Economics of Globalization
Exam Answer Key
Course Introduction
This course explores the economic dimensions of globalization, examining how the integration of international markets for goods, services, labor, and capital affects economies, societies, and governance worldwide. Topics include the theory and history of international trade, the role of multinational corporations, migration, international financial markets, global value chains, and the impact of globalization on inequality, development, and policy autonomy. The course analyzes both the opportunities and challenges globalization presents, drawing on empirical case studies and current events to provide students with a comprehensive understanding of the complex forces shaping the global economy.
Recommended Textbook
International Economics 16th Edition by Robert Carbaugh
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17 Chapters
2660 Verified Questions
2660 Flashcards
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Page 2
Chapter 1: The International Economy and Globalization
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71 Flashcards
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Sample Questions
Q1) Economic interdependence occurs through
A) trade
B) labor migratin
C) capital flows
D) all of these
Answer: D
Q2) Important trading partners of the United States include Canada,Mexico,Japan,and China.
A)True
B)False
Answer: True
Q3) International trade forces domestic firms to become more competitive in terms of:
A) The introduction of new products
B) Product design and quality
C) Product price
D) All of the above
Answer: D
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Chapter 2: Foundations of Modern Trade Theory: Comparative Advantage
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215 Flashcards
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Sample Questions
Q1) Compared to Ricardian trade theory,modern trade theory provides a more general view of comparative advantage since it is based on all factors of production rather than just labor.
A)True
B)False
Answer: True
Q2) The presence of increasing opportunity costs gives rises to production possibilities schedules that are
A) downward-sloping straight lines
B) upward-sloping straight lines
C) bowed outward from the diagram's origin
D) bowed inward toward the diagram's origin
Answer: C
Q3) Complete specialization usually occurs under the assumption of increasing opportunity costs.
A)True
B)False
Answer: False
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Chapter 3: Sources of Comparative Advantage
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Sample Questions
Q1) According to the theory of intra-industry trade,many manufactured goods undergo a trade cycle in which the home country initially is an exporter and eventually becomes an importer of a product.
A)True
B)False
Answer: False
Q2) The Heckscher-Ohlin model assumes that tastes and preferences,and also factor endownments,are identical for trading nations.
A)True
B)False
Answer: False
Q3) When transportation costs are included in a trade model
A) a country's gains from trade decreases
B) a country's gains from trade increases
C) a country's volume of trade increases
D) a country's terms of trade improve
Answer: A
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Chapter 4: Tariffs
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Sample
Questions
Q1) Figure 4.3 represents the domestic market for gasoline in the United States.What is the consumer surplus in this market?
A) 60 gallons of gasoline
B) $120
C) $60
D) $3
Q2) If Brazil levies a tariff that prohibits imports of oil,the tariff has
A) only a protective effect
B) only a revenue effect
C) both a revenue effect and a protective effect
D) neither a revenue effect nor a protective effect
Q3) Assume that Mexico is a small country and it imposes a tariff on imported automobiles.As a result of the tariff
A) the world price of automobiles falls
B) the world price of autos remains constant
C) the Mexican price of autos falls
D) the Mexican price of autos remains constant
Q4) Is it possible for a low nominal tariff rate to understate the effective rate of protection? What is tariff escalation?
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Chapter 5: Nontariff Trade Barriers
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Sample Questions
Q1) Consider Figure 5.1.Suppose the rest of the world voluntarily agrees to reduce steel shipments to Mexico vis-a-vis an export quota equal to 2 tons.??Assuming Mexican importers behave as competitive buyers while foreign exporters behave as monopoly sellers,the overall welfare loss of the quota to Mexico is:
A) $200
B) $400
C) $600
D) $800
Q2) An elimination of nontariff barriers on apples tends to increase apple imports,reduce profits of import-competing apple producers,and generate job losses for domestic apple workers.
A)True
B)False
Q3) From the perspective of the American public as a whole,export subsidies levied by overseas governments on goods sold to the United States:
A) Help more than they hurt
B) Hurt more than they help
C) Are equivalent to an import quota
D) Are equivalent to an export quota
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Chapter 6: Trade Regulations and Industrial Policies
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Sample Questions
Q1) According to the normal-trade-relations (most-favored-nation) principle,if the United States extends MFN treatment to China and then grants a low tariff on imports of shirts from South Korea,the United States is obligated to provide the identical low-tariff on imports of shirts from China.
A)True
B)False
Q2) With the passage of the Smoot-Hawley Act in 1930,U.S.average tariffs were raised to over 50 percent on protected imports.
A)True
B)False
Q3) The principle of normal trade relations (most-favored-nation)treatment was established with the passage of the:
A) Fordney-McCumber Act of 1922
B) Smoot-Hawley Act of 1930
C) Reciprocal Trade Agreements Act of 1934
D) Trade Act of 1974
Q4) What is the basis for trade adjustment assistance?
Q5) Has industrial policy contributed significantly to Japan's economic growth?
Q6) What is the essential idea behind strategic trade policy?
Page 8
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Chapter 7: Trade Policies for the Developing Nations
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305 Verified Questions
305 Flashcards
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Sample Questions
Q1) Are economic downturns helpful to cartels?
Q2) Concerning the price elasticities of supply and demand for commodities,empirical estimates suggest that most commodities have:
A) Inelastic supply schedules and inelastic demand schedules
B) Inelastic supply schedules and elastic demand schedules
C) Elastic supply schedules and inelastic demand schedules
D) Elastic supply schedules and elastic demand schedules
Q3) The potential for trade diversion is smaller when a custom union's external tariff is lower rather than higher.
A)True
B)False
Q4) To help developing nations strengthen their international competitiveness,many industrial nations have granted nonreciprocal tariff reductions to developing nations under the:
A) International commodity agreements program
B) Multilateral contract program
C) Generalized system of preferences program
D) Export-led growth program
Q5) What factors influence the extent of trade creation and trade diversion?
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Chapter 8: Regional Trading Arrangements
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Sample Questions
Q1) Trade creation occurs when imports from a low-cost supplier outside of a customs union are replaced by purchases from a higher-cost supplier within the union.
A)True
B)False
Q2) A static welfare effect resulting from the formation of the European Union would be:
A) Economies of scale
B) Trade diversion
C) Investment incentives
D) Increased competition
Q3) All of the following are factors mitigating against global trade liberalization EXCEPT:
A) regional trading arrangements may limit trade liberalization with outsiders
B) a small nation might do better entering into a pact with a larger nation,rather than competing globally
C) trading bloc members may not realize economies of scale through global liberalization
D) trading bloc members prefer competing globally rather than locally
Q4) What factors influence the extent of trade creation and trade diversion?
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Chapter 9: International Factor Movements and Multinational Enterprises
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Sample Questions
Q1) Exxon Oil Co.would undertake forward vertical integration if its retailing division acquired oil wells in the Middle East.
A)True
B)False
Q2) Foreign-owned companies in the United States operate under more strict antitrust,environmental,and other regulations than U.S.-owned companies.
A)True
B)False
Q3) Which of the following is not a significant motive for the formation of multinational enterprises?
A) Avoiding tariffs by obtaining foreign manufacturing facilities
B) Obtaining the benefits from overseas comparative advantages
C) The acquisition of natural resource supply sources
D) Subsidies granted by the home government to overseas corporations
Q4) The smallest share of U.S.direct investment abroad has recently gone to
A) Europe
B) Canada
C) Latin America
D) Middle East
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Chapter 10: The Balance-of-payments
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Sample Questions
Q1) An increase in import restrictions by the U.S.government tends to promote a merchandise-trade surplus.
A)True
B)False
Q2) If Japan lends more to the rest of the world than it borrows from the rest of the world,Japan is a
A) net borrowing country
B) net lending country
C) net exporting country of goods and services
D) net importing country of goods and services
Q3) When the United States imports goods and services from other countries,the United States
A) makes payments to other countries
B) receives payments from other countries
C) becomes a net lender to other countries
D) receives interest income from other countries
Q4) Refer to Table 10.3.The "net exports" component of the U.S.gross domestic product registered $-110 billion.
A)True
B)False
Page 12
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Chapter 11: Foreign Exchange
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Sample Questions
Q1) In recent years,major international banks that trade in the foreign exchange market have included
A) Deutsche Bank
B) Citigroup
C) Barclays
D) all of the above
Q2) The supply schedule of pesos has a negative-sloping region corresponding to the inelastic region on the Mexican demand schedule for foreign currency.
A)True
B)False
Q3) Referring to Table 11.3,the yen cost of purchasing 100 British pounds is roughly:
A) 18,000 yen
B) 19,000 yen
C) 20,000 yen
D) 21,000 yen
Q4) What foreign exchange transactions do banks typically engage in?
Q5) Is it possible to trade foreign exchange in the futures market? How does such trading differ from the forward market?
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Chapter 12: Exchange Rate Determination
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Sample Questions
Q1) Refer to Figure 12.1.If Switzerland experienced a disastrous wheat-crop failure,leading to additional wheat imports from the United States,there would occur an:
A) Increase in the supply of francs and an appreciation of the dollar
B) Increase in the supply of francs and a depreciation of the dollar
C) Increase in the demand for francs and a depreciation of the dollar
D) Increase in the demand for francs and an appreciation of the dollar
Q2) 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
Q3) Assume the initial yen/dollar exchange rate to be 100 yen per dollar.If the U.S.inflation rate is 2 percent and the Japanese inflation rate is 7 percent,the exchange rate should move to 105 yen per dollar according to the purchasing-power-parity theory.
A)True
B)False
Q4) What is exchange rate overshooting?
Q5) What is the asset market approach to exchange rate determination?
Q6) What is the purchasing power parity approach to exchange rate determination?
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Chapter 13: Mechanisms of International Adjustment
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107 Flashcards
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Sample Questions
Q1) The classical economists assumed
A) That the volume of final output is fixed at the full-employment level in the long-run
B) The velocity of money is constant
C) The velocity of money depends on physical,structural,and institutional factors
D) All of the above
Q2) The monetary approach to balance-of-payments adjustments suggests that all payments surpluses are the result of:
A) Too high interest rates in the home country
B) Too low interest rates in the home country
C) Excess money supply over money demand in the home country
D) Excess money demand over money supply in the home country
Q3) The gold standard's "rules of the game" required central bankers in a surplus country to initiate contractionary monetary policies which lead to higher interest rates and net investment inflows.
A)True
B)False
Q4) What is the foreign repercussion effect?
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Chapter 14: Exchange Rate Adjustments and the
Balance-of-payments
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Sample Questions
Q1) According to the ______,following a currency devaluation,the balance of trade worsens for a while before improving.
A) A-curve effect
B) J-curve effect
C) L-curve effect
D) T-curve effect
Q2) Suppose the U.S.price elasticity of demand for imports equals 0.4 and the foreign demand elasticity for the U.S.exports equals 0.2.According to the Marshall-Lerner condition,a depreciation of the dollar's exchange value will improve the U.S.balance of trade.
A)True
B)False
Q3) How is the absorption approach used for analyzing the effects of currency devaluation?
Q4) Reversing balance of payments disequilibria may came at the expense of
A) Economic relations with our trading partners
B) Domestic recession
C) Price inflation
D) All of the above
Q5) What is a pass-through relationship?
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Chapter 15: Exchange Rate Systems and Currency Crises
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Sample Questions
Q1) When pursued over the long run,a policy of increasing the domestic money supply to offset an appreciation of the home country's currency results in inflation and a decrease in home-country competitiveness in key industries.
A)True
B)False
Q2) To offset an appreciation of the dollar against the yen,the Federal Reserve would:
A) Sell dollars on the foreign exchange market and lower domestic interest rates
B) Sell dollars on the foreign exchange market and raise domestic interest rates
C) Buy dollars on the foreign exchange market and lower domestic interest rates
D) Buy dollars on the foreign exchange market and raise domestic interest rates
Q3) The "impossible trinity" should the relationship between
A) free movements of international capital
B) independent monetary policies of countries
C) fixed exchange rate systems of countries
D) all of the above
Q4) How can currency boards and dollarization prevent currency crises?
Q5) What is the difference between the crawling peg and adjustable pegged exchange rates?
Q6) What is an SDR?
Page 17
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Chapter
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Sample Questions
Q1) Assume a system of floating exchange rates.In response to relatively high domestic interest rates,suppose that foreign investors place their funds in domestic 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
Q2) Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency.This causes the
A) domestic money supply to decrease and a decline in aggregate demand
B) domestic money supply to increase and a decline in aggregate demand
C) domestic money supply to decrease and a rise in aggregate demand
D) domestic money supply to increase and a rise in aggregate demand
Q3) International policy coordination is plagued by differing national economic objectives,institutions,political climates,and phases in the business cycle.
A)True
B)False
Q4) What is international economic policy coordination?
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Page 18
Chapter 17: International Banking: Reserves, Debt, and Risk
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Sample Questions
Q1) International trade and investment are most frequently financed by the U.S.dollar and the:
A) Japanese yen
B) British pound
C) Australian dollar
D) Swiss franc
Q2) Concerning international lending risk of commercial banks,____ is closely related to political developments in a borrowing country,especially the government's views concerning international investments and loans.
A) Economic risk
B) Credit risk
C) Country risk
D) Currency risk
Q3) When exchange rates are fixed by central bankers,the need for international reserves disappears.
A)True
B)False
Q4) Why do countries hold international reserves?
Q5) Are international reserve needs different for different exchange rate regimes?
Q6) Describe the eurocurrency market.
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