Applied International Economics
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Course Introduction
Applied International Economics explores the practical aspects of international economic relations, focusing on trade, finance, and investment across borders. The course examines key concepts such as comparative advantage, balance of payments, exchange rate dynamics, and the impact of international policies on domestic economies. Students will analyze real-world case studies, evaluate the effects of globalization, and use quantitative tools to assess current issues in international economics. Emphasis is placed on policy applications, economic integration, and the role of international organizations in regulating economic activity among nations.
Recommended Textbook
International Economics 7th Edition by James Gerber
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17 Chapters
1201 Verified Questions
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Page 2
Chapter 1: The United States in a Global Economy
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Sample Questions
Q1) Labor mobility was
A)less in 1900 than in 2010.
B)unimportant to global integration until the 1960s.
C)greater in 1900 than in 2010.
D)never controversial.
Answer: C
Q2) Which of the following is FALSE?
A)Capital flows today are larger mainly because economies are larger.
B)The last two decades are the first time in history that a nation has borrowed more than 10 percent of its GDP.
C)There are important qualitative differences between capital flows today and in the past.
D)Today most international financial transactions involve buying and selling assets denominated in foreign currencies.
Answer: B
Q3) Open economies grow more slowly than closed economies.
A)True
B)False
Answer: False
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Chapter 2: International Economic Institutions Since World
War II
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Sample Questions
Q1) China's alternative to the IMF is called A)AIIB.
B)ASEAN.
C)MERCOSUR.
D)TIIP.
Answer: A
Q2) Until the Uruguay Round of trade negotiations,which of the following sectors were NOT included in the rules for international trade?
A)Steel and agriculture
B)Agriculture and apparel
C)Steel and textiles
D)Automobiles and agriculture
Answer: B
Q3) Which multilateral institution serves as the lender of last resort?
Answer: The IMF
Q4) WTO talks in the late 1990s led to openings in both financial services and telecommunications.
A)True
B)False Answer: True
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Chapter 3: Comparative Advantage and the Gains From Trade
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Sample Questions
Q1) If a nation is more productive than a trading partner,can it still gain from trade with that partner? Use the concepts of absolute and comparative advantage to explain. Answer: The gains from trade do not rely on overall productivity (absolute advantage)but on differences in relative prices (comparative advantage).In producing a good or service,as long as a trading partner gives up fewer units of an alternate product,we can gain from trade with them.
Q2) A country will gain relatively more from trade when A)trade is regulated.
B)the world price is close to the country's opportunity cost of the good.
C)the world price is below the country's opportunity cost of the good.
D)the world price is much greater than the country's opportunity cost for the good. Answer: D
Q3) What type of policies did Adam Smith attack in his book,An Inquiry into the Nature and Causes of the Wealth of Nations?
Answer: Mercantilism
Q4) In the simple trade model,what is assumed about labor?
Answer: It is perfectly mobile between the two industries within a nation.
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Chapter 4: Comparative Advantage and Factor
Endowments
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Sample Questions
Q1) Empirical tests of the theory of comparative advantage have provided
A)strong support for both the Ricardian and Heckscher-Ohlin models.
B)mixed support for the Ricardian model and strong support for the Heckscher-Ohlin model.
C)strong support for the Ricardian model and mixed support for the Heckscher-Ohlin model.
D)mixed support for both Ricardian and Heckscher-Ohlin models.
E)no support for either the Ricardian or the Heckscher-Ohlin models.
Q2) Suppose that Brazil is capital abundant and Chile is natural resource abundant.If timber is natural resource intensive and computers are capital intensive,then according to the Heckscher-Ohlin Theorem,Chile should export goods that
A)intensively use labor input.
B)intensively use capital input.
C)intensively use natural resources.
D)use capital and labor in about equal proportions.
Q3) If General Motors imports parts from its plants in Canada and Mexico for finished trucks that it will sell across the NAFTA region,what type of trade does this represent?
Q4) In the Heckscher-Ohlin model,what assumption is made about opportunity costs?
Page 6
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Chapter 5: Beyond Comparative Advantage
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Sample Questions
Q1) Intraindustry trade refers to
A)international trade in products made within the same industry.
B)international trade in products made across different industries.
C)trade that occurs as a result of comparative advantage.
D)the exchange of dissimilar items.
Q2) Suppose that the United States decided to subsidize a major research and development effort by U.S.firms in the semiconductor industry.Under the current rules of the WTO and GATT,the U.S.effort is
A)allowed as long as the subsidies are a small percent of the total cost.
B)allowed as long as the subsidies do not involve a direct payment to the industry.
C)not allowed.
D)allowed as long as the subsidies are for developing a "precompetitive" technology.
Q3) Concentration of firms in a particular region is likely to attract skilled labor to that area.
A)True
B)False
Q4) Explain how concentration of industries in a particular region can lead to external economies.
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Page 7
Chapter 6: The Theory of Tariffs and Quotas
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Sample Questions
Q1) In the case of a small country,consumer surplus
A)decreases less with a tariff than with an equivalent quota.
B)decreases less with a quota than with an equivalent tariff.
C)decreases the same with tariffs and equivalent quotas.
D)increases more with quotas.
Q2) What has been the most significant obstacle to progress in the Doha Round?
Q3) Average tariff rates are highest for
A)high-income countries.
B)middle-income countries.
C)low-income countries.
D)industrialized countries.
Q4) What do developing countries want regarding agriculture in the Doha Round?
Q5) In economic terms,tariffs are preferred to quotas because
A)domestic manufacturers gain more producer surplus.
B)there is less loss of consumer surplus.
C)quotas create a greater production inefficiency.
D)given the way quotas are usually administered, tariffs cause a smaller net national welfare loss.
Q6) Why is the Doha Round called the Doha Development Round?
Q7) What are the three major types of quotas?
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Chapter 7: Commercial Policy
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Sample Questions
Q1) The average agricultural tariff in the U.S. is about
A) 3 percent.
B) 5 percent.
C) 9 percent.
D) 15 percent.
Q2) If a large percentage of economic activity in developing countries is unrecorded, then the countries are likely to rely on which of the following taxes to provide government revenue?
A) Sales taxes
B) Property taxes
C) Income taxes
D) Tariffs
Q3) At this point, potential gains from further tariff reductions worldwide are
A) still very large.
B) equal to zero.
C) relatively small.
D) not worth the cost of negotiations.
Q4) Choose one of the arguments countries generally use to justify protection for a particular industry. Describe the argument and any inherent problems with it. Is the argument primarily an economic or a noneconomic one?
Page 9
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Chapter 8: International Trade and Labor and Environmental Standards
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Sample Questions
Q1) Critics argue that concern about labor practices in other countries is often used to justify protectionism.Is this a reasonable criticism? Explain.
Q2) What is a pollution haven,and is there evidence that pollution havens exist?
Q3) All of the following are reasons countries may be unable to use discriminatory trade practices to enforce labor standards EXCEPT
A)countries can never impose trade barriers on other sovereign nations.
B)the WTO requires nations to treat other nations the same.
C)a single country may be unsuccessful in convincing members of its trading block to participate in imposing the sanctions.
D)retaliation or a full blown trade war might result.
Q4) Separate standards refers to
A)the elimination of tariffs and quotas by trading partners.
B)common product safety, environment, labor, and fair competition standards agreed upon by trading partners.
C)the acceptance of a trading partner's standards as valid and sufficient by another trading partner.
D)standards held by different trading partners which other partners refuse to recognize.
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Chapter 9: Trade and the Balance of Payments
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Sample Questions
Q1) Technology transfer comes only from nations importing new capital goods in the current account.
A)True
B)False
Q2) It is unclear whether the free flow of capital is beneficial to all countries.Explain the benefits and costs of allowing capital to move freely.
Q3) What does a current account deficit do that is positive for a nation?
Q4) What were some of the consequences of the large current account deficits that the U.S.ran from the 1990s to 2007?
Q5) Which of the following is FALSE?
A)In 2002, the United States imported more goods and services from foreign suppliers than it exported to foreign purchasers.
B)Services are almost one-third of total exports and are a growing part of U.S. and world trade.
C)The U.S. trade balance in services is in deficit.
D)With the exception of the Gulf War period in 1991, the U.S. current account has been in deficit since the 1980s.
Q6) Explain why current account deficits may or may not be harmful to a country.
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Sample Questions
Q1) Which type of exchange rate system minimizes external shocks to an economy?
Q2) If U.S.consumers increase their demand for foreign products and foreign travel,the U.S.dollar would tend to depreciate as more dollars are supplied to foreign exchange markets.
A)True
B)False
Q3) When the purchasing power of currencies is the same,
A)interest parity holds.
B)currencies cannot change in value
C)the real exchange rate is equal to the nominal exchange rate.
D)interest rates are the same.
Q4) The spot rate is the rate at which foreign currencies will be exchanged a specified number of days in the future.
A)True
B)False
Q5) Economic research using data from the 1990s has shown that
A)floating rate systems are better for economic growth.
B)fixed rate systems are better for economic growth.
C)gold standards are better for economic growth.
D)there is no clear relationship between the exchange rate system and growth.
Page 12
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) Which of the following is FALSE concerning the long run?
A)Economists believe that fiscal and monetary policies have no permanent effects on the economy.
B)Economists more or less agree that the economy tends to fluctuate around the level that is consistent with full employment.
C)In the long run, the unemployment rate returns to its normal level.
D)The current account must tend toward balance in the long run.
E)None of the above.
Q2) All of the following make the use of fiscal policy less attractive except
A)that it cannot be effective unless it is accommodated with expansionary monetary policy.
B)the substantial margin of error in the value of the multiplier.
C)the legislative lag, which is the time it takes for Congress and the President to pass and implement the measure.
D)the crowding out effect, which is the decrease in private spending that occurs due to increased government spending.
Q3) Explain why expenditure switching and expenditure reducing policies need to be used together.
Q4) What typically happens to imports as income and spending rise?
Page 13
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Chapter 12: International Financial Crises
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Sample Questions
Q1) When a country borrows from the IMF
A)it receives all the funds from the loan at once.
B)it receives funds in tranches, each dependent on the completion of reform targets.
C)it is free of conditions.
D)it can be any amount that the country requests.
Q2) Capital controls for banks
A)reduce the chance of bank failures.
B)have been demonstrated to be effective in preventing financial crises.
C)increase the problem of moral hazard.
D)increase the profitability of banks.
Q3) How were macroeconomic balances different in the period from 2000 to 2007 from past financial crises?
Q4) 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.
Q5) If the banking sector borrows internationally and lends locally,how does this intensify a financial crisis?
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Chapter 13: The United States in the World Economy
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Sample Questions
Q1) Major trading partners with the United States have not changed significantly over the last several decade with the exception of trade with A)the United Kingdom.
B)Mexico.
C)China.
D)Canada.
Q2) Preferential agreements
A)are the same as free trade agreements.
B)provide market access without demanding reciprocation.
C)are not recognized under WTO rules.
D)must be approved by the IMF.
Q3) Explain the importance of free trade agreements to the U.S.and how they benefit the U.S.economy.
Q4) Explain what a purchasing power parity adjustment is and why it is necessary.Should it always be used?
Q5) What two trends was Canada trying to address in negotiating CUSTA?
Q6) The TPP incorporates labor standards directly rather than as a side agreement.
A)True
B)False
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Chapter 14: The European Union: Many Markets Into One
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Sample Questions
Q1) All countries in the European Union use the euro as their currency.
A)True
B)False
Q2) Other nations had tried economic union in the past,and since adopting a common currency had shown economic benefits for them,the nations of Europe decided to try it too.
A)True B)False
Q3) The single most important factor in the 1992 crisis of the EMS was
A)ratification of the Single European Act.
B)the near failure of the Maastricht Treaty.
C)German reunification efforts.
D)the outbreak of war in the former Yugoslavia.
Q4) The Single European Act
A)created a common currency.
B)created a free trade area.
C)created a customs union.
D)created a common market for capital and labor.
Q5) Which EU institution has played a significant role is responding to the economic crisis that began in 2007?
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Chapter 15: Trade and Policy Reform in Latin America
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Sample Questions
Q1) Overvalued exchange rates were a persistent problem under ISI policies.In part,this was a deliberate policy in order to
A)increase imports.
B)discourage exports.
C)help targeted industries sell their exports.
D)help targeted industries buy imports.
Q2) While the Brady Plan did not end the debt crisis,it was a significant step toward greater stability in the Latin American region.
A)True
B)False
Q3) Today,primary commodities
A)are not a major export for most of Latin America.
B)are highly valued relative to manufactured goods.
C)have benefited from increased demand from growing world economies.
D)are not subject to business cycles.
Q4) What benefits did an overvalued currency offer a domestic economy in the ISI period? Which sectors were typically harmed by overvalued currencies?
Q5) Explain the reasons for export pessimism in Latin American countries.
Q6) What are the three initial conditions that trigger economic populism?
Page 17
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Chapter 16: Export-Oriented Growth in East Asia
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Q1) What types of government intervention did the World Bank determine was common in the East Asian economies?
Q2) Name the eight high-growth Asian economies.
Q3) Export promotion is widely regarding by economists as a positive role for government policy makers to play because it is very effective at promoting economic growth.
A)True
B)False
Q4) What evidence is there that industrial policies were a major influence on East Asian success?
Q5) One of the functions of deliberation councils is to A)coordinate foreign investment from different countries. B)set educational policy for universities and colleges.
C)coordinate government policy and private investment.
D)ensure stability in the country's fiscal and monetary policies.
Q6) Each of the high-growth Asian economies promoted manufactured exports. A)True B)False
Q7) Could the high-income Asian economies be characterized as open economies? Explain.
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Chapter 17: China and India in the World Economy
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Sample Questions
Q1) Some claim that China's trade surpluses are created by currency undervaluation.Is this true? Explain.
Q2) India would raise income levels faster if workers migrated from the country to the city.
A)True
B)False
Q3) What is the difference between Chinese and Indian trade in services?
Q4) India's economic reforms began in
A)1960.
B)1978.
C)1991.
D)1998.
Q5) What did China create to allow more international trade?
A)Special economic zones
B)Foreign exchange centers
C)More open and transparent government meetings
D)New educational efforts
Q6) Can U.S.manufacturing job losses be attributed to the growth of manufacturing in China?
Q7) Who was the leader of Chinese economic reforms?
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