Applied International Economics Exam Bank
Course Introduction
Applied International Economics explores the practical aspects of international trade, finance, and economic policy, focusing on how global economic forces influence business decisions and government strategies. The course examines topics such as trade theory, exchange rates, balance of payments, monetary systems, and economic integration, using real-world case studies and data analysis to understand contemporary issues like globalization, trade agreements, tariffs, and international financial crises. Students will develop analytical tools to assess policy implications and navigate economic challenges faced by businesses and governments in the interconnected global marketplace.
Recommended Textbook
International Economics 6th Edition by James Gerber
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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
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Sample Questions
Q1) Capital and labor only very recently have been free to move across international borders.
A)True
B)False
Answer: False
Q2) Which of the following is TRUE?
A)Domestic policies are never barriers to trade.
B)Programs aimed at supporting domestic industries do not form trade barriers today.
C)Tariffs and quotas in industrial nations are significantly higher now than they were in 1950.
D)Tariffs and quotas are the primary trade barrier in industrialized countries.
E)Domestic policies intended to protect consumers or the environment may become trade barriers.
Answer: E
Q3) Which nations does the acronym BRIC stand for?
Answer: Brazil,Russia,India and China
Q4) Which type of integration requires adapting domestic policies to coordinate with those of trading partners?
Answer: Deep integration
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Chapter 2: International Economic Institutions Since World War
Ii
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Sample Questions
Q1) With a partial trade agreement
A)goods and services are allowed to cross boundaries without tariffs.
B)two or more countries agree to liberalize trade in a selected group of categories.
C)two or more countries set common tariffs toward non-members.
D)two or more countries allow the free mobility of inputs such as labor and capital.
E)two or more countries agree on establishing a common currency.
Answer: B
Q2) The majority of economists favor open capital flows.
A)True
B)False
Answer: False
Q3) When the United States gives MFN status to China,it means that
A)China is treated better than other U.S.trading partners.
B)China is treated the same as other U.S.trading partners.
C)China is treated worse than other U.S.trading partners.
D)China is better than all the nations in the WTO.
E)China is legally bound to reciprocate.
Answer: B
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Chapter 3: Comparative Advantage and the Gains From Trade
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Sample Questions
Q1) Mercantilists perceived trade as a zero sum game.
A)True
B)False Answer: True
Q2) What is productivity?
Answer: The amount of output from a unit of an input
Q3) Given that Sandy can produce 10 economics reports or 2 sales calls and Tim can produce 2 economics reports or 1 sales call,which of the following would NOT be a mutually agreeable terms of trade for Sandy and Tim?
A)1 economics report for 1 sales call
B)1 sales call for 3 economics reports
C)1 sales call for 4 economics reports
D)1 economics report for 1/4 of a sales call
Answer: A
Q4) The nation as a whole is better off from trade as long as the gains from the winners exceed the losses from the losers.
A)True
B)False
Answer: True
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) 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.
Q3) In the Heckscher-Ohlin model,what assumption is made about opportunity costs?
Q4) The primary interest of firms engaging in offshoring is to find lower wages and to decrease production costs.
A)True
B)False
Q5) What is the Heckscher-Ohlin theorem? Using the case studies in the chapter on U.S.trade with China describe the theory and the resulting trade patterns that would support it.
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Chapter 5: Beyond Comparative Advantage
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Sample Questions
Q1) Which type of industry is likely to see more intraindustry trade?
Q2) Most trade between Mexico and the United States is intrafirm. A)True
B)False
Q3) If the United States and Canada trade hydro-powered electricity for Hollywood films,what type of trade does this represent?
Q4) A substantial amount of trade between industrialized countries is intraindustry or intrafirm trade rather than interindustry trade.
A)True
B)False
Q5) Which industry was first covered by a free trade agreement between Canada and the United States?
Q6) The United States does not use subsidies as part of its policies. A)True B)False
Q7) Trading French wine for California wine is an example of intraindustry trade. A)True
B)False
Q8) Intraindustry trade is characterized by what two features?
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Chapter 6: The Theory of Tariffs and Quotas
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Sample Questions
Q1) Deadweight losses are the only potential cost associated with tariffs,which is why they are preferred to quotas.
A)True
B)False
Q2) In the case of a small country,consumer surplus
A)decreases less with a tariff than with an equivalent quota.
B)decreases less with a quota than with an equivalent tariff.
C)is not changed by tariffs or quotas.
D)decreases the same with tariffs and equivalent quotas.
E)increases more with quotas.
Q3) A real cost of tariffs and quotas that is difficult to measure is that they
A)encourage rent seeking.
B)shift income from consumers to producers.
C)limit the quantity of imports.
D)reduce wages.
E)cause deflation.
Q4) How is the Agreement on Textiles and Clothing impacting trade today?
Q5) Describe intellectual property rights.What agreements have been reached regarding their protection? What are the benefits and the costs of protecting intellectual property rights?
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Chapter 7: Commercial Policy
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Sample Questions
Q1) Which of the following is NOT a reason people tolerate tariffs and quotas?
A)Ignorance
B)Their personal jobs depend on tariffs and quotas.
C)Costs may be hidden and hard to quantify.
D)Costs of the policy are spread over a large number of people.
E)The marginal expenses to fight the protection outweigh the personal marginal costs of the protection.
Q2) Describe some of the gains from lowering trade barriers that may be difficult to measure.
Q3) The biggest flaw in the logic of the labor argument is the failure to consider
A)the needs of developing countries.
B)the impact of tariffs on inflation.
C)the differences in national productivity levels.
D)the strategy of multinational businesses.
E)the impact on employment levels.
Q4) In the global recession of 2007-2009,world trade declined because nations closed their markets to trading partners.
A)True
B)False
Q5) Under Special 301,what is the U.S.government required to do?
Page 9
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Chapter 8: International Trade and Labor and Environmental Standards
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Sample Questions
Q1) Most regional trade and WTO agreements practice
A)the harmonization standards only.
B)separate standards only.
C)mutual recognition standards only.
D)a combination of harmonization,mutual recognition,and separate standards.
E)only the standards set out by the WTO.
Q2) The use of trade barriers to enforce standards abroad raises all of the following concerns except
A)the potential deadweight losses in consumption and production at home.
B)the lack of agreement over specific content of standards.
C)the potential for the use of trade barriers to erupt into a bigger trade war.
D)the difficulty of knowing whether some of the concerns are over standards or veiled protectionism.
E)only small countries may be able to use trade barriers effectively.
Q3) Which region has the highest proportion of its children working?
Q4) Suppose two nations are seeking to expand their commercial relations.What options do they have in terms of addressing conflicts in standards? Describe each and what conditions might favor different approaches to setting standards.
Q5) 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) Describe how a sudden stop leads to a financial crisis.
Q2) Technology transfer comes only from nations importing new capital goods in the current account.
A)True B)False
Q3) What is the difference between the U.S.current account deficits of the 1980s and the 1990s?
Q4) Your text considers both the low savings and high savings nations and concludes what about the relationship between government budgets and the current account?
Q5) Typically,the most important determinant of private investment in an economy is
A)the inflow of foreign investment.
B)the size of the capital account surplus.
C)the size of the current account deficit.
D)the outflow of private investment.
E)the amount of domestic savings.
Q6) Global capital flows have completely broken the link between domestic savings and domestic investment.
A)True B)False
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Sample Questions
Q1) According to purchasing power parity,which of the following is FALSE about an overvalued dollar compared to the Japanese yen?
A)U)S.merchants would be motivated to import more Japanese goods.
B)Japanese merchants would tend to export more to the United States.
C)Prices in the United States would tend to fall.
D)Over the long term,the exchange rate would fall.
E)Prices in Japan would tend to rise.
Q2) How does the growth in the daily volume of foreign currency transactions compare with the growth rate of the global economy?
Q3) A single currency area requires
A)mobile labor and synchronized business cycles.
B)immobile labor and synchronized business cycles.
C)immobile labor and mobile capital.
D)a political union.
E)mobile labor and unsynchronized business cycles.
Q4) If inflation in the rest of the world is lower than inflation in Brazil,Brazil's currency (the real)would tend to appreciate.
A)True
B)False
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) Describe some of the potential problems with using expansionary fiscal policy.
Q2) Expenditure switching refers to
A)a switching back and forth between investment and consumption expenditures.
B)a switching back and forth between domestic and foreign goods in response to changes in the exchange rate.
C)a switching back and forth between domestic and foreign goods in response to changes in the interest rate.
D)a switching of back and forth in the current account from a deficit to a surplus and vice versa.
E)All of the above.
Q3) Government spending and taxes
A)do not change aggregate demand.
B)are an important component of aggregate supply.
C)do not play a big role in determining GDP.
D)are a major determinant of aggregate demand.
E)cannot affect the price level.
Q4) Expansionary fiscal policy is likely to lead a nation's currency to depreciate.
A)True
B)False
Q5) If interest rates rise,what will happen to the nation's exchange rate?
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Chapter 12: International Financial Crises
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Sample Questions
Q1) The Mexican peso crisis of 1994 and 1995 was directly related to A)the start of NAFTA.
B)a large capital account surplus.
C)a large capital account deficit.
D)an undervalued peso.
E)a large current account surplus.
Q2) Current research suggests that countries that adopt a pegged exchange rate may be more vulnerable to an exchange rate crisis.
A)True
B)False
Q3) Deficits financed by borrowed money lead to inflation,and in a fixed or crawling peg exchange rate system,this leads to the real exchange rate being undervalued.
A)True
B)False
Q4) An exchange rate crisis may lead to a banking crisis and disintermediation.
A)True
B)False
Q5) What agreement has been reached to reduce the moral hazard problem and what does it require?
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Chapter 13: The United States in the World Economy
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Sample Questions
Q1) Why are trade agreements between the U.S.and Mexico more controversial than trade agreements between the U.S.and Canada?
Q2) Most Mexican workers can increase their wages if they migrate to the United States,a demand-pull factor for migration.
A)True
B)False
Q3) President Salinas of Mexico devised a strategy to restore Mexican growth by encouraging
A)large inflows of foreign capital.
B)large increases in domestic savings.
C)large interest rate cuts.
D)an expansion of import substitution industrialization policies.
E)more government ownership of industrial firms.
Q4) What type of economic policy did Mexico follow from the end of World War II until the 1980s? Describe the three-stage strategy that supporters of this policy emphasized.What was the outcome of these policies for Mexico's manufacturing sector?
Q5) What two trends was Canada trying to address in negotiating CUSTA?
Q6) What is the main problem with rules of origin?
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Chapter 14: The European Union: Many Markets Into One
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Sample Questions
Q1) The principle of subsidiarity is a way to
A)divide power between local governments and unions.
B)provide support for industries in decline.
C)provide support for industries under pressure from foreign competition.
D)divide power between national governments and the EU.
E)divide EU tax money among the member countries.
Q2) Adopting the Single European Act had broad popular support;the Treaty on European Union was more controversial.
A)True
B)False
Q3) The fact that 10 additional nations joined the European Union in May 2004 is an example of deepening.
A)True
B)False
Q4) 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.
Page 16
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Chapter 15: Trade and Policy Reform in Latin America
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Sample Questions
Q1) Indirectly,overvalued exchange rates in Latin America caused
A)a capital shortage in agriculture.
B)a capital shortage in industry.
C)a capital abundance in agriculture.
D)a growth in incomes in rural areas.
E)an increase in competitive pressures faced by industry.
Q2) The concept of "economic pessimism" stems from
A)the theory and empirical fact which states that developing nations face declining export prices relative to increasing import prices.
B)the fact that economic growth in an era of globalization is difficult to attain.
C)the fact that smaller countries would not enjoy comparative advantage unless they are allowed to subsidize some of their industries.
D)the fact that it is impossible to achieve desired economic development without adopting full democratic principles.
E)None of the above.
Q3) What do structural reform policies emphasize?
Q4) What is the primary reason exchange rates were overvalued under ISI?
Q5) What is called for with heterodox stabilization policies?
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Chapter 16: Export-Oriented Growth in East Asia
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Sample Questions
Q1) Which of the following groupings correctly represents the Four Tigers (or Four Dragons)?
A)Thailand,China,Japan,and Malaysia
B)Hong Kong,Singapore,South Korea,and Taiwan
C)Japan,Hong Kong,Thailand,and Malaysia
D)South Korea,China,the Philippines,and Japan
E)Singapore,Malaysia,Indonesia,and India
Q2) One of the functions of deliberation councils is to
A)coordinate foreign investment from different countries.
B)set educational policy for universities and colleges.
C)coordinate government policy and private investment.
D)broaden the economies base of exports.
E)ensure stability in the country's fiscal and monetary policies.
Q3) What appears to have been one of the major causes of the Asian financial crisis?
Q4) Similarly to the Latin American region,the HPAE experienced a Lost Decade in the 1980s.
A)True
B)False
Q5) Identify at least three key factors in the HPAE's economic success?
Q6) What did the HPAE do to share wealth across all levels of society?
Page 18
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Chapter 17: The Bric Countries in the World Economy
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Q1) For China
A)there was a long period of success with the economic results of communism so it was hard to change policies.
B)reform of its economic system was rapid,with a quick dismantling of most of the controls exercised by the state and party over the economic system,but not the political system.
C)economic reforms were intended to create more wealth to distribute,not do undo the communist party.
D)there are no longer state owned enterprises.
Q2) 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.
Q3) Three forces played a significant role in preparing Indian policy makers for economic reform.Describe them.
Q4) Why has Chinese exchange rate policy been controversial?
Q5) What is the difference between Chinese and Indian trade in services?
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