Economics of Globalization Review
Questions
Course Introduction
Economics of Globalization examines the economic forces and policies that drive the increasing integration of nations, markets, and production on a global scale. This course explores the impact of globalization on trade, investment, labor markets, income distribution, and economic growth, emphasizing both theoretical frameworks and empirical evidence. Students will analyze the roles of international organizations, multinational corporations, and government policies in shaping global economic trends. Special attention is given to contemporary issues such as global value chains, financial crises, economic inequality, and the challenges faced by developing economies in the global marketplace.
Recommended Textbook
International Economics 14th Edition by Robert Carbaugh
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17 Chapters
1874 Verified Questions
1874 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) A reduced share of the world export market for the United States would be attributed to:
A) Decreased productivity in U.S. manufacturing
B) High incomes of American households
C) Relatively low interest rates in the United States
D) High levels of investment by American corporations
Answer: A
Q2) How much physical output a worker producers in an hour's work depends on:
A) The worker's motivation and skill
B) The technology, plant, and equipment in use
C) How easy the product is to manufacture
D) All of the above
Answer: D
Q3) In an open trading system, a country will import those commodities that it produces at relatively low cost while exporting commodities that can be produced at relatively high cost.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Foundations of Modern Trade Theory: Comparative Advantage
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170 Flashcards
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Sample Questions
Q1) The dynamic gains from trade include all of the following \(\underline { \text { except } }\):
A) Economies of large-scale production resulting in decreasing unit cost
B) Increased saving and investment resulting in economic growth
C) Increased competition resulting in lower prices and wider range of output
D) Increasing comparative advantage leading to specialization
Answer: D
Q2) Under free trade, Sweden enjoys all of the gains from trade with Holland if Sweden:
A) Trades at Holland's rate of transformation
B) Trades at Sweden's rate of transformation
C) Specializes completely in the production of its export good
D) Specializes partially in the production of its export good
Answer: A
Q3) Because the Ricardian theory of comparative advantage was based only on a nation's supply conditions, it could only determine the outer limits within which the equilibrium terms of trade would lie.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Sources of Comparative Advantage
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) Owners of resources specific to export industries tend to lose from international trade, while owners of factors specific to import-competing industries tend to gain.
A)True
B)False
Answer: False
Q2) In industries where the final product is much less weighty or bulky than the materials from which it is made, firms tend to locate production near resource supplies.
A)True
B)False
Answer: True
Q3) The Leontief paradox questioned the validity of the theory of:
A) Comparative advantage
B) Factor endowments
C) Overlapping demands
D) Absolute advantage
Answer: B
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Chapter 4: Tariffs
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) The deadweight losses of an import tariff consist of the protection effect plus the consumption effect.
A)True
B)False
Q2) Suppose an importer of steel is required to pay a tariff of $20 per ton plus 5 percent of the value of steel. This is an example of a (an):
A) Specific tariff
B) Ad valorem tariff
C) Compound tariff
D) Tariff quota
Q3) Suppose that the production of $500,000 worth of steel in the United States requires $100,000 worth of iron ore. The U.S. nominal tariff rates for importing these goods are 15 percent for steel and 5 percent for iron ore. Given this information, the effective rate of protection for the U.S. steel industry is approximately:
A) 6 percent
B) 12 percent
C) 18 percent
D) 24 percent
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6
Chapter 5: Nontariff Trade Barriers
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133 Flashcards
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Sample Questions
Q1) The sugar import quotas of the U.S. government have tended to increase the market price of sugar, thus reducing the costs to the government of maintaining sugar price supports for domestic growers.
A)True
B)False
Q2) Consider Figure 5.2. In the absence of international dumping, ABC Inc. maximizes profits by selling ____ calculators at a price of $____; the firm realizes profits totaling $____.
A) 27, $5, $54
B) 27, $5, $36
C) 24, $4, $46
D) 24, $4, $28
Q3) If the Japanese demand for computers is elastic and the Canadian demand for computers is inelastic, a profit-maximizing firm would charge a higher price to Canadian buyers than to Japanese buyers.
A)True
B)False
Q4) What are the intent and impact of domestic content requirements?
Q5) Is a tariff-rate quota a two-tier tariff? Why?
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Chapter 6: Trade Regulations and Industrial Policies
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129 Flashcards
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Sample Questions
Q1) The Export-Import Bank of the United States encourages American firms to sell overseas by providing direct loans and loan guarantees to foreign purchasers of American goods. To American firms, this represents a:
A) Specific subsidy
B) Ad valorem subsidy
C) Domestic subsidy
D) Export subsidy
Q2) The average tariff rate today on dutiable imports in the United States is approximately:
A) 5 percent of the value of imports
B) 15 percent of the value of imports
C) 20 percent of the value of imports
D) 25 percent of the value of imports
Q3) Copyrights, trademarks, and patents are used to protect the intellectual property of a nation from foreign imitators.
A)True
B)False
Q4) What is the basis for trade adjustment assistance?
Q5) Has industrial policy contributed significantly to Japan's economic growth?
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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 of the following could partially explain why the terms of trade of developing countries might \(\underline { \text { deteriorate } }\) over time?
A) Developing-country exports mainly consist of manufactured goods
B) Developing-country imports mainly consist of primary products
C) Commodity export prices are determined in highly competitive markets
D) Commodity export prices are solely determined by developing countries
Q2) Which trade strategy have developing countries used to replace commodity exports with exports such as processed primary products, semi-manufacturers, and manufacturers?
A) Multilateral contract
B) Buffer stock
C) Export promotion
D) Export quota
Q3) Which method has \(\underline { \text { not } }\) 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
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Page 9
Chapter 8: Regional Trading Arrangements
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) The transition of the former communist countries to market economies requires all of the following \(\underline { \text { except } }\)
A) Removing domestic price controls
B) Opening economies to international competition
C) Establishing private property rights
D) Terminating the convertibility of their currencies
Q2) Which nation is \(\underline { \text { not } }\) a member of the North American Free Trade Association?
A) Canada
B) Greenland
C) Mexico
D) United States
Q3) Critics of the North American Free Trade Agreement maintained that it would result in manufacturing firms fleeing Mexico's stringent pollution-control policies and relocating in the United States and Canada.
A)True
B)False
Q4) Concerning transition economies, what do the advocates of shock therapy propose?
Q5) What is meant by economic integration?
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Chapter 9: International Factor Movements and Multinational Enterprises
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96 Flashcards
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Sample Questions
Q1) Consider Figure 9.3. At labor market equilibrium, the payment to Mexican capital owners equals:
A) 3 pesos
B) 6 pesos
C) 9 pesos
D) 12 pesos
Q2) A joint venture leads to increases in national welfare if the cost-reduction effect is due to wage concessions and if it more than offsets the market-power effect.
A)True
B)False
Q3) International trade in goods and services and flows of productive factors are substitutes for each other.
A)True
B)False
Q4) The theory of multinational enterprise is totally inconsistent with the principle of comparative advantage.
A)True
B)False
Q5) What are the disadvantages of forming joint ventures?
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Chapter 10: The Balance of Payments
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Most economists belief that in the 1980s, a massive outflow of capital caused a current account deficit for the United States.
A)True
B)False
Q2) The "goods and services" account of the balance of payments shows the monetary value of international flows associated with transactions in goods, services, and unilateral transfers.
A)True
B)False
Q3) Credit (+) items in the balance of payments correspond to anything that:
A) Involves receipts from foreigners
B) Involves payments to foreigners
C) Decreases the domestic money supply
D) Increases the demand for foreign exchange
Q4) Refer to Table 10.3. The merchandise-trade balance registered a deficit of $50 billion. A)True
B)False
Q5) What does a current account deficit mean?
Q6) What are the components of the current account of the balance of payments?
Page 12
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Chapter 11: Foreign Exchange
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) In the interbank market for foreign exchange, the ____ refers to the price that a bank is willing to pay for a unit of foreign currency.
A) Offer rate
B) Bid rate
C) Spread rate
D) Transaction rate
Q2) Refer to Table 11.2. The equilibrium exchange rate equals:
A) $1.20 per pound
B) $1.40 per pound
C) $1.60 per pound
D) $1.80 per pound
Q3) The demand schedule for Swiss francs is always downsloping while the supply schedule of francs is always upsloping.
A)True
B)False
Q4) Currency arbitrage tends to result in identical yen/dollar exchange rates in New York and in Tokyo.
A)True
B)False
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Chapter 12: Exchange-Rate Determination
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133 Flashcards
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Sample Questions
Q1) Refer to Figure 12.2. If the Federal Reserve adopts a restrictive monetary policy that leads to relatively high interest rates in the United States, the demand for francs would decrease, the supply of francs would increase, and the dollar's exchange value would appreciate.
A)True
B)False
Q2) An exchange rate is said to ____ when its short-run response to a change in market fundamentals is greater than its long-run response.
A) Overshoot
B) Undershoot
C) Depreciate
D) Appreciate
Q3) 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
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Page 14
Chapter 13: Mechanisms of International Adjustment
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107 Flashcards
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Sample Questions
Q1) Refer to Figure 13.1. Upward movements along U.S. capital and financial account schedule CA<sub>0</sub> would be caused by:
A) U.S. interest rates rising relative to foreign interest rates
B) U.S. interest rates falling relative to foreign interest rates
C) Taxes placed on income earned by U.S. residents from their foreign investments
D) Taxes placed on income earned by foreign residents from their U.S. investments
Q2) Starting from a position where the nation's money demand equals the money supply, and its balance of payments is in equilibrium, economic theory suggests that the nation's balance of payments would move into a deficit position if there occurred in the nation a:
A) Decrease in the money supply
B) Increase in the money demand
C) Decrease in the money demand
D) None of the above
Q3) What is the foreign repercussion effect?
Q4) Explain David Hume's theory of automatic adjustment for balance of payments disequilibria.
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15
Chapter 14: Exchange-Rate Adjustments and the Balance of Payments
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Suppose the exchange value of the franc rises against the currencies of Switzerland's major trading partners. To protect themselves from decreases in foreign sales caused by the mark's appreciation, Swiss companies could shift production to countries whose currencies had depreciated against the mark.
A)True
B)False
Q2) The Marshall-Lerner condition deals with the impact of currency depreciation on:
A) Domestic income
B) Domestic absorption
C) Purchasing power of money balances
D) Relative prices
Q3) The shorter the currency pass-through period, the ____ required for currency depreciation to have the intended effect on the trade balance.
A) Shorter the time period
B) Longer the time period
C) Larger the spending cut
D) Smaller the spending cut
Q4) What is a pass-through relationship?
Page 16
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Chapter 15: Exchange-Rate Systems and Currency Crises
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) Small nations (e.g., Tanzania) with more than one major trading partner tend to peg the value of their currencies to:
A) Gold
B) Silver
C) A single currency
D) A basket of currencies
Q2) Which exchange-rate system does \(\underline { \text { not } }\) require monetary reserves for official exchange-rate intervention?
A) Floating exchange rates
B) Pegged exchange rates
C) Managed floating exchange rates
D) Dual exchange rates
Q3) A market-determined \(\underline { \text { decrease } }\) in the dollar price of the pound is associated with:
A) Revaluation of the dollar
B) Devaluation of the dollar
C) Appreciation of the dollar
D) Depreciation of the dollar
Q4) Which nations use multiple exchange rates the most and why?
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Chapter 16: Macroeconomic Policy in an Open Economy
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Sample Questions
Q1) Which policies are \(\underline { \text { expenditure-changing } }\) policies?
A) Currency devaluation and revaluation
B) Import quotas and tariffs
C) Monetary and fiscal policy
D) Wage and price controls
Q2) A nation experiences \(\underline { \text { overall } }\) balance if it achieves:
A) Balance-of-payments equilibrium, full employment, and price stability
B) Balance-of-payments equilibrium, maximum productivity, and price stability
C) Full employment, price stability and no change in its money supply
D) Full employment, price stability, and maximum productivity
Q3) Given an open economy with high capital mobility and floating exchange rates, suppose an expansionary monetary policy is implemented to combat recession. The initial and secondary effects of the policy have conflicting effects on aggregate demand, thus weakening the policy's expansionary effect.
A)True
B)False
Q4) Expenditure-switching policies include fiscal policy and monetary policy.
A)True
B)False
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Chapter 17: International Banking: Reserves, Debt, and Risk
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Sample Questions
Q1) Created by the International Monetary Fund, special drawing rights (SDRs) are unconditional rights to draw currencies of other nations, thus enabling countries to finance their current-account deficits.
A)True
B)False
Q2) Concerning international lending risk, currency risk is the risk of asset losses due to changing currency values.
A)True
B)False
Q3) "Owned" international reserves consist of:
A) Special drawing rights
B) Oil facility
C) IMF drawings
D) Reciprocal currency arrangements
Q4) Swap agreements are generally conducted by the:
A) Federal Reserve with foreign central banks
B) Federal Reserve with foreign commercial banks
C) U.S. Treasury with foreign central banks
D) U.S. Treasury with foreign commercial banks
Q5) Describe the eurocurrency market.
19
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