Applied International Economics
Test Preparation
Course Introduction
Applied International Economics explores the practical aspects of international economic relations, focusing on the real-world applications of trade theory, exchange rates, international monetary systems, and economic integration. The course examines how governments, businesses, and institutions respond to globalization, regional trade agreements, and current policy debates. Students analyze empirical data and case studies to understand the impact of international economic policies on growth, development, and market dynamics, gaining insights into topics such as balance of payments, foreign direct investment, and the operation of multinational enterprises in a global context.
Recommended Textbook
International Economics 6th Edition by James Gerber
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17 Chapters
830 Verified Questions
830 Flashcards
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Page 2
Chapter 1: The United States in a Global Economy
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46 Verified Questions
46 Flashcards
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Sample Questions
Q1) Which nations does the acronym BRIC stand for?
Answer: Brazil,Russia,India and China
Q2) How is the international economy qualitatively different in the first part of the twenty-first century from what it was like in the first part of the twentieth century?
Answer: Since tariffs and quotas have been reduced (and would have been the common barriers in the past),now nations are addressing issues related to deeper levels of integration,which involve domestic policies such as labor or environmental standards or investment policies.Today there are multilateral international governmental organizations that address global economic issues where none existed then.There has been a significant increase in the number of regional trade agreements.
Q3) Which of the following kinds of agreements between two or more countries would be an example of a shallow integration measure?
A)An agreement to accept another nation's certification of architects
B)An agreement to unify customs forms in order to speed up cross-border traffic
C)An agreement to use the same environmental standards
D)An agreement to impose the same limits on cartels and monopolies
E)An agreement to limit subsidies offered to domestic businesses
Answer: B
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Chapter 2: International Economic Institutions Since World
War Ii
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50 Verified Questions
50 Flashcards
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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.
E)to limit the tariffs of the United States.
Answer: C
Q2) What is MFN status? How does the WTO reconcile the principle of equal treatment with the preferential treatment created by regional trade agreements?
Answer: MFN status is basically that you will treat all nations participating in the agreement the same.A regional trade agreement creates preferential treatment for nations that are participants.(For example,because of NAFTA,Mexico and Canada get more preferential terms with the United States than other WTO members would. )The WTO recognizes that regional agreements destroy some opportunities for trade (by making nonmembers face higher barriers than members),but believes they create more trade between participants than they destroy.The regional agreements also allow nations to try out new arrangements that may later be adopted more broadly.
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Page 4
Chapter 3: Comparative Advantage and the Gains From Trade
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) What results has the Republic of Korea experienced from its change in policies?
Answer: It has successfully industrialized.Its index of openness is many times greater and incomes have grown almost 6 percent per year over the period.
Q2) For a country in autarky,the opportunity cost of the good on the horizontal axis is the same as
A)the relative price of the good on the vertical axis.
B)the relative price of the good on the horizontal axis.
C)the opportunity cost of the good on the vertical axis.
D)Both A and C.
E)None of the above.
Answer: B
Q3) If a nation has no absolute advantage,then it
A)cannot gain from trade.
B)still gains from trade.
C)can only gain from trade if it raises its productivity levels.
D)can only gain from trade if it reduces wages paid.
E)can only gain from trade if it produces outside its production possibilities curve.
Answer: B
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Chapter 4: Comparative Advantage and Factor
Endowments
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53 Verified Questions
53 Flashcards
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Sample Questions
Q1) 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.
Q2) After trade opens,the short run impact on the income of the specific factor that is relatively scarce will be
A)a decrease in its income.
B)an increase in its income.
C)no change in its income.
D)indeterminate,income effects are not possible to know.
Q3) OLI theory is a direct contradiction of trade theory,especially trade theory based on comparative advantage.
A)True
B)False
Q4) What is the source of comparative advantage in the Heckscher-Ohlin model?
Q5) How is offshoring of services different from past trade patterns?
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Chapter 5: Beyond Comparative Advantage
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43 Verified Questions
43 Flashcards
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Sample Questions
Q1) Interindustry trade is not based on comparative advantage since it consists of the export and import of similar countries and mostly between countries that have similar productivity,technology,and factor endowments.
A)True
B)False
Q2) Internal economies of scale means that
A)firms are experiencing lower average production costs due to a geographical concentration of firms in their industry that make it cheaper and easier to hire highly specialized workers and inputs.
B)firms will have lower profits after international trade begins,because costs will be higher than when they just focused on the domestic market.
C)consumers will have less choices once trade begins,because firms will be squeezed out of the market.
D)simply expanding the size of the market the firm serves reduces overall per unit costs,since the firm can spread costs over more output.
Q3) If the United States and Mexico trade Budweiser for Modelo beer,what type of trade does this represent?
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Chapter 6: The Theory of Tariffs and Quotas
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59 Verified Questions
59 Flashcards
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Sample Questions
Q1) A real cost of tariffs and quotas that is difficult to measure is that they
A)encourage rent seeking.
B)shift income from consumers to producers.
C)limit the quantity of imports.
D)reduce wages.
E)cause deflation.
Q2) What is Joseph Stiglitz' main criticism regarding intellectual property rights protection?
Q3) Which of the following is FALSE?
A)Consumer surplus increases after a tariff is placed on imports.
B)Producer surplus increases after a tariff is imposed.
C)Government revenue increases after a tariff is imposed.
D)Deadweight losses result from tariffs.
Q4) An increase in domestic demand for a product protected by a quota results in an increase in producer surplus for domestic firms,while for a tariff it would result in more imports.
A)True
B)False
Q5) Give an example from your text of a nontariff measure that could reduce the quantity of imports or exports.
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Chapter 7: Commercial Policy
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46 Verified Questions
46 Flashcards
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Sample Questions
Q1) When comparing the U.S.and Mexican car assembly industries,the disadvantage of higher U.S.wages is offset by
A)Mexican trade barriers.
B)trade adjustment assistance in the United States.
C)higher productivity in the United States.
D)a lower opportunity cost in Mexico.
E)"Buy American" advertising campaigns in the United States.
Q2) A countervailing duty is a tariff that is levied to counteract
A)the dumping of goods in the domestic market by foreign firms.
B)a sudden surge of imports which hurt a domestic industry.
C)subsidies given to foreign firms by their own governments.
D)the tariff on domestic goods that are enacted by foreign governments.
E)low prices for imported goods that are made in countries with low wages.
Q3) It seems likely that economic sanctions ultimately would have led to regime change in Iraq.
A)True
B)False
Q4) In the United States,which part of government investigates claims of subsidies or dumping?
Q5) Critique the infant industry or the labor argument for protection.
Page 9
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Chapter 8: International Trade and Labor and Environmental Standards
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) One reason why the plants of multinational corporations abroad may have better standards than domestic contractors in low-income countries is because multinational corporations tend to reduce costs by using one standard in terms of capital equipment and technology for all markets.
A)True
B)False
Q2) Low-income countries are largely responsible for excess carbon dioxide emissions globally.
A)True
B)False
Q3) 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 or keeping of a trading partner's standards as valid and sufficient by another trading partner.
D)separate standards held by different trading partners which other partners refuse to recognize.
Q4) What environmental problem gets worse as income rises according to your text?
Page 10
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Chapter 9: Trade and the Balance of Payments
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) Which of the following is FALSE about the Highly Indebted Poor Countries initiative?
A)Most of the countries included are in sub-Saharan Africa.
B)Countries qualify for debt relief partly based on their level of poverty.
C)Countries do not have to have established a past track record of economic reform in order to qualify as long as they make future commitments.
D)External debt levels must be high relative to exports in order to qualify.
Q2) Typically,the most important determinant of private investment in an economy is
A)the inflow of foreign investment.
B)the size of the capital account surplus.
C)the size of the current account deficit.
D)the outflow of private investment.
E)the amount of domestic savings.
Q3) If domestic savings is less than domestic investment,then
A)a trade deficit occurs.
B)the government runs a budget deficit.
C)there will be a negative foreign investment.
D)a trade surplus must result.
E)Both A and C.
Q4) Describe how a sudden stop leads to a financial crisis.
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Chapter 10: Exchange Rates and Exchange Rate Systems
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56 Verified Questions
56 Flashcards
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Sample Questions
Q1) If Mexicans increasingly lose confidence in their domestic financial markets and move their assets to other countries,the peso will depreciate.
A)True
B)False
Q2) Under a fixed exchange standard,if the domestic demand for foreign exchange increases
A)the central monetary authority must meet the demand out of its reserves.
B)the central monetary authority must increase the supply of domestic money.
C)the fixed exchange standard will breakdown.
D)inflation will increase.
E)the domestic currency must be depreciated.
Q3) Suppose that the U.S.Open ticket costs $100 and the British Open ticket costs £50 and the exchange rate is $1.43.How much does the British Open ticket cost for an American attending the British Open?
Q4) Currently the NAFTA nations do not meet the conditions for an optimal currency area.What are the two main reasons why?
Q5) How does the growth in the daily volume of foreign currency transactions compare with the growth rate of the global economy?
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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46 Verified Questions
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Sample Questions
Q1) How is an exchange rate depreciation likely to affect imports and exports in the short run and over a longer period of time?
Q2) An example of expansionary fiscal policy would be
A)a decrease in government spending to reduce budget deficits.
B)an increase in tax collection to reduce budget deficits.
C)a decrease in interest rates to help stimulate the economy.
D)an increase in government spending on infrastructure to create jobs and improve the economy.
E)an increase in interest rates to encourage private savings.
Q3) Expansionary monetary policy involves an increase in the money supply and a fall in interest rates,leading to a positive expansion in income.
A)True
B)False
Q4) Which nations make up the G8?
Q5) If a currency rapidly depreciates,what are the possible negative results to the economy of using contractionary monetary policy to address the depreciation?
Q6) If interest rates rise,what will happen to the nation's exchange rate?
Q7) How does expansionary monetary policy affect a nation's exchange rate?
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Chapter 12: International Financial Crises
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) Which of the following may NOT help avoid a financial crisis?
A)Maintaining credible and sustainable fiscal policies
B)Regulation and supervision of the financial system
C)Disclosure of timely information to lenders,investors,and depositors about key economic variables such as the central bank's holding of international reserves
D)Immediately bailing out financial intermediaries and standing ready to bail out others in case a financial crisis occurs
E)Maintaining credible and sustainable monetary policies
Q2) Which one of the following countries refused to accept the IMF conditions during the East Asian financial crisis?
A)South Korea
B)Indonesia
C)Malaysia
D)Thailand
E)Singapore
Q3) Small devaluations are usually sufficient to stem capital flight.
A)True
B)False
Q4) What are the benefits of capital mobility?
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Chapter 13: The United States in the World Economy
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) One area of labor issues that the labor side agreement to NAFTA does not open to foreign consultation or investigation is
A)the use of child labor.
B)worker exposure to unsafe conditions.
C)minimum wages.
D)worker's rights to organize.
E)worker exposure to toxic hazards.
Q2) The main area of economic activity that Canada chose not to open to free trade is A)agriculture.
B)oil and gas.
C)lumber.
D)the cultural industries.
E)financial services.
Q3) Why are trade agreements between the U.S.and Mexico more controversial than trade agreements between the U.S.and Canada?
Q4) What is the United States primary trade promotion initiative with Africa?
Q5) What lessons did Mexico's policy makers learn from the 1980s debt crisis? What reforms did President Salinas pursue? What were his main goals?
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Chapter 14: The European Union: Many Markets Into One
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49 Verified Questions
49 Flashcards
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Sample Questions
Q1) As populations age,public spending tends to increase.
A)True
B)False
Q2) Which of the following is NOT part of the European Union?
A)Luxembourg
B)Austria
C)Portugal
D)Greece
E)Switzerland
Q3) There is no possibility of further widening of the European Union.
A)True
B)False
Q4) Which of the following nations DOES use the euro and participates in the Treaty on European Union?
A)Sweden
B)Denmark
C)Portugal
D)The United Kingdom
E)Norway
Q5) What are the two largest expenditure categories in the EU budget?
Page 16
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Chapter 15: Trade and Policy Reform in Latin America
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45 Verified Questions
45 Flashcards
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Sample Questions
Q1) Briefly describe orthodox stabilization policies.
Q2) What is called for with heterodox stabilization policies?
Q3) 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
Q4) The first phase of a typical cycle of economic populism is usually A)hyperinflation.
B)rising growth and rising wages.
C)falling growth and falling wages.
D)rising unemployment.
E)severe disinflation.
Q5) One of the main causes of economic inequality in Latin America is the A)failure of governments to support urban consumers.
B)lack of progress in raising agricultural productivity.
C)lack of governmental interest in solving the problem of inequality.
D)focus of governments on agricultural exports to the detriment of food production.
E)oil crisis of the 1970s.
Q6) What do structural reform policies emphasize?
Page 17
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Chapter 16: Export-Oriented Growth in East Asia
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Sample Questions
Q1) Which of the following has not been promoted by HPAE?
A)Large job creation in the government sector
B)Land reform
C)Free basic health care
D)Significant investments in rural infrastructure
Q2) Macroeconomic stability has been a high priority for the economic policies of the HPAE.
A)True
B)False
Q3) The World Bank's view of the effectiveness of industrial policies in East Asia is that,in general,they
A)hindered growth.
B)had little or no effect on growth.
C)encouraged growth.
D)are the main factor in the success of the East Asian economies.
E)worked in Japan and Korea,but not in the other countries.
Q4) The main contributor to growth in the HPAE according to empirical research was government industrial policies.
A)True
B)False
Page 18
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Chapter 17: The Bric Countries in the World Economy
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Sample Questions
Q1) Most nations that split from the USSR saw their incomes increase over the next several years after USSR's collapse.
A)True
B)False
Q2) For China
A)there was a long period of success with the economic results of communism so it was hard to change policies.
B)reform of its economic system was rapid,with a quick dismantling of most of the controls exercised by the state and party over the economic system,but not the political system.
C)economic reforms were intended to create more wealth to distribute,not do undo the communist party.
D)there are no longer state owned enterprises.
Q3) Which of the following is FALSE? All the BRICs
A)rank among the world's top 10 in population.
B)have been transformed by reforms.
C)have become more isolated and focused on domestic issues.
D)are among the world's top 11 economies.
E)have yet to fully realize their economic potential.
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Page 19