Deck 9: World Politics: Trade and Investment

Question 1

The idea that states should seek relative rather than absolute gains to be stronger than their closest competitors reflects

A) The liberal perspective.
B) The constructivist perspective.
C) The realist perspective.
D) The Marxist perspective.

Answer 1

The realist perspective.

Question 2

The _____________ perspective suggests that international trade benefits all when those seeking their own self-interest lead to a healthier economic system for all.

A) Liberal
B) Constructivist
C) Realist
D) Marxist

Answer 2

Liberal

Question 3

Because nations have different allocations of resources, each can

A) Be entirely self-sufficient.
B) Enjoy a comparative advantage in producing certain products.
C) Enjoy equality of capital abundance.
D) Always have an absolute advantage in producing whatever it needs most.

Answer 3

Enjoy a comparative advantage in producing certain products.

Question 4

Suppose a country has a favorable climate and a great deal of land to produce one cash crop, such as bananas or coffee. This country is said to be

A) Labor abundant.
B) Capital abundant.
C) Land abundant.
D) Land deficient.

Question 5

A nation that is relatively rich, in terms of money as well as industrial plants and equipment, is considered

A) Labor abundant.
B) Capital abundant.
C) Land abundant.
D) Land deficient.

Question 6

Who is credited with the concept of comparative advantage?

A) Adam Smith
B) Thomas Jefferson
C) David Ricardo
D) David Hume

Question 7

Nations often impose trade barriers because

A) They wish to protect domestic industries.
B) They wish to provide consumers with the least expensive products.
C) Most consumers demand it.
D) They are effective free-market economic policies.

Question 8

Which of the following is not a trade barrier?

A) Tariff
B) Import quota
C) Gold standard
D) Internal subsidy

Question 9

Tariffs have what kind of effect on international trade?

A) They decrease the price of imported goods.
B) They increase the incentives for domestic producers to become more efficient.
C) They increase consumer access to foreign goods.
D) They decrease international competition.

Question 10

As a result of the Smoot-Hawley Tariff, by 1932 the average tariff reached

A) 40 percent.
B) 49 percent.
C) 50 percent.
D) 59 percent.

Question 11

_______________ refers to a tariff levied by one country in response to tariffs imposed by another country.

A) Countervailing tariffs
B) Nontariff barrier
C) Import quotas
D) Voluntary export restrictions

Question 12

Between 1981 and 1994, the United States hoped to protect domestic automobile producers by threatening to impose tariffs against the Japanese if they did not restrict their car exports to the American market. This is an example of a(n)

A) Countervailing tariff.
B) Import quota.
C) Voluntary export restriction.
D) Import subsidy.

Question 13

A(n) _____________ is a limit on the number of imports that a state will receive from the rest of the world and is considered a _______________.

A) Subsidy; tariff barrier
B) Subsidy; nontariff barrier
C) Import quota type; tariff barrier
D) Import quota type; nontariff barrier

Question 14

Between 1981 and 1994, Japan agreed to comply to limit its exports of automobiles to the United States to avoid stiff tariffs from the United States, which was attempting to protect local automobile producers. This is an example of

A) A subsidy.
B) An internal tariff.
C) A voluntary export restriction.
D) A quota.

Question 15

In the 1990s, _______________ imposed a ban on importing genetically modified foods.

A) The United States
B) The European Union
C) Russia
D) Canada

Question 16

Which of the following countries agreed to a VER on its soft-lumber exports to the United States as part of a larger trade dispute?

A) Canada
B) Mexico
C) Iceland
D) Brazil

Question 17

The Agricultural Department in Country A pays wheat farmers a subsidy to allow them to price their goods below the cost of production to stay in business. This action allows for which of the following?

A) Allows wheat producers to compete against imported wheat
B) Allows wheat producers in Country A to compete on the international wheat market
C) Allows importers to price their wheat at a lower price on the international wheat market
D) Both a and b

Question 18

Subsidies are designed to help domestic industries by

A) Helping domestic producers compete at home against imported products.
B) Helping domestic producers compete abroad against foreign products.
C) Helping producers price their goods below the cost of production without going out of business.
D) All of the above.

Question 19

Which U.S. industry has brought antidumping suits against foreign producers before the U.S. Department of Commerce and the International Trade Commission over the past two decades?

A) Automobile
B) Computer
C) Steel
D) Clothing

Question 20

____________ refers to exporting a product at below the cost of production and shipping.

A) Subsidies
B) Price supports
C) Dumping
D) Balance of trade

Question 21

The United States refers to internal subsidies as

A) Price supports.
B) Dumping.
C) Balance of trade.
D) Quotas.

Question 22

A balance-of-payments sheet tells all but

A) How much money a country's citizens earned overseas.
B) A country's trade balance.
C) The minimum hourly wage in the country.
D) The official level of foreign aid given to other countries.

Question 23

At the end of the fiscal year, Country A has imported more than it has exported. This country is said to have a

A) Trade surplus.
B) Trade deficit.
C) Balance of trade.
D) None of the above.

Question 24

The system that allows for the balance of payments to always equal zero is called

A) Single-entry bookkeeping.
B) Double-entry bookkeeping.
C) Triple-entry bookkeeping.
D) Debit-credit entry bookkeeping.

Question 25

Barter systems are considered inefficient because

A) They prove difficult to establish rates of exchange between goods and services.
B) There must be a coincidence of wants.
C) Many commodities are perishable.
D) All of the above.

Question 26

A medium of exchange, a unit of account, and a store of value are all used to describe

A) An exchange rate system.
B) Money.
C) A barter system.
D) None of the above.

Question 27

In the United States, which department has exclusive authority to issue paper and coin currency?

A) Internal Revenue Service
B) State Department
C) Treasury Department
D) Department of Commerce

Question 28

Which of the following is an example of a fixed exchange rate system?

A) The Smoot-Hawley Tariff
B) Voluntary export restriction
C) The gold standard
D) The barter system

Question 29

The gold standard and the Bretton Woods system were both examples of

A) A fixed exchange rate system.
B) A floating exchange rate system.
C) A hybrid floating exchange rate system.
D) None of the above.

Question 30

To help protect the value of currency under a fixed exchange rate system, government officials might

A) Raise interest rates to shore up the value of their currency.
B) Inflate the exchange rate to maintain its fixed value.
C) Stop defending the currency.
D) All of the above.

Question 31

The advantage of a fixed exchange rate system is

A) It makes the international economy more stable and predictable.
B) It accurately reflects the health of a nation's economy.
C) It prevents states from pursuing harmful economic policies.
D) It allows currency values to fluctuate according to their true value.

Question 32

A restaurant owner in the United States purchases five crates of wine from a French wine maker for $500 in May. In June, the same five crates of wine cost $700. The international system is operating under a

A) Fixed exchange rate.
B) Floating exchange rate.
C) Modified exchange rate.
D) Final exchange rate.

Question 33

Raising interest rates in an attempt to help the domestic economy under a fixed exchange rate system

A) Makes borrowing money more expensive.
B) Reduces the number of domestic purchases.
C) Increases the demand for domestic investments by foreign investors.
D) All of the above.

Question 34

When domestic investments become more attractive because of higher interest rates, investors will demand more of the domestic (or local) currency. The effect is

A) An increase in the value of the domestic currency.
B) A decrease in the value of the domestic currency.
C) The local government will impose quotas on domestic investment.
D) Foreign investors become increasingly wary of the domestic currency.

Question 35

All of the following cities are major centers for foreign exchange markets except

A) London.
B) Hong Kong.
C) Tokyo.
D) Berlin.

Question 36

The currency market is considered unstable and unpredictable because of

A) The various factors that influence the appeal of any particular state's money.
B) The number of investors looking for a quick trade.
C) The level of government intervention in the currency market.
D) Both a and b

Question 37

The foreign exchange market has a unique appeal in that

A) Traders can participate 24 hours per day.
B) Traders must do business through a major investment firm.
C) Traders can set up online trading accounts.
D) Both a and c

Question 38

The fixed rate exchange system was abandoned in

A) 1970.
B) 1973.
C) 1977.
D) 1983.

Question 39

Speculation in currency markets in 1997-1998 contributed to the collapse of all but which of the following nation's currencies?

A) The Philippines
B) China
C) Thailand
D) Indonesia

Question 40

Capital markets include all of the following except

A) Banks.
B) Stock and bond exchanges.
C) Commodities exchanges.
D) Foreign direct investment.

Question 41

________________ bonds are considered one of the most secure investments in the world because the government is unlikely to default.

A) U.S. Treasury
B) Russian Treasury
C) British Treasury
D) Canadian Treasury

Question 42

Since 2001, the United States has relied on which two countries to purchase U.S. Treasury bonds to avoid raising interest rates?

A) Canada and Great Britain
B) Great Britain and Germany
C) Germany and Japan
D) Japan and China

Question 43

One of the effects of the Japanese and Chinese purchases of U.S. Treasury bonds is that

A) The American real estate business is protected from a collapse that would occur if interest rates were to be raised.
B) The American consumer continues to spend rather than save.
C) Japanese and Chinese exports to the United States continue to benefit.
D) All of the above.

Question 44

The process of buying an existing business in a foreign country as opposed to merely investing in the business is referred to as a

A) Cash buyout.
B) Merger and acquisition.
C) Foreign direct investment.
D) Domestic direct investment.

Question 45

Most foreign direct investment takes place

A) Between developed countries.
B) Between developed and developing countries.
C) Between developing countries.
D) Between the United States and China.

Question 46

Patents, copyrights, trademarks, industrial design rights, and trade secrets are all covered under

A) Research and development rights.
B) Foreign direct investment.
C) Intellectual property rights.
D) Mergers and acquisitions

Question 47

Which of the following do multinational corporations look at when considering investing in foreign country?

A) Incentive packages put together by host states
B) Levels of local development
C) The level of corruption within a state
D) Both b and c

Question 48

Currently, the most popular FDI destination is

A) The United States.
B) Hong Kong.
C) China.
D) India.

Question 49

The Number One Oil Company in Country A is up for sale and has several foreign bidders as well as a domestic bidder. One of the foreign bidders, Country B, has failed to address immigration issues that negatively influence Country A. As a result, the domestic bidder is awarded the sale. This is an example of

A) Nationalist pressure to resist foreign investment.
B) International pressure to resist foreign investment.
C) The natural state of international investment.
D) None of the above.

Question 50

According to the text, all of the following factor into a state's economic strengths as well as vulnerabilities except

A) A state's raw materials.
B) A state's population.
C) A state's industrial capacity.
D) A state's political institutional structure.

Question 51

The three categories of economic power are

A) Territory, population, and trade and industry.
B) Territory, population, and geography.
C) Population, geography, and trade and industry.
D) Population, geography, and technology.

Question 52

Gross national income measures

A) How much money a nation has.
B) The market value of goods and services a nation produces.
C) The market value of exports a nation sells.
D) A nation's expenditures on goods and services.

Question 53

Gross national income differs from gross domestic product in that

A) The former does not take into account the amount of income earned by a nation's citizens operating outside its borders.
B) The latter does not take into account the amount of income earned by a nation's citizens operating outside its borders.
C) The former looks only at the total value of goods and services produced within a country.
D) None of the above.

Question 54

Which of the following best characterizes U.S. economic performance during the 1980s?

A) The U.S. economy was declining in absolute terms.
B) The relative size of the U.S. economy increased in comparison with that of Japan and Germany.
C) The U.S. economy was growing in absolute terms.
D) The U.S. share of world production was increasing both absolutely and relatively.

Question 55

In 2002, ______________ suffered from the lowest growth rate in the European Union.

A) France
B) Germany
C) Italy
D) Great Britain

Question 56

Which of the following resulted in a dampening of economic growth of the German economy?

A) The end of the Cold War
B) The Gulf War
C) The Iran-Iraq War
D) None of the above

Question 57

Which country moved from a budget surplus in 2001 to a budget deficit by 2005?

A) The United Kingdom
B) France
C) Japan
D) The United States

Question 58

In the information age, which of the following will become increasingly important?

A) Knowledge
B) Information
C) Communication
D) All of the above

Question 59

Which nation dominates in the realm of information technology?

A) Japan
B) South Korea
C) Germany
D) The United States

Question 60

What percentage of U.S. companies sell their products online?

A) 25 percent
B) 35 percent
C) 50 percent
D) 60 percent

Question 61

As of 2011, more than ____________ percent of the world's population has Internet access.

A) 50
B) 32
C) 70
D) None of the above

Question 62

Technology has allowed for all of the following except

A) Globalization of the job market.
B) Spread of economic gains from the wealthiest countries to developing states.
C) The shift in developing countries from producing textiles to producing computer chips.
D) The shift in developed countries from exporter to importer.

Question 63

Which philosopher wrote Leviathan, which describes the natural states of humankind as a "war of all against all"?

A) Niccolò Machiavelli
B) Thomas Hobbes
C) John Locke
D) Hans Morgenthau

Question 64

States may refuse to cooperate because

A) They distrust one another.
B) They fear that other states will gain relatively more than they will.
C) They fear that other states will benefit disproportionately from cooperation.
D) All of the above.

Question 65

Realists believe that

A) Nation-states are the principal actors in economics.
B) Economic factors are more important than military power.
C) Individuals are the principal actors in economics.
D) Free trade is always the best policy.

Question 66

The extreme approach to trade that emphasizes that a state exports more than it imports is referred to as

A) Mercantilism.
B) Marxism.
C) Materialism.
D) Massive retaliation.

Question 67

Liberals believe that which of the following is beneficial for international economics?

A) Tariffs
B) Free markets
C) Government intervention
D) Voluntary export restrictions

Question 68

__________ wrote about the "unseen hand" in his 1776 book The Wealth of Nations.

A) Thomas Jefferson
B) Adam Smith
C) David Ricardo
D) Karl Marx

Question 69

Economic liberals believe that

A) Individuals are irrational in their economic decision making.
B) States are the principal actors in economics.
C) Government intervention is beneficial to the individual and international economy.
D) Individuals' self-interest not only increases their own wealth but also unintentionally improves the general public good.

Question 70

Trade liberals argue that cooperation is both

A) Possible and beneficial.
B) Impossible and useless.
C) Unfavorable and unachievable.
D) Feasible and improbable.

Question 71

The purpose of the tit-for-tat strategy is to

A) Demonstrate your willingness to cooperate with your opponent.
B) Establish international regimes.
C) Create prisoner's dilemmas in international relations.
D) Provide for economic interdependence.

Question 72

Regimes do which of the following?

A) They reduce the attractiveness of cheating.
B) They establish norms that facilitate cooperation.
C) They possess multiple and effective mechanisms and institutions to enforce agreements.
D) Both a and b

Question 73

Hegemons are often responsible for

A) Providing loans to countries in need.
B) Providing markets for commodities.
C) Making the seas safe for international commerce.
D) All of the above.

Question 74

Decline of the hegemon is inevitable because

A) There are no long-term benefits of hegemony.
B) The costs of hegemony tend to grow over time.
C) No state wants to be the hegemon for a prolonged period of time.
D) All of the above.

Question 75

Define the concepts of capital abundant, land abundant, and labor abundant and explain why they are important.

Question 76

Define comparative advantage, and briefly explain its importance to trade theory.

Question 77

Define trade barriers, and list three different types.

Question 78

Define VER and give an example.

Question 79

Differentiate between tariffs and NTBs.

Question 80

What is dumping, why do states do it, and what can be done about it?