel members have a strong incentive to adhere to the agreed-upon price
Q4) What are some major trade problems faced by developing nations?
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Chapter 8: Regional Trading Arrangements
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Sample Questions
Q1) By the mid-1990s,the European Union had essentially achieved the common market stage of economic integration.
A)True
B)False
Q2) The formation of a regional trading bloc results in trade creation if
A) inefficient domestic production is replaced by more efficient production from another member country
B) inefficient domestic production is replaced by more efficient production from a nonmember country
C) member countries import more,but export less to nonmember countries
D) member countries export less,but import more from nonmember countries
Q3) U.S.labor unions argued against the North American Free Trade Agreement on the grounds that it would result in U.S.companies relocating in Mexico in order to take advantage of lower wage rates.
A)True
B)False
Q4) The EU has abolished restrictions on agricultural products traded internally.
A)True
B)False
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Chapter 9: International Factor Movements and Multinational
Enterprises
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Sample Questions
Q1) Joint ventures lead to losses in national welfare when the newly established business adds to pre-existing production capacity and fosters additional competition.
A)True
B)False
Q2) In natural-resource oriented industries,such as oil and copper,joint ventures have often been formed by several companies since the cost of resource-extraction may be prohibitively large for a particular company.
A)True
B)False
Q3) In recent years,Apple Inc.has triggered controversy through its legal avoidance of U.S.income taxes.
A)True
B)False
Q4) Firms undertake multinational operations in order to:
A) Hire low-wage workers
B) Manufacture in nations they have difficulty exporting to
C) Obtain necessary factor inputs
D) All of the above
Q5) What are the disadvantages of forming joint ventures?
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Chapter 10: The Balance-of-payments
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Sample Questions
Q1) The burden of a current account deficit would be the least if a nation uses what it borrows to finance:
A) Unemployment compensation benefits
B) Social Security benefits
C) Expenditures on food and recreation
D) Investment on plant and equipment
Q2) Because the rest of the world has accepted dollars,the United States has faced virtually no (or minimal) constraint on its ability to realize current-account deficits.
A)True
B)False
Q3) About 25 percent of the world's official foreign exchange reserves are held in U.S.dollars
A)True B)False
Q4) In the balance-of-payments statement,statistical discrepancy is treated as part of the merchandise trade account because merchandise transactions are generally the most frequent source of error.
A)True B)False
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Chapter 11: Foreign Exchange
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Sample Questions
Q1) Throughout the world,the foreign exchange market is open for business only during the hours of 9 A.M.to 3 P.M.,Pacific Standard Time.
A)True
B)False
Q2) Refer to Table 11.2.The equilibrium exchange rate equals:
A) $1.20 per pound
B) $1.40 per pound
C) $1.60 per pound
D) $1.80 per pound
Q3) If the exchange rate is $0.01 per yen in New York and $0.015 per yen in Tokyo,an arbitrager could profit by buying yen in Tokyo and simultaneously sell them in New York.
A)True
B)False
Q4) Most foreign exchange trading occurs between banks and:
A) National governments
B) Other banks
C) Corporations
D) Household investors
Q5) What foreign exchange transactions do banks typically engage in?
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Chapter 12: Exchange Rate Determination
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Sample Questions
Q1) According to the safe-haven effect,investors may be willing to sacrifice an amount of return if an economy offers them a low risk repository for their funds.
A)True
B)False
Q2) The demand in the United States for yen will increase if,other things remaining equal:
A) Labor costs rise in Japan
B) Income rises in Japan
C) Prices rise in Japan
D) Interest rates rise in Japan
Q3) A country having stronger preferences for imports than its trading partners have for its exports finds its demand for foreign exchange rising more rapidly than its supply of foreign exchange.
A)True
B)False
Q4) A forward discount on Mexico's peso serves as a rough benchmark of the expected appreciation in the peso's spot rate.
A)True
B)False
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Chapter 13: Mechanisms of International Adjustment
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Sample Questions
Q1) During the gold standard era,the "rules of the game" suggested that:
A) Surplus countries should increase their money supplies
B) Deficit countries should increase their money supplies
C) Surplus and deficit countries should increase their money supplies
D) Surplus and deficit countries should decrease their money supplies
Q2) According to the price-adjustment mechanism,trade deficits can occur only in the long run rather than in the short run.
A)True
B)False
Q3) Referring to Table 13.1,Canada's equilibrium level of income is:
A) $8000 billion
B) $9000 billion
C) $10,000 billion
D) $11,000 billion
Q4) For the income adjustment mechanism to reverse a trade deficit,economic policymakers must be willing to permit domestic income to increase which leads to rising imports.
A)True
B)False
Q5) What is the foreign repercussion effect?
Page 15
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Chapter 14: Exchange Rate Adjustments and the Balance-of-payments
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Sample Questions
Q1) The J-curve effect implies that the price elasticity of demand for imports and exports is more elastic in the short run than in the long run.
A)True
B)False
Q2) The dominant use of dollars in invoicing U.S.trade helps explain the partial pass-through of changes in the dollar's exchange rate to U.S.import prices.
A)True
B)False
Q3) By increasing relative U.S.production costs,a dollar depreciation tends to increase U.S.export prices in foreign-currency terms,which results in an increase in the quantity of U.S.goods exported abroad.
A)True
B)False
Q4) The J-curve effect implies that in the short run a currency depreciation will result in a balance of trade surplus for the home country.As time passes,however,the home country's balance of trade will move toward deficit.
A)True
B)False
Page 16
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Chapter 15: Exchange Rate Systems and Currency Crises
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Sample Questions
Q1) In recent years,the United States has accused China of manipulating the yuan so as to gain an unfair competitive advantage in global trade.Thus,proposals have been made that the United States should offset China's currency manipulation by
A) selling yuan and buying dollars,thus depreciating the yuan against the dollar
B) selling and buying dollars,thus appreciating the yuan against the dollar
C) buying yuan and selling dollars,thus depreciating the yuan against the dollar
D) buying yuan and selling dollars,thus appreciating the yuan against the dollar
Q2) Refer to Figure 15.1.Suppose that the United States increases its imports from Switzerland,resulting in a rise in the demand for francs from D0 to D1.Under a floating exchange rate system,the new equilibrium exchange rate would be:
A) $0.40 per franc
B) $0.50 per franc
C) $0.60 per franc
D) $0.70 per franc
Q3) Many developing nations with low inflation rates have pegged their currencies to the U.S.dollar as a way of allowing modest increases in domestic inflation rates.
A)True
B)False
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Chapter
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Sample Questions
Q1) A nation experiences external balance if it achieves:
A) No net changes in its international gold stocks
B) Productivity levels equal to those of its trading partners
C) An increase in its money supply equal to increases overseas
D) Equilibrium in its balance of payments
Q2) What policy instrument should be used when demand-pull inflation exists?
Q3) Assume a system of floating exchange rates.In response to relatively high interest rates abroad,suppose domestic investors place their funds in foreign capital markets.The result would be
A) a depreciation of the domestic currency and a rise in net exports
B) a depreciation of the domestic currency and a fall in net exports
C) an appreciation of the domestic currency and a rise in net exports
D) an appreciation of the domestic currency and a fall in net exports
Q4) Given an open economy with high capital mobility and floating exchange rates,suppose an expansionary monetary policy is implemented to combat recession.The initial and secondary effects of the policy have conflicting effects on aggregate demand,thus weakening the policy's expansionary effect.
A)True
B)False
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Chapter 17: International Banking: Reserves, Debt, and Risk
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Sample Questions
Q1) Refer to Figure 17.1.Under a fixed exchange rate system,U.S.monetary authorities would have to supply 8 million pounds in exchange for dollars to keep the exchange rate at $3 per pound.
A)True
B)False
Q2) The main purpose of the International Monetary Fund is to grant long-term loans to developing nations to help them finance the development of infrastructure such as roads,dams,and bridges.
A)True
B)False
Q3) The U.S.dollar has been considered a reserve (key) currency because trading nations have been willing to hold it as an international reserve asset.
A)True
B)False
Q4) The currencies generally referred to as "reserve currencies" are the:
A) Japanese yen and U.S.dollar
B) Swiss franc and Japanese yen
C) British pound and U.S.dollar
D) Swiss franc and British pound
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