Economics of Globalization
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Course Introduction
Economics of Globalization explores the economic forces and policy decisions that drive the increasing integration of economies around the world. The course examines the movement of goods, services, capital, labor, and technology across national borders, with a focus on the impacts of these flows on economic growth, development, income distribution, and national sovereignty. Topics include international trade theory and policy, multinational corporations, global supply chains, financial markets, exchange rates, and the effects of globalization on labor markets and the environment. Students will analyze case studies and current events to understand the benefits and challenges of globalization for developed and developing countries alike.
Recommended Textbook
International Finance Theory and Policy 10th Edition by Paul R. Krugman
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12 Chapters
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Chapter 1: Introduction
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Sample Questions
Q1) International Economists cannot discuss the effects of international trade or recommend changes in government policies toward trade with any confidence unless they know
A) their theory is the best available.
B) their theory is internally consistent.
C) their theory passes the "reasonable person" legal criteria.
D) their theory is good enough to explain the international trade that is actually observed.
E) their theory accounts for China's unique position in international trade.
Answer: D
Q2) For almost 70 years international trade policies have been governed
A) by the World Trade Organization.
B) by the International Monetary Fund.
C) by the World.
D) by an international treaty known as the General Agreement on Tariffs and Trade (GATT).
E) by the North American Free Trade Agreement (NAFTA).
Answer: D
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Chapter 2: National Income Accounting and the Balance of Payments
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Sample Questions
Q1) Government purchases currently take up about
A) 20 percent of U.S. GNP, and this share has not changed much since the late 1950s.
B) 38 percent of U.S. GNP, and this share has not changed much since the late 1950s.
C) 18 percent of U.S. GNP, and this share has been increasing since the late 1950s.
D) 18 percent of U.S. GNP, and this share has been decreasing since the late 1950s.
E) 25 percent of U.S. GNP, and this share has been decreasing since the late 1950s.
Answer: A
Q2) Which one of the following statements is the MOST accurate?
A) GNP plus depreciation is called net national product (NNP).
B) GNP less depreciation is called net national product (NNP).
C) GNP less depreciation is called net factor product (NFP).
D) GDP plus depreciation is called net national product (NNP).
E) GDP less depreciation is called net national product (NNP).
Answer: B
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Chapter 3: Labor Productivity and Comparative Advantage:
The Ricardian Model
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Sample Questions
Q1) Given the information in the table above,if it is ascertained that Foreign uses prison-slave labor to produce its exports,then home should
A) export cloth.
B) export widgets.
C) export both and import nothing.
D) export and import nothing.
E) export widgets and import cloth.
Answer: A
Q2) The Country of Rhozundia is blessed with rich copper deposits.The cost of copper produced (relative to the cost of widgets produced)is therefore very low.From this information we know that
A) Rhozundia has a comparative advantage in copper.
B) Rhozundia should import copper and export widgets.
C) Rhozundia should export both widgets and copper.
D) Rhozundia should invest in more in widget production.
E) Rhozundia may or may not have a comparative advantage in copper.
Answer: E
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Chapter 4: Specific Factors and Income Distribution
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Sample Questions
Q1) The slope of a country's production possibility frontier with cloth measured on the horizontal and food measured on the vertical axis in the Ricardian model is equal to ________ and it ________ as more cloth is produced.
A) -MPLF/MPLC; is constant
B) -MPLF/MPLC; becomes steeper
C) -MPLF/MPLC; becomes flatter
D) -MPLC/MPLF; becomes steeper
E) -MPLC/MPLF; is constant
Q2) U)S.imports of sugar are limited by an import quota that,according to a study updated in 2013,imposed annual costs on American consumers of A) $2,000,000.
B) $1,500,000.
C) $1,000,000,000.
D) $200,000.
E) $370,000.
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Chapter 5: Resources and Trade: The Heckscher-Ohlin
Model
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Sample Questions
Q1) Why are prices of factors of production NOT equalized?
Q2) If a country produces good Y (measured on the vertical axis)and good X (measured on the horizontal axis),then the absolute value of the slope of its production possibility frontier is equal to
A) the opportunity cost of good X.
B) the price of good X divided by the price of good Y.
C) the price of good Y divided by the price of good X.
D) the opportunity cost of good Y.
E) the cost of capital (assuming that good Y is capital intensive) divided by the cost of labor.
Q3) Why is the H.O.model called the factor-proportions theory?
Q4) Using the figure above,demonstrate what happens to the composition of production (that is quantity of cloth per 1 unit of food)in Australia once trade is established between the two countries.Which country will export cloth? What happens to the relative income of workers in Australia as a result of trade? Does it increase or decrease? Would land owners in Australia lobby for or against free trade? Would land owners in Australia lobby for or against free admittance of immigrant workers?
Q5) "A good cannot be both land- and labor-intensive." Discuss.
Q6) International trade leads to complete equalization of factor prices.Discuss.
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Chapter 6: The Standard Trade Model
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Sample Questions
Q1) Other things being equal,a rise in a country's terms of trade increases its welfare.What would happen if we relax the ceteris paribus assumption,and allow for the law of demand to operate internationally?
Q2) Suppose that a "small country" experiences growth strongly biased toward its export,cloth
A) this will have no effect on terms of trade for the country's trading partner.
B) this will tend to worsen the country's terms of trade.
C) this will tend to improve the country's terms of trade.
D) this will tend to worsen terms of trade for the country's trading partner.
E) this will tend to improve terms of trade for the country's trading partner.
Q3) An increase in the real interest rate,all other things held constant,will cause a country's ________ to ________.
A) current consumption: increase
B) current consumption: decrease
C) terms of trade; improve
D) terms of trade; worsen
E) welfare level; improve
Q4) What is intertemporal comparative advantage?
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Chapter 7: External Economies of Scale and the
International Location of Production
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Sample Questions
Q1) Internal economies of scale will ________ average cost when output is ________ by ________.
A) reduce; increased; a firm
B) increase; increased; a firm
C) reduce; increased; the industry
D) increase; increased; the industry
E) reduce; reduce; the industry
Q2) What is meant by an "industrial district" and what are the three main sources of the economic advantages derived from locating in such a district?
Q3) If a firm's output more than doubles when all inputs are doubled,production is said to occur under conditions of
A) increasing returns to scale.
B) imperfect competition.
C) intra-industry equilibrium.
D) constant returns to scale
E) decreasing returns to scale.
Q4) Why are increasing returns to scale and fixed costs important in models of international trade and imperfect competition?
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Chapter 8: Firms in the Global Economy: Export
Decisions,Outsourcing,and Multinational Enterprises
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Sample Questions
Q1) Intra-industry trade is most common in the trade patterns of A) the industrial countries of Western Europe.
B) the developing countries of Asia and Africa.
C) raw material producers.
D) China with the rest of the world.
E) labor-intensive products.
Q2) Two countries engaged in trade in products with no scale economies,produced under conditions of perfect competition,are likely to be engaged in A) inter-industry trade.
B) monopolistic competition.
C) intra-industry trade.
D) Heckscher-Ohlin trade.
E) oligopolistic competition
Q3) The figure above represents the demand and cost functions facing a Brazilian Steel producing monopolist.If it were unable to export,and was constrained by its domestic market,what quantity would it sell at what price?
Q4) Refer to above figure.The monopolist can export as much as it likes of its steel at the world price of $5/ton.How much steel will the monopolist sell,and at what price?
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Chapter 9: The Instruments of Trade Policy
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Sample Questions
Q1) If an import-competing firm is imperfectly competitive,than under free trade an import quota will ________ domestic market price,________ producer surplus,________ consumer surplus,________ government revenue,and ________ overall domestic national welfare.
A) increase; increase; decrease; have no effect on; decrease
B) decrease; decrease; increase; decrease; have no effect on C) increase; have no effect on; decrease; increase; decrease
D) decrease; increase; decrease; increase; decrease
E) have no effect on; have no effect on; decrease; increase; decrease
Q2) If a good is imported into (small)country H from country F,then the imposition of a tariff In country H
A) raises the price of the good in both countries (the "Law of One Price").
B) raises the price in country H and does not affect its price in country F.
C) lowers the price of the good in both countries.
D) lowers the price of the good in H and could raise it in F.
E) raises the price of the good in H and lowers it in F.
Q3) Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets produced domestically?
Q4) Refer to above figure.In the absence of trade,what is the country's consumer surplus?
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Chapter 10: The Political Economy of Trade Policy
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Sample Questions
Q1) The optimum tariff is most likely to apply to
A) a small tariff imposed by a small country.
B) a small tariff imposed by a large country.
C) a large tariff imposed by a small country.
D) a large tariff imposed by a large country.
E) an ad valorem tariff on a small country.
Q2) A trade policy designed to alleviate some domestic economic problem by exporting it to foreign countries is know as a(n)
A) international dumping policy.
B) countervailing tariff policy.
C) beggar thy neighbor policy.
D) trade adjustment assistance policy.
E) redistribution quota policy.
Q3) An issue never confronted effectively by GATT,but considered an important issue for WTO is that of
A) the promotion of freer World trade.
B) the promotion of freer World commodity trade.
C) the promotion of freer World services trade.
D) the lowering of tariff rates.
E) the liberalization of trade.
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Chapter 11: Trade Policy in Developing Countries
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Sample Questions
Q1) The disappointment with import-substitution policies is in part because
A) of the rapid and continuous growth record of South American countries.
B) many countries pursuing this strategy experienced stagnation in their growth.
C) this policy is inconsistent with sophisticated economic growth models.
D) this policy tended to create world-class industrial competitors.
E) of the financial investment lost by the U.S.
Q2) Taiwan and South Korea are examples of developing nations that have recently pursued these industrialization policies
A) import substitution.
B) export promotion.
C) commercial dumping.
D) multilateral contract.
E) trade embargoes.
Q3) The imperfect capital market justification for infant industry promotion
A) assumes that new industries will tend to have low profits.
B) assumes that infant industries will soon mature.
C) assumes that infant industries will be in products of comparative advantage.
D) assumes that banks can allocate resources efficiently.
E) assumes that developing country will reward the donor country.
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Chapter 12: Controversies in Trade Policy
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Q1) When the WTO met in Seattle to initiate a further move towards free international trade,thousands of activists met
A) in order to promote the WTO's goals of "Trade-not Aid."
B) in order to laud the WTO policy orientation which would bust local monopolies and therefore help ordinary relatively poor consumers everywhere.
C) in order to laud the WTO policy of disallowing government sweetheart deals, which typically meant that corrupt governments subsidized their in-laws' conglomerates on the backs of poor taxpayers.
D) in order to support the WTO efforts of bringing about a universal shift of resources in poor countries to higher efficiency and productivity uses, which would raise the real incomes of everyone.
E) in order to protest WTO free trade policies that they believed hurt workers.
Q2) Refer to the above table.Suppose the U.S.government (but not Europe)offers a $10 million subsidy?
Q3) Refer to the above table.How could the U.S.government justify its decision to offer a subsidy to a profitable and successful business?
Q4) What is a pollution haven?
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