Economic Development and International Trade Exam Review
Course Introduction
This course explores the dynamic relationship between economic development and international trade, examining how global markets, trade policies, and international agreements impact the growth trajectories of nations. Students will analyze fundamental theories of trade and development, assess the roles of institutions and government interventions, and investigate real-world case studies to understand the challenges and opportunities faced by developing and developed economies. Key topics include trade liberalization, globalization, foreign direct investment, poverty alleviation, and strategies for sustainable development within the context of the global economy.
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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46 Verified Questions
46 Flashcards
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Sample Questions
Q1) Which type of integration requires adapting domestic policies to coordinate with those of trading partners?
Answer: Deep integration
Q2) Economists
A)describe reducing tariffs and quotas as shallow integration.
B)describe reducing tariffs and quotas as deep integration.
C)believe that changing domestic policies affecting trade is a relatively simple process.
D)believe that the work of reducing trade barriers is done since most tariffs are low and most quotas eliminated.
Answer: A
Q3) Transactions costs in international financial markets are higher today than they were in the past.
A)True
B)False
Answer: False
Q4) 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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56 Verified Questions
56 Flashcards
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Sample Questions
Q1) Which of the following is an example of an institution whose primary concern is global stability?
A)NAFTA (North American Free Trade Agreement)
B)OPEC (Oil Producing and Exporting Countries)
C)IMF (International Monetary Fund)
D)Asian Development Bank
Answer: C
Q2) Which of the following is NOT a feature of a common market?
A)Substantial coordination of macroeconomic policies among the members
B)Free trade in goods and services between the members
C)Common external barriers to trade
D)Factor mobility
Answer: A
Q3) An important function of international institutions during times of crisis is to
A)make goods nonrival.
B)make goods nonexcludable.
C)prevent free riding.
D)prevent nondiscrimination.
Answer: C
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Chapter 3: Comparative Advantage and the Gains From Trade
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Sample Questions
Q1) Adam Smith created the theory of comparative advantage.
A)True
B)False
Answer: False
Q2) All of the following are true EXCEPT
A)trade between two nations reduces their opportunity costs.
B)trade makes nations dependent on each other.
C)trade between nations will not benefit all citizens.
D)the principle of comparative advantage does not apply to countries with limited resources.
Answer: D
Q3) Economic restructuring that takes place as a result of opening to trade with other countries
A)contradicts the idea of gains from trade.
B)causes some trading activity to be zero sum.
C)worsens the nation's allocation of resources.
D)improves the nation's allocation of resources.
Answer: D
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) What is the Heckscher-Ohlin theorem? Using the case studies in the chapter on U.S.trade with China describe the theory and the resulting trade patterns that would support it.
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 A)Chile will produce more computers after trade begins with Brazil. B)Brazil will produce more timber after trade begins with Chile. C)Chile will produce more timber after trade begins with Brazil. D)Brazil will completely specialize in computers once trade begins with Chile.
Q3) The L in OLI theory stands for loyalty,and this factor makes it more difficult for firms to substitute foreign operations for domestic as they fear a loss of sales due to negative publicity.
A)True
B)False
Q4) The relocation of service industry functions to another country is called what?
Q5) Forces inside a nation that cause people to think about leaving that nation are called what in migration theory?
Page 6
Q6) How is offshoring of services different from past trade patterns?
Q7) In the Heckscher-Ohlin model,what assumption is made about opportunity costs?
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Chapter 5: Beyond Comparative Advantage
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Sample Questions
Q1) WTO rules allow subsides
A)when there are external economies.
B)of "precompetitive" activities such as research.
C)when there are internal economies.
D)when there are positive externalities in production.
Q2) If the United States and Canada trade hydro-powered electricity for Hollywood films,what type of trade does this represent?
Q3) Interindustry trade is not based on comparative advantage since it consists of the export and import of similar goods.
A)True
B)False
Q4) If countries have similar factor endowments and productivities,what type of trade are they most likely to have?
Q5) Japan and Korea use or have used many industrial policies,and they are both considered to be countries that have developed successfully.Does that mean that the industrial policies caused their successful development?
Q6) Is it possible that trade could prevent the development of new and more efficient industries?
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Chapter 6: The Theory of Tariffs and Quotas
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Sample Questions
Q1) Which of the following is FALSE?
A)At the end of the twentieth century, more and more traded goods and services incorporated specialized knowledge and unique ideas.
B)Pharmaceuticals, computer hardware, telecommunications equipment, and other high technology products are valuable because of the innovation and research they incorporate.
C)Developing countries usually strongly advocate the protection of intellectual property rights.
D)The protection given to creators and innovators varied greatly internationally until standardization began with the signing of the TRIPs agreement.
Q2) 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.
Q3) Developing countries have identified which key issues as important to them in current trade talks?
Q4) What has been the most significant obstacle to progress in the Doha Round?
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Page 8
Chapter 7: Commercial Policy
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78 Verified Questions
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Sample Questions
Q1) Developed countries have lost comparative advantage in textiles and apparel.
A)True
B)False
Q2) The WTO's Doha Development Agenda is only considering market access issues in agriculture, such as tariffs and quotas, because export subsidies and production subsidies are considered less harmful and have not been part of the GATT or WTO agenda.
A)True
B)False
Q3) Television programming might be targeted for protection in a country using which of the following arguments?
A) Infant industry
B) National security
C) Labor argument
D) Cultural protection
Q4) Historically, one of the most common reasons for countries to impose tariffs was
A) to protect their national security.
B) to raise revenue for the government.
C) to eliminate unemployment.
D) to counter inflation.
Page 9
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Chapter 8: International Trade and Labor and Environmental Standards
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79 Verified Questions
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Sample Questions
Q1) Is the claim that environmental standards reduce industrial competitiveness valid?
A)Yes, because environmental standards raise costs to businesses.
B)No, because consumers will want to buy from firms that pollute less.
C)No, because environmental standards have little effect in high-income countries.
D)Yes, because environmental standards will cause the imposition of WTO sanctions.
Q2) While Africa has the largest numbers of working children,Asia has the highest proportion of working children,with an estimated one in four employed.
A)True
B)False
Q3) Which of the following is NOT a problem with finding a solution to global climate change?
A)Countries have not recognized that there is a problem with climate change.
B)Solutions must be adopted globally, not unilaterally.
C)Science can only provide probabilities of future events, not certainties.
D)It is difficult to determine an appropriate level of response to climate change problems.
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Chapter 9: Trade and the Balance of Payments
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Sample Questions
Q1) Between 1972 and 1999,the majority of loans to HIPC countries went to regimes considered "not free," and between 1985 and 1995,to places that were considered "corrupt" by international organizations.
A)True
B)False
Q2) Based on Table 9.3,the capital account balance is equal to A)+25. B)-25. C)-125. D)+125.
Q3) A country that runs out of official reserve assets
A)cannot settle international debts.
B)is bankrupt.
C)will have a current account deficit. D)will have a current account surplus.
Q4) An example of odious debt would be debts on the part of a nation that were incurred by a dictator for the well-being of his family.
A)True B)False
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Sample Questions
Q1) The traditional view of fixed rate systems was that
A)they improved inflation but were worse for growth.
B)they improved stability but were worse for inflation.
C)they improved inflation but worsened stability.
D)they improved growth but worsened inflation.
Q2) The majority of countries in the world have some type of fixed exchange rate system.
A)True
B)False
Q3) Suppose the dollar is subject to a floating exchange rate system and that R is the number of dollars per unit of foreign exchange.If R increases,then the dollar
A)depreciates.
B)appreciates.
C)is devalued.
D)is revalued.
Q4) Which type of exchange rate system minimizes external shocks to an economy?
Q5) How does rapid economic growth at home affect foreign exchange markets?
Q6) Which currency is most commonly traded?
Q7) Explain the three rules that countries must follow to maintain a gold standard.
Page 12
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) In most cases,expenditure-switching policies must be accompanied by expenditure-reducing policies because
A)expenditure-switching policies are completely ineffective without expenditure-reducing policies.
B)inflation ensues as home country domestic expenditures switch away from foreign goods to domestic goods unless overall expenditures are reduced.
C)inflation abroad may increase the demand for domestic goods, causing inflation to rise.
D)the depreciation in the exchange rate may decrease the domestic price of foreign goods, causing an increase in the current account deficit.
Q2) Intermediate inputs are
A)goods used for household consumption only.
B)goods used for government consumption only.
C)goods purchased by one business from another to use in production.
D)raw materials used in the production process.
Q3) Describe some of the potential problems with using expansionary fiscal policy.
Q4) Describe the difficult choices in macroeconomic policy that Argentina faced in the late 1990s.
Page 13
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Chapter 12: International Financial Crises
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Sample Questions
Q1) 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
Q2) Although financial crises can be unpredictable,they are usually preceded by identifiable vulnerabilities.
A)True
B)False
Q3) Tax systems in developing countries tend to be efficient and reliable.
A)True
B)False
Q4) International financial flows have changed in meaningful ways,and these changes were brought to the attention of policy makers by the Asian financial crisis.Describe three changes.
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14
Chapter 13: The United States in the World Economy
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Sample Questions
Q1) The U.S.has free trade agreements only with Mexico and Canada.
A)True
B)False
Q2) Most Mexican workers can increase their wages if they migrate to the United States,a demand-pull factor for migration.
A)True
B)False
Q3) What lessons did Mexico's policy makers learn from the 1980s debt crisis? What reforms did President Salinas pursue? What were his main goals?
Q4) The single most important reason for Canada's seeking a free trade agreement with the United States was to
A)ensure its access to the U.S. market.
B)ensure its ability to join NAFTA.
C)harmonize its environmental laws with the United States.
D)avoid international outsourcing in low wage countries.
Q5) The ratio of trade to GDP for the U.S.has roughly tripled since the 1960s.
A)True
B)False
Q6) What is the United States' primary trade promotion initiative with Africa?
Page 15
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Chapter 14: The European Union: Many Markets Into One
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Sample Questions
Q1) The "Four Freedoms" are an important goal of the A)Treaty of Rome.
B)Single European Act.
C)European Monetary System.
D)Maastricht Treaty.
Q2) The largest country in the EU is A)Germany.
B)France.
C)the United Kingdom.
D)Italy.
Q3) Subsidiarity requires nations to give up some of their national sovereignty. A)True
B)False
Q4) Members of which European Union institution are popularly elected?
Q5) The majority of countries in the EU are relatively small. A)True
B)False
Q6) Briefly describe the European Union.
Q7) Which agreement removes customs and passport controls at the common borders of many EU countries?
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Chapter 15: Trade and Policy Reform in Latin America
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Sample Questions
Q1) How does the IMF approach the problem of failing economic populist regimes?
Q2) The external shock that hit Mexico and other Latin American countries in the early 1980s that caused the Lost Decade was a collapse in world oil prices.
A)True
B)False
Q3) An orthodox model calls for cutting government spending,reforming the tax system to increase compliance and revenues,and limiting the creation of new money.
A)True
B)False
Q4) Many economist believe that misguided macroeconomic policies did more to create the Debt Crisis of the 1980s than ISI.
A)True
B)False
Q5) 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.
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Chapter 16: Export-Oriented Growth in East Asia
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Sample Questions
Q1) Falling inequality has been a feature of the high-growth Asian economies due to land reform,free public education,free basic health care,and significant investments in infrastructure for communication,sanitation,and transportation.
A)True
B)False
Q2) Measurements of TFP indicate that the East Asian success story is based on A)a significantly different economic model from the one followed in the West.
B)unusually large amounts of innovation.
C)rapid increases in the education of the work force.
D)high amounts of savings and investment.
Q3) Which of the following has NOT been promoted by high-growth Asian economies?
A)Large job creation in the government sector
B)Land reform
C)Free basic health care
D)Significant investments in rural infrastructure
Q4) Identify at least three key factors in the high-growth Asian economies' economic success.
Q5) Name the eight high-growth Asian economies.
Q6) What appears to have been one of the major causes of the Asian financial crisis?
Page 18
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Chapter 17: China and India in the World Economy
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Sample Questions
Q1) Environmental problems in China
A)increase pressure for decentralization of power and authority from the ruling Communist party.
B)are not recognized by local Chinese interests, but get large amounts of attention from global activists.
C)are improving at a rapid pace in Chinese urban areas.
D)are generally not an issue domestically or globally.
Q2) What is the difference between Chinese and Indian trade in services?
Q3) Which primary trade partner of India suffered setbacks that ultimately helped lead India to embark on economic reform?
A)The United Kingdom
B)The United States
C)The Soviet Union
D)South Korea
Q4) India would raise income levels faster if workers migrated from the country to the city.
A)True
B)False
Q5) Who was the leader of Chinese economic reforms?
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