International Political Economy
Study Guide Questions
Course Introduction
International Political Economy explores the complex interplay between politics and economics on a global scale, examining how governments, international organizations, and market forces influence the distribution of wealth and power across nations. The course covers key theories and concepts such as globalization, trade policy, monetary systems, economic development, and the roles of institutions like the World Trade Organization and International Monetary Fund. Students will analyze how domestic and international factors affect economic relations, policy decisions, and the challenges faced by countries at different levels of development in navigating an interconnected global economy.
Recommended Textbook
International Economics 15th Edition by Robert Carbaugh
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17 Chapters
1863 Verified Questions
1863 Flashcards
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Page 2
Chapter 1: The International Economy and Globalization
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) If a nation has an open economy,it means that the nation allows private ownership of capital.
A)True
B)False
Answer: False
Q2) Opening the economy to international trade tends to lessen inflationary pressures at home.
A)True
B)False
Answer: True
Q3) Which of the following is a fallacy of international trade?
A) Trade is a zero-sum activity
B) Exports increase employment in exporting industries
C) Import restrictions increase employment in import-competing industries
D) Tariffs and quotas reduce trade volume
Answer: A
Q4) What are the challenges of the international trading system?
Answer: Among the challenges that the international trading system faces are dealing with fair labor standards and concerns about the environment.
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Chapter 2: Foundations of Modern Trade Theory:
Comparative Advantage
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166 Flashcards
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Sample Questions
Q1) The commodity terms of trade measures
A) The rate at which exports exchange for imports
B) The influence trade has on productivity levels
C) The effect on income of the trading nation
D) The improvement in a nation's welfare
Answer: A
Q2) The equilibrium prices and quantities established after trade are fully determinate if we know:
A) The location of all countries' indifference curves
B) The shape of each country's production possibilities curve
C) The comparative costs of each trading partner
D) The strength of world supply and demand for each good
Answer: D
Q3) The writings of G.MacDougall emphasized which of the following as an explanation of a country's competitive position?
A) National income levels
B) Relative endowments of natural resources
C) Domestic tastes and preferences
D) Labor compensation and productivity levels
Answer: D
Page 4
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Chapter 3: Sources of Comparative Advantage
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108 Flashcards
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Sample Questions
Q1) Stringent governmental regulations (e.g.,air quality standards)imposed on domestic steel manufacturers tend to:
A) Enhance their competitiveness in the international market
B) Detract from their competitiveness in the international market
C) Increase the profitability and productivity of domestic manufacturers
D) Reduce the market share of foreign firms selling steel in the domestic market
Answer: B
Q2) The Leontief Paradox was the first major challenge to the product-life-cycle theory of trade.
A)True
B)False
Answer: False
Q3) Economists agree that wages of unskilled workers are being held down by A) International trade
B) Technology improvements
C) Lack of education
D) A combination of a,b,and c
Answer: D
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Chapter 4: Tariffs
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Sample
Questions
Q1) Assume that the United States imports televisions from Taiwan at a price of $300 per unit and that these televisions are subject to an import tariff of 25 percent.Also assume that U.S.components are used in the televisions assembled by Taiwan and that these components have a value of $100.Under the Offshore Assembly Provision of U.S.tariff policy,the price of an imported television to the U.S.consumer after the tariff has been levied is $375
A)True
B)False
Q2) Consider Figure 4.1.With free trade,Mexico imports:
A) 40 calculators
B) 60 calculators
C) 80 calculators
D) 100 calculators
Q3) Consider Figure 4.1.With a per-unit tariff of $3,the quantity of imports decreases to:
A) 20 calculators
B) 40 calculators
C) 50 calculators
D) 70 calculators
Q4) Can import duties have unintended side effects?
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Chapter 5: Nontariff Trade Barriers
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Sample Questions
Q1) According to the cost-based definition of dumping,dumping begins to occur when a firm sells a product at a price that is less than average variable cost.
A)True
B)False
Q2) To the extent that a local content requirement forces firms to locate production in a high-cost nation,product price rises and consumer surplus falls.
A)True
B)False
Q3) Assume the U.S.has a competitive advantage in producing calculators,while the rest of the world has a competitive advantage in steel.Suppose the U.S.and the rest of the world enter into an agreement to lower import quotas below existing levels on calculators and steel.Which of the following would least likely occur for the U.S.? Rising levels of:
A) Consumer surplus for American buyers of steel
B) Producer surplus for American steelmakers
C) Production in the American calculator industry
D) Producer surplus for American calculator producers
Q4) What is the price-based definition of dumping?
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Page 7
Chapter 6: Trade Regulations and Industrial Policies
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129 Verified Questions
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Sample Questions
Q1) Major beneficiaries of export-credit subsidies,granted by the Export-Import Bank,have included U.S.producers of aircraft,telecommunications,and power-generating equipment.
A)True
B)False
Q2) Which international organization stipulates procedures for the settlement of international trade disputes?
A) World Trade Organization
B) World Bank
C) International Monetary Fund
D) Organization of Economic Development
Q3) The Uruguay Round of multilateral trade negotiations succeeded in establishing the World Trade Organization.
A)True
B)False
Q4) The high point of U.S.protectionism occurred with the passage of the Kennedy Act in the 1960s.
A)True
B)False
Q5) What is the essential idea behind strategic trade policy?
Page 8
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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) Which method has not generally been used by the international commodity agreements to stabilize commodity prices?
A) Production quotas applied to the level of commodity output
B) Buffer stock arrangements among producing nations
C) Export restrictions applied to international sales of commodities
D) Measures to nationalize foreign-owned production operations
Q2) The characteristics that have underlaid the economic success of the "high-performing Asian Economies" have included all of the following except:
A) High rates of domestic investment
B) Diseconomies of scale occurring at low output levels
C) Large endowments of human capital
D) High levels of labor productivity
Q3) The success of buffer stocks is limited by the fact that stockpiles of a product may be exhausted after prolonged sales,while funds may be exhausted after prolonged purchases.
A)True
B)False
Q4) Are economic downturns helpful to cartels?
Q5) What are some major trade problems faced by developing nations?
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Chapter 8: Regional Trading Arrangements
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130 Flashcards
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Sample Questions
Q1) The formation of the European Monetary Union is expected to entail benefits for member countries which include all of the following except:
A) Greater certainty for investors within the EMU
B) Lower costs of transactions within the EMU
C) Independent monetary policies run by the central bank of each member country
D) Enhanced competition among companies in member countries
Q2) Trade creation occurs when imports from a low-cost supplier outside of a customs union are replaced by purchases from a higher-cost supplier within the union.
A)True
B)False
Q3) As new regional trading arrangements are formed,the opportunity cost of remaining outside:
A) increases
B) decreases
C) remains stable
D) none of these
Q4) Who were the losers in the U.S.as a result of NAFTA?
Q5) Explain the theory of optimum currency areas.
Q6) What is meant by economic integration?
Page 10
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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) 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
Q2) Consider Figure 9.1.At the equilibrium price,domestic households attain ____ of consumer surplus:
A) $4
B) $8
C) $12
D) $16
Q3) Critics of multinational corporations maintain that they often abandon domestic workers in order to take advantage of lower wage scales abroad.
A)True
B)False
Q4) What are guest workers?
Q5) What are the disadvantages of forming joint ventures?
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Chapter 10: The Balance of Payments
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Sample Questions
Q1) By the mid-1980s,the United States had evolved from the status of a net-creditor nation to a net-debtor nation in its balance of international indebtedness.
A)True
B)False
Q2) When a country realizes a deficit on its current account:
A) Its net foreign investment position becomes positive
B) It becomes a net demander of funds from other countries
C) It realizes an excess of imports over exports on goods and services
D) It becomes a net supplier of funds to other countries
Q3) Concerning the balance of international indebtedness,when is a country a net creditor or a net debtor?
Q4) The value to American residents of income earned from overseas investments shows up in which account in the U.S.balance of payments?
A) Current account
B) Trade account
C) Unilateral transfers account
D) Capital account
Q5) What are the components of the current account of the balance of payments?
Q6) What does a current account deficit mean?
Page 12
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Chapter 11: Foreign Exchange
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121 Flashcards
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Sample Questions
Q1) A currency speculator's goal is to buy a currency at a low price and immediately resell it at a higher price,thus realizing a riskless profit.
A)True
B)False
Q2) Refer to Table 11.4.On Wednesday,the 180-day forward franc was selling at a:
A) 0.6 percent premium per annum against the dollar
B) 1.6 percent premium per annum against the dollar
C) 0.6 percent discount per annum against the dollar
D) 1.6 percent discount per annum against the dollar
Q3) The "spread" is a bank's profit margin on foreign exchange trading and equals the difference between the bid rate and the offer rate.
A)True
B)False
Q4) An appreciation in the value of the U.S.dollar against the British pound would tend to:
A) Discourage the British from buying American goods
B) Discourage Americans from buying British goods
C) Increase the number of dollars that could be bought with a pound
D) Discourage U.S.tourists from traveling to Britain
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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) A forward discount on Mexico's peso serves as a rough benchmark of the expected appreciation in the peso's spot rate.
A)True
B)False
Q2) According to the asset-markets approach,adjustments among financial assets are a key determinant of long-run movements in exchange rates.
A)True
B)False
Q3) When the price of foreign currency (i.e.,the exchange rate)is above the equilibrium level:
A) An excess supply of that currency exists in the foreign exchange market
B) An excess demand for that currency exists in the foreign exchange market
C) The supply of foreign exchange shifts outward to the right
D) The supply of foreign exchange shifts backward to the left
Q4) 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
Q5) What is exchange rate overshooting?
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Chapter 13: Mechanisms of International Adjustment
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107 Flashcards
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Sample Questions
Q1) Referring to Table 13.1,if Canada's income rises by $200 billion,saving would rise by:
A) $10 billion
B) $20 billion
C) $30 billion
D) $40 billion
Q2) Under the gold standard,each participating nation defined the mint price of gold in terms of its national currency was prepared to buy and sell gold at that price.
A)True
B)False
Q3) For the income adjustment mechanism to reverse a trade deficit,economic policymakers must be willing to permit domestic income to increase which leads to rising imports.
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
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Chapter 14: Exchange-Rate Adjustments and the Balance of Payments
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Sample Questions
Q1) According to the J-curve effect,currency appreciation:
A) Decreases a trade surplus
B) Increases a trade surplus
C) Decreases a trade surplus before increasing a trade surplus
D) Increases a trade surplus before decreasing a trade surplus
Q2) Assume that General Motors employs labor and materials,whose costs are denominated in dollars,in the production of automobiles.If the dollar's exchange value depreciates by 10 percent against the yen,the yen-denominated cost of a GM vehicle rises by 10 percent.
A)True
B)False
Q3) According to the absorption approach,an increase in domestic expenditures must occur for currency devaluation to promote balance of trade equilibrium.
A)True
B)False
Q4) If a currency's exchange rate is overvalued,a government would likely initiate actions to revalue the currency.
A)True
B)False
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Chapter 15: Exchange-Rate Systems and Currency Crises
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Sample Questions
Q1) Under managed-floating exchange rates,market forces are allowed to determine exchange rates in the short run while central bank intervention is used to stabilize exchange rates in the long run.
A)True
B)False
Q2) Under managed floating exchange rates,the Federal Reserve could offset an appreciation of the dollar against the yen by:
A) Increasing the money supply which promotes falling interest rates and net investment outflows
B) Increasing the money supply which promotes rising interest rates and net investment inflows
C) Decreasing the money supply which promotes falling interest rates and net investment outflows
D) Decreasing the money supply which promotes rising interest rates and net investment inflows
Q3) How can currency boards and dollarization prevent currency crises?
Q4) What is an SDR?
Q5) What is the difference between the crawling peg and adjustable pegged exchange rates?
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Chapter 16: Macroeconomic Policy in an Open Economy
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Sample Questions
Q1) Given fixed exchange rates,assume Mexico initiates contractionary monetary and fiscal policies to combat inflation.These policies will also:
A) Reduce a balance-of-payments surplus
B) Reduce a balance-of-payments deficit
C) Increases both imports and exports
D) Decrease both imports and exports
Q2) The appropriate expenditure-switching policy to correct a current account deficit is:
A) Contractionary monetary policy
B) Expansionary fiscal policy
C) Currency devaluation
D) Currency revaluation
Q3) Under a fixed exchange-rate system and high capital mobility,a contraction in the domestic money supply leads to a:
A) Trade-account deficit and a capital-account surplus
B) Trade-account deficit and a capital-account deficit
C) Trade-account surplus and a capital-account surplus
D) Trade-account surplus and a capital-account deficit
Q4) What is international economic policy coordination?
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Chapter 17: International Banking: Reserves, Debt, and Risk
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Sample Questions
Q1) "Borrowed" international reserves consist of:
A) IMF drawings
B) Foreign currencies
C) Gold
D) Special drawing rights
Q2) Gold constitutes the largest component of the world's international reserves.
A)True
B)False
Q3) In the market for British Pounds the demand is represented by D<sub>0</sub> and supply by S<sub>0</sub>.If the exchange rate is allowed to rise as high as $4 and the demand for pounds increases to D1,US monetary authorities will need to
A) supply 8 million pounds to the market
B) supply 4 million pounds to the market
C) supply 2 million pounds to the market
D) do nothing
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
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