Question 1

Which concept is described as a compromise between economic liberalism and state intervention?

Accepted Answer

Embedded liberalism is a concept that refers to a compromise between economic liberalism and state intervention. It involves the state supporting free trade while also providing social welfare programs and regulations to protect workers and consumers. Fair trade and outsourcing are specific economic practices that may align with embedded liberalism but do not describe the overall concept. Welfare economics is a field of economics that focuses on the optimal distribution of resources and can be related to embedded liberalism but does not fully encompass the concept.

Question 2

Globalization, according to the text, contains all of the following components except

Accepted Answer

A

Question 3

The General Agreement on Tariffs and Trade (GATT) replaced the earlier concept of reciprocity with

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) replaced reciprocity with nondiscrimination as the guiding principle for trade negotiations. This means that countries could no longer condition their trade policies on the policies of other countries; instead, they were required to treat all trading partners equally.

Question 4

Which of the following reasons explained Greece's difficulty in financing its debt?

Accepted Answer

Greece's difficulty in financing its debt was primarily due to a combination of factors including the global recession and higher interest rates. Greece did not abandon the euro in exchange for the drachma.

Question 5

The objectives of the Bretton Woods system were to

Accepted Answer

The Bretton Woods system was created to promote international economic cooperation and increase global wealth through stable exchange rates and free trade. It was not specifically designed to fight communism or enrich the United States. While rebuilding Europe was a component of the system, it was not the primary objective, nor was democratizing the developing world. Additionally, the system was not created to ensure continued U.S. presence in Asia, although it did support global capitalism.

Question 6

According to the text, under globalization comparative advantage is based not in natural resource endowments but in

Accepted Answer

Under globalization, comparative advantage is based on factors such as technology, education, and network effects, rather than on natural resource endowments or military strength. This is because as countries become more interconnected and trade becomes more globalized, traditional factors of production become less important and non-traditional factors that enable innovation and specialization become more important.

Question 7

An important conclusion in this chapter focuses on the changes in power and control by the state. This conclusion can be summed up as

Accepted Answer

The conclusion of the chapter is that the state has lost control over globalization. The chapter discusses how globalization has undermined the power of the state and led to the rise of non-state actors such as transnational corporations and international organizations. The state is no longer able to regulate economic and financial flows as it used to, and is forced to compete in a global marketplace where it has less power and control.

Question 8

The General Agreement on Tariffs and Trade (GATT) dispute resolution mechanism was criticized by weaker and poorer countries for all of the following reasons except

Accepted Answer

The reason given in option A is not a criticism of the GATT dispute resolution mechanism but rather a separate issue related to high tariffs imposed by the United States. The other options (B, C, and D) are criticisms that have been raised by weaker and poorer countries about the GATT dispute resolution mechanism.

Question 9

Which of the following statements is/are true?

Accepted Answer

Foreign trade has been growing at a faster rate than domestic economies in many countries due to globalization and increased international economic integration.

Question 10

The most favored nation principle means that

Accepted Answer

The most favored nation principle is a cornerstone of the World Trade Organization (WTO) and mandates that any advantage, favor, privilege or immunity given by one member to another regarding trade must be extended to all other members on the basis of reciprocity. This means that if a state lowers a tariff toward one GATT member, it is obliged to give all members the same low tariff.

Question 11

What is a quota?

Accepted Answer

A quota is a quantitative limit on the number of imported goods that can be brought into a country. It is usually set by the government to control trade and protect domestic industries.

Question 12

Why was agriculture left out of the original General Agreement on Tariffs and Trade (GATT) agreement?

Accepted Answer

Agriculture was left out of the original GATT agreement because of the powerful political interests of agricultural groups. These groups have significant influence over government policies and decision-making, making it difficult to negotiate a comprehensive agreement that would benefit all member countries equally.

Question 13

In economics, a decline in output of less than __________ is referred to as a recession; a deeper contraction is called a depression.

Accepted Answer

The answer of In economics, a decline in output of...

Question 14

__________ describes the agreement that one state's tariffs on goods would be the same as its trading partner's tariff.

Accepted Answer

Reciprocity refers to the practice of two countries agreeing to apply the same level of tariffs and other trade regulations to each other's imports. It is a basic principle of modern trade agreements and is intended to promote fair and balanced trade between nations.

Question 15

All of the following are considered to be nontariff barriers except

Accepted Answer

Taxes on imports are considered a tariff barrier, not a nontariff barrier. Nontariff barriers include voluntary export restraints, health and environmental regulations, and quotas.

Question 16

Which member country of the European Union apparently came very close to defaulting on its debt?

Accepted Answer

Greece came very close to defaulting on its debt in 2015, which led to a bailout agreement with the European Union and International Monetary Fund.

Question 17

One major problem of the General Agreement on Tariffs and Trade (GATT) was the exclusion of certain classes of products. One of the most significant classes of product originally excluded from GATT was

Accepted Answer

Agricultural products were originally excluded from GATT, which made it difficult for developing countries relying heavily on agriculture to benefit from international trade. This exclusion was later addressed with the agreement on Agriculture in the Uruguay Round of trade negotiations.

Question 18

In the past, governments had greater control over currency prices because

Accepted Answer

The answer of In the past, governments had greater control...

Question 19

How did the Greek crisis spread to the rest of Europe?

Accepted Answer

The spread of the Greek crisis to the rest of Europe was largely due to two factors: the fear that other states may also be unable to pay their debts (option A) and the fact that many banks that were owed monies by Greek businesses were headquartered in other European states (option C). Additionally, capital mobility and arbitrage (option B) also played a part in the spread of the crisis. Therefore, the best answer is D, both options A and C are true.

Question 20

Voluntary export restraints (VERs) are

Accepted Answer

Voluntary export restraints (VERs) are regulations adopted when one country threatens restrictions on trade and an exporting country agrees to limit exports to avoid the imposition of more stringent limits. VERs are a form of trade barrier and are used to protect domestic industries from foreign competition. VERs are voluntary because the exporting country agrees to limit exports, rather than being forced to do so by the importing country.

Quiz 11: The Globalization of Trade and Finance