Deck 10: The Globalization of Trade and Finance

Question 1

Adherents to commercial liberalism agree that everyone benefits from unfettered free trade.

Answer 1

True

Question 2

The negotiating states at the 1944 Bretton Woods Conference agreed the global monetary regime should be based on fixed exchange rates.

Answer 2

True

Question 3

A country's money supply consists of currency minus government debt.

Answer 3

False

Question 4

Monetary policy affects two main economic variables: the supply of money in circulation and interest rates.

Question 5

Unlike private investors, governments are not allowed to intervene in the currency market to affect the value of their own currency.

Question 6

In contrast to liberalism, mercantilism advocates government regulation of economic life to increase state power and security.

Question 7

Under a system of fixed exchange rates, the international market determines the value of a country's currency.

Question 8

An open international economy is a collective good.

Question 9

The number of regional trade agreements has been declining during the age of globalization.

Question 10

Commercial liberalism is an economic philosophy that advocates free markets, open trade, and free flowing capital.

Question 11

After the WTO superseded GATT, it successfully ended most global trade disputes.

Question 12

NAFTA is an example of a regional trade agreement (RTA).

Question 13

Since the early 1970s, the world has had a system of fixed but adjustable exchange rates.

Question 14

According to hegemonic stability theory, a global free trade economy needs a single dominant leader to keep it open and stable.

Question 15

The volume of international capital flows is less than the volume of international trade.

Question 16

Protestors at WTO meetings argue in favor of increasing trade liberalization.

Question 17

If a state has a balance of payments deficit, it is exporting more than it is importing.

Question 18

The "balance of payments" is a calculation summarizing a country's financial transactions with the external world.

Question 19

Most of the world's states consistently support the tenets of free trade.

Question 20

Liberals emphasize the mutual gains (absolute gains) of global trade whereas mercantilists are more concerned with relative gains.

Question 21

According to monetarist theory, a country can manipulate its money supply to

A)facilitate economic growth.
B)control inflation.
C)regulate economic activity.
D)Both a and c are true.
E)All of the above are true.

Question 22

The Group of 20 (G 20) represents which percentage of world GDP?

A)20 percent
B)40 percent
C)60 percent
D)80 percent
E)90 percent

Question 23

The Bretton Woods system established at the end of World War II included all but which of the following?

A)Free trade
B)Open markets
C)A global currency
D)Monetary stability
E)Strong leadership role for the United States

Question 24

Which of the following is the world's reserve currency?

A)Euro
B)Dollar
C)Yen
D)Pound
E)Renminbi

Question 25

A trade policy of protectionism is one in which

A)tariffs are established to restrict imports.
B)profits from one subsidiary of an MNC are used to subsidize sales by another subsidiary.
C)nontariff barriers are used to restrict imports.
D)Both options a and c are true.
E)All of the above are true.

Question 26

Liberals believe that free markets

A)are engines of progress.
B)expand political rights.
C)benefit only wealthy nations.
D)Both options a and b are true.
E)All of the above are true.

Question 27

An infant industry is one that

A)is not yet strong enough to compete effectively in the global marketplace.
B)is new to the practice of voluntary export restraints.
C)is accused of "dumping" products below the cost of production.
D)recently began selling exports.
E)utilizes child labor.

Question 28

Nontariff barriers include

A)safety regulations.
B)licensing requirements.
C)health requirements.
D)Both options a and c are true.
E)All of the above are true.

Question 29

Which of the following describes the primary impact of devaluation of a nation's currency?

A)It increases exports.
B)It lowers taxes.
C)It increases the spending power of citizens within that country.
D)It lowers interest rates.
E)All of the above are true.

Question 30

The organization formed at the end of World War II at Bretton Woods to manage the system of fixed exchange rates was the

A)World Trade Organization (WTO).
B)International Monetary Fund (IMF).
C)World Bank.
D)International Bank for Reconstruction and Development.
E)Liberal International Economic Order (LIEO).

Question 31

According to the most-favored-nation (MFN) principle,

A)states cannot rely on comparative advantage in their trade policies.
B)goods produced at home are treated the same for import and export agreements.
C)tariff preferences granted to one state must be granted to all others exporting the same product.
D)import quotas can be used to regulate trade, but export quotas cannot be used.
E)certain important trading partners should be given favors status.

Question 32

A good that everyone benefits from and from which no one can be excluded is a(n)

A)exported good.
B)free rider.
C)collective or public good.
D)commercial good.
E)benefit.

Question 33

Dollar convertibility refers to

A)the ability to exchange dollars for any other currency.
B)the ability to convert dollars to commodities such as exported goods.
C)the ability of the World Bank to devalue the dollar.
D)the pricing of a barrel of oil in U.S.dollars.
E)the U.S.commitment to exchange gold for dollars.

Question 34

Another term for neomercantilism is

A)classical liberalism.
B)economic fascism.
C)economic nationalism.
D)communitarianism.
E)the New Economic Order.

Question 35

Which of the following is not a type of quota?

A)Voluntary export restraint
B)Order market arrangement
C)Countervailing duty
D)Nontariff barriers
E)All of the above are quotas.

Question 36

A government can control the value of its currency by

A)increasing or decreasing the supply of money.
B)adjusting interest rates.
C)practicing arbitrage.
D)Both options a and b are true.
E)All of the above are true.

Question 37

The situation that results when a state buys more from abroad than it sells is known as a(n)

A)devaluation.
B)floating exchange rate.
C)managed exchange rate system.
D)balance-of-trade deficit.
E)inflation.

Question 38

Which of the following is (are) protectionist policies?

A)Quotas on imports
B)Tariffs on foreign goods
C)Outsourcing labor
D)Both options a and b are true.
E)Both options a and c are true.

Question 39

The rate at which one state's currency is exchanged for another state's currency in the global marketplace is known as

A)monetary policy.
B)the money supply.
C)the balance of payments.
D)an exchange rate.
E)arbitrage.

Question 40

Globalization is

A)an exclusively economic phenomenon.
B)an exclusively political phenomenon.
C)an economic and political phenomenon.
D)an economic, political, and cultural phenomenon.
E)None of the above is true.

Question 41

Although the saying is, "A rising tide lifts all boats," globalization is not affecting all states equally.Who are the big winners, and who are the losers? What creates this disparity and keeps all states from developing along parallel paths? What steps could be taken to help those who are adversely affected by globalization?

Question 42

One of the most important aspects of globalization has been the communications revolution.Discuss how telecommunications has changed societies across the globe.Will the communications revolution create a more peaceful "global village" or not?

Question 43

Some economists believe that the post-World War II international trade and finance regime, led by America, may be coming to an end.What are the alternatives to this regime? What nation or group of nations could emerge to establish a new trading and finance regime?

Question 44

Describe the practice of dollar convertibility.How did this impact the international economy? How did it impact the U.S.'s domestic economy? Why was it ultimately unsustainable? What system took its place?

Question 45

Contrast mercantilist and liberal economic theories.Will globalization spawn a new era of "neo-mercantilism?" Explain the roles and goals of neo-mercantilist ideas in the global economy today.

Question 46

In what ways can private investors affect a currency's value? In what ways can a government's central bank affect the value of the state's currency? How are the role and the interests of the government different from that of a private investor?

Question 47

During a meeting of the World Trade Organization, anti-WTO activists descended upon the trade talks in Seattle, WA.Why were the protestors there? What were their complaints? Were they justified? Write an essay in which you decide whether the World Trade Organization is a friend or foe.

Question 48

Does globalization mean the end of the age of states? Write an essay in which you explore this question, citing examples of how globalization has eroded state power and ways in which the state is still a viable entity in international relations.

Question 49

Discuss the three tools/policies states use to protect their economies from foreign competition.Should America use more protectionist policies to protect key industries? What American industries would a protectionist target?

Question 50

Rules governing international commerce often evolve according to the wishes of the powerful.How useful is hegemonic stability theory in accounting for the creation and stability of the postwar international economic regime? Describe the problems that arise when the hegemon is no longer able to effectively carry out its role.