Course Introduction
Economic Development Test Questions
Economic Development explores the processes by which countries improve the economic, political, and social well-being of their people. The course examines key theories and models of development, the role of institutions, government policies, and international influences. Students will analyze issues such as poverty, inequality, population growth, urbanization, education, health, and sustainable development. Through case studies and empirical analysis, the course aims to provide a deeper understanding of the challenges and strategies involved in achieving economic growth and improving living standards in developing regions.
Recommended Textbook
International Economics 7th Edition by James Gerber
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Page 2
Chapter 1: The United States in a Global Economy
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Sample Questions
Q1) Countries that have high rates of savings also have
A)high rates of investment.
B)low rates of investment.
C)stock market bubbles.
D)low rates of growth.
Answer: A
Q2) Your text mentions several ways that international trade flows are qualitatively different than they were a century ago.Which of the following is NOT one of those ways?
A)Firms' investment spending on capital goods is more important than in the past.
B)International trade in raw commodities and agricultural products is more important than it was in the past.
C)It is possible to trade some types of services in a way that was not possible in the past.
D)Multinational corporations play a bigger role in production than they did in the past.
Answer: B
Q3) What are the negative impacts of migration for the nation receiving migrants?
Answer: More competition for other workers and greater social tensions
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Chapter 2: International Economic Institutions Since World War
II
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Sample Questions
Q1) Which round of GATT first addressed subsidies?
Answer: The Tokyo Round
Q2) The United States is an example of
A)a customs union.
B)a free trade area.
C)an economic union.
D)a common market.
Answer: C
Q3) The IMF,because it can force nations to take loans and bail out packages,has more power than other international governmental organizations dealing with the global economy.
A)True
B)False
Answer: False
Q4) Which round of GATT led to the formation of the WTO?
Answer: The Uruguay Round
Q5) International economic crises are relatively rare events.
A)True
B)False
Answer: False
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Chapter 3: Comparative Advantage and the Gains From Trade
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Sample Questions
Q1) Suppose that Canada can produce 15 units of timber or 3 units of grain.Suppose that Mexico can produce 6 units of timber or 2 units of grain.Which of the following is CORRECT?
A)Mexico has a comparative advantage in grain production.
B)Mexico has an absolute advantage in timber production.
C)Canada has a comparative advantage in grain production.
D)The countries would find trade mutually beneficial at a trading ratio of 1 grain for 2 timber.
Answer: A
Q2) Given that Sandy can produce 10 economics reports or 2 sales calls and Tim can produce 2 economics reports or 1 sales call,which of the following would NOT be a mutually agreeable terms of trade for Sandy and Tim?
A)1 economics report for 1 sales call
B)1 sales call for 3 economics reports
C)1 sales call for 4 economics reports
D)1 economics report for 1/4 of a sales call
Answer: A
Q3) When did the Republic of Korea change its economic policies?
Answer: The 1960s
Page 5
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Chapter 4: Comparative Advantage and Factor
Endowments
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Q1) Which types of workers are most likely to favor lowering trade barriers in the United States?
Q2) What does research thus far suggest about job loss and offshoring?
Q3) Wage inequality has been on the rise in virtually all high-income industrial economies since the 1970s.The causes are probably numerous,but the leading explanation for the greatest share of the increase in inequality is
A)the growth of trade with developing countries.
B)the growth of trade with other high income industrial countries.
C)technological change which increased the relative demand for skilled workers.
D)technological change which increased the relative demand for unskilled workers.
Q4) Explain some of the reasons why the HO model is difficult to test empirically.Does this mean that it is not a useful model of trade?
Q5) How is offshoring of services different from past trade patterns?
Q6) The bulk of offshoring is vertical,relating to producing a component piece in an overall supply chain production.
A)True
B)False
Q7) What is the source of comparative advantage in the Heckscher-Ohlin model?
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Chapter 5: Beyond Comparative Advantage
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Sample Questions
Q1) Which of the following is NOT an example of intraindustry trade?
A)Trading Jeeps for Toyotas
B)Trading Boeing airplanes for Airbus airplanes
C)Trading Bush beer for Heineken beer
D)Trading oil for trucks
Q2) Describe how Mexico's manufacturing has changed location and type over time.
Q3) One reason that a large share of the trade between high-income industrial economies is intraindustry trade is because
A)it is more advantageous than interindustry trade.
B)high-income industrial economies produce in the first stage of the product cycle.
C)high-income industrial economies have dissimilar resource endowments in absolute terms.
D)it allows firms to take advantage of internal economies of scale.
Q4) If countries have similar factors of production and similar productivities,most of their trade is likely to be intraindustry.
A)True
B)False
Q5) Carefully explain why there are gains from intraindustry trade.
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Chapter 6: The Theory of Tariffs and Quotas
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Sample Questions
Q1) Carefully explain why tariffs create deadweight losses.
Q2) Carefully explain how the imposition of a tariff is different for a large country (that can affect the world price)than a small country.
Q3) The rules for respecting property rights as they relate to trade were negotiated during the Uruguay Round (1986-1994)and culminated in the Trade-Related Aspects of Intellectual Property Rights (TRIPS)agreement.
A)True
B)False
Q4) Suppose a manufacturer of software develops a new computer program that sells for $50.The $50 cost includes $0.25 for the CD it is stored on,$5 for the labor of the company software programmers,and $1.75 for packaging materials and transportation costs.Value added by the software company is
A)$49.75.
B)$48.25.
C)$48.
D)$44.75.
Q5) What are some of the long-run costs of tariffs?
Q6) What are the three major types of quotas?
Q7) Why is the Doha Round called the Doha Development Round?
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Chapter 7: Commercial Policy
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Sample Questions
Q1) Developed countries have lost comparative advantage in A) high-tech industries.
B) labor-intensive industries.
C) capital-intensive industries.
D) agricultural industries.
Q2) At the end of World War II,
A) tariffs around the world fell substantially.
B) agricultural subsidies were significantly reduced.
C) most nations began to apply tariffs uniformly across all industries.
D) tariffs increased in low-income countries and fell a small percentage in high-income countries.
Q3) If a country faces action under Section 301 of the U.S. Trade Act of 1974, it means that the country has
A) exceeded average export growth by more than 50 percent.
B) tariffs that are above the legal limit.
C) been charged by the United States with systematically engaging in unfair trade practices.
D) been charged by the WTO with violating its trade obligations.
Q4) Under Special 301, what is the U.S. government required to do?
Q5) Carefully explain why agricultural subsidies are viewed as harmful.
Page 9
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Chapter 8: International Trade and Labor and Environmental Standards
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Q1) Countries that compete by offering foreign firms a reduced set of environmental compliance requirements are known as
A)transboundary members.
B)pollution havens.
C)pollutants.
D)pollution exporters.
Q2) Why would a global carbon tax be desirable?
Q3) Critics argue that concern about labor practices in other countries is often used to justify protectionism.Is this a reasonable criticism? Explain.
Q4) Trade measures are usually not the best way of addressing problems such as pollution and child labor because
A)it is more efficient to address these problems at the production and consumption level.
B)trade measures are not effective in reducing pollution.
C)the governments of high-income countries are not interested in sanctioning pollution and child labor.
D)the WTO prohibits most trade sanctions.
Q5) What does empirical research suggest about the existence of pollution havens?
Page 10
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Chapter 9: Trade and the Balance of Payments
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Q1) Describe the technology transfer benefit of capital flows into low-income countries.
Q2) Ultimate solutions to the problems of unsustainable debt must take into account the incentives for lenders to make loans.
A)True
B)False
Q3) 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 amount of domestic savings.
Q4) Based on Table 9.1,the balance on the current account is A)+100. B)+200. C)-100. D)-200.
Q5) What were some of the consequences of the large current account deficits that the U.S.ran from the 1990s to 2007?
Q6) Describe how a sudden stop leads to a financial crisis.
Q7) What are official reserve assets,and why are they important to countries?
Page 11
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Q1) If more European and Japanese firms want to build factories and expand their offshore investments in the United States,the supply of U.S.dollars on foreign exchange markets will increase as a result of this investment activity.
A)True
B)False
Q2) All else equal,if Canada raises its interest rates, A)the dollar depreciates.
B)the U.S. demand for Canadian dollars decreases.
C)the Canadian supply of Canadian dollars increases.
D)the Canadian dollar will depreciate.
Q3) Speculation would involve using forward contracts and options to reduce the exchange rate risk on future foreign exchange transactions.
A)True
B)False
Q4) 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
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) Explain why in an economy with fixed exchange rates,monetary policy will not cause expenditure switching.
Q2) When a central bank sells bonds,cash reserves throughout the financial system increase,interest rates fall,and investment spending increases.
A)True
B)False
Q3) The recent trend internationally has been for the executive and legislative branches of elected governments to get more control over monetary policy,as has been the case in countries such as the United States.
A)True
B)False
Q4) Describe the policies a nation would follow to correct a current account deficit.What are the primary purposes of each type of policy?
Q5) Monetary policy is more effective in an open economy than in a closed economy.
A)True
B)False
Q6) Describe some of the potential problems with using expansionary fiscal policy.
Q7) Which nations make up the G8?
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Chapter 12: International Financial Crises
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Q1) How were macroeconomic balances different in the period from 2000 to 2007 from past financial crises?
Q2) How does a weak financial sector intensify the problems created by volatile capital flows?
Q3) Which of the following is NOT a characteristic of a financial crisis caused by macroeconomic imbalances?
A)Crises can be unpredictable.
B)Crises can be predictable.
C)Crises can by expansionary fiscal policies accompanied by high budget deficits.
D)Crises can be caused by budget surpluses.
Q4) One criticism of IMF conditionality is that it is not sufficiently contractionary.
A)True B)False
Q5) Explain the pros and cons of a crawling peg.
Q6) Financial capital is highly volatile,and technological advances have reinforced this volatility.
A)True B)False
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Chapter 13: The United States in the World Economy
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Q1) U)S.opponents of NAFTA argued that the agreement will hurt the United States.In their view,NAFTA's greatest harm is in its
A)harmonization of labor policies.
B)harmonization of environmental policies.
C)harmonization of the use of pesticides and herbicides.
D)job destruction and downward pressure on U.S. wages.
Q2) Explain what a purchasing power parity adjustment is and why it is necessary.Should it always be used?
Q3) Explain the criticisms of labor and environmental clauses and how these are being addressed in the TPP.
Q4) Few countries have a higher GDP per capita than the weighted average of Canada,Mexico and U.S.GDP.
A)True
B)False
Q5) When did NAFTA go into effect?
Q6) What are bilateral investment treaties?
Q7) In negotiating NAFTA,what two side agreements were reached?
Q8) What two trends was Canada trying to address in negotiating CUSTA?
Q9) What is the main problem with rules of origin?
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Chapter 14: The European Union: Many Markets Into One
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Sample Questions
Q1) Before the creation of the European Economic Community,there was the
A)European Economic Union.
B)European Coal and Steel Community.
C)European Union.
D)European Free Trade Area.
Q2) Emigration is when people leave a country because of supply push factors.
A)True
B)False
Q3) Before European currencies were linked,countries would competitively devalue their currencies.
A)True
B)False
Q4) When Germany increased fiscal spending and raised interest rates in the early 1990s,
A)economic growth increased throughout Europe.
B)other countries were forced to raise interest rates to stay in the ERM.
C)it was unsuccessful in supporting East Germany.
D)it forced other countries to devalue their currencies.
Q5) Members of which European Union institution are popularly elected?
Q6) 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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Sample Questions
Q1) One problem of ISI was
A)the failure to consider that government officials may make inefficient decisions.
B)the overemphasis on improvements in the rural rather than the urban sector.
C)the oversupply of complex technical goods.
D)the undervaluation of currencies to promote export growth.
Q2) In order to accumulate the resources that they needed to make interest payments,Latin American countries were forced to used macroeconomic policies that
A)devalued their currencies and caused deep recessions.
B)revalued their currencies and caused increased inflation.
C)devalued their currencies and caused increased inflation.
D)revalued their currencies and caused deep recessions.
Q3) Proponents of ISI assumed that governments
A)were capable of identifying and correcting market failures.
B)were capable of identifying and correcting the excesses of economic populists.
C)should enact orthodox stabilization plans.
D)could control the terms of trade.
Q4) What is called for with heterodox stabilization policies?
Q5) Explain the reasons for export pessimism in Latin American countries.
Q6) Briefly describe orthodox stabilization policies.
Page 17
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Chapter 16: Export-Oriented Growth in East Asia
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Q1) Critics of the World Bank's analysis of East Asian industrial policies argue that
A)even though growth was faster in the non-targeted industries than it was in the targeted ones, the policies were essential to overall economic growth.
B)growth was faster in nearly every targeted industries than it was in the non-targeted ones.
C)even though growth was the same in the targeted industries as it was in the non-targeted ones, they would have grown slower without the policies.
D)growth was slower in the targeted industries; hence the policies did not work.
Q2) Which of the following is NOT a characteristic of high-growth Asian economies?
A)stable macroeconomic policies
B)similar governments
C)credible commitments to expanding access to health care
D)the development of skilled workforces
Q3) What appears to have been one of the major causes of the Asian financial crisis?
Q4) Could the high-income Asian economies be characterized as open economies? Explain.
Q5) Which factors account for most of the growth in the high growth Asian economies?
Q6) Name the eight high-growth Asian economies.
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Chapter 17: China and India in the World Economy
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Q1) China has few state-owned enterprises left in its economy.
A)True
B)False
Q2) Which of the following accurately depicts the situation of India's trade in services and what it might mean for the global economy?
A)It is not perceived as threatening to the industrialized nations so it is likely to grow without any impact.
B)Because it is nothing new, other economies have had time to adjust.
C)It creates only harm to other national economies.
D)It may lead to protectionist sentiment and policies in other nations as comparative advantages shift.
Q3) Why did the USSR collapse and China succeed? Explain.
Q4) What is the difference between Chinese and Indian trade in services?
Q5) Which of the following is NOT a true statement?
A)India can easily relocate workers from the country to the city.
B)India would raise income faster if it moved workers from agriculture to manufacturing.
C)High agricultural tariffs in India protect rural workers.
D)India has low tariffs in manufacturing.
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