Globalization and the World Economy
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Course Introduction
This course explores the complex and dynamic process of globalization and its profound impact on the world economy. Students will examine the historical evolution of global economic integration, the driving forces behind globalization, and its effects on trade, investment, labor markets, and economic development. Key topics include the role of multinational corporations, international economic organizations, global supply chains, and the interplay between economic growth and inequality. The course also considers debates surrounding the benefits and challenges of globalization, its implications for national economies, and the political, social, and environmental ramifications of a more interconnected world.
Recommended Textbook
International Economics 14th Edition by Robert Carbaugh
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1874 Verified Questions
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Page 2
Chapter 1: The International Economy and Globalization
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Sample Questions
Q1) The first wave of globalization was brought to an end by
A) The Great Depression
B) The Second World War
C) The First World War
D) The Smoot-Hawley Act
Answer: C
Q2) If a nation has an open economy, it means that the nation allows private ownership of capital.
A)True
B)False
Answer: False
Q3) Multilateral trade negotiations have led to
A) Continued trade liberalization
B) Financial liberalization
C) Increased investment
D) All of the above
Answer: D
Q4) What is the most important factor which contributes to competitiveness?
Answer: Key to the concept of competitiveness is productivity, or output per worker hour.
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Chapter 2: Foundations of Modern Trade Theory:
Comparative Advantage
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Sample Questions
Q1) Because the Ricardian trade theory recognized only how supply conditions influence international prices, it could determine:
A) The equilibrium terms of trade
B) The outer limits for the terms of trade
C) Where a country chooses to locate along its production possibilities curve
D) Where a country chooses to locate along its trade triangle
Answer: B
Q2) Refer to Figure 2.1. If the relative cost of steel were to rise, then the production possibilities schedule would:
A) Become steeper
B) Become flatter
C) Shift inward in a parallel manner
D) Shift outward in a parallel manner
Answer: A
Q3) The basic idea of mercantilism was that wealth consisted of the goods and services produced by a nation.
A)True
B)False
Answer: False
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Chapter 3: Sources of Comparative Advantage
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Sample Questions
Q1) The Heckscher-Ohlin theory asserts that relative differences in labor productivity underlie comparative advantage.
A)True
B)False
Answer: False
Q2) The theory of overlapping demands predicts that trade in manufactured goods is \(\underline { \text { unimportant } }\) for countries with very different:
A) Tastes and preferences
B) Expectations of future interest rate levels
C) Per-capita income levels
D) Labor productivities
Answer: C
Q3) Recent studies of U.S. resource endowments indicate that the United States is most abundant in unskilled labor, followed by semi-skilled labor and skilled labor.
A)True
B)False
Answer: False
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Chapter 4: Tariffs
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Sample Questions
Q1) Refer to Exhibit 4.2. As a result of the tariff, the price of imported motorcycles equals $13,000 and imports total 4 cycles.
A)True
B)False
Q2) According to the infant-industry argument, temporary tariff protection granted to an infant industry will help it become competitive in the world market; when international competitiveness is achieved, the tariff should be removed.
A)True
B)False
Q3) Refer to Exhibit 4.2. The tariff leads to an increase in Canadian consumer surplus totaling $11,000.
A)True
B)False
Q4) Free traders point out that:
A) There is usually an efficiency gain from having tariffs
B) There is usually an efficiency loss from having tariffs
C) Producers lose from tariffs at the expense of consumers
D) Producers lose from tariffs at the expense of the government
Q5) How can tariffs be justified?
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Chapter 5: Nontariff Trade Barriers
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Sample Questions
Q1) Suppose the government grants a subsidy to its export firms that permits them to charge \(\underline { \text { lower } }\)prices on goods sold abroad. The export revenue of these firms would \(\underline { \text { rise } }\) if the foreign demand is:
A) Elastic in response to the price reduction
B) Inelastic in response to the price reduction
C) Unit elastic in response to the price reduction
D) None of the above
Q2) For most nations, the ratio of imports to total purchases in the public sector is much higher than in the private sector.
A)True
B)False
Q3) According to the U.S. Buy American Act, federal government agencies cannot purchase materials and products from U.S. suppliers if their prices are higher than those of foreign competitors.
A)True
B)False
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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Sample Questions
Q1) Consider Figure 6.3. With free trade, Iraq purchases ____ computers at a price of $____, and realizes $____ of consumer surplus from the availability of computers.
A) 30, $3,000, $25,000
B) 30, $3,000, $35,000
C) 30, $3,000, $45,000
D) 30, $3,000, $55,000
Q2) Referring to Figure 6.1, the total cost of the Airbus subsidy to the European taxpayer equals:
A) $16 million
B) $20 million
C) $24 million
D) $28 million
Q3) Consider Figure 6.2. As a result of the South Korean subsidy, Mexicans find their consumer surplus:
A) Rising by $160
B) Rising by $220
C) Falling by $160
D) Falling by $220
Q4) What is the basis for trade adjustment assistance?
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Chapter 7: Trade Policies for the Developing Nations
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Sample Questions
Q1) During the late 1980s and early 1990s, China dismantled much of its centrally-planned economy and permitted free enterprise to replace it.
A)True
B)False
Q2) The development of countries like South Korea and Singapore has been underlaid by all of the following except:
A) High domestic interest rates
B) R&D and product innovation
C) Education and on-the-job training
D) High levels of saving and investment
Q3) East Asian economies started enacting export-push strategies
A) By late 1950s and 1960s
B) Immediately after World War II
C) In the late 1980s
D) In the early 2000s
Q4) 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
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Chapter 8: Regional Trading Arrangements
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Sample Questions
Q1) If Chile and Mexico form a free-trade agreement, the welfare of the two countries will necessarily increase.
A)True
B)False
Q2) The economic reforms of the early 1990s that occurred in the former Soviet Union and Eastern Europe resulted in:
A) The formation of the Council for Mutual Economic Assistance
B) Multinational firms refusing to operate in these nations
C) A movement from centrally-planned economies toward market economies
D) A movement from market economies toward centrally-planned economies
Q3) When products from high-cost suppliers within a customs union replace imports from a low-cost nation that is \(\underline { \text { not } }\) a member of the customs union, there exist(s):
A) Dynamic welfare losses
B) Dynamic welfare gains
C) Trade creation
D) Trade diversion
Q4) What factors influence the extent of trade creation and trade diversion?
Q5) Concerning transition economies, what do the advocates of shock therapy propose?
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Chapter 9: International Factor Movements and Multinational
Enterprises
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Sample Questions
Q1) The effect of workers migrating from low-wage Mexico to high-wage United States is to redistribute income from capital to labor in the United States and from labor to capital in Mexico.
A)True
B)False
Q2) American critics of U.S. multinational enterprises contend that they promote
A) Runaway jobs
B) Technology transfers abroad
C) Tax evasion
D) All of the above
Q3) Both Coca-Cola Co. and Pepsi-Cola Co. are multinational firms in that their soft drinks are bottled throughout the world. This practice illustrates:
A) Backward vertical integration
B) Forward vertical integration
C) Horizontal integration
D) Conglomerate integration
Q4) What are the disadvantages of forming joint ventures?
Q5) Are there any differences between the theory of multinational enterprises and conventional trade theory?
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Chapter 10: The Balance of Payments
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Sample Questions
Q1) The capital account of the balance of payments includes private-sector transactions as well as official-settlements transactions of the home country's central bank.
A)True
B)False
Q2) According to researchers at the Federal Reserve, the loss of jobs associated with a deficit in the current account tends to be:
A) Offset by the increase of jobs associated with a surplus in the capital account
B) Reinforced by the decrease of jobs associated with a surplus in the capital account
C) A threat to the level of employment for the economy as a whole
D) Of no long-run economic consequence for workers who lose their jobs
Q3) Because a large number of international transactions fail to get recorded, statisticians insert a residual, known as statistical discrepancy, to ensure that total debits equal total credits.
A)True
B)False
Q4) What are the components of the current account of the balance of payments?
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Chapter 11: Foreign Exchange
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121 Flashcards
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Sample Questions
Q1) When the dollar depreciates
A) U.S. exporters tend to sell more goods in foreign markets
B) U.S. consumers travel abroad more cheaply
C) More foreign tourists can afford to visit the United States
D) both a and c
Q2) Most foreign exchange transactions are conducted between commercial banks and household customers.
A)True
B)False
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) Most foreign exchange trading is carried out in the forward market.
A)True
B)False
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Chapter 12: Exchange-Rate Determination
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Sample Questions
Q1) Assume that the United States faces an 8 percent inflation rate while no (zero) inflation exists in Japan. According to the purchasing-power parity theory, the dollar would be expected to:
A) Appreciate by 8 percent against the yen
B) Depreciate by 8 percent against the yen
C) Remain at its existing exchange rate
D) None of the above
Q2) Given a system of floating exchange rates, \(\underline { \text { weaker } }\)U.S. preferences for imports would trigger:
A) An increase in the demand for imports and an increase in the demand for foreign currency
B) An increase in the demand for imports and a decrease in the demand for foreign currency
C) A decrease in the demand for imports and an increase in the demand for foreign currency
D) A decrease in the demand for imports and a decrease in the demand for foreign currency
Q3) What is the asset market approach to exchange rate determination?
Q4) What is the purchasing power parity approach to exchange rate determination?
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Chapter 13: Mechanisms of International Adjustment
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Sample Questions
Q1) According to the quantity theory of money, a change in the money supply will induce an inverse and less-than-proportionate change in the price level.
A)True
B)False
Q2) The gold standard's "rules of the game" required central bankers in a trade deficit nation to expand the money supply, leading to falling interest rates and net investment outflows.
A)True
B)False
Q3) Under a fixed exchange rate system, adjustment mechanisms work for the automatic return to current-account balance after the initial balance has been disrupted.
A)True
B)False
Q4) Referring to Figure 13.4, Canada's marginal propensity to save equals 0.25 and marginal propensity to import equal 0.5.
A)True
B)False
Q5) What is the foreign repercussion effect?
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Chapter 14: Exchange-Rate Adjustments and the Balance of Payments
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Sample Questions
Q1) According to the Marshall-Lerner condition, currency depreciation would have a positive effect on a country's trade balance if the elasticity of demand for its exports plus the elasticity of demand for its imports equals:
A) 0.2
B) 0.5
C) 1.0
D) 2.0
Q2) In Figure 14.1, D represents the US demand curve for Toyotas and MC<sub>0</sub> represents the marginal cost of producing Toyotas. A shift in the marginal cost curve from MC<sub>0</sub> to MC<sub>1</sub> represents
A) an appreciation of the dollar relative to the yen
B) an appreciation of the yen relative to the dollar
C) a depreciation of the dollar relative to the yen
D) neither an appreciation nor a depreciation of the dollar relative to the yen
Q3) The absorption approach to currency depreciation focuses on the A) Purchasing power of money
B) Relative price effects
C) Income effects
D) Price elasticity of demand
Page 16
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Chapter 15: Exchange-Rate Systems and Currency Crises
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Sample Questions
Q1) Given a two-country world, assume Canada and Sweden \(\underline { \text { devalue } }\) their currencies by 20 percent. This would result in:
A) An appreciation in the Canadian currency
B) An appreciation in the Swedish currency
C) An appreciation in both currencies
D) An appreciation in neither currency
Q2) If Uganda devalues its shilling by 10 percent and Burundi devalues its franc by 5 percent, the shilling's exchange value appreciates 10 percent against the franc.
A)True
B)False
Q3) Refer to Table 15.1. If monetary authorities fix the exchange rate at $0.30 per franc, there will be a:
A) Shortage of 200 francs
B) Shortage of 400 francs
C) Surplus of 200 francs
D) Surplus of 400 francs
Q4) What is an SDR?
Q5) How can currency boards and dollarization prevent currency crises?
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Chapter 16: Macroeconomic Policy in an Open Economy
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Sample Questions
Q1) Given a system of floating exchange rates, an expansionary monetary policy by the Federal Reserve will cause
A) the dollar to appreciate and will decrease U.S. net exports
B) the dollar to appreciate and will increase U.S. net exports
C) the dollar to depreciate and will increase U.S. net exports
D) the dollar to depreciate and will decrease U.S. net exports
Q2) A nation realizes external balance when its current account is in equilibrium. A)True
B)False
Q3) When a nation realizes external balance
A) it can have a current account deficit
B) it can have a current account surplus
C) it has neither a current account deficit nor a current account surplus
D) Both a and b
Q4) A nation realizes internal balance if economy achieves full employment and price stability.
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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Q1) When granting loans to financially troubled nations, the International Monetary Fund requires some degree of conditionality, meaning that the borrowing nation must agree to implement economic policies as mandated by the IMF.
A)True
B)False
Q2) 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
Q3) With floating exchange rates, countries require sizable amounts of international reserves for the stabilization of exchange rates.
A)True
B)False
Q4) The purpose of international reserves is to finance:
A) Short-term surpluses in the balance of payments
B) Long-term surpluses in the balance of payments
C) Short-term deficits in the balance of payments
D) Long-term deficits in the balance of payments
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