Global Economic Policy Analysis
Exam Solutions
Course Introduction
Global Economic Policy Analysis explores the frameworks and tools used to assess international economic issues and policy decisions. Students will examine the economic, political, and social factors shaping policy formation across countries, including trade relations, financial markets, monetary and fiscal strategies, and international organizations' roles. The course emphasizes quantitative and qualitative analytical techniques to evaluate the impact of policy choices on economic growth, development, and global inequality, preparing students to critically assess current global economic challenges and recommend evidence-based solutions.
Recommended Textbook
International Economics 15th Edition by Robert Carbaugh
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17 Chapters
1863 Verified Questions
1863 Flashcards
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Chapter 1: The International Economy and Globalization
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) Although free trade provides benefits for consumers,it is often argued that import protection should be provided to domestic producers of strategic goods and materials vital to the nation's security.
A)True
B)False
Answer: True
Q2) In the long run,competitiveness depends on an industry's natural resources,its stock of machinery and equipment,and the skill of its workers in creating goods that people want to buy.
A)True
B)False
Answer: True
Q3) A firm's ____,relative to that of other firms,is generally regarded as the most important determinant of competitiveness.
A) Income level
B) Tastes and preferences
C) Governmental regulation
D) Productivity
Answer: D
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Page 3
Chapter 2: Foundations of Modern Trade Theory:
Comparative Advantage
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166 Verified Questions
166 Flashcards
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Sample Questions
Q1) Ricardo's model of comparative advantage assumed all of the following except:
A) Trade is balanced,thus ruling out flows of money between nations
B) Firms make production decisions in an attempt to maximize profits
C) Free trade occurs between nations
D) Labor is immobile within a country,but is incapable of moving between countries
Answer: D
Q2) If two nations of approximately the same size and with similar taste patterns participate in international trade,the gains from trade tend to be shared about equally between them.
A)True
B)False
Answer: True
Q3) Refer to Table 2.2.According to the principle of comparative advantage:
A) South Korea should export steel
B) South Korea should export steel and VCRs
C) Japan should export steel
D) Japan should export steel and VCRs
Answer: A
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Chapter 3: Sources of Comparative Advantage
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) The factor-endowment theory highlights the relative abundance of a nation's resources as the key factor underlying comparative advantage.
A)True
B)False
Answer: True
Q2) According to the factor endowment model,countries heavily endowed with land will:
A) Devote excessive amounts of resources to agricultural production
B) Devote insufficient amounts of resources to agricultural production
C) Export products that are land-intensive
D) Import products that are land-intensive
Answer: C
Q3) Does factor price equalization occur in the real world?
Answer: In the real world,differences in factor prices tend to exist.Different technologies,imperfect markets,transportation costs,and trade barriers may prevent factor prices from equalizing among nations.
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5
Chapter 4: Tariffs
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) How can tariffs be justified?
Q2) Consider Table 4.1.Prior to the tariff,the total price of domestically-produced VCRs is:
A) $150
B) $200
C) $225
D) $250
Q3) When a tariff on imported inputs exceeds that on the finished good,
A) The nominal tariff rate on the finished product would tend to overstate its protective effect
B) The nominal tariff rate would tend to understate it's protective effect
C) It is impossible to determine the protective effect of a tariff
D) Tariff escalation occurs
Q4) Consider Figure 4.2.Of the $100 tariff,$____ is passed on to the U.S.consumer via a higher price,while $____ is borne by the foreign exporter; the U.S.terms of trade:
A) $25,$75,improve
B) $25,$75,worsen
C) $75,$25,improve
D) $75,$25,worsen
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Page 6
Chapter 5: Nontariff Trade Barriers
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Consider Figure 5.4.Assume the Venezuelan government grants its manufacturers a production subsidy of $4 per calculator.After the subsidy is granted,Venezuelan imports total:
A) 8 calculators
B) 12 calculators
C) 16 calculators
D) 20 calculators
Q2) A subsidy granted to import-competing producers reduces overall domestic welfare by the same amount as would a tariff or quota that restricts imports by the same amount.
A)True
B)False
Q3) Consider Figure 5.1.With free trade,the quantity of steel imported by Mexico equals:
A) 2 tons
B) 4 tons
C) 6 tons
D) 8 tons
Q4) Is a tariff-rate quota a two-tier tariff? Why?
Q5) What are the intent and impact of domestic content requirements?
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Chapter 6: Trade Regulations and Industrial Policies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) The Uruguay Round of trade negotiations resulted in the General Agreement on Tariffs and Trade being succeeded by the World Trade Organization.
A)True
B)False
Q2) According to the strategic-trade-policy hypothesis,a subsidy granted to domestic exporters may lead to increased export profits which more than offset the cost of the subsidy to domestic taxpayers.
A)True
B)False
Q3) The Uruguay Round of multilateral trade negotiations succeeded in establishing the World Trade Organization.
A)True
B)False
Q4) By reducing available supplies of a product,an export embargo leads to falling prices in the target nation and increasing target-nation consumer surplus.
A)True
B)False
Q5) What is the essential idea behind strategic trade policy?
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Chapter 7: Trade Policies for the Developing Nations
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Are economic downturns helpful to cartels?
Q2) It is widely agreed that import-substitution policies have been a main contributor to above-average growth rates in developing countries.
A)True
B)False
Q3) During periods of weak demand,the Organization of Petroleum Countries has implemented production (export)quotas to ensure that excess oil supplies be kept off the market.
A)True
B)False
Q4) To be considered a good candidate for an export cartel,a commodity should:
A) Be a manufactured good
B) Be a primary product
C) Have a low price elasticity of supply
D) Have a high price elasticity of demand
Q5) Among the economic problems facing developing countries have been low dependence on primary-product exports,unstable export markets,and worsening terms of trade.
A)True
B)False
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Chapter 8: Regional Trading Arrangements
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) If the United States and Canada abolish all tariffs on each other's goods and implement a common tariff on goods imported from other countries,there occurs a (an):
A) Free-trade area
B) Customs union
C) Common market
D) Economic union
Q2) According to the theory of optimum currency areas,a currency area has the least chance for success when:
A) Countries of the currency area have differing business cycles
B) Workers have a high degree of mobility across borders of the currency area
C) Prices and wages can be adjusted in response to economic disturbances
D) A single monetary policy affects all member countries in the same manner
Q3) Trade creation tends to more than offset trade diversion for a home country forming a customs union with partner countries when: (1)the tariff rate in the home country is high prior to the formation of the customs union; (2)there are a large number of countries forming the customs union.
A)True
B)False
Q4) What is meant by economic integration?
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Chapter 9: International Factor Movements and Multinational
Enterprises
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Critics of U.S.trade and immigration policy maintain that
A) It has depressed wages for many Americans
B) It has increased the supply of less educated workers in the United States
C) It has an adverse impact on the employment opportunities of less-skilled,American workers
D) All of the above
Q2) Forward vertical integration would occur if a U.S.automobile manufacturer acquired a German subsidiary.
A)True
B)False
Q3) Suppose that an American automobile manufacturer establishes foreign subsidiaries to market the automobiles.This practice is referred to as:
A) Forward vertical integration
B) Forward conglomerate integration
C) Backward vertical integration
D) Backward conglomerate integration
Q4) Are there any differences between the theory of multinational enterprises and conventional trade theory?
Q5) What are guest workers?
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Chapter 10: The Balance of Payments
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92 Verified Questions
92 Flashcards
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Sample Questions
Q1) Which of the following would call for inpayments to the United States?
A) American imports of German steel
B) Gold flowing out of the United States
C) American unilateral transfers to less-developed countries
D) American firms selling insurance to British shipping companies
Q2) Concerning a country's business cycle,____ is commonly associated with large or growing current account deficits:
A) Rapid growth rates of production and employment
B) Slow growth rates of production and employment
C) Falling interest rates on government securities
D) Falling interest rates on corporate securities
Q3) Which of the following is considered a capital inflow?
A) A sale of U.S.financial assets to a foreign buyer
B) A loan from a U.S.bank to a foreign borrower
C) A purchase of foreign financial assets by a U.S.buyer
D) A U.S.citizen's repayment of a loan from a foreign bank
Q4) The U.S.unilateral-transfers balance has consistently registered surplus in the past two decades.
A)True
B)False
Page 12
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Chapter 11: Foreign Exchange
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) If it takes $0.18544 to purchase 1 French franc,it takes 5.3926 francs to purchase $1.
A)True
B)False
Q2) In a supply-and-demand diagram for Japanese yen,with the exchange rate in dollars per yen on the vertical axis,the demand schedule for yen is drawn sloping:
A) Upward
B) Vertical
C) Downward
D) Horizontal
Q3) A (An)____ is an arrangement by which two parties exchange one currency for another and agree that the exchange will be reversed at a stipulated date in the future:
A) Arbitrage
B) Swap
C) Option
D) Hedge
Q4) Where are foreign currency options traded?
Q5) What foreign exchange transactions do banks typically engage in?
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Page 13
Chapter 12: Exchange-Rate Determination
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) High real interest rates in the United States tend to:
A) Decrease the demand for dollars,causing the dollar to depreciate
B) Decrease the demand for dollars,causing the dollar to appreciate
C) Increase the demand for dollars,causing the dollar to depreciate
D) Increase the demand for dollars,causing the dollar to appreciate
Q2) A forward premium on the British pound serves as a rough benchmark of the expected rate of appreciation in the pound's spot rate.
A)True
B)False
Q3) A country having stronger preferences for imports than its trading partners have for its exports finds its demand for foreign exchange rising more rapidly than its supply of foreign exchange.
A)True
B)False
Q4) Lower tariffs on U.S.agricultural imports cause the dollar to ____ in the ____.
A) Appreciate,long run
B) Depreciate,long run
C) Appreciate,short run
D) Depreciate,short run
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Chapter 13: Mechanisms of International Adjustment
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) Referring to Table 13.1,if Canada's income rises by $200 billion,imports would rise by:
A) $50 billion
B) $75 billion
C) $100 billion
D) $125 billion
Q2) Under the gold standard,a surplus nation facing a gold inflow and an increase in its money supply would also experience a:
A) Rise in its interest rate and a short-term financial inflow
B) Rise in its interest rate and a short-term financial outflow
C) Fall in its interest rate and a short-term financial inflow
D) Fall in its interest rate and a short-term financial outflow
Q3) Assume that Canada initially faces payments equilibrium in its merchandise trade account as well as in its capital and financial account.Now suppose that Canadian interest rates fall to levels below those abroad.For Canada,this tends to promote:
A) Net financial inflows
B) Net financial outflows
C) Net merchandise exports
D) Net merchandise imports
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Chapter 14: Exchange-Rate Adjustments and the Balance of Payments
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) The J-curve effect implies that in the short run a currency depreciation will result in a balance of trade surplus for the home country.As time passes,however,the home country's balance of trade will move toward deficit.
A)True
B)False
Q2) Refer to Table 14.1.Assume that Toyota Inc.obtains all of its automobile inputs from Japanese suppliers.If the yen's exchange value appreciates from 200 yen = $1 to 100 yen = $1,the yen cost of a Toyota automobile equals:
A) 4,000,000 yen
B) 6,000,000 yen
C) 8,000,000 yen
D) 10,000,000 yen
Q3) Complete currency pass-through arises when a 10 percent depreciation in the value of the dollar causes U.S.:
A) Import prices to fall by 10 percent
B) Import prices to rise by 10 percent
C) Export prices to rise by 10 percent
D) Export prices to rise by 20 percent
Q4) What is a pass-through relationship?
Page 16
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Chapter 15: Exchange-Rate Systems and Currency Crises
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) Developing countries with more than one major trading partner often peg their currencies to a group or basket of those trading partner currencies.
A)True
B)False
Q2) To keep the pound's exchange value from depreciating against the franc,the British exchange stabilization fund would sell pounds for francs on the foreign exchange market.
A)True
B)False
Q3) Under adjustable pegged exchange rates,if the rate of inflation in the United States exceeds the rate of inflation of its trading partners:
A) U.S.exports tend to rise and imports tend to fall
B) U.S.imports tend to rise and exports tend to fall
C) U.S.foreign exchange reserves tend to rise
D) U.S.foreign exchange reserves remain constant
Q4) What is the difference between the crawling peg and adjustable pegged exchange rates?
Q5) Which nations use multiple exchange rates the most and why?
Q6) How can currency boards and dollarization prevent currency crises?
Page 17
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Chapter 16: Macroeconomic Policy in an Open Economy
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72 Verified Questions
72 Flashcards
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Sample Questions
Q1) Expenditure-switching policies include fiscal policy and monetary policy.
A)True
B)False
Q2) A nation experiences overall balance if it achieves:
A) Balance-of-payments equilibrium,full employment,and price stability
B) Balance-of-payments equilibrium,maximum productivity,and price stability
C) Full employment,price stability and no change in its money supply
D) Full employment,price stability,and maximum productivity
Q3) The appropriate expenditure-switching policy to correct a current account surplus is:
A) Currency revaluation
B) Currency devaluation
C) Expansionary monetary policy
D) Contractionary fiscal policy
Q4) Fiscal and monetary policies are generally used to combat domestic recession and inflation and have secondary effects on the balance of payments.
A)True
B)False
Q5) Was the Plaza Agreement of 1985 a success?
Q6) What is international economic policy coordination?
Page 18
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Chapter 17: International Banking: Reserves, Debt, and Risk
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Sample Questions
Q1) In 1974 the United States revoked a 41-year ban on U.S.citizen's ownership of gold.
A)True
B)False
Q2) Swap arrangements
A) Are agreements between governments
B) Require repayment within a stipulated period
C) Are usually multilateral agreements
D) Are never initiated by telephone
Q3) When exchange rates are fixed by central bankers,international reserves are necessary for financing payments imbalances and the stabilization of exchange rates.
A)True
B)False
Q4) Eurodollars are:
A) Dollar-denominated deposits in overseas banks
B) European currencies used to finance transactions in the United States
C) Dollars that U.S.residents spend in Europe
D) European currencies used to finance imports from the United States
Q5) Describe the eurocurrency market.
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