Advanced International Economics Study Guide Questions
Course Introduction
Advanced International Economics explores the theoretical frameworks and empirical analyses that underpin the global economic system. The course covers key topics such as international trade theory, trade policy, exchange rates, balance of payments, international monetary arrangements, and open-economy macroeconomics. Students will analyze the effects of globalization, economic integration, and international capital flows on national economies, utilizing both classical and modern economic models. Emphasis is placed on real-world applications, policy implications, and recent developments in international economic relations, equipping students to critically evaluate international economic issues and contribute to informed policy-making.
Recommended Textbook
International Economics 7th Edition by James Gerber
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17 Chapters
1201 Verified Questions
1201 Flashcards
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Page 2
Chapter 1: The United States in a Global Economy
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Sample Questions
Q1) Since the end of World War II,
A)world trade has grown more slowly than world GDP in the same time period.
B)world trade has grown more slowly than during the years leading up to World War II.
C)the trade-to-GDP ratios of most countries have fallen.
D)world trade has grown more rapidly than world output.
Answer: D
Q2) The four criteria for economic integration include trade flows,capital flows,people flows,and the similarity of prices in separate markets.
A)True
B)False
Answer: True
Q3) What are the negative impacts of migration for the nation receiving migrants?
Answer: More competition for other workers and greater social tensions
Q4) What are the positive impacts of migration on migrants and the firms that hire them?
Answer: Higher incomes for migrants and lower labor costs for firms
Q5) Why are high domestic savings rates important?
Answer: High savings rates are correlated with high domestic investment.
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Chapter 2: International Economic Institutions Since World
War II
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Sample Questions
Q1) The Tokyo Round of the GATT negotiations was notable because it was the first round A)that included Japan.
B)that included textiles and apparel.
C)to begin establishing rules on subsidies.
D)to begin discussions of exchange rates.
Answer: C
Q2) Which of the following is true?
A)A country experiencing a debt or currency crisis would contact the World Trade Organization.
B)The World Trade Organization was formed at the Bretton Woods conference.
C)The General Agreement on Tariffs and Trade created the World Trade Organization in the negotiations and treaty known as the Uruguay Round.
D)The World Trade Organization has no power to resolve trade disputes and to enforce their resolution.
Answer: C
Q3) What result of the Uruguay Round was the most significant for global trade?
Answer: The creation of the WTO
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Page 4
Chapter 3: Comparative Advantage and the Gains From Trade
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Sample Questions
Q1) The basis for free trade is the concept of A)absolute advantage.
B)differences in natural resources and climate.
C)differences in nominal wages.
D)comparative advantage.
Answer: D
Q2) If two countries agree to specialize and trade based on comparative advantage,which of the following is most likely to be true?
A)Both of the countries will consume outside their respective production possibilities curves.
B)One of the countries will end up receiving all of the gains from trade.
C)One of the countries will both consume and produce on its production possibilities curve.
D)Only one of the countries will produce on and consume outside its production possibilities curve.
Answer: A
Q3) What did Adam Smith perceive was primarily responsible for improving standard of living?
Answer: Increased specialization in production
Page 5
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Chapter 4: Comparative Advantage and Factor
Endowments
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Sample Questions
Q1) Test of the HO theory have clearly been successful.
A)True
B)False
Q2) What does research thus far suggest about job loss and offshoring?
Q3) Wage inequality has been on the rise in virtually all high-income industrial economies since the 1970s.The causes are probably numerous,but the leading explanation for the greatest share of the increase in inequality is
A)the growth of trade with developing countries.
B)the growth of trade with other high income industrial countries.
C)technological change which increased the relative demand for skilled workers.
D)technological change which increased the relative demand for unskilled workers.
Q4) Empirical tests of the HO model have had mixed results.One explanation for this is that
A)the Ricardian model is more detailed.
B)it is difficult to measure factor endowments.
C)it does not explain the effects of trade on income.
D)it assumes that countries have different technologies.
Q5) In the Heckscher-Ohlin model,what assumption is made about opportunity costs?
Q6) How is offshoring of services different from past trade patterns?
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Chapter 5: Beyond Comparative Advantage
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Sample Questions
Q1) Comparative advantage has mixed results when it comes to predicting a country's trade patterns.Which of the following is FALSE?
A)There are many potential products an economy might export that use the same comparative advantage.
B)A large share of international trade is not based on comparative advantage.
C)Comparative advantage has proven completely incapable of predicting trade.
D)Comparative advantage is a dynamic concept, which means that the spread of technology, improvement in skills, and learning-by-doing may alter a country's comparative advantage over time.
Q2) The geographical distribution of resources such as skilled labor has little effect on firm location decisions.
A)True
B)False
Q3) Which of the following is FALSE about intraindustry trade?
A)Intraindustry trade creates gains from trade.
B)Intraindustry trade is due to comparative advantage.
C)Intraindustry trade may involve heightened competition and lower prices for consumers.
D)Intraindustry trade increases consumer choice.
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Page 7
Chapter 6: The Theory of Tariffs and Quotas
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Q1) Based on Figure 6.1,suppose the government puts a tariff of $0.25 per bushel on soybean imports.How much will the tariff reduce imports?
A)Imports will decrease by 10 million bushels.
B)Imports will decrease by 20 million bushels.
C)Imports will decrease by 60 million bushels.
D)Imports will not change after the tariff.
Q2) Intellectual property rights protection is a critical issue for the pharmaceutical industry among others.
A)True
B)False
Q3) High tariffs on intermediate inputs
A)increase the effective rate of protection on final goods.
B)have no impact on the effective rate of protection on final goods.
C)decrease the effective rate of protection on final goods.
D)lower the nominal rate of protection on final goods.
Q4) Tariff revenue is an important source of operating revenue for many governments of high income countries.
A)True
B)False
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Chapter 7: Commercial Policy
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Sample Questions
Q1) It seems likely that economic sanctions ultimately would have led to regime change in Iraq.
A)True
B)False
Q2) Which of the following is an example of an antidumping duty?
A) A tariff is granted because foreign firms are selling below cost.
B) A temporary tariff is granted to allow for adjustment of the domestic industry.
C) A tariff is granted to an industry because foreign firms are subsidized by their governments.
D) A tariff is granted to an industry because another nation persistently uses unfair trade practices.
Q3) In the United States, which agency determines whether domestic firms have been harmed by subsidies and dumping or by a sudden surge in imports and whether protection is warranted?
Q4) Section 301 actions are more frequently used as a tool of trade policy, especially since the formation of the World Trade Organization.
A)True
B)False
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Chapter 8: International Trade and Labor and Environmental Standards
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Sample Questions
Q1) Which of the following is NOT a true statement about the WTO and the protection of endangered species?
A)The environmental movement has been critical of the WTO.
B)Under WTO rules, countries have a right to impose import barriers to protect endangered species.
C)The WTO did not allow the U.S. to protect sea turtles.
D)GATT rules prohibit discrimination based on the production process used.
Q2) Countries that compete by offering foreign firms a reduced set of environmental compliance requirements are known as
A)transboundary members.
B)pollution havens.
C)pollutants.
D)pollution exporters.
Q3) The International Labor Organization has been around since 1919,and has a consistent record of being willing to take action against countries that violate core labor standards.
A)True
B)False
Q4) What are two main obstacles to increased international integration?
Page 10
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Chapter 9: Trade and the Balance of Payments
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Sample Questions
Q1) Which of the following is NOT part of the current account?
A)Dividends received on a foreign investment
B)Purchase of a plane ticket on a foreign airline
C)Shipment of food aid to a poor country
D)Purchase of a foreign bond
Q2) If a country runs a current account surplus and national private savings equals domestic investment,then the combined governmental accounts
A)must be balanced.
B)must be positive.
C)must be negative.
D)could be either negative or positive, depending on the net international investment position.
Q3) Based on Table 9.1,the statistical discrepancy is A)+100.
B)0)
C)-100. D)-200.
Q4) Technology transfer is not valuable to high-income countries.
A)True
B)False
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Sample Questions
Q1) Suppose that the nominal exchange rate between the U.S.dollar and the Canadian dollar is 0.75 U.S.dollars per Canadian dollar.If Canada's rate of inflation is 0 percent and the U.S.rate is 10 percent,then the real exchange rate for the U.S.dollar will
A)appreciate by about 9 percent.
B)appreciate by 10 percent.
C)depreciate by about 9 percent.
D)depreciate by 10 percent.
Q2) What are the differences and similarities between a depreciation and devaluation of a currency?
Q3) Which of the following defines a soft peg?
A)An exchange rate determined by the market
B)An exchange rate that fluctuates within a set band
C)An exchange rate that is not allowed to vary
D)An exchange rate that is backed by gold
Q4) Imports tend to fall whenever a nation's currency appreciates because foreign products become more expensive to domestic consumers.
A)True
B)False
Q5) Explain Mundell's four conditions for adopting a single currency.
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) Starting from a balanced budget,which of the following would NOT cause a government budget deficit?
A)A decrease in taxes
B)An increase in spending of goods and services
C)An increase in transfer payments
D)A 50 percent increase in spending accompanied by a 50 percent increase in taxes
Q2) During the worldwide recession of 2007-2009,
A)the Fed and the European Central Bank worked together.
B)all countries coordinated macroeconomic policies.
C)nations sacrificed some sovereignty.
D)the IMF coordinated world economic policies.
Q3) The recent trend internationally has been for the executive and legislative branches of elected governments to get more control over monetary policy,as has been the case in countries such as the United States.
A)True
B)False
Q4) Contractionary fiscal policy attempts to shift aggregate demand to the right.
A)True
B)False
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Chapter 12: International Financial Crises
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Sample Questions
Q1) Current research suggests that countries that adopt a pegged exchange rate may be more vulnerable to an exchange rate crisis.
A)True
B)False
Q2) Which of the following was NOT a cause or a characteristic of the 1994/95 Mexican peso crisis?
A)An overvalued exchange rate
B)An inflow of large foreign portfolio capital
C)The inability of the IMF, the world bank, and the NAFTA member countries (i.e., the United States and Canada)to predict the looming financial crisis
D)Shifts by the world capital markets toward more conservative and risk-averse investments because of interest and exchange rate movements around the world
Q3) A crisis caused by sudden capital flight
A)is easy to resolve with capital controls.
B)might be lessened if investor confidence can be increased.
C)has a clear and unique equilibrium outcome.
D)can be corrected through currency devaluation.
Q4) What are the benefits of capital mobility?
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Page 14
Chapter 13: The United States in the World Economy
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Sample Questions
Q1) Why are trade agreements between the U.S.and Mexico more controversial than trade agreements between the U.S.and Canada?
Q2) The ratio of trade to GDP for the U.S.has roughly tripled since the 1960s.
A)True
B)False
Q3) Which of the following is most important in determining the number of jobs in an economy?
A)Macroeconomic policies
B)Trade policies
C)Urban policies
D)Tax policies
Q4) U.S manufacturing exports have declined since the 1990s.
A)True
B)False
Q5) The main area of economic activity that Canada chose not to open to free trade is A)agriculture.
B)lumber.
C)cultural industries.
D)financial services.
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Chapter 14: The European Union: Many Markets Into One
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Sample Questions
Q1) The roots of the European Union are in agreements within the coal and steel industries.
A)True
B)False
Q2) In the face of capital outflow,countries had to lower interest rates to stay in the ERM.
A)True
B)False
Q3) Which EU institution has played a significant role is responding to the economic crisis that began in 2007?
Q4) EU deepening refers to
A)legislation that restricts the sovereignty of individual countries.
B)activities that cause increased levels of integration in the national economies.
C)extending the boundaries of the EU to include new members.
D)adding additional countries into the single currency area.
Q5) Emigration is when people leave a country because of supply push factors. A)True
B)False
Q6) Explain the costs and benefits of a single currency.
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Chapter 15: Trade and Policy Reform in Latin America
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Sample Questions
Q1) Latin America has more trade agreements than any other region,and it has some of the oldest as well.
A)True
B)False
Q2) In order to accumulate the resources that they needed to make interest payments,Latin American countries were forced to used macroeconomic policies that
A)devalued their currencies and caused deep recessions.
B)revalued their currencies and caused increased inflation.
C)devalued their currencies and caused increased inflation.
D)revalued their currencies and caused deep recessions.
Q3) The terms of trade are
A)the terms negotiated in a trade agreement.
B)exports plus imports divided by GDP.
C)the value of the real exchange rate.
D)the ratio of export prices to import prices.
Q4) Overvalued exchange rates benefit consumers in the short run.
A)True
B)False
Q5) What are the three initial conditions that trigger economic populism?
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Chapter 16: Export-Oriented Growth in East Asia
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Q1) After 2000,rapid economic growth continued for the high-growth Asian economies.
A)True
B)False
Q2) Could the high-income Asian economies be characterized as open economies? Explain.
Q3) Property rights are relatively secure and free from the threat of nationalization in the high-growth Asian economies.
A)True
B)False
Q4) The Latin American region has more economic equality than the high-growth Asian economies because nations are more democratic.
A)True
B)False
Q5) All eight countries known as the high-growth Asian economies are outwardly oriented for trade and investment,and all have experienced rapid growth by world standards.
A)True
B)False
Q6) Which factors account for most of the growth in the high growth Asian economies?
Page 18
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Chapter 17: China and India in the World Economy
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Sample Questions
Q1) Who was the leader of Chinese economic reforms?
Q2) Special economic zones in China have been
A)the same as export processing zones.
B)centers of economic reform.
C)controlled by state run enterprises.
D)poor regions that are targeted for industrial development.
Q3) Who was the leader of India's economic reforms?
Q4) The gravity model predicts that China and India will trade with
A)smaller economies that are close by.
B)larger economies that are close by.
C)larger economies that are distant.
D)smaller economies that are distant.
Q5) China has a larger population than India and is expected to be the most populous nation in the world throughout the twenty-first century. A)True B)False
Q6) What is the difference between Chinese and Indian trade in services?
Q7) China is not an important market for other nations' exports. A)True B)False
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