Economics of Globalization Practice Questions
Course Introduction
Economics of Globalization explores the causes and consequences of globalization on economies, industries, and societies worldwide. The course examines how international trade, capital flows, and migration shape economic development, income distribution, and policy responses. Students analyze the roles of multinational corporations, international institutions, and governmental regulations in the global marketplace. Through empirical case studies and theoretical frameworks, the course evaluates both the benefits and challenges of globalization, including its impact on growth, labor markets, environmental sustainability, and social inequality.
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
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Sample Questions
Q1) What are some of the main advantages and disadvantages of the extensive financial and commercial networks linking nations today?
Answer: Some of the advantages are that buyers receive lower prices,more choice,and more access to innovative technology.The major disadvantage is that a crisis is more likely to spread from one part of the world to another.
Q2) The four criteria for economic integration include trade flows,capital flows,people flows,and the similarity of prices in separate markets.
A)True
B)False
Answer: True
Q3) A major impact of the transatlantic telegraph was
A)a reduction in time required to complete a financial transaction between New York and London
B)an increase in labor flows across the Atlantic.
C)a decrease in trade barriers between the United States and Europe.
D)an increase in trade conflicts between the United States and Europe.
E)that nations abandoned the gold standard.
Answer: A
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Chapter 2: International Economic Institutions Since World War
Ii
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Sample Questions
Q1) Institutions are
A)the same thing as organizations.
B)associations of individuals or groups.
C)always embodied in a written set of rules.
D)a set of rules governing behavior,whether written or not.
E)only relevant on international issues.
Answer: D
Q2) When the United States gives MFN status to China,it means that
A)China is treated better than other U.S.trading partners.
B)China is treated the same as other U.S.trading partners.
C)China is treated worse than other U.S.trading partners.
D)China is better than all the nations in the WTO.
E)China is legally bound to reciprocate.
Answer: B
Q3) How is the IMF funded?
Answer: It collects fees called quotas from it members.
Q4) What result of the Uruguay Round was the most significant for global trade?
Answer: The creation of the WTO
Page 4
Q5) Which round of GATT led to the formation of the WTO?
Answer: The Uruguay Round
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Chapter 3: Comparative Advantage and the Gains From Trade
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Sample Questions
Q1) Based on Table 3.1,trade between the United States and Mexico will occur as long as the relative price of shoes is between
A)three computers and one computer.
B)three computers and two computers.
C)one-half computer and one-third computer.
D)six computers and three computers.
E)None of the above.
Answer: C
Q2) Based on the theory of comparative advantage,nations maximize their well being when they
A)create more jobs.
B)allocate resources more efficiently.
C)increase trade surpluses.
D)increase exports.
Answer: B
Q3) What is productivity?
Answer: The amount of output from a unit of an input
Q4) Which economist introduced the simple trade model and the concept of trade based on comparative advantage?
Answer: David Ricardo
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Chapter 4: Comparative Advantage and Factor
Endowments
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Sample Questions
Q1) If General Motors imports parts from its plants in Canada and Mexico for finished trucks that it will sell across the NAFTA region,what type of trade does this represent?
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 according to the Stolper-Samuelson Theorem,the incomes of the owners of ________ are likely to rise in Brazil after trade with Chile begins.
A)capital
B)labor
C)natural resources
D)It is impossible to determine which will be favored.
Q3) 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.
Q4) Offshoring required which types of advances?
Page 6
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Chapter 5: Beyond Comparative Advantage
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Sample Questions
Q1) 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.
Q2) Which of the following does NOT indicate intraindustry trade?
A)Trading Jeeps for Toyotas
B)Trading Boeing airplanes for Airbus airplanes
C)Trading Bush beer for Heineken beer
D)Trading Japanese-made films for Hollywood-made films
E)Trading oil for trucks
Q3) Which industry was first covered by a free trade agreement between Canada and the United States?
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Chapter 6: The Theory of Tariffs and Quotas
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Sample Questions
Q1) Give an example of an industry that would seek intellectual property rights protection because its product incorporates innovation and research.
Q2) 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)Software,movies,music,and other artistic expressions are valued for their creativity.
D)Developing countries usually strongly advocate the protection of intellectual property rights.
E)The protection given to creators and innovators varied greatly internationally until standardization began with the signing of the TRIPs agreement.
Q3) Developing countries have identified which key issues as important to them in current trade talks?
Q4) Why is the Doha Round called the Doha Development Round?
Q5) When did intellectual property rights become part of trade agreements?
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Page 8
Chapter 7: Commercial Policy
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Sample Questions
Q1) 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
Q2) Tariffs are highest in which sector internationally?
A)Agriculture
B)Energy
C)Technology
D)Automobiles
Q3) Choose one of the arguments countries generally use to justify protection for a particular industry.Describe the argument and any inherent problems with it.Is the argument primarily an economic or a noneconomic one?
Q4) Trade barriers are an expensive and grossly inefficient way to reach most of the goals for which they are used.
A)True
B)False
Q5) Under Special 301,what is the U.S.government required to do?
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Chapter 8: International Trade and Labor and Environmental Standards
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Sample Questions
Q1) Transborder environmental impacts can take place when one country's pollution spills over into a second country in all of the following situations except
A)when an upstream user pollutes a shared watershed.
B)when industrial production in one country creates acid rain in another country.
C)when heavy traffic between two or more countries creates semi-global warming.
D)the production of exported products degrades the local environment.
E)ozone depletion caused by many countries' pollution spills or emissions.
Q2) Which of the following is NOT an obstacle to increased international economic integration?
A)Monopoly powers given to domestic companies of individual nations
B)High tariff rates imposed by industrialized nations
C)Health and safety standard requirements
D)Labor and environmental standard requirements
E)Income disparities among and within trading partners
Q3) Which region has the highest proportion of its children working?
Q4) What environmental problem gets worse as income rises according to your text?
Q5) What are two main obstacles to increased international integration?
Page 10
Q6) What does empirical research suggest about the existence of pollution havens?
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Chapter 9: Trade and the Balance of Payments
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Sample Questions
Q1) What is the difference between the U.S.current account deficits of the 1980s and the 1990s?
Q2) What were some of the consequences of the large current account deficits that the U.S.ran over a long period of time that culminated in the crisis that began in 2007?
Q3) 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
Q4) If a country runs a current account surplus and national private savings equals domestic investment,then the combined governmental accounts
A)must be balanced.
B)must be positive.
C)must be negative.
D)could be either negative or positive,depending on the capital account.
E)could be either negative or positive,depending on the net international investment position.
Q5) How do recent current account deficits compare to GNP and to past ratios?
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Sample Questions
Q1) What are the differences and similarities between a depreciation and devaluation of a currency?
Q2) Covered interest arbitrage involves both
A)the purchase of a foreign asset and a forward contract in the market for foreign exchange.
B)the purchase of a domestic asset and a spot contract in the market for foreign exchange.
C)the sale of a foreign asset and the purchase of a forward contract in the market for foreign exchange.
D)the sale of domestic stocks and the purchase of foreign bonds.
E)None of the above.
Q3) A single currency area requires
A)mobile labor and synchronized business cycles.
B)immobile labor and synchronized business cycles.
C)immobile labor and mobile capital.
D)a political union.
E)mobile labor and unsynchronized business cycles.
Q4) How is dollarization different from monetary union?
Q5) The most important participants in foreign exchange markets are ________.
Q6) Which currency is most commonly traded?
Page 12
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) Expansionary fiscal policy is likely to lead a nation's currency to depreciate.
A)True
B)False
Q2) Fiscal policy is
A)the selling of government bonds by the Treasury.
B)the deliberate manipulation of the money supply designed to affect the interest rate.
C)the deliberate manipulation of taxation and spending designed to affect the economy.
D)the selling of foreign exchange reserves designed to change the exchange rate.
E)All of the above.
Q3) How is an exchange rate depreciation likely to affect imports and exports in the short run and over a longer period of time?
Q4) A common response to stop a depreciation of a currency is to use contractionary monetary policy,which could lead to a recession.
A)True
B)False
Q5) Describe some of the potential problems with using expansionary fiscal policy.
Page 13
Q6) What typically happens to imports as income and spending rise?
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Chapter 12: International Financial Crises
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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) The Mexican peso crisis of 1994 and 1995 was directly related to
A)the start of NAFTA.
B)a large capital account surplus.
C)a large capital account deficit.
D)an undervalued peso.
E)a large current account surplus.
Q3) If governments promise to bail out the financial system in the event of a crisis,this creates a moral hazard problem.Describe this problem.
Q4) If the banking sector borrows internationally and lends locally,how does this intensify a financial crisis?
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Page 14
Chapter 13: The United States in the World Economy
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Sample Questions
Q1) What is the United States primary trade promotion initiative with Africa?
Q2) Under NAFTA,environmental standards are
A)harmonized around Mexican rules.
B)harmonized around U.S.rules.
C)harmonized around Canadian rules.
D)harmonized around a combination of the rules in all three countries.
E)not harmonized.
Q3) 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.
Q4) In Canada,there are no preferences given to Canadian tv networks and programming over U.S.networks and programming.
A)True
B)False
Q5) What two trends was Canada trying to address in negotiating CUSTA?
Q6) What is the main problem with rules of origin?
Page 15
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Chapter 14: The European Union: Many Markets Into One
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Sample Questions
Q1) Describe the criteria for membership in the European Union.Given the criteria,what are some of the major challenges with expanding the EU eastward? What are the potential problems of Turkey joining the EU?
Q2) Subsidiarity requires nations to give up some of their national sovereignty.
A)True
B)False
Q3) Most cohesion funds in the EU budget go to the wealthier EU member nations.
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) As populations age,public spending tends to increase.
A)True
B)False
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) Private capital flows in the form of both direct and portfolio investment began to return to Latin America after 1989,effectively marking the end of the Lost Decade.
A)True
B)False
Q2) The Lost Decade refers to the years between approximately
A)1975 and 1985.
B)1980 and 1990.
C)1987 and 1997.
D)1972 and 1980.
E)1960 and 1970.
Q3) Rent seeking
A)is unlikely the more heavily engaged government planners are with the economy.
B)is more likely where institutions are strong.
C)is not likely to lead to waste and efficiency.
D)is more likely when government policy creates something of value that government officials are charged with distributing.
Q4) What economic problems persist in Latin America? How has this shaped recent policy in the region and why are changes particularly challenging?
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Chapter 16: Export-Oriented Growth in East Asia
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Sample Questions
Q1) All of the following are true of the HPAE except
A)macroeconomic stability has been a high priority of their economic policies.
B)strong,credible commitments to sharing economic growth across all layers of society exist.
C)exports have been promoted while at the same time being more open to imports than other developing countries.
D)restrictions on imports of capital goods have helped to favor the development of domestic technology.
Q2) One of the functions of deliberation councils is to
A)coordinate foreign investment from different countries.
B)set educational policy for universities and colleges.
C)coordinate government policy and private investment.
D)broaden the economies base of exports.
E)ensure stability in the country's fiscal and monetary policies.
Q3) Property rights are relatively secure and free from the threat of nationalization in the HPAE.
A)True
B)False
Q4) Which factors account for most of the growth in the HPAEs?
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Chapter 17: The Bric Countries in the World Economy
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Sample Questions
Q1) What is the difference between Chinese and Indian trade in services?
Q2) Which of the following is NOT identified by your text as a challenge to doing business in China?
A)Issues related to the business climate,such as taxes
B)The availability of credit
C)Licensing requirements
D)Failure to protect intellectual property
E)Poor infrastructure and port facilities to support export of products
Q3) What was the thesis to James O'Neill's paper where he introduced the BRIC acronym?
A)These nations were going to collapse.
B)These were failing states and thus a treat to global stability.
C)These economies were moribund and needed IMF assistance.
D)These nations had the potential to change global trade and capital flows.
E)These nations would repeat the patterns of development and business cycles as the United States and Europe had in their economic history.
Q4) China has a trade deficit in services,while India has a trade surplus in services.
A)True
B)False
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