Economics of Globalization
Mock Exam
Course Introduction
Economics of Globalization explores the economic forces and institutional frameworks shaping the integration of national economies into a global system. The course examines topics such as international trade theory and policy, foreign direct investment, the role of multinational corporations, global financial markets, labor migration, and the impacts of globalization on income distribution, development, and the environment. Students will analyze empirical evidence, assess policy responses to globalization, and discuss the challenges and opportunities countries face in an interconnected world economy.
Recommended Textbook
International Economics 6th Edition by James Gerber
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830 Verified Questions
830 Flashcards
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Chapter 1: The United States in a Global Economy
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Sample Questions
Q1) What are the positive impacts of migration on migrants and the firms that hire them?
Answer: Higher incomes for migrants and lower labor costs for firms
Q2) Capital and labor only very recently have been free to move across international borders.
A)True
B)False
Answer: False
Q3) 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)In 1900 most international financial transactions involved buying and selling bonds.
E)Today most international financial transactions involve buying and selling assets denominated in foreign currencies.
Answer: B
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Chapter 2: International Economic Institutions Since World War
Ii
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Q1) The World Bank was created as a result of the Bretton Woods conference and was originally focused on the reconstruction of Europe after World War II.
A)True
B)False
Answer: True
Q2) Many of the important international governmental institutions that deal with the global economy have their roots in the Bretton Woods conference at the end of World War II.
A)True
B)False
Answer: True
Q3) 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)Automobiles and electronics
C)Agriculture and apparel
D)Steel and textiles
E)Automobiles and agriculture
Answer: C
Page 4
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Chapter 3: Comparative Advantage and the Gains From Trade
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Q1) Comparative advantage can change over time.
A)True
B)False
Answer: True
Q2) Mercantilists perceived trade as a zero sum game. A)True
B)False
Answer: True
Q3) Given that Sandy can produce 10 economics reports or make 2 sales calls and Tim can produce 2 economics reports or make 1 sales call,we can conclude that A)Sandy should specialize in economics reports,and Tim should specialize in sales calls.
B)Sandy should produce both economics reports and sales calls since she cannot possibly gain from trade with Tim.
C)Tim should specialize in producing economics reports,and Sandy should specialize in producing sales calls.
D)Tim should produce both economics reports and sales calls.
Answer: A
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Page 5
Chapter 4: Comparative Advantage and Factor
Endowments
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Q1) Which of the following is NOT a proposition of the Heckscher-Ohlin model?
A)A country has a comparative advantage in the production of that commodity which uses more intensively the country's more abundant resource.
B)The effect of international trade is to tend to equalize factor prices between the trading nations.
C)If Mexico is an unskilled labor abundant country,then Mexico has a comparative advantage in the production of goods that use unskilled labor more intensively.
D)If the United States is a skilled labor abundant country,then the United States has a comparative advantage in the production of goods that use skilled labor more intensively.
E)Countries will completely specialize in the product in which they have a comparative advantage if free trade is allowed to occur.
Q2) In the Heckscher-Ohlin model,what assumption is made about opportunity costs?
Q3) Forces inside a nation that cause people to think about leaving that nation are called what in migration theory?
Q4) The relocation of service industry functions to another country is called what?
Q5) What does research thus far suggest about job loss and offshoring?
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Chapter 5: Beyond Comparative Advantage
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Q1) Which of the following is an example of intraindustry trade?
A)Trading peanut oil for tractors
B)Trading crude oil for automobiles
C)Trading Nokia smartphone for Apple iPhones
D)Trading jeans for cotton
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) Most trade between Mexico and the United States is intrafirm.
A)True
B)False
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Chapter 6: The Theory of Tariffs and Quotas
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Q1) Which of the following is FALSE?
A)Tariffs are a relatively easy tax to administer and often form an important part of revenue for low-income countries.
B)Taxes on income,sales,and property require more complex accounting systems than do tariffs.
C)Low-income countries often have large informal markets with the sales of many goods and services not being recorded,which makes it difficult to apply many kinds of taxes.
D)Taxes on income and property run into powerful interest groups in low-income countries,which work to prevent the creation or payment of these taxes.
E)Tariffs are not an attractive tax option for most low-income countries,so they mostly rely on quota licenses for revenue.
Q2) Nontariff barriers to trade are less transparent than tariffs.
A)True
B)False
Q3) Why is the Doha Round called the Doha Development Round?
Q4) What do developing countries want regarding agriculture in the Doha Round?
Q5) What are some of the long-run costs of tariffs?
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Chapter 7: Commercial Policy
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Q1) Economic sanctions
A)usually work to create policy change in the targeted country.
B)are more likely to work if the international community supports them.
C)are more likely to work if military force is not used.
D)never work to create policy change in the targeted country.
E)Both A and C.
Q2) Infant industry protection requires
A)a positive technological externality.
B)a national security externality.
C)time limited protection.
D)Both A and B.
E)Both A and C.
Q3) Trade barriers are an expensive and grossly inefficient way to reach most of the goals for which they are used.
A)True
B)False
Q4) In the United States,which agency determines whether domestic firms have been harmed by subsidies and dumping or by a sudden surge in imports and whether protection is warranted?
Q5) How did the Uruguay Round of GATT impact agriculture?
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Chapter 8: International Trade and Labor and Environmental Standards
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Q1) Child labor is a common family survival strategy,especially for farmers in rural areas where it is hard to enforce rules or to reach the poor with any supporting infrastructure or social services.
A)True
B)False
Q2) The International Labor Organization has been around since 1919,and has a consistent record of being willing to take action against countries that violate core labor standards.
A)True
B)False
Q3) Low standards reduce production costs and change a nation's comparative advantage.
A)True
B)False
Q4) Which region has the highest proportion of its children working?
Q5) Low labor standards are usually associated with A)nondemocratic governments.
B)high-income countries.
C)high-wage countries.
D)low foreign investment.
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Chapter 9: Trade and the Balance of Payments
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Q1) It is important to compare debt levels of low- and middle-income countries to exports because countries must earn foreign exchange in order to service their debts.
A)True
B)False
Q2) Your text considers both the low savings and high savings nations and concludes what about the relationship between government budgets and the current account?
Q3) The current account balance of the United States began to deteriorate in
A)the late 1960s.
B)the early 1970s.
C)the early 1980s.
D)the late 1980s.
E)the early 1990s.
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
Q5) Describe how a sudden stop leads to a financial crisis.
Q6) What does a current account deficit do that is positive for a nation?
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Q1) If the forward rate is greater than the spot rate,what are markets signaling about their expectations for the future spot rates for the home currency?
Q2) Suppose the exchange rates between the United States and Canada are in long-run equilibrium as defined by the idea of purchasing power parity.If the law of one price holds perfectly,then differences between U.S.and Canadian rates of inflation would
A)have no effect on nominal exchange rates.
B)be completely offset by changes in the real exchange rate.
C)be completely offset by changes in the nominal exchange rate.
D)violate the conditions for the law of one price.
E)lead to a change in the real purchasing power of each country's currency when it is converted to the other country's currency.
Q3) Which of the following institutions is the most important participant in foreign currency markets?
A)A retail customer
B)A commercial bank
C)A foreign exchange broker
D)A central bank
E)None of the above.
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) Which nations make up the G8?
Q2) Expansionary monetary policy is likely to lead to a depreciation of the nation's currency.
A)True
B)False
Q3) For any given increase in spending that is not directly caused by an increase in income,the impact on equilibrium GDP is greater than the initial spending increase.
A)True
B)False
Q4) If consumption spending increases because people feel more confident about the future,
A)aggregate demand will shift to the left.
B)aggregate demand will shift to the right.
C)aggregate supply will shift to the left.
D)aggregate supply will shift to the right.
Q5) Contractionary fiscal policy attempts to shift aggregate demand to the right. A)True B)False
Q6) If interest rates rise,what will happen to the nation's exchange rate?
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Chapter 12: International Financial Crises
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Q1) The two main types of economies generating current account surpluses from 2000 to 2007 were Asian exporters and oil producers.
A)True
B)False
Q2) An exchange rate crisis is caused by
A)a sudden and an unexpected collapse in the value of a nation's currency.
B)the inability of the IMF to predict the immediate collapse of the currency of a country.
C)the adoption of a flexible exchange rate system by a country or group of countries.
D)the adoption of a fixed exchange rate system by a country or group of countries.
E)Both C and D are correct.
Q3) Unlike a banking crisis,an exchange rate crisis rarely results in a deep recession.
A)True
B)False
Q4) A debt crisis may lead to a banking crisis.
A)True
B)False
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Chapter 13: The United States in the World Economy
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Q1) 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.
E)ensure the continuation of its social programs.
Q2) Few countries have a higher GDP per capita than the weighted average of Canada,Mexico and the U.S.
A)True
B)False
Q3) One problem with NAFTA that is not shared by other trade blocs is that
A)national environmental laws differ greatly.
B)the countries are at very different stages of economic development.
C)the countries speak different languages.
D)the countries are not natural trading partners.
E)the United States and Mexico have a history of conflict.
Q4) What is the main problem with rules of origin?
Q5) What are bilateral investment treaties?
Q6) In negotiating NAFTA,what two side agreements were reached?
Page 15
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Chapter 14: The European Union: Many Markets Into One
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Q1) A major reason for creating the European Monetary System was to A)create a single currency.
B)unify banking laws and permit cross-border investment.
C)avoid competitive devaluations.
D)reduce the costs of changing currencies.
E)eliminate the need for central banks.
Q2) The primary legislative branch of the European Union is called the A)European Commission.
B)European Parliament.
C)European Court of Justice.
D)European Council of Ministers.
E)Council of the European Union.
Q3) All the countries of the EU participate in the Schengen Agreement. A)True
B)False
Q4) 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
Page 16
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Chapter 15: Trade and Policy Reform in Latin America
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Q1) 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.
E)Both A and D.
Q2) The accumulation of international debt increased the debt service requirements of the indebted countries.After the debt crisis began,this caused
A)the adoption of expansionary policies to return to growth.
B)large capital inflows to service the debt.
C)the adoption of strongly contractionary policies to reduce consumption and government deficits.
D)an intensification of industrial policies targeted on import substitutes.
E)a reduction in inequality.
Q3) What is the primary reason exchange rates were overvalued under ISI?
Q4) Latin America has more trade agreements than any other region,and it has some of the oldest as well.
A)True
B)False
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Chapter 16: Export-Oriented Growth in East Asia
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Q1) 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.
E)large current account surpluses.
Q2) What did the HPAE do to share wealth across all levels of society?
Q3) Which of the following is NOT a contributing factor into why the HPAE were able to rapidly accumulate physical and human capital?
A)A stable macroeconomic environment meant low inflation
B)Loans from multilateral institutions such as the IMF,the World Bank,and regional development banks
C)The demographic transition meant that the proportion of their population working was higher.
D)A rapid rise in income made greater amounts of savings possible.
Q4) All of the Newly Industrializing Economies are in East Asia.
A)True
B)False
Q5) What appears to have been one of the major causes of the Asian financial crisis?
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Chapter 17: The Bric Countries in the World Economy
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Q1) Which of the following is not a potential source of comparative advantage for China in the manufacturing sector?
A)Abundant low wage,low skill workers
B)A large domestic market that can lead to scale economies
C)Coastal areas with good logistics for international trade
D)Abundant credit from China's government sector to set up manufacturing operations
Q2) Which of the following is TRUE?
A)Russia is more dependent of international trade than Brazil.
B)Exports and imports are rising more slowly than GDP in the BRIC countries.
C)China was the last of the BRICs to start economic reforms.
D)All of the BRIC countries had to transition from socialist or communist systems.
Q3) The BRIC nations have one quarter of the world's GDP and more than 40 percent of its population.
A)True
B)False
Q4) Why has Chinese exchange rate policy been controversial?
Q5) Three forces played a significant role in preparing Indian policy makers for economic reform.Describe them.
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