Applied International Economics
Solved Exam Questions
Course Introduction
Applied International Economics explores the fundamental theories, policies, and real-world applications of economics in a global context. Students examine topics such as international trade, exchange rates, globalization, and international financial markets, with an emphasis on the practical implications for businesses, governments, and consumers. The course includes analysis of current international economic issues, case studies, and the use of quantitative methods to assess the effects of economic policies and global events. By the end of the course, students gain the analytical tools needed to evaluate international economic trends and to contribute to decision-making in multinational environments.
Recommended Textbook
International Economics 14th Edition by Robert Carbaugh
Available Study Resources on Quizplus
17 Chapters
1874 Verified Questions
1874 Flashcards
Source URL: https://quizplus.com/study-set/1081 Page 2
Chapter 1: The International Economy and Globalization
Available Study Resources on Quizplus for this Chatper
48 Verified Questions
48 Flashcards
Source URL: https://quizplus.com/quiz/21353
Sample Questions
Q1) Arguments for free trade are sometimes disregarded by politicians because:
A) Maximizing domestic efficiency is not considered important
B) Maximizing consumer welfare may not be a chief priority
C) There exist sound economic reasons for keeping one's economy isolated from other economies
D) Economists tend to favor highly protected domestic markets
Answer: B
Q2) The first wave of globalization was brought to an end by
A) The Great Depression
B) The Second World War
C) The First World War
D) The Smoot-Hawley Act
Answer: C
Q3) Technological improvements are similar to international trade since they both:
A) Provide benefits for all producers and consumers
B) Increase the nation's aggregate income
C) Reduce unemployment for all domestic workers
D) Ensure that industries can operate at less than full capacity
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Foundations of Modern Trade Theory:
Comparative Advantage
Available Study Resources on Quizplus for this Chatper
170 Verified Questions
170 Flashcards
Source URL: https://quizplus.com/quiz/21354
Sample Questions
Q1) Referring to Table 2.1, the United Kingdom gains most from trade if:
A) 1 ton of steel trades for 2 televisions
B) 1 ton of steel trades for 3 televisions
C) 2 tons of steel trade for 4 televisions
D) 2 tons of steel trade for 5 televisions
Answer: B
Q2) If a country's terms of trade improve, it must exchange more exports for a given amount of imports.
A)True
B)False
Answer: False
Q3) Referring to Table 2.1, the United Kingdom has a comparative advantage in the production of:
A) Steel
B) Televisions
C) Both steel and televisions
D) Neither steel nor televisions
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Sources of Comparative Advantage
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/21355
Sample Questions
Q1) In explaining international trade, the product life cycle theory focuses on
A) Tastes and preferences
B) The role of technological innovation
C) Per-capita income levels of nations
D) Both b and c
Answer: B
Q2) Which trade theory is tantamount to a short-run version of the factor price equalization theory?
A) Specific factors theory
B) Product life cycle theory
C) Economies of scale theory
D) Overlapping demand theory
Answer: A
Q3) The product-life-cycle theory applies best to trade in primary products in the short run.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Tariffs
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21356
Sample Questions
Q1) What happens to effective protection when the value added by the domestic producer declines?
Q2) Consider Figure 4.2. With free trade, the United States achieves market equilibrium at a price of $____. At this price, ____ tons of steel are produced by U.S. firms, ____ tons are bought by U.S. buyers, and ____ tons are imported.
A) $450, 5 tons, 60 tons, 55 tons
B) $475, 10 tons, 50 tons, 40 tons
C) $525, 5 tons, 60 tons, 55 tons
D) $630, 30 tons, 30 tons, 0 tons
Q3) According to Figure 4.2, the tariff leads to the overall welfare of the United States:
A) Rising by $250
B) Rising by $500
C) Falling by $250
D) Falling by $500
Q4) Is it possible for a low nominal tariff rate to understate the effective rate of protection? What is tariff escalation?
Q5) Can import duties have unintended side effects?
Q6) How can tariffs be justified?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Nontariff Trade Barriers
Available Study Resources on Quizplus for this Chatper
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/21357
Sample Questions
Q1) 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
Q2) Consider Figure 5.3. Suppose the rest of the world can supply apples to Sweden at a price of $0.60 per pound. With free trade, Sweden produces ____ pounds of apples and imports ____ pounds of apples.
A) 10, 8
B) 10, 18
C) 6, 22
D) 6, 16
Q3) Consider Figure 5.6. In the global market for wine, the EU is willing to supply as much wine as the US demands at $8 per bottle. How much will the US produce and import in these circumstances?
A) 5 bottles, 40 bottles
B) 40 bottles, 0 bottles
C) 5 bottles, 35 bottles
D) 5 bottles, 0 bottles
Q4) Is a tariff-rate quota a two-tier tariff? Why?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Trade Regulations and Industrial Policies
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/21358
Sample Questions
Q1) Industrial policy attempts to foster the development of industries that offer long-run comparative disadvantages and which are insulated from other sectors of the economy.
A)True
B)False
Q2) The classical theory of comparative advantage assumes that firms operate in imperfectly competitive markets, while the theory of strategic trade policy assumes that firms operate in perfectly competitive markets.
A)True
B)False
Q3) The U.S. "trade-remedy laws" could establish all of the following \(\underline { \text { except } }\):
A) Import tariffs to protect U.S. firms seriously injured by foreign competition
B) Countervailing duties which neutralize foreign export subsidies
C) Antidumping duties which protect U.S. firms from imports sold at less-than-fair-value
D) Economic sanctions levied against hostile nations
Q4) What is the essential idea behind strategic trade policy?
Q5) What is the basis for trade adjustment assistance?
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Trade Policies for the Developing Nations
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/21359
Sample Questions
Q1) What are some major trade problems faced by developing nations?
Q2) Consider Figure 7.3. Under competitive conditions, the quantity of oil produced equals:
A) 40 barrels
B) 70 barrels
C) 90 barrels
D) 110 barrels
Q3) Developing countries have complained that because their commodity terms of trade has deteriorated in recent decades, they should receive preferential tariff treatment from industrialized countries.
A)True
B)False
Q4) Which of the following could partially explain why the terms of trade of developing countries might \(\underline { \text { deteriorate } }\) over time?
A) Developing-country exports mainly consist of manufactured goods
B) Developing-country imports mainly consist of primary products
C) Commodity export prices are determined in highly competitive markets
D) Commodity export prices are solely determined by developing countries
Q5) Are economic downturns helpful to cartels?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Regional Trading Arrangements
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/21360
Sample Questions
Q1) To protect its farmers from foreign competition, the European Union has utilized variable import levies and export subsidies.
A)True
B)False
Q2) The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.
A)True
B)False
Q3) If Chile and Mexico form a free-trade agreement, the welfare of the two countries will necessarily increase.
A)True
B)False
Q4) Explain the theory of optimum currency areas.
Q5) Consider Figure 8.1. The value of the trade creation effect, resulting from the Greece/France customs union, equals:
A) $5
B) $10
C) $15
D) $20
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: International Factor Movements and Multinational Enterprises
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/21361
Sample Questions
Q1) Consider Figure 9.2, at labor market equilibrium, _____ workers are hired at a wage rate of $____ per hour, while total wages equal ____.
A) 2, $12, $24
B) 2, $12, $36
C) 3, $9, $27
D) 3, $9, $36
Q2) Consider Figure 9.1. Suppose that Sony Company and American Company jointly form a new firm, Venture Company, whose ball bearings replace the output sold by the parents in the domestic market. Assuming that Venture Company operates as a monopoly and that its costs equal MC<sub>0</sub>=AC<sub>0</sub>, the firm's price, output, and total profit would respectively equal:
A) $6, 2 units, $4
B) $4, 2 units, $2
C) $6, 4 units, $4
D) $4, 4 units, $2
Q3) What are the disadvantages of forming joint ventures?
Q4) What are Mexican maquiladoras?
Q5) Are there any differences between the theory of multinational enterprises and conventional trade theory?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: The Balance of Payments
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/21362
Sample Questions
Q1) If an American receives dividends from the shares of stock she or he owns in Toyota, Inc., a Japanese firm, the transaction would be recorded on the U.S. balance of payments as a:
A) Capital account debit
B) Capital account credit
C) Current account debit
D) Current account credit
Q2) Debt (-) items in the balance of payments correspond to anything that:
A) Involves receipts from foreigners
B) Involves payments to foreigners
C) Increases the domestic money supply
D) Decreases the demand for foreign exchange
Q3) How do we measure the international investment position of the United States at any point in time? How did the U.S. become a net debtor nation so rapidly?
Q4) On the U.S. balance-of-payments statement, a capital inflow would occur if a Swiss resident purchases the securities of the U.S. government.
A)True
B)False
Q5) What are the components of the current account of the balance of payments?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Foreign Exchange
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/21363
Sample Questions
Q1) Similar to stock and commodity exchanges, the foreign exchange market is an organized structure with a central meeting place and formal licensing requirements.
A)True
B)False
Q2) The trade-weighted dollar is the weighted average of the exchange rates between the dollar and the most important industrial-country trading partners of the United States.
A)True
B)False
Q3) Refer to Figure 11.3. If the supply curve is represented by S<sub>0</sub>, the equilibrium exchange rate is
A) $1.20
B) $1.00
C) $0.80
D) $0.60
Q4) A commercial bank profits from foreign-exchange trading when its bid rate exceeds its offer rate.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Exchange-Rate Determination
Available Study Resources on Quizplus for this Chatper
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/21364
Sample Questions
Q1) 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
Q2) Consider Figure 12.3. The market is initially governed by demand curve D<sub>0</sub> and supply curve S<sub>0</sub>. Suppose US productivity growth is faster than the UK, which supply and demand curves depict the new situation?
A) S<sub>1</sub> and D<sub>2</sub>
B) S<sub>2</sub> and D<sub>1</sub>
C) S<sub>0</sub> and D<sub>2</sub>
D) S<sub>0 </sub>and D<sub>1</sub>
Q3) Suppose the exchange rate between the U.S. dollar and the Japanese yen is initially 90 yen per dollar. According to purchasing-power parity, if the price of traded goods rises by 5 percent in the United States and 15 percent in Japan, the exchange rate will become:
A) 72 yen per dollar
B) 81 yen per dollar
C) 99 yen per dollar
D) 108 yen per dollar
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Mechanisms of International Adjustment
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/21365
Sample Questions
Q1) An "automatic" adjustment mechanism would require a trade-surplus nation to accept price deflation and/or falling income as the cost of increasing imports.
A)True
B)False
Q2) Refer to Figure 13.1. The U.S. capital and financial account schedule would shift upward from CA<sub>0</sub> to CA<sub>1</sub> if:
A) U.S. political stability improves relative to foreign political stability
B) U.S. interest rates rise relative to foreign interest rates
C) Taxes are placed on income earned by U.S. residents from foreign investments
D) Restrictions are imposed on international loans granted by foreign banks
Q3) According to the equation of exchange, the total expenditures on final goods equals the monetary value of the final goods sold.
A)True
B)False
Q4) Compared to classical economists, how did Keynesian economics change the discussion of trade adjustment?
Q5) Is the monetary approach to the balance-of-payments part of the traditional adjustment theories?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Exchange-Rate Adjustments and the Balance of Payments
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/21366
Sample Questions
Q1) The monetary approach emphasizes the effects of currency depreciation on the purchasing power of money, and the resulting impact on domestic expenditure levels.
A)True
B)False
Q2) When producing jetliners, suppose that Boeing employs labor and materials whose costs are denominated in dollars and marks respectively. If the dollar's exchange value depreciates 20 percent against the mark, the mark-denominated cost of a Boeing jetliner falls by an amount less than 20 percent.
A)True
B)False
Q3) When manufacturing computer software, suppose that Microsoft Inc. uses labor and materials whose costs are denominated in dollars and francs respectively. If the dollar's exchange value depreciates 10 percent against the franc, the franc-denominated cost of the firm's software falls by 10 percent.
A)True
B)False
Q4) How do demand elasticities influence a country's trade position when exchange rates change?
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Exchange-Rate Systems and Currency Crises
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/21367
Sample Questions
Q1) Most nations currently allow their currencies' exchange values to be determined solely by the forces of supply and demand in a free market.
A)True
B)False
Q2) Under managed floating exchange rates, if the rate of inflation in the United States is \(\underline { \text { less } }\) than the rate of inflation of its trading partners, the dollar will likely:
A) Appreciate against foreign currencies
B) Depreciate against foreign currencies
C) Be officially revalued by the government
D) Be officially devalued by the government
Q3) Given an initial equilibrium in the money market and foreign exchange market, suppose the Federal Reserve \(\underline { \text { decreases } }\)the money supply of the United States. Under a floating exchange rate system, the dollar would:
A) Appreciate in value relative to other currencies
B) Depreciate in value relative to other currencies
C) Be officially devalued by the government
D) Be officially revalued by the government
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Macroeconomic Policy in an Open Economy
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/21368
Sample Questions
Q1) The Plaza Agreement of 1985 and Louvre Accord of 1987 are examples of:
A) Tariff trade barrier formation
B) Nontariff trade barrier formation
C) International economic policy coordination
D) Beggar-thy-neighbor policies
Q2) 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
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) What is international economic policy coordination?
Q5) Was the Plaza Agreement of 1985 a success?
Q6) What policy instrument should be used when demand-pull inflation exists?
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: International Banking: Reserves, Debt, and Risk
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/21369
Sample Questions
Q1) Eurocurrencies are deposits, denominated and payable in dollars and other foreign currencies, in banks outside the United States, primarily in London, the market's center.
A)True
B)False
Q2) Concerning international lending risk, country risk refers to the risk that part or all of the interest or principal of a loan will not be repaid.
A)True
B)False
Q3) Most analysts feel that the financial difficulties in East Asia were triggered by A) Misallocation of investment
B) Unavailability of cheap foreign labor
C) Lack of alignment of the exchange rate with the dollar
D) Surpluses in the trade accounts of the Asian countries
Q4) The demand for international reserves tend to increase with the level of world income and trade activity.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19