Deck 14: International Economics: Where Does America Fit Into the New World Order

Question 1

Conservatives believe that import duties worsen the balance of payments because

A) fewer goods are imported.
B) U.S. firms export capital.
C) other nations retaliate with their own import duties so we export less.
D) tariffs act as a sort of domestic price support.

Answer 1

C

Question 2

According to Conservatives, protectionism encourages all of the following except

A) higher domestic prices.
B) lower productivity.
C) retaliation by trading partners.
D) increased employment.

Answer 2

D

Question 3

Liberals do not support the logic of free trade because

A) trade imbalances would worsen.
B) some industries need protection.
C) U.S. wage rates are low relative to the rest of the world.
D) capital inflows would increase.

Answer 3

B

Question 4

Conservatives claim that pegged exchange rates resulted in

A) increased exports for American manufacturers.
B) a persistently overvalued dollar.
C) lower real interest rates.
D) All of the above.

Question 5

Rising oil prices, which cause U.S. purchases of OPEC oil to increase, result in

A) reduced imports into the United States.
B) greater OPEC ability to buy U.S. goods.
C) smaller balance-of-payments problems.
D) import quotas.

Question 6

One reason people purchase gold during periods of high inflation is that

A) the price of silver usually declines.
B) trade imbalances are shrinking.
C) gold is typically used as a hedge against the declining value of paper and coin currency.
D) the U.S. dollar is rising relative to other currencies.

Question 7

The tight monetary policy of the early 1980s

A) led to a stronger dollar.
B) increased the trade deficit.
C) demonstrated that domestic economic policies have unintended international effects.
D) All of the above.
E) None of the above.

Question 8

The effect of a strong dollar is to

A) lower the price of U.S. exports.
B) lower the price of U.S. imports.
C) lower the domestic prices of U.S.-produced goods.
D) spur overseas demand for U.S. manufactured products.

Question 9

All things being equal, which of the following should have the immediate effect of reducing the trade deficit?

A) A worldwide recession.
B) Pegging the dollar at a very high level.
C) Lowering U.S. tariffs.
D) All of the above.
E) None of the above.

Question 10

With regard to international trade and finance, Conservatives urge

A) free trade and fixed exchange rates.
B) "leveling the international playing field" before the United States cuts its tariffs.
C) flexible exchange rates and free trade.
D) "protectionism."

Question 11

Which is not an argument offered by Liberals to defend the occasional use of tariffs?

A) Protecting infant industries.
B) Maintaining our national security.
C) Protecting against the effects of foreign "dumping."
D) Our exports will rise as a result.

Question 12

Devaluation of a nation's currency tends to

A) encourage exports and discourage imports.
B) discourage exports and encourage imports.
C) discourage both exports and imports.
D) encourage both exports and imports.

Question 13

Conservatives argue that the shift to floating exchange rates

A) was desirable because although it created balance-of-payments deficits, the real value of a nation's currency was established by free markets.
B) was not desirable because it allowed nations to more easily manipulate their foreign exchange rates.
C) was desirable because it eliminated balance-of-payment deficits and reflected the real value of a nation's currency.
D) made the effects of international inflation worse.

Question 14

Protectionism, Liberals argue, is necessary to

A) develop national specialization in certain industries.
B) give America an advantage in foreign markets.
C) close off the development of infant or inefficient industries.
D) maintain self-sufficiency of certain goods critical to our economic well-being.

Question 15

Which foreign trade policy would Radicals most likely favor?

A) Close U.S. borders to all foreign trade.
B) "Fair-trade" agreements that guarantee and equalize wage, health and safety standards across all countries.
C) WTO-sponsored trade agreements.
D) None of the above.

Question 16

Radicals claim that a necessary consequence of multinational-dominated globalization is

A) a loss of sovereignty and political autonomy.
B) lower living standards.
C) greater economic instability.
D) All of the above.

Question 17

Liberals argue that pursuing free trade policies when other nations do not, results in all of the following except

A) outsourced jobs.
B) destruction of critical industries.
C) economic instability.
D) lower prices for imported goods.
E) None of the above.

Question 18

Increased trade among nations is chiefly dependent on maintaining high tariffs and fixed exchange rates.

Question 19

Since the 1930s, the effective tariff rates have been trending downward.

Question 20

In the past twenty years, the proportion of GDP that America sells overseas has fallen by about half.

Question 21

Ideally, all nations should have a favorable balance of trade each year.

Question 22

Conservatives advocate fixed and stable exchange rates.

Question 23

Liberals believe that some protectionism will benefit American industries.

Question 24

Radicals claim that growing trade within the divisions of the largest multinational corporations is subverting national sovereignty over trade policy.

Question 25

Radicals assert that the trade deficit and volatility of the U.S. dollar exchange rate are in part due to the decline in overseas U.S. military power.

Question 26

Conservatives believe that protectionism will eventually bring an end to international trade.

Question 27

Under the Bretton Woods arrangements, the U.S. dollar replaced the British pound as the international unit of account.

Question 28

Liberals criticize Conservatives "free trade" argument on the grounds that the international market is not free.

Question 29

Most Conservatives and Liberals agree that the best defense a nation has against vulnerability to fluctuations in international trade is to develop its comparative advantage.

Question 30

The Radical argument states that the basic international trade problem is one of production: too many buyers and too few goods.

Question 31

The largest increase in U.S. foreign direct investment occurred between 1980 and 1990.

Question 32

Conservatives claim that outsourcing will increase employment in the short-run, but decrease employment over the long-term.

Question 33

The Generalized System of Preferences exempts developing countries from paying import taxes on their U.S. sales.