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Chapter 01
Multiple Choice
1. The most general description of globalization is
A. Large scale movement of labor across countries
B. Expanded economic interaction between countries
C. Large scale movement of goods across countries
D. Large scale movement of capital across countries
Answer: B
2. Which of the following is not within the definition of globalization?
A. American firms establishing production facilities in Europe in the nineteenth century
B. British investors financing the Argentinian railroad
C. British colonization of India
D. Chinese workers migrating to the US to work on building the railroad
Answer: C
3. Which out of the following was the principal reason for the First Wave of Globalization?
A. The invention of the telegraph
B. The noticeable decline in international freight costs
C. The rise of international banking
D. Population growth in Europe
Answer: B
4. Which out of the following was the principal reason for the First Wave of Globalization?
A. The sharp decline in commodity prices
B. The invention of the steamship
C. The laying of the telephone cable across the Atlantic
D. The migration from Europe to North America
Answer: A
5. The average tariff rate for a country is the
A. Average of all the tariff rates imposed on different imported goods
B. The average of the tariff rates the country has imposed over a ten-year span
C. Tariff revenue as percentage of dutiable imports
D. Tariff revenue as a percentage of all imports
Answer: D
6. To calculate the average tariff rate of the US
A. One would take the total tariff revenue collected and then divide that by the value of all the goods on which the US has tariffs
B. One would take the total tariff revenue collected and then divide that by the value of all the imported goods
C. One would calculate the simple average of all the different tariff rates imposed on the goods on which the US has imposed tariffs
D. One would calculate the weighted average of all the different tariff rates imposed on the goods on which the US has tariffs, weighted by their dollar values
Answer: B
7. The most significant reduction in US tariff rates took place between
A. 1900-1920
B. 1930-1950
C. 1950-1975
D. 1980-2005
Answer: A
8. The second-highest tariff rate for the US in the twentieth century was reached in 1930-31
A. Because average tariff rates rose due to the Great Depression
B. Because the US put prohibitive tariffs on Japan and Germany
C. Due to the enactment of the Smoot-Hawley Act
D. Because the US retaliated against tariff hikes by the US’s principal trading partners
Answer: C
9. After 1950 the first impetus for globalization came from the
A. Reconstruction of Europe
B. Containerization in shipping
C. Fall in the cost of air transportation
D. Co-ordinated cut in trade restrictions under GATT-WTO
Answer: B
10. Which is the most recent breakthrough in lowering transportation costs?
A. Diesel-powered ships
B. Containerization in shipping
C. Fall in the cost of air transportation
D. Mammoth oil tankers
Answer: C
11. Which out of the following has had the greatest impact on Globalization since 1950?
A. The repeal of Smoot-Hawley
B. Containerization in shipping
C. Fall in the cost of air transportation
D. Co-ordinated cut in trade restrictions under GATT-WTO
Answer: D
12. The definition of an “open” economy is the
A. Sum of exports and imports as a percentage of GNP
B. Exports minus imports as a percentage of GNP
C. Exports plus imports
D. Exports minus imports
Answer: A
13. If the People’s Bank of China buys US Government Bonds, then from the US point of view this would be called
A. Inward FDI
B. Outward FDI
C. Inward Portfolio Investment
D. Outward Portfolio Investment
Answer: C
14. If Citibank lends funds to the Government of Ireland, then from the US point of view this would be called
A. Inward FDI
B. Outward FDI
C. Inward Portfolio Investment
D. Outward Portfolio Investment
Answer: D
15. If Credit Suisse buys mortgage-backed securities issued by Morgan Stanley, then from the US point of view this would be called
A. Inward FDI
B. Outward FDI
C. Inward Portfolio Investment
D. Outward Portfolio Investment
Answer: C
16. If Hyundai opens a factory in the US, which it owns wholly, then from the US point of view this would be called
A. Inward FDI
B. Outward FDI
C. Inward Portfolio Investment
D. Outward Portfolio Investment
Answer: A
17. If Hewlett-Packard opens a factory in Singapore, which it owns wholly, then from the US point of view this would be called
A. Inward FDI
B. Outward FDI
C. Inward Portfolio Investment
D. Outward Portfolio Investment
Answer: B
18. If Intel opens a factory in Costa Rica, which it owns wholly, then from the US point of view this would be called
A. Inward FDI
B. Outward FDI
C. Inward Portfolio Investment
D. Outward Portfolio Investment
Answer: B
19. Which of the following activities is not equivalent to importing workers to perform the respective activity in the US?
A. Dell undertaking FDI in China to assemble laptops for the US market
B. Nike contracting to make sneakers in Bangladesh to import into the US
C. GM making cars in China to sell cars in China
D. HP setting up a call center in India to handle customer services
Answer: C
20. Immigration as a fraction of the total population to the US since 1850
A. Has increased continuously till 1990
B. Increased till 1910 and has been declining since
C. Risen steadily till 1970 after which it has increased sharply
D. Increased till 1910, then declined till 1970, after which it started rising again
Answer: D
21. “Offshoring” might not be necessary if a country allowed unrestricted
A. Immigration of labor
B. Emigration of labor
C. Inward FDI
D. Outward FDI
Answer: A
22. According to the textbook a new reason why global trade declined by 30% after the 2009 international financial crisis is that
A. International FDI flows declined sharply
B. Countries are much more linked than before in terms of international supply chains
C. The price of oil increased which grounded large number of container ships
D. Escalating trade wars much like 1930
Answer: B
23. If the US has a macroeconomic crisis nowadays, that will get transmitted to a reduction in world trade because
A. US firms will cut back on Outward FDI
B. Foreign firms will cut back on undertaking FDI in the US
C. The reduction in demand in the US will be transmitted across countries through the international supply chains
D. Foreigners will buy less goods from the US
Answer: C
24. Which of the following has a strong probability of setting back globalization in the near future?
A. A US-China trade war
B. Over production of container ships
C. The international illegal drug trade
D. High price of oil
Answer: D
25. What recently has been the biggest impediment to global trade?
A. The pirates of Somalia
B. The closure of the Suez Canal due to the Egyptian revolution
C. The threat by Iran to close down a major sea lane of oil trade
D. The US-China trade war
Answer: A
26. In order to slow down Global Warming it will be required to reduce the usage of fossil fuels. That will
A. Leave global trade unaffected
B. Adversely affect global trade
C. Hurt the world trade in services more than the world trade in goods
D. Increase world trade with the innovations of ships and airplanes which can run on batteries
Answer: B
27. If the community of nations decided to seriously contend with Global Warming, then
A. That will have no impact on global trade
B. It’s difficult to predict how that will impact global trade
C. Adversely affect global trade
D. There will be quick inventions of ships and airplanes which do not run on fossil fuels
Answer: C
28. If the world economy continues in its current slow growth path then
A. The price of oil will keep falling and global trade will get a boost
B. With less energy being used, Global warming will slow down and global trade will increase
C. Protectionism might increase
D. International migration will increase
Answer: C
29. Which out of the following is not used explicitly as an explanation for international trade
A. Economic Geography
B. Comparative Advantage
C. Increasing Returns to Scale
D. Imperfect competition
Answer: A
30. In explaining trade between nations economic theory pays the least amount of attention to
A. Comparative Advantage
B. Increasing Returns to Scale
C. Theory of Oligopoly
D. Transportation costs
Answer: D