Question 1

The most globalized nations tend to be the smaller advanced economies.

Accepted Answer

This is generally considered to be true, as smaller economies often rely heavily on global trade and investment to sustain their economies. Larger economies may have more domestic resources and markets to rely on, and may be less dependent on global ties.

Question 2

To measure the importance of global trade to an economy, economists usually divide ________ by the total volume of its domestic output.&#10;A) exports&#10;B) capital flows&#10;C) exports minus imports&#10;D) exports plus imports

Accepted Answer

To measure the importance of global trade to an economy, economists typically use the ratio of the sum of exports and imports to the total volume of domestic output. This ratio indicates the extent to which an economy is engaged in international trade.

Question 3

Foreign direct investment (FDI) is the acquisition of assets that involves a long-term relationship and at least a ___ percent controlling interest in an enterprise located in another economy.&#10;A) 1&#10;B) 5&#10;C) 10&#10;D) 50

Accepted Answer

Foreign direct investment (FDI) typically involves a controlling interest of at least 10 percent in a foreign enterprise, signifying a long-term relationship and significant influence over the management of the enterprise.

Question 4

An increase in the price of an important input in the production process results in:&#10;A) an increase in demand and a higher price.&#10;B) a decrease in demand and a lower price.&#10;C) an increase in supply and a lower price.&#10;D) a decrease in supply and a higher price.

Accepted Answer

An increase in the price of an important input would cause a decrease in supply as it raises the costs of production. With a decrease in supply, the price of the final product will increase to reflect the higher costs of production. Therefore, the correct answer is D.

Question 5

News that white tea can reduce the chance of heart disease would:&#10;A) increase the supply of black tea and reduce the price of black tea.&#10;B) decrease the supply of black tea and increase the price of black tea.&#10;C) increase the demand for black tea and increase the price of black tea.&#10;D) decrease the demand for black tea and reduce the price of black tea.

Accepted Answer

The news that white tea can reduce the chance of heart disease could shift consumer preferences and increase demand for white tea, leading to a decrease in demand for black tea. This decrease in demand for black tea could lead to a decrease in price. Therefore, the correct answer is option D.

Question 6

An increase in consumer income results in:&#10;A) an increase in demand for an inferior good.&#10;B) a decrease in demand for an inferior good.&#10;C) an increase in supply of an inferior good.&#10;D) a decrease in supply of an inferior good.

Accepted Answer

When consumer income increases, the demand for a good typically increases as well. However, if the good is an inferior good, which is a good for which demand decreases as consumer income increases (e.g. generic brands), the opposite occurs and the demand for the good decreases. Therefore, an increase in consumer income results in a decrease in demand for an inferior good (choice B).

Question 7

A production tax causes ______ to decrease.&#10;A) demand&#10;B) quantity demanded&#10;C) supply&#10;D) quantity supplied

Accepted Answer

A production tax increases the cost of production, leading to a decrease in supply as producers are less willing or able to supply the same quantity at the previous price.

Question 8

The difference between what consumers are willing and able to pay for a particular quantity and the market price is:&#10;A) consumer surplus.&#10;B) producer surplus.&#10;C) global surplus.&#10;D) market surplus.

Accepted Answer

Consumer surplus is the difference between the highest price a consumer is willing to pay for a good or service and the market price they actually pay. It represents the benefit or surplus value that a consumer receives from purchasing a good at a price lower than what they are willing to pay. Producer surplus, on the other hand, is the difference between the market price and the lowest price a producer is willing to accept for a product, and represents the benefit or surplus value that a producer receives from selling a good at a price higher than the lowest price they are willing to accept. Global surplus and market surplus are not commonly used terms in economics.

Question 9

Which of the following would most likely result in a decrease in the supply of wheat?&#10;A) an increase in the price of bread&#10;B) an increase in the price of corn&#10;C) a decrease in consumer incomes&#10;D) a decrease in the price of fertilizer

Accepted Answer

An increase in the price of corn might lead farmers to allocate more land to corn production instead of wheat, thus decreasing the supply of wheat.

Question 10

A positive amount by which quantity supplied exceeds quantity demanded at a given price is:&#10;A) consumer surplus.&#10;B) producer surplus.&#10;C) excess quantity supplied.&#10;D) excess quantity demanded.

Accepted Answer

Excess quantity supplied occurs when the quantity of a good that producers are willing to supply exceeds the quantity that consumers are willing to buy at a given price. This situation typically leads to a surplus in the market.

Question 11

Suppose there is a decrease in the global supply of coffee, resulting in an increase in the global price of coffee. All other things held constant, the likely impact on the global market coffee creamer is:

A) a decrease in demand for creamer and a decrease in the global price of creamer.
B) an increase in demand for creamer and an increase in the global price of creamer.
C) a decrease in supply of creamer and an increase in the global price of creamer.
D) an increase in supply of creamer and a decrease in the global price of creamer.

Accepted Answer

The answer of Suppose there is a decrease in the...

Question 12

The portion of an economy engaged in the production and sale of goods is referred to as:&#10;A) the globalized sector&#10;B) the real sector&#10;C) the financial sector&#10;D) the foreign sector

Accepted Answer

The answer of The portion of an economy engaged in...

Question 13

Portfolio capital flows to emerging economies tend to be larger than flows of foreign direct investment.

Accepted Answer

The answer of Portfolio capital flows to emerging economies tend...

Question 14

Activities in the real sector of an economy are independent of the activities in the financial sector of an economy.

Accepted Answer

The answer of Activities in the real sector of an...

Question 15

The annual turnover in the foreign exchange markets is about double the value of world exports of goods.

Accepted Answer

The answer of The annual turnover in the foreign exchange...

Question 16

There is a clear relationship between inequality of income patterns and globalization.

Accepted Answer

The answer of There is a clear relationship between inequality...

Question 17

&#34;Economic integration&#34; refers to the extent and strength of real-sector and financial-sector linkages among economies.

Accepted Answer

The answer of &#34;Economic integration&#34; refers to the extent and...

Question 18

Trade in goods and services has become more and more important for only the small advanced economies.

Accepted Answer

The answer of Trade in goods and services has become...

Question 19

In spite of the financial crises of the mid-1990s through the early 2000s, capital flows to emerging economies continued to grow at impressive rates.

Accepted Answer

The answer of In spite of the financial crises of...

Question 20

The rate of growth of the international monetary and financial markets is rather small compared with the rate of growth of world trade in goods and services

Accepted Answer

The answer of The rate of growth of the international...

Question 21

If the price of a product declines, supply increases.

Accepted Answer

The answer of If the price of a product declines,...

Question 22

An increase in the number of consumers in a market will decrease demand and is illustrated by a leftward shift of the demand curve.

Accepted Answer

The answer of An increase in the number of consumers...

Question 23

If there is an excess quantity demanded in a market then the current price must be below the equilibrium or market clearing price.

Accepted Answer

The answer of If there is an excess quantity demanded...

Question 24

Growth of global trade in goods and services:&#10;A) is quite volatile, with an equal number of periods in which it is positive or negative.&#10;B) is rather robust, with only a few negative growth periods.&#10;C) tends to outpace the growth in international monetary and financial markets.&#10;D) is never negative.

Accepted Answer

The answer of Growth of global trade in goods and...

Deck 1: Understanding the Global Economy