Global Economics Practice Exam
Course Introduction
Global Economics explores the complex interactions of economies on an international scale, examining how goods, services, capital, and labor move across borders. The course covers foundational concepts such as comparative advantage, international trade theories, exchange rates, balance of payments, and the impact of globalization. Students will analyze the roles of major international institutions, the effects of economic policies on world markets, and the challenges faced by both developed and developing countries in a globalized economy. Through case studies and contemporary issues, the course equips students with the analytical tools needed to understand and critically assess the economic forces shaping our interconnected world.
Recommended Textbook
International Economics 9th Edition by Paul
R. Krugman Maurice Obstfeld
Available Study Resources on Quizplus
22 Chapters 1611 Verified Questions
1611 Flashcards
Source URL: https://quizplus.com/study-set/2702 Page 2
Chapter 1: Introduction
Available Study Resources on Quizplus for this Chatper
39 Verified Questions
39 Flashcards
Source URL: https://quizplus.com/quiz/53904
Sample Questions
Q1) International trade theory implies that international trade is beneficial to all trading countries. However, casual observation leads to the conclusion that official obstruction of international trade flows is widespread. How might you reconcile these two facts?
Answer: This question is meant to allow students to offer preliminary discussions of issues, which will be explored in depth later in the book.
Q2) The insight that patterns of trade are primarily determined by international differences in labor productivity was first proposed by
A) Adam Smith.
B) David Hume.
C) David Ricardo.
D) Eli Heckscher.
E) Lerner and Samuelson.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: World Trade: An Overview
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/53905
Sample Questions
Q1) Which of the following does not explain the extent of trade between Ireland and the U.S.?
A) historical ties
B) cultural Linguistic ties
C) Gravity Model
D) multinational corporations
E) large numbers of Irish-Americans
Answer: C
Q2) The two neighbors of the United States do a lot more trade with the United States than European economies of equal size.
A) This contradicts predictions from gravity models.
B) This is consistent with predictions from gravity models.
C) This is irrelevant to any inferences that may be drawn from gravity models.
D) This is because these neighboring countries have exceptionally large GDPs.
E) This relates to Belgium's trade record with the U.S.
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Labor Productivity and Comparative Advantage:
The Ricardian
Model
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/53906
Sample Questions
Q1) If the world terms of trade for a country are somewhere between the domestic cost ratio of H and that of F, then
A) country H but not country F will gain from trade.
B) country H and country F will both gain from trade.
C) neither country H nor F will gain from trade.
D) only the country whose government subsidizes its exports will gain.
E) country F but not country H will gain from trade.
Answer: B
Q2) If a very small country trades with a very large country according to the Ricardian model, then
A) the small country will suffer a decrease in economic welfare.
B) the large country will suffer a decrease in economic welfare.
C) the small country only will enjoy gains from trade.
D) the large country will enjoy gains from trade.
E) both countries will enjoy equal gains from trade.
Answer: C
Q3) Given the information in the table above. What is the opportunity cost of Cloth in terms of Widgets in Foreign?
Answer: One half a widget.
Page 5
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Specific Factors and Income Distribution
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/53907
Sample Questions
Q1) The Ricardian model of international trade demonstrates that trade can be mutually beneficial. Why, then, do governments restrict imports of some goods?
A) Trade can have significant harmful effects on some segments of a country's economy.
B) The Ricardian model is often incorrect in its prediction that trade can be mutually beneficial.
C) Import restrictions are the result of trade wars between hostile countries.
D) Imports are only restricted when foreign-made goods do not meet domestic standards of quality.
E) Restrictions on imports can have significant beneficial effects on domestic consumers.
Q2) In the specific factors model, a country's production function is ________ because of ________.
A) a straight line; diminishing marginal returns
B) a curved line; diminishing marginal returns
C) a straight line; constant marginal returns
D) a curved line; constant marginal returns
E) a curved line; a limited supply of labor
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Resources and Trade: The Heckscher-Ohlin Model
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/53908
Sample Questions
Q1) One of the commonly used assumptions in deriving the Heckscher-Ohlin model is that tastes are homothetic, or that if the per capita incomes were the same in two countries, the proportions of their expenditures allocated to each product would be the same as it is in the other country. Imagine that this assumption is false, and that in fact, the tastes in each country are strongly biased in favor of the product in which it has a comparative advantage. How would this affect the relationship between relative factor abundance between the two countries, and the nature (factor-intensity) of the product each exports? What if the taste bias favored the imported good?
Q2) Use the diagram above to identify the pre-trade situation for Australia and Sri-Lanka. Where on the K/L axis will you find each of the two countries? Which of the two countries has a higher relative wage, w/r? Which product is the labor intensive, and which is the land intensive one? Show where the relative price of cloth to food will be found once trade opens between these two countries. Show where the relative wages of each will appear.
Q3) Why do we observe the Leontief paradox?
Q4) "No country is abundant in everything." Discuss.
Q5) Why is the H.O. model called the factor-proportions theory?
Q6) Why are prices of factors of production not equalized?
Q7) International trade leads to complete equalization of factor prices. Discuss.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: The Standard Trade Model
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/53909
Sample Questions
Q1) If two countries with diminishing returns and different marginal rates of substitution between two products were to engage in trade, then
A) the marginal rates of substitution of both would become equal.
B) the shapes of their respective production possibility frontiers would change.
C) the larger of the two countries would dominate their trade.
D) the country with relatively elastic supplies would export more.
E) the opportunity costs for the smaller country would increase.
Q2) An export subsidy will cause the terms of trade of the ________ country to ________ and will ________ the country.
A) exporting; suffer; harm
B) exporting; improve; benefit
C) importing; suffer; harm
D) importing; suffer; benefit
E) importing; improve; harm
Q3) Refer to above figure. Now, suppose that the relative price of A is actually not higher than Albania's autarkic level of 1, but quite the opposite (e.g., P<sub>A</sub>/P<sub>B</sub> = 0.5). Would Albania still be able to gain from trade? If so, where would be its production point? Given the information in this question, where is Albania's comparative advantage?
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: External Economies of Scale and the
International Location of Production
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/53910
Sample Questions
Q1) Restaurant meals are an example of a ________ good and clothing is an example of a ________ good. The pattern of interregional trade is determined primarily by
A) nontraded; traded; external economies.
B) traded; nontraded; internal economies
C) nondurable; durable; natural resource
D) durable; nondurable; natural resources
E) consumer; style; population
Q2) In the presence of external economies of scale, trade
A) may or may not improve welfare in both countries.
B) will unambiguously improves welfare in both countries.
C) will unambiguously worsens welfare in both countries.
D) will unambiguously worsen welfare in the exporting country and improve welfare in the importing country.
E) will unambiguously improve welfare in the exporting country and worsen welfare in the importing country.
Q3) Why is it that if an industry is operating under conditions of internal scale economies then the resultant equilibrium cannot be consistent with the pure competition model?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/53911
Sample Questions
Q1) Under the model of monopolistic competition, a(an) ________ in the number of firms in the industry will cause ________ to ________.
A) increase; markup; decrease
B) increase; average price; increase C) increase; average cost; decrease D) decrease; markup; decrease E) increase; marginal cost; decrease
Q2) In the model of monopolistic competition, an increase in industry output will ________ market shares and ________ profits of producers of higher-priced goods and will ________ market shares and ________ profits of producers of lower-priced goods.
A) reduce; reduce; increase; increase B) increase; increase; reduce; reduce C) increase; reduce; increase; reduce D) reduce; increase; reduce; increase
E) reduce; increase; increase; reduce
Q3) 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?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: The Instruments of Trade Policy
Available Study Resources on Quizplus for this Chatper
62 Verified Questions
62 Flashcards
Source URL: https://quizplus.com/quiz/53912
Sample Questions
Q1) Refer to above figure. The loss of Consumer Surplus due to the tariff equals
Q2) The most vocal political pressure for tariffs is generally made by
A) consumers lobbying for export tariffs.
B) consumers lobbying for import tariffs.
C) consumers lobbying for lower import tariffs.
D) producers lobbying for export tariffs.
E) producers lobbying for import tariffs.
Q3) Which of the following is a fixed percentage of the value of an imported product?
A) specific tariff
B) ad valorem tariff
C) nominal tariff
D) effective protection tariff
E) infant industry tariff
Q4) Refer to above figure. With free trade and no tariffs, what is the quantity of Widgets imported?
Q5) Refer to above figure. The lowest specific tariff which would be considered prohibitive is ________.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: The Political Economy of Trade Policy
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/53913
Sample Questions
Q1) The General Agreement on Tariffs and Trade and the World Trade Organization have resulted in
A) termination of export subsidies applied to manufactured goods.
B) termination of import tariffs applied to manufactures.
C) termination of import tariffs applied to agricultural commodities.
D) termination of international theft of copyrights.
E) a number of rounds of multilateral trade agreements.
Q2) The efficiency case made for free trade is that as trade distortions such as tariffs are dismantled and removed,
A) government tariff revenue will decrease, and therefore national economic welfare will decrease.
B) government tariff revenue will decrease, and therefore national economic welfare will increase.
C) deadweight losses for producers and consumers will decrease, hence increasing national economic welfare.
D) deadweight losses for producers and consumers will decrease, hence decreasing national economic welfare.
E) government tariff revenue will increase, hence increasing national economic welfare.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Trade Policy in Developing Countries
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/53914
Sample Questions
Q1) The experience of sub-Saharan Africa, as compared to that of "Other Asia" (not including the HPAEs) supports the argument that
A) high rates of protection tend to harm economic growth.
B) the poorer is the country the easier it is for it to "catch up" economically.
C) low rates of protection tend to promote economic growth.
D) free trade always best stimulates a developing country's economy.
E) neither trade liberalization nor import substitution is a foolproof strategy for economic development.
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 consensus today is that import-substitution protectionist industrial policy has not served the developing countries' growth ambitions well. This fact proves that policies relying on export-driven growth are the "winning ticket" for these countries.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Controversies in Trade Policy
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/53915
Sample Questions
Q1) The Shipbreakers of Alang utilize much labor and little capital, thereby supporting the applicability of the
A) factor proportions explanation of the sources of comparative advantage.
B) specific factor theory of comparative advantage.
C) monopolistic competition theory of comparative advantage.
D) scale economies theory of comparative advantage.
E) basis of the non-dumping legislation.
Q2) Faced with the evidence of poor working conditions and low wages in the border maquiladoras, Economists
A) shrug their shoulders and ignore the issue.
B) agree that trade theory is thus proven hollow and internally inconsistent.
C) argue that U.S. consumers should not consume lettuce.
D) argue that the poor conditions and low wages are actually improvements for the Mexican workers, and may be cited as gains-from-trade.
E) argue that Mexico's generally high overall productivity offsets these conditions.
Q3) Refer to the above table. Suppose the U.S. government (but not Europe) offers a $10 million subsidy?
Q4) Describe the environmental Kuznets curve.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: National Income Accounting and the Balance of Payments
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/53916
Sample Questions
Q1) Which of the following statements about the central bank is true?
A) Only the central bank may hold foreign reserves and intervene officially in exchange markets.
B) Central banks have little power to alter macroeconomic conditions.
C) Today, central banks' reserves consist largely of gold.
D) The Federal Reserve holds only a small level of official reserve assets other than gold.
E) Central banks never inject money into the economy.
Q2) Which of the following is true about current cost method and market value method?
A) They are used by the BEA to place current values on foreign indirect investments.
B) These methods lead to the same valuations.
C) Based on the current cost method, the BEA's 2009 estimate of U.S. net foreign wealth was $2,737.86 billion.
D) The current cost method is preferred by the BEA.
E) Foreign direct investments of the U.S. are valued at their original purchase price.
Q3) Explain the concept of Ricardian equivalence.
Q4) What is the national income identity for an open economy?
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Exchange Rates and the Foreign Exchange
Market: An Asset Approach
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/53917
Sample Questions
Q1) Which of the following statements is the most accurate?
A) The U.S. and Canadian dollar have traded roughly at par since 1970.
B) The exchange rate (U.S.$ per Canadian $) has always been less than one since 1970.
C) The U.S. and Canadian dollar traded roughly at par in the early 1970s and as of 2006, is nearing par as the Canadian dollar rises.
D) The U.S. and Canadian dollar traded roughly at par in the early 1970s and as of 2006, is nearing par as the Canadian dollar falls.
E) None of the above.
Q2) The dollar rate of return on euro deposits is
A) approximately the euro interest rate plus the rate of depreciation of the dollar against the euro.
B) approximately the euro interest rate minus the rate of depreciation of the dollar against the euro.
C) the euro interest rate minus the rate of inflation against the euro.
D) the rate of appreciation of the dollar against the euro.
E) the euro interest rate plus the rate of inflation against the euro.
Q3) What is the interest parity condition?
Q4) Discuss the effects of a rise in the dollar interest rate on the exchange rate.
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Money, Interest Rates, and Exchange Rates
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/53918
Sample Questions
Q1) For a given level of
A) nominal GNP, changes in interest rates cause movements along the L(R,Y) schedule.
B) real GNP, changes in interest rates cause a decrease of the L(R,Y) schedule.
C) real GNP, changes in interest rates cause an increase of the L(R,Y) schedule.
D) nominal GNP, changes in interest rates cause an increase in the L(R,Y) schedule.
E) real GNP, changes in interest rates cause movements along the L(R,Y) schedule.
Q2) What are the factors that determine the amount of money an individual desires to hold?
Q3) Combine the graph showing the interest parity condition and one showing money demand and supply to demonstrate simultaneous equilibrium in the money market and the foreign exchange market.
How would an increase in the U.S. money supply affect the Dollar/Euro exchange rate and the U.S. interest rate? Illustrate your answer graphically and explain.
Q4) What would be the effect of an increase in the European Money Supply in the Dollar Euro Exchange Rate?
Q5) Explain the exchange rate over-shooting hypothesis.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Price Levels and the Exchange Rate in the Long Run
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/53919
Sample Questions
Q1) Which of the following statements is the most accurate? In general, under the monetary approach to the exchange rate,
A) the interest rate is not independent of the money supply growth rate in the short run.
B) the interest rate is independent of the money supply growth rate in the long run.
C) the interest rate is not independent of the money supply growth rate in the long run, but independent in the short run.
D) the interest rate is not independent of the money supply growth rate in the long run.
E) the interest rate is a factor of the money supply growth rate only in the short term.
Q2) What are the predictions of the PPP theory with regards to the real exchange rates?
Q3) Construct a table that will summarize the effects of money market and output market changes on the long-run nominal dollar/euro exchange rate
Q4) Define the concept of the real exchange rate and explain how it differs from the nominal exchange rate.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Output and the Exchange Rate in the Short Run
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/53920
Sample Questions
Q1) Which one of the following statements is most accurate?
A) Factors of production can only be over-employed in the short run.
B) Factors of production can only be under-employed in the short run.
C) Factors of production can be over- or under-employed in the long run.
D) Factors of production can be over- or under-employed in the short run.
E) Factors of production are fully employed in the short run.
Q2) Using a figure show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run.
Q3) Discuss the main factors affecting the position of the DD schedule.
Q4) In the long-run equilibrium, after a permanent money-supply increase there follows:
A) an increase in exchange rate, E.
B) a decrease in exchange rate, E.
C) an increase in output, Y.
D) a decrease in output, Y.
E) an unchanged exchange rate, E.
Q5) Explain what are the factors that shift the DD Schedule.
Q6) Explain how the AA schedule is derived.
Q7) Explain and give some governmental policy problems?
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Fixed Exchange Rates and Foreign Exchange Intervention
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/53921
Sample Questions
Q1) Balance of payments crises under fixed exchange rates occur because of A) government policies that are inconsistent with fixed exchange rates.
B) punitive currency wars.
C) global inflation and trade imbalances due to war.
D) excessive exports and imports that overload the global system.
E) monotonic expansion in global currency volume.
Q2) Which one of the following statements is the most accurate?
A) Under a fixed exchange rate, central bank monetary tools are powerless to affect the economy's money supply.
B) Under a flexible exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output.
C) Under a fixed exchange rate, fiscal policy tools are powerless to affect the economy's money supply or its output.
D) Under a fixed exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output.
E) Under a dirty float exchange rate, central bank monetary tools are powerless to affect the economy's money supply or its output.
Q3) What are the factors affecting the demand for foreign currency?
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: International Monetary Systems: An Historical Overview
Available Study Resources on Quizplus for this Chatper
162 Verified Questions
162 Flashcards
Source URL: https://quizplus.com/quiz/53922
Sample Questions
Q1) A sudden increase in the U.S. price level
A) makes those with dollar debts worse off.
B) makes those with dollar debts better off.
C) do not affect those with dollar debts.
D) makes those with DM debt better off.
E) increases all dollar debts.
Q2) An attempt by a central bank to alter the money supply by buying or selling domestic assets
A) will leave both domestic money supply and foreign reserves unchanged.
B) will cause an offsetting change in aggregate demand.
C) will lead to a rise in domestic employment and output.
D) will lead to a decrease in domestic employment and output.
E) will cause an offsetting change in foreign reserves and leave the domestic money supply unchanged.
Q3) What is the difference between an expenditure-changing policy and an expenditure-switching policy?
Q4) Explain why under the gold standard a perpetual surplus or a perpetual deficit is impossible.
Q6) What explains the nearly universal scope of the Great Depression? Page 21
Q5) "Fixed exchange rates are not even an option for most countries." Discuss.
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 20: Optimum Currency Areas and the European Experience
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/53923
Sample Questions
Q1) Did the 1957 Treaty of Rome turn the EU into a truly unified market?
A) Yes, it paved the way for the current EMU.
B) No, although it established a customs union, it failed to remove barriers to the movement of goods and factors within Europe.
C) No, it was only after the German unification and locating the ECB in Frankfurt that unity was achieved.
D) No, since the Northern members of the EU had larger endowments of capital and skilled labor.
E) No, the Treaty of Rome created more trade barriers between European countries.
Q2) On average, from 1978-1996, the country with the highest rate of annual inflation was A) France.
B) Ireland.
C) Italy.
D) Belgium.
E) Netherlands.
Q3) Discuss some of the main reasons why EU countries have favored mutually fixed exchanged rates over other exchange rate policies.
To view all questions and flashcards with answers, click on the resource link above.
Page 23
Chapter 21: Financial Globalization: Opportunity and Crisis
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/53924
Sample Questions
Q1) For the following question, assume the following facts: (1) Chase (which is located in the United States) has a 20% reserve requirement imposed by the government.
(2) Bank of Germany has no reserve requirements.
(3) Both banks may invest at an 8% interest rate.
(4) Both banks have fixed costs of $3 per deposit made.
What is the difference between the minimum interest rates each bank can offer and still make a profit if the deposit is $500 for 1 year?
A) 0 - Both banks can offer the same rate.
B) 1%
C) 1.6%
D) 0.4%
E) 20%
Q2) Explain why a London Eurobank has a competitive advantage over a bank in New York in attracting dollar deposits.
Q3) What is securitization?
Q4) Explain Tobin's idea of "Don't put all your eggs in one basket."
Q5) Explain what Eurocurrencies are and why they are significant?
Q6) Discuss studies based on the interest parity conditions.
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 22: Developing Countries: Growth, Crisis, and Reform
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/53925
Sample Questions
Q1) Explain the reasons for the economic "miracle" of the East Asian countries between 1960 and 1997. Is it only because of the common Asian practice of industrial policy and business-government cooperation?
Q2) The following are all the forms of debt finance:
A) bond, bank, and official finance.
B) bond and bank finance.
C) bond, bank, and portfolio finance.
D) foreign direct and portfolio investment.
E) direct investment, stock, and dividends
Q3) Why may equity finance be preferred to debt finance for developing countries?
A) A fall in domestic income automatically reduces the earnings of foreign shareholders without violating any loan agreement.
B) There are laws insuring against any default with equity finance.
C) The risk is shared between debtor and creditor with debt finance.
D) The tax structure leaves equity finance unconstrained.
E) Repayments are unaffected by falls in real income.
Q4) What factors lie behind capital inflows to the developing world?
Q5) Write an essay on the importance of a sound banking system in developing countries.
To view all questions and flashcards with answers, click on the resource link above. Page 25