Applied International Economics
Mock Exam
Course Introduction
Applied International Economics examines the practical applications of economic theories and models to real-world issues in the global economy. This course covers topics such as international trade, exchange rates, balance of payments, trade policy, and the effects of globalization on economic growth and development. Students will analyze case studies, use empirical data, and employ quantitative methods to assess the impact of international economic events and policies on businesses, governments, and individuals. The course is designed to provide students with the analytical tools necessary to understand and evaluate international economic phenomena, preparing them for careers in business, government, or international organizations.
Recommended Textbook
International Economics 14th Edition by Robert Carbaugh
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17 Chapters
1874 Verified Questions
1874 Flashcards
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Page 2
Chapter 1: The International Economy and Globalization
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) For a nation to maximize its productivity in a global economy:
A) Only imports are necessary
B) Only exports are necessary
C) Both imports and exports are necessary
D) Neither imports nor exports are necessary
Answer: C
Q2) If a nation has an open economy, it means that the nation:
A) Allows private ownership of capital
B) Has flexible exchange rates
C) Has fixed exchange rates
D) Conducts trade with other countries
Answer: D
Q3) Recent empirical studies indicate that productivity performance in industries is:
A) Directly related to globalization of industries
B) Inversely related to globalization of industries
C) Not related to globalization of industries
D) Any of the above
Answer: A
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3
Chapter 2: Foundations of Modern Trade Theory: Comparative Advantage
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170 Flashcards
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Sample Questions
Q1) The existence of exit barriers tends to delay the closing of inefficient firms that face international competitive disadvantages.
A)True
B)False
Answer: True
Q2) The Ricardian theory of comparative advantage assumes only two nations and two products, labor can move freely within a nation, and perfect competition exists in all markets.
A)True
B)False
Answer: True
Q3) In autarky equilibrium, a nation realizes the lowest possible level of satisfaction given the constraint of its production possibilities schedule.
A)True
B)False
Answer: False
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4
Chapter 3: Sources of Comparative Advantage
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) According to the factor-endowment theory, a nation will import that good for which a large amount of the relatively abundant resource is used.
A)True
B)False
Answer: False
Q2) The Leontief paradox questioned the validity of the theory of:
A) Comparative advantage
B) Factor endowments
C) Overlapping demands
D) Absolute advantage
Answer: B
Q3) Classical trade theory emphasized which of the following as an underlying explanation of the basis for trade?
A) Productivities of labor inputs
B) Tastes and preferences among nations
C) Changes in technologies over time
D) Quantities of economic resources
Answer: A
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Chapter 4: Tariffs
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) A tariff on steel imports tends to improve the competitiveness of domestic automobile companies.
A)True
B)False
Q2) Consider Figure 4.1. With free trade, the total value of Mexico's imports equal:
A) $220
B) $260
C) $290
D) $300
Q3) According to Figure 4.1, the loss in Mexican consumer surplus due to the tariff equals:
A) $225
B) $265
C) $285
D) $325
Q4) An import tariff reduces the welfare of a "small" country by an amount equal to the redistribution effect plus the revenue effect.
A)True
B)False
Q5) Can import duties have unintended side effects?
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Chapter 5: Nontariff Trade Barriers
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) A firm granting lifetime employment to its workers has the incentive to engage in international dumping during periods of business recession and excess production capacity.
A)True
B)False
Q2) Export subsidies levied by foreign governments on products in which the United States has a comparative disadvantage:
A) Lower the welfare of all Americans
B) Lead to increases in U.S. consumer surplus
C) Encourage U.S. production of competing goods
D) Encourage U.S. workers to demand higher wages
Q3) The purpose of international dumping is to decrease a firm's costs and increase its profits, compared to what would be realized in the absence of dumping.
A)True
B)False
Q4) What is an OMA?
Q5) Consider Figure 5.5. The Japanese export quota's revenue effect totals $1200.
A)True
B)False
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Chapter 6: Trade Regulations and Industrial Policies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) What is the basis for trade adjustment assistance?
Q2) By reducing available supplies of a product, an export embargo leads to falling prices in the target nation and increasing target-nation consumer surplus.
A)True
B)False
Q3) In 1990 the United States and its allies imposed trade embargoes on exports/imports to/from Iraq in response to its invasion of Kuwait. The embargoes would induce smaller losses in Iraq's consumer surplus the:
A) Lesser its initial dependence on foreign products
B) Less elastic Iraq's demand schedule
C) Lesser the available output from alternative suppliers
D) More inelastic Iraq's supply schedule
Q4) Referring to Figure 6.1, the total cost of the Airbus subsidy to the European taxpayer equals:
A) $16 million
B) $20 million
C) $24 million
D) $28 million
Q5) What is the essential idea behind strategic trade policy?
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Chapter 7: Trade Policies for the Developing Nations
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100 Verified Questions
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Sample Questions
Q1) Under the Generalized System of Preferences program, the major industrial countries agree to temporarily reduce tariffs on designated imports from other industrial countries.
A)True
B)False
Q2) Concerning the price elasticities of supply and demand for commodities, empirical estimates suggest that most commodities have:
A) Inelastic supply schedules and inelastic demand schedules
B) Inelastic supply schedules and elastic demand schedules
C) Elastic supply schedules and inelastic demand schedules
D) Elastic supply schedules and elastic demand schedules
Q3) Which trade strategy have developing countries used to restrict imports of manufactured goods so that the domestic market is preserved for home producers, who thus can take over markets already established in the country?
A) International commodity agreement
B) Export promotion
C) Multilateral contract
D) Import substitution
Q4) Are economic downturns helpful to cartels?
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Chapter 8: Regional Trading Arrangements
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Consider to Figure 8.1. Assume Greece levies a per-unit tariff of $20 on imports from both Germany and France. Greece will import:
A) 1 calculator from Germany
B) 1 calculator from France
C) 3 calculators from Germany
D) 3 calculators from France
Q2) The North American Free-Trade Agreement was most strongly opposed by U.S.:
A) Electronics manufacturers
B) Labor unions
C) Commercial banks
D) Engineering companies
Q3) Consider Figure 8.1. Assume Greece levies a per-unit tariff of $20 on imports from both Germany and France. The deadweight welfare loss to Greece, resulting from the $20 tariff, equals:
A) $20
B) $40
C) $60
D) $80
Q4) Concerning transition economies, what do the advocates of shock therapy propose?
Q5) What is meant by economic integration?
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Chapter 9: International Factor Movements and Multinational Enterprises
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Developing countries have sometimes feared open immigration policies of developed countries on the grounds that highly educated and skilled people may emigrate to the developed countries, thus limiting the growth potential of the developing countries.
A)True
B)False
Q2) 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
Q3) The source (home) location of most of the world's leading multinational enterprises is:
A) North America and Europe
B) North America and Asia
C) Europe and South America
D) Europe and Asia
Q4) What are Mexican maquiladoras?
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Q5) What are the typical ways in which multinational enterprises have diversified their operations?
Chapter 10: The Balance of Payments
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Sample Questions
Q1) Concerning the balance of payments, the goods-and-services balance is commonly referred to as the "trade balance" by the news media.
A)True
B)False
Q2) Which balance-of-payments item does not directly enter into the calculation of the U.S. gross domestic product?
A) Merchandise imports
B) Shipping and transportation receipts
C) Direct foreign investment
D) Service exports
Q3) Reducing a current account deficit requires a country to:
A) Increase private saving relative to investment
B) Increase private consumption relative to saving
C) Increase private investment relative to consumption
D) Increase private investment relative to saving
Q4) What does a current account deficit mean?
Q5) Refer to Table 10.3. The services balance registered a surplus of $100 billion. A)True
B)False
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Chapter 11: Foreign Exchange
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) If the trade-weighted dollar moves from an index value to 100 to 110, the dollar depreciates by 10 percent against the trade-weighted averages of the exchange rates of the major trading partners of the United States.
A)True
B)False
Q2) Where are foreign currency options traded?
Q3) Refer to Table 11.4. On Wednesday, the 30-day forward franc was selling at a:
A) 1 percent premium per annum against the dollar
B) 2 percent premium per annum against the dollar
C) 1 percent discount per annum against the dollar
D) 2 percent discount per annum against the dollar
Q4) A commercial bank profits from foreign-exchange trading when its bid rate exceeds its offer rate.
A)True
B)False
Q5) A depreciation of the dollar refers to:
A) A fall in the dollar price of foreign currency
B) An increase in the dollar price of foreign currency
C) A loss of foreign-exchange reserves for the U.S.
D) An intervention in the international money market
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Chapter 12: Exchange-Rate Determination
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) Econometric models are best suited for forecasting long-run exchange rates rather than short-run exchange rates.
A)True
B)False
Q2) If Mexico's labor productivity rises relative to Europe's labor productivity:
A) The peso tends to depreciate against the euro in the short run
B) The peso tends to appreciate against the euro in the short run
C) The peso tends to depreciate against the euro in the long run
D) The peso tends to appreciate against the euro in the long run
Q3) Exchange-rate overshooting is based on the notion that the supply schedule of a currency is more elastic in the short run than in the long run.
A)True
B)False
Q4) \(\underline{\mathrm{High}}\)real interest rates in the United States tend to:
A) Decrease the demand for dollars, causing the dollar to depreciate
B) Decrease the demand for dollars, causing the dollar to appreciate
C) Increase the demand for dollars, causing the dollar to depreciate
D) Increase the demand for dollars, causing the dollar to appreciate
Q5) What is the asset market approach to exchange rate determination?
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Chapter 13: Mechanisms of International Adjustment
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Sample Questions
Q1) Refer to Table 13.1. If weak economic conditions abroad result in Canada's exports falling from $3000 billion to $2500 billion, Canada's equilibrium income falls by approximately:
A) $888 billion
B) $990 billion
C) $1110 billion
D) $1220 billion
Q2) Under the price-adjustment mechanism, trade-deficit nations realize price inflation and a loss of competitiveness while trade surplus nations realize price deflation and an improvement in competitiveness.
A)True
B)False
Q3) Compared to classical economists, how did Keynesian economics change the discussion of trade adjustment?
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
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Chapter 14: Exchange-Rate Adjustments and the Balance of Payments
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Empirical research suggests that most countries' price elasticities of demand for imports and exports are very inelastic, suggesting that currency depreciation would result in a worsening of a country's balance of trade.
A)True
B)False
Q2) The ____ effect suggests that following a currency depreciation a country's trade balance worsens for a period before it improves.
A) Marshall-Lerner
B) J-curve
C) Absorption
D) Pass-through
Q3) According to the J-curve effect, currency depreciation:
A) Decreases a trade deficit
B) Increases a trade deficit
C) Decreases a trade deficit before increasing a trade deficit
D) Increases a trade deficit before decreasing a trade deficit
Q4) How is the absorption approach used for analyzing the effects of currency devaluation?
Q5) What is a pass-through relationship?
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Chapter 15: Exchange-Rate Systems and Currency Crises
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) A main purpose of exchange stabilization funds is to:
A) Permit a country to overvalue its currency in the exchange markets
B) Permit a country to undervalue its currency in the exchange markets
C) Increase the supply of foreign currency when imports exceed exports
D) Decrease the supply of foreign currency when imports exceed exports
Q2) A market-determined \(\underline { \text { increase } }\) in the dollar price of the pound is associated with:
A) Revaluation of the dollar
B) Devaluation of the dollar
C) Appreciation of the dollar
D) Depreciation of the dollar
Q3) The U.S. dollar is generally regarded as the major "key currency" of the international monetary system.
A)True
B)False
Q4) Which nations use multiple exchange rates the most and why?
Q5) What is the difference between the crawling peg and adjustable pegged exchange rates?
Q6) How can currency boards and dollarization prevent currency crises?
Q7) What is an SDR?
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Chapter 16: Macroeconomic Policy in an Open Economy
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72 Verified Questions
72 Flashcards
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Sample Questions
Q1) Most industrial countries generally considered ____ as the most important economic goal.
A) External balance
B) Internal balance
C) Maximum efficiency for business
D) Maximum efficiency for labor
Q2) Expenditure-switching policies include fiscal policy and monetary policy.
A)True
B)False
Q3) Policy coordination is complicated by
A) Different economic objectives
B) Different national institutions
C) Different phases in the business cycle
D) All of the above
Q4) Given a system of floating exchange rates, an expansionary monetary policy by the Federal Reserve will cause
A) the dollar to appreciate and will decrease U.S. net exports
B) the dollar to appreciate and will increase U.S. net exports
C) the dollar to depreciate and will increase U.S. net exports
D) the dollar to depreciate and will decrease U.S. net exports
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Chapter 17: International Banking: Reserves, Debt, and Risk
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Sample Questions
Q1) With floating exchange rates, payments imbalances tend to be corrected by market-induced fluctuations in the exchange rate, and the need for exchange-rate stabilization and international reserves disappears.
A)True
B)False
Q2) A debt-equity swap results in a trade surplus nation forgiving the loans made to a trade-deficit nation.
A)True
B)False
Q3) Which of the following assets makes use of the basket valuation technique?
A) Swap agreements
B) Oil facility
C) Buffer stock facility
D) Special drawing rights
Q4) To the extent that adjustments in prices, interest rates, and income levels promote balance-of-payments equilibrium, the demand for international reserves decreases.
A)True
B)False
Q5) How can a bank reduce its exposure to the debt of developing nations?
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