Question 1

Rich country to poor country migration is relatively uncommon.

Accepted Answer

Most migration tends to occur within regions or from poorer to richer countries, as people often move in search of better economic opportunities, safety, and living conditions. Migration from rich to poor countries is less common due to these factors.

Question 2

Legal immigration to the United States peaked just before World War I,but today is almost zero.

Accepted Answer

Immigration numbers are currently around 800,000 per year.

Question 3

If the expansion of a country's exports leads to growth in non-export industries this is called a(n)

Accepted Answer

The expansion of exports can lead to growth in related industries, such as transportation and packaging, and can also stimulate demand for goods and services in other sectors of the economy. This is known as the linkage or multiplier effect.

Question 4

Sale of U.S.government bonds to foreigners is an example of direct foreign investment in the United States.

Accepted Answer

Sale of U.S. government bonds to foreigners is considered a form of foreign portfolio investment, not direct foreign investment. Direct foreign investment involves acquiring a lasting interest and control in a foreign enterprise, typically through the purchase of a company or establishment of operations.

Question 5

International factor flows tend to lower incomes of those factors in host countries that most directly substitute for that factor,and to raise the incomes of other factors.

Accepted Answer

This statement is true according to the Heckscher-Ohlin model, which suggests that factors of production that are abundant in a country will be relatively cheaper in that country, while factors that are scarce will be relatively more expensive. When a country engages in international trade, the relative prices of goods and factors will adjust to reflect the new opportunities for production and consumption. In general, factors that are abundant will see their incomes rise, while factors that are scarce will see their incomes fall, as production shifts towards industries that make intensive use of the abundant factor.

Question 6

A government program that relies on high barriers to imported goods in order to stimulate domestic production of competing goods is an example of a(n)________ policy.

Accepted Answer

The government program described in the question is essentially import substitution, where a country seeks to reduce its import dependence by replacing foreign goods with domestically produced goods. The program involves the use of trade barriers, such as tariffs, quotas, and non-tariff barriers, to limit or exclude the entry of competing foreign products. This protectionist policy is aimed at developing domestic industries and promoting economic self-sufficiency. Therefore, the best choice to complete the sentence is (B) import-substitution development policy.

Question 7

A key element in outward-looking development policies is to maintain open markets so that internal prices reflect world prices.

Accepted Answer

Maintaining open markets allows for competition and access to global resources, leading to internal prices that reflect world prices. Closed markets, on the other hand, can result in distorted prices and hinder economic growth.

Question 8

A government program that attempts to stimulate growth in the production of goods in which the country has a potential future comparative advantage is an example of a(n)________ policy.

Accepted Answer

Outward-looking development policies focus on promoting exports and integrating the country into the global economy. This includes policies that stimulate growth in the production of goods in which the country has a potential future comparative advantage.

Question 9

The way in which growth occurs affects the pattern of trade of a country.

Accepted Answer

When a country experiences economic growth, it typically leads to an increase in demand for goods and services. This, in turn, can affect the country's pattern of trade as it may need to import more raw materials or capital goods to support its growing industries. Additionally, as the country becomes more prosperous, it may also increase its exports to meet the demand of emerging markets. Thus, the way in which growth occurs can have a significant impact on a country's trade patterns.

Question 10

A government program that attempts to stimulate domestic production of a good in which the country has a natural comparative advantage because of its domestic resources is an example of a(n)________ policy.

Accepted Answer

The answer of A government program that attempts to stimulate...

Question 11

What is outsourcing?

Accepted Answer

Outsourcing refers to the process of moving production or services to affiliate firms located outside of the country. It is a business practice that involves contracting out certain tasks or operations to third-party companies or individuals. This allows companies to take advantage of lower labor costs and access a wider range of skills and expertise, ultimately resulting in cost savings and increased efficiency. Vertical integration (A) involves acquiring or controlling all aspects of the production process, from raw materials to distribution channels. Selling products overseas to bypass import tariffs (B) is known as export-oriented production.

Question 12

Over time,countries grow in a fashion so that their production possibility frontiers always retain the same shape.

Accepted Answer

This would only be true if overall capital/labor ratios in the country remained constant over time.

Question 13

The process of achieving a quality of life in a country that is comparable to that found in a modern economy is called ________.

Accepted Answer

Economic development is the process of increasing the economic prosperity and well-being of a country through various measures such as improving infrastructure, increasing access to education and healthcare, and promoting economic diversification. It aims to achieve a quality of life in a country that is comparable to that found in a modern economy. Economic modernization refers to the adoption of new technologies and methods of production, which is necessary for economic development, but it is not the same as economic development. Comparative advantage refers to the ability of one country to produce a particular good or service at a lower opportunity cost than another country, while industrial growth refers to the growth of manufacturing industries within a country. Neither of these terms encompasses the full process of achieving a comparable quality of life to that found in a modern economy.

Question 14

Economic growth at constant prices will never lead to a fall in the output of one good.

Accepted Answer

The Rybczynski theorem proves otherwise.

Question 15

As a candidate for president of the United States,Barak Obama was an ardent supporter of outsourcing.

Accepted Answer

This statement is false. While Obama did not explicitly oppose outsourcing, he did emphasize the need for creating jobs in America and investing in American industries during his presidential campaigns.

Question 16

The Dutch Disease refers to a deadly outbreak of influenza that destroyed all international trade for the Netherlands in the 1960s.

Accepted Answer

The Dutch Disease is an economic phenomenon characterized by a natural resource boom that leads to a decline in other sectors, such as manufacturing and agriculture. It was named after the Netherlands, which experienced a similar effect in the 1960s due to the discovery of natural gas. It did not refer to a disease outbreak.

Question 17

If an economy experiences an increase in its capital stock,everything else constant,then at constant world prices,it will

Accepted Answer

An increase in the capital stock, with everything else constant, means the economy has more capital available for production. This typically leads to an increase in the production of capital-intensive goods because the economy can now produce these goods more efficiently. Conversely, the production of labor-intensive goods may decrease since the comparative advantage shifts towards capital-intensive production.

Question 18

Import-substitution development policies have been especially effective in promoting employment in newly industrializing sectors because these policies discourage the import of foreign capital goods.

Accepted Answer

Import-substitution development policies aim to promote domestic production of goods that were previously imported, and often involve restrictions or tariffs on imported goods. While this can encourage the growth of domestic industries, it does not necessarily directly promote employment. In fact, some argue that import-substitution policies can lead to inefficiencies and higher costs in domestic production, ultimately hindering job creation.

Question 19

If an economy experiences an increase in its capital stock,everything else constant,then its production possibilities frontier (PPF)will

Accepted Answer

An increase in capital stock means that there is more capital available for production, which will increase the productivity of capital-intensive goods. As a result, the PPF will expand outward largely in the direction of the capital-intensive good.

Question 20

Economic growth could make a country worse off.

Accepted Answer

Economic growth can lead to negative externalities such as environmental degradation, depletion of natural resources, and inequality. These factors can ultimately harm the well-being of a country's citizens and outweigh the benefits of economic growth. Additionally, if economic growth is not inclusive and does not generate widespread improvements in living standards, it can exacerbate social tensions and political instability. Therefore, under certain circumstances, economic growth can make a country worse off.

Quiz 10: International Trade and Economic Growth