Course Introduction
International Trade Midterm
Exam
International Trade explores the economic, political, and institutional factors that drive the exchange of goods and services across borders. The course examines foundational theories such as comparative advantage and Heckscher-Ohlin, the effects of trade policies, tariffs, and quotas, and the role of international organizations like the World Trade Organization. It delves into contemporary issues surrounding globalization, trade agreements, and the impact of trade on economic development, labor markets, and the environment, providing students with analytical tools to understand and evaluate real-world trade dynamics.
Recommended Textbook
International Economics 6th Edition by James Gerber
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17 Chapters
830 Verified Questions
830 Flashcards
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Page 2
Chapter 1: The United States in a Global Economy
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46 Verified Questions
46 Flashcards
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Sample Questions
Q1) Economists
A)describe reducing tariffs and quotas as shallow integration.
B)describe reducing tariffs and quotas as deep integration.
C)believe that changing domestic policies affecting trade is a relatively simple process.
D)believe that the work of reducing trade barriers is done since most tariffs are low and most quotas eliminated.
E)believe the original motivation for nations forming domestic policies and regulations was to create trade barriers to foreign companies.
Answer: A
Q2) Capital and labor only very recently have been free to move across international borders.
A)True
B)False
Answer: False
Q3) Which nations does the acronym BRIC stand for?
Answer: Brazil,Russia,India and China
Q4) Why are high domestic savings rates important?
Answer: It correlates with high domestic investment
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Chapter 2: International Economic Institutions Since World War
Ii
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Sample Questions
Q1) Which of the following is FALSE?
A)A common market is more deeply integrated than an economic union.
B)NAFTA is an example of a free trade area.
C)The European Union is a deeper form of integration than NAFTA.
D)Common markets allow for labor mobility between participating nations.
Answer: A
Q2) The primary mission of the World Bank today is to
A)provide capital to underdeveloped countries.
B)provide capital to firms around the world.
C)provide financial assistance for the reconstruction of war-damaged nations.
D)provide a safe place for people around the world to put their money.
E)help countries manage their exchange rates.
Answer: A
Q3) The original mission of the World Bank was to
A)provide capital to underdeveloped countries.
B)provide capital to firms around the world.
C)provide financial assistance for the reconstruction of war-damaged nations.
D)provide a safe place for people around the world to put their money.
E)help countries manage their exchange rates.
Answer: C
Page 4
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Chapter 3: Comparative Advantage and the Gains From Trade
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Sample Questions
Q1) Suppose that Canada can produce 15 units of timber or 3 units of grain.Suppose that Mexico can produce 6 units of timber or 2 units of grain.Which of the following is CORRECT?
A)Mexico has a comparative advantage in grain production.
B)Mexico has an absolute advantage in timber production.
C)Canada has a comparative advantage in grain production.
D)The countries would find trade mutually beneficial at a trading ratio of 1 grain for 2 timber.
Answer: A
Q2) All individuals and firms in a country must gain from trade in order for it to be beneficial to the nation.
A)True
B)False
Answer: False
Q3) The gains from trade rely on overall productivity (absolute advantage).
A)True
B)False
Answer: False
Q4) In the simple trade model,what is assumed about labor?
Answer: It is perfectly mobile between the two industries within a nation.
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Chapter 4: Comparative Advantage and Factor
Endowments
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Sample Questions
Q1) A production possibilities curve that is a straight line represents the case of A)constant costs.
B)increasing costs.
C)decreasing costs.
D)constant opportunity costs but increasing real costs.
E)constant opportunity costs but decreasing real costs.
Q2) Based on Table 4.1,according to the Stolper-Samuelson Theorem,the income distribution effects of free trade in the United States are likely to favor A)capital.
B)labor.
C)either capital or labor,depending on U.S.productivity.
D)neither capital nor labor.
E)Not enough information to tell.
Q3) After trade opens,the short run impact on the income of the specific factor that is relatively scarce will be A)a decrease in its income.
B)an increase in its income.
C)no change in its income.
D)indeterminate,income effects are not possible to know.
Page 6
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Chapter 5: Beyond Comparative Advantage
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43 Flashcards
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Sample Questions
Q1) Interindustry trade refers to
A)international trade of products made within the same industry.
B)domestic trade of products made within the same industry.
C)international trade of products made across different industries.
D)the exchange of similar items that are differentiated.
E)None of the above.
Q2) Market failures occur whenever
A)private returns may be greater than social returns.
B)social returns may be greater than private returns.
C)the free market produces less than what is socially optimal.
D)monopolies exist in a market.
E)All of the above.
Q3) Intraindustry trade tends to be more controversial than interindustry trade.
A)True
B)False
Q4) If countries have similar factor endowments and productivities,their trade is likely to be interindustry.
A)True
B)False
Q5) Intraindustry trade is characterized by what two features?
Page 7
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Chapter 6: The Theory of Tariffs and Quotas
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Q1) If the effective rate of protection is greater than the nominal rate of protection,there must be tariffs on intermediate products.
A)True
B)False
Q2) Both tariffs and quotas lead to a decrease in imports,a decrease in domestic consumption,and an increase in domestic production.
A)True
B)False
Q3) In a small country,the net national cost of tariff protection is equal to the reduction in consumer surplus minus
A)the gain to foreigners.
B)the increase in government revenue and the increase in producer surplus.
C)the increase in government revenue.
D)the increase in producer surplus.
E)the efficiency loss and the consumption side loss.
Q4) What do developing countries want regarding agriculture in the Doha Round?
Q5) Why is the Doha Round called the Doha Development Round?
Q6) What is Joseph Stiglitz' main criticism regarding intellectual property rights protection?
Page 8
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Chapter 7: Commercial Policy
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Sample Questions
Q1) One reason why consumers are unlikely to be too upset about tariffs is because
A)most consumers benefit from protection.
B)tariffs are an inexpensive way to create jobs.
C)consumer losses are not real losses.
D)the costs are so spread out that no one pays a big share of the total.
E)the gains of producers are larger.
Q2) A major difficulty with the infant industry argument for protection is that
A)government revenue will fall with a tariff.
B)it requires the nation to fall into the large country case for tariff protection.
C)effective rates of protection are usually greater than nominal rates.
D)the measurement of production externalities is hard and uncertain.
E)the productivity of infant industries is usually declining.
Q3) If a large percentage of economic activity in developing countries is unrecorded,then the countries are likely to rely on which of the following taxes to provide government revenue?
A)Sales taxes
B)Property taxes
C)Income taxes
D)Tariffs
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Page 9
Chapter 8: International Trade and Labor and Environmental Standards
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Sample Questions
Q1) While Africa has the largest numbers of working children,Asia has the highest proportion of working children,with an estimated one in four employed.
A)True
B)False
Q2) The WTO encourages nations to take unilateral action on trade issues,including issues involving environmental protection.
A)True
B)False
Q3) Low labor standards are usually associated with A)nondemocratic governments.
B)high-income countries.
C)high-wage countries.
D)low foreign investment.
Q4) Low standards reduce production costs and change a nation's comparative advantage.
A)True
B)False
Q5) What does empirical research suggest about the existence of pollution havens?
Q6) What are two main obstacles to increased international integration?
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Chapter 9: Trade and the Balance of Payments
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Sample Questions
Q1) What does a current account deficit do that is positive for a nation?
Q2) What were some of the consequences of the large current account deficits that the U.S.ran over a long period of time that culminated in the crisis that began in 2007?
Q3) Which of the following is NOT true about this national income equation: \( S+(T-G)=I+C \mathrm{~A} ? \)
A)For the current account,CA,to improve,we may have to invest less than otherwise would be the case.
B)For the current account,CA,to improve,we may have to save more to maintain the same amount of investment that includes foreign saving.
C)For the current account,CA,to improve,the government may have to run budget surplus.
D)A reduction in the trade deficit with one country will simply show up as an increase in a trade deficit with another country.
E)None of the above.
Q4) Briefly describe the factors that contributed to the U.S.Current Account deficits of the 1990s.
Q5) How do recent current account deficits compare to GNP and to past ratios?
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Sample Questions
Q1) What matters most to importers and exporters is the nominal exchange rate.
A)True
B)False
Q2) Suppose the exchange rates between the United States and Canada are in long-run equilibrium as defined by the idea of purchasing power parity.If the law of one price holds perfectly,then differences between U.S.and Canadian rates of inflation would
A)have no effect on nominal exchange rates.
B)be completely offset by changes in the real exchange rate.
C)be completely offset by changes in the nominal exchange rate.
D)violate the conditions for the law of one price.
E)lead to a change in the real purchasing power of each country's currency when it is converted to the other country's currency.
Q3) The spot rate is the rate at which foreign currencies will be exchanged a specified number of days in the future.
A)True
B)False
Q4) How does rapid economic growth at home affect foreign exchange markets?
Q5) What is the largest center for currency trading?
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) Which nations make up the G8?
Q2) The recent trend internationally has been for the executive and legislative branches of elected governments to get more control over monetary policy,as has been the case in countries such as the United States.
A)True
B)False
Q3) Which of the following is TRUE?
A)Points along the aggregate supply curve show the equilibrium levels of output and prices that are consistent on the demand side of the economy.
B)Points along the aggregate demand curve show the equilibrium levels of output and prices that are consistent on the supply side of the economy.
C)Aggregate demand shows the levels of GDP and prices where expenditure decisions and production decisions match.
D)Aggregate supply shows the levels of GDP and prices where expenditure decisions and production decisions match.
Q4) How does expansionary monetary policy affect a nation's exchange rate?
Q5) What typically happens to imports as income and spending rise?
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Chapter 12: International Financial Crises
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Sample Questions
Q1) An exchange rate crisis may lead to a banking crisis and disintermediation.
A)True
B)False
Q2) All of the following are possible outcomes of a banking crisis except
A)depositors,but not banks,may lose all or a portion of their assets.
B)a recession due to decreases in consumption by households.
C)decreases in lending practices by banks.
D)decreases in investment.
E)a contagion effect of the crisis from vulnerable banks to financial institutions on sound basis.
Q3) International financial flows changed in meaningful ways,and these changes were brought to the attention of policy makers by the Asian financial crisis.Describe three changes.
Q4) If governments promise to bail out the financial system in the event of a crisis,this creates a moral hazard problem.Describe this problem.
Q5) Unlike a banking crisis,an exchange rate crisis rarely results in a deep recession.
A)True
B)False
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Chapter 13: The United States in the World Economy
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Twenty-four years before CUSTA,another agreement between the same countries covered trade in A)textiles.
B)steel.
C)autos.
D)agriculture.
E)telecommunications.
Q2) In negotiating NAFTA,what two side agreements were reached?
Q3) The main area of economic activity that Canada chose not to open to free trade is A)agriculture.
B)oil and gas.
C)lumber.
D)the cultural industries.
E)financial services.
Q4) Why is the U.S.putting less emphasis on multilateral and more emphasis on bilateral trade agreements?
Q5) When did NAFTA go into effect?
Q6) What is the United States primary trade promotion initiative with Africa?
Q7) What are bilateral investment treaties?
Page 15
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Chapter 14: The European Union: Many Markets Into One
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49 Verified Questions
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Sample Questions
Q1) When did the European Union become a common market?
Q2) As Europe explored monetary union,evidence to date suggests that increased variability in exchange rates
A)reduces foreign trade and investment.
B)increases foreign trade and investment.
C)does not seem to have an impact on foreign trade and investment.
D)hurts foreign investment but not trade.
E)hurts foreign trade but not investment.
Q3) The "Four Freedoms" are an important goal of the A)Treaty of Rome.
B)Single European Act.
C)European Monetary System.
D)Maastricht Treaty.
E)European Free Trade Area.
Q4) What are the two largest expenditure categories in the EU budget?
Q5) As populations age,public spending tends to increase.
A)True
B)False
Q6) Members of which European Union institution are popularly elected?
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Q7) What challenges does the European Union face in the short,medium,and long run?
Chapter 15: Trade and Policy Reform in Latin America
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Sample Questions
Q1) Latin American economies have become relatively more closed to international trade since 1985.
A)True B)False
Q2) Latin America has more trade agreements than any other region,and it has some of the oldest as well.
A)True B)False
Q3) Populist policies are not successful even in the immediate short run at stimulating the economy and creating jobs.
A)True
B)False
Q4) An orthodox model calls for cutting government spending,reforming the tax system to increase compliance and revenues,and limiting the creation of new money.
A)True
B)False
Q5) What do structural reform policies emphasize?
Q6) What is the primary reason exchange rates were overvalued under ISI?
Q7) What is called for with heterodox stabilization policies?
Page 17
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Chapter 16: Export-Oriented Growth in East Asia
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Q1) What types of government intervention did the World Bank determine was common in the HPAEs?
Q2) Property rights are relatively secure and free from the threat of nationalization in the HPAE.
A)True
B)False
Q3) Deliberation councils have no private sector input.
A)True
B)False
Q4) The HPAE focused their education spending on the university level to better develop high technology workers.
A)True
B)False
Q5) Name the eight HPAEs.
Q6) The Latin American region has more economic equality than the HPAE because nations are more democratic.
A)True
B)False
Q7) What appears to have been one of the major causes of the Asian financial crisis?
Q8) Identify at least three key factors in the HPAE's economic success?
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Chapter 17: The Bric Countries in the World Economy
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Q1) Recently,there has been little political stability in Brazil.
A)True
B)False
Q2) The BRICs share all of the following EXCEPT
A)they are getting a rising share of international trade and foreign investment.
B)they are easy places to do business.
C)their governments have a lot of power and authority in economic affairs.
D)to varying degrees they all present a new model,sometimes referred to as state capitalism.
Q3) Describe how Brazil and Russia are similar and how they are different.
Q4) Special economic zones in China have been
A)the same as export processing zones.
B)centers of economic reform.
C)controlled by state run enterprises.
D)closed to foreigners.
E)poor regions that are targeted for industrial development.
Q5) China has a larger population than India and is expected to be the most populous nation in the world throughout the twenty-first century.
A)True
B)False
Page 19
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