Question 1

Theories of international economics from the 18th and 19th centuries are
A) not relevant to current policy analysis.
B) only of moderate relevance in today's modern international economy.
C) highly relevant in today's modern international economy.
D) the only theories that are actually relevant to modern international economy.
E) not well understood by modern mathematically oriented theorists.

Accepted Answer

The theories of international economics from the 18th and 19th centuries, such as those developed by Adam Smith and David Ricardo, are highly relevant in today's modern international economy. Many of these theories, such as the theory of comparative advantage, still form the basis of contemporary economic analysis and policy.

Question 2

If there are large disparities in wage levels between countries, then
A) trade is likely to be harmful to both countries.
B) trade is likely to be harmful to the country with the high wages.
C) trade is likely to be harmful to the country with the low wages.
D) trade is likely to be harmful to neither country.
E) trade is likely to have no effect on either country.

Accepted Answer

D

Question 3

The United States is less dependent on trade than most other countries because
A) the United States is a relatively large country with diverse resources.
B) the United States is a "Superpower."
C) the military power of the United States makes it less dependent on anything.
D) the United States invests in many other countries.
E) many countries invest in the United States.

Accepted Answer

The United States is a relatively large country with diverse resources, including natural resources, human capital, and technological advancements, making it less dependent on trade compared to smaller countries that may have to rely on imports for essential resources. Additionally, the United States has a well-developed domestic market, which further reduces its reliance on international trade.

Question 4

The insight that patterns of trade are primarily determined by international differences in labor productivity was first proposed by
A) Adam Smith.
B) David Hume.
C) David Ricardo.
D) Eli Heckscher.
E) Lerner and Samuelson.

Accepted Answer

The answer of The insight that patterns of trade are...

Question 5

Which of the following is NOT a major concern of international economic theory?
A) protectionism
B) the balance of payments
C) exchange rate determination
D) bilateral trade relations with China
E) the international capital market

Accepted Answer

Bilateral trade relations with China are a specific aspect of international economic policy and are not a major concern of international economic theory as a whole. The other options are all major concerns within the field of international economics.

Question 6

The benefits of international trade are derived from trade in
A) tangible goods only.
B) intangible goods only.
C) goods but not services.
D) services but not goods.
E) anything of value.

Accepted Answer

The benefits of international trade are derived from trade in anything of value, including both tangible and intangible goods, as well as services. Trade can lead to increased efficiency, greater competition, and specialization, leading to economic growth and increased standards of living.

Question 7

Because the Constitution forbids restraints on interstate trade
A) the U.S. may not impose tariffs on imports from NAFTA countries.
B) the U.S. may not affect the international value of the $ U.S.
C) the U.S. may not put restraints on foreign investments in California if it involves a financial intermediary in New York State.
D) the U.S. may not impose export duties.
E) the U.S. may not disrupt commerce between Florida and Hawaii.

Accepted Answer

The answer of Because the Constitution forbids restraints on interstate...

Question 8

For almost 70 years international trade policies have been governed
A) by the World Trade Organization.
B) by the International Monetary Fund.
C) by the World.
D) by an international treaty known as the General Agreement on Tariffs and Trade (GATT).
E) by the North American Free Trade Agreement (NAFTA).

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) was signed in 1947 and governed international trade policies until 1995, when it was replaced by the World Trade Organization (WTO). Therefore, for almost 70 years, international trade policies were governed by GATT.

Question 9

A fundamental problem in international economics is how to produce
A) a perfect degree of monetary harmony.
B) an acceptable degree of harmony among the international trade policies of different countries.
C) a world government that can harmonize trade and monetary policies
D) a counter-cyclical monetary policy so that all countries will not be adversely affected by a financial crisis in one country.
E) a worldwide form of currency.

Accepted Answer

International trade policies can vary widely between countries, and this can create conflicts and inefficiencies in global trade. Finding ways to achieve an acceptable degree of harmony among these policies is a fundamental problem in international economics. While the other options may be desirable, they are either unrealistic (such as a world government to harmonize policies) or not as directly related to the problem of international trade policy.

Question 10

Which of the following does NOT belong?
A) NAFTA
B) Uruguay Round
C) World Trade Organization
D) non-tariff barriers
E) major free trade agreements of the 1990s

Accepted Answer

NAFTA, Uruguay Round, World Trade Organization, and major free trade agreements of the 1990s all relate to international trade agreements and policies. Non-tariff barriers, however, are not an agreement or organization but rather refer to various obstacles to trade that do not involve tariffs, such as quotas, regulations, and licensing requirements.

Question 11

After World War II, the United States has pursued a broad policy of
A) strengthening "Fortress America" protectionism.
B) removing barriers to international trade.
C) isolating Iran and other members of the "axis of evil."
D) protecting the U.S. from the economic impact of oil producers.
E) restricting trade of manufactured goods.

Accepted Answer

After World War II, the United States implemented policies to remove barriers to international trade such as the implementation of the General Agreement on Tariffs and Trade (GATT) in 1947 and the later creation of the World Trade Organization (WTO) in 1995 which aimed to promote free trade and decrease tariffs among member countries. This policy has been pursued by several administrations and continues to be a dominant feature of U.S. trade policy.

Question 12

The balance of payments has become a central issue for the United States because
A) when the balance of payments is not balanced, society is unbalanced.
B) the U.S. economy cannot grow when the balance of payments is in deficit.
C) the U.S. has run huge trade deficits in every year since 1982.
D) the U.S. never experienced a surplus in its balance of payments.
E) the U.S. once ran a large trade surplus of about $40 billion.

Accepted Answer

The statement "the U.S. has run huge trade deficits in every year since 1982" is the reason why the balance of payments has become a central issue for the United States. The other options do not accurately reflect the situation.

Question 13

The international capital market is
A) the place where you can rent earth moving equipment anywhere in the world.
B) a set of arrangements by which individuals and firms exchange money now for promises to pay in the future.
C) the arrangement where banks build up their capital by borrowing from the Central Bank.
D) the place where emerging economies accept capital invested by banks.
E) exclusively concerned with the debt crisis that ended in the 1990s.

Accepted Answer

The international capital market refers to the global network of financial institutions, governments, and individuals that facilitate the exchange of money for promises to pay in the future, such as bonds or stocks. It is not related to renting earth moving equipment or bank capitalization, and it is not limited to a specific crisis like the debt crisis of the 1990s.

Question 14

"Trade is generally harmful if there are large disparities between countries in wages."
A) This is generally true.
B) This is generally false.
C) Trade theory has nothing to say about this issue.
D) This is true if the trade partner ignores child labor laws.
E) This is true if the trade partner uses prison labor.

Accepted Answer

Trade theory, particularly the theory of comparative advantage, suggests that trade can be beneficial for all countries involved, regardless of wage disparities. It posits that countries will specialize in producing goods for which they have a comparative advantage, leading to increased efficiency and gains from trade for all parties involved.

Question 15

Who sells what to whom
A) has been a major preoccupation of international economics.
B) is not a valid concern of international economics.
C) is not considered important for government foreign trade policy since such decisions are made in the private competitive market.
D) is determined by political rather than economic factors.
E) is less important than international economic theory.

Accepted Answer

Understanding who sells what to whom is a fundamental aspect of international trade and has been a major preoccupation of international economics. It helps countries to formulate their foreign trade policy and to understand the economic ties between nations.

Question 16

The study of exchange rate determination is a relatively new part of international economics, since
A) for much of the past century, exchange rates were fixed by government action.
B) the calculations required for this were not possible before modern computers became available.
C) economic theory developed by David Hume demonstrated that real exchange rates remain fixed over time.
D) dynamic overshooting asset pricing models are a recent theoretical development.
E) the exchange rate never fluctuates.

Accepted Answer

Exchange rates were fixed by government action for much of the past century. It was only with the breakdown of the Bretton Woods system in the 1970s that exchange rates began to float freely and became subject to market forces. Therefore, the study of exchange rate determination is a relatively new part of international economics.

Question 17

An important insight of international trade theory is that when two countries engage in voluntary trade
A) one country always benefits at the expense of the other.
B) it is almost always beneficial to both countries.
C) it only benefits the low wage country.
D) it only benefits the high wage country.
E) it is almost never beneficial to both countries.

Accepted Answer

The principle of comparative advantage suggests that both countries can benefit from trade as long as they specialize in producing the goods in which they have a comparative advantage and then trade with each other. This can lead to increased efficiency, lower prices, and ultimately higher standards of living for both countries involved. While there may be winners and losers within each country due to trade, as a whole, both countries can reap the benefits of trade.

Question 18

Historians of economic thought often describe ________ written by ________ and published in ________ as the first real exposition of an economic model.
A) "Of the Balance of Trade," David Hume, 1776
B) "Wealth of Nations," David Hume, 1758
C) "Wealth of Nations," Adam Smith, 1758
D) "Wealth of Nations," Adam Smith, 1776
E) "Of the Balance of Trade," David Hume, 1758

Accepted Answer

The answer of Historians of economic thought often describe ________...

Question 19

International economics ________ use the same fundamental methods of analysis as other branches of economics, because ________.
A) does not, the level of complexity of international issues is unique
B) does not, the interactions associated with international economic relations is highly mathematical
C) does not, international economics takes a different perspective on economic issues
D) does not, international economic policy requires cooperation with other countries
E) does, the motives and behavior of individuals are the same in international trade as they are in domestic transactions

Accepted Answer

International economics uses the same fundamental methods of analysis as other branches of economics because the motives and behavior of individuals are the same in international trade as they are in domestic transactions. While there may be some unique complexities and interactions associated with international economic relations, the underlying principles and analytical methods are still applicable.

Question 20

From 1950 to 2015
A) the U.S. economy roughly tripled in size.
B) U.S. imports roughly tripled in size.
C) the share of U.S. trade in the global economy roughly tripled in size.
D) U.S. imports roughly tripled as compared to U.S. exports.
E) U.S. exports roughly tripled in size.

Accepted Answer

The answer of From 1950 to 2015
A) the U.S. economy...

Quiz 1: Introduction

Theories of international economics from the 18th and 19th centuries are

If there are large disparities in wage levels between countries, then

The United States is less dependent on trade than most other countries because

The insight that patterns of trade are primarily determined by international differences in labor productivity was first proposed by

Which of the following is NOT a major concern of international economic theory?

The benefits of international trade are derived from trade in

Because the Constitution forbids restraints on interstate trade

For almost 70 years international trade policies have been governed

A fundamental problem in international economics is how to produce

Which of the following does NOT belong?

After World War II, the United States has pursued a broad policy of

The balance of payments has become a central issue for the United States because

The international capital market is

"Trade is generally harmful if there are large disparities between countries in wages."

Who sells what to whom

The study of exchange rate determination is a relatively new part of international economics, since

An important insight of international trade theory is that when two countries engage in voluntary trade

Historians of economic thought often describe written by and published in as the first real exposition of an economic model.

International economics use the same fundamental methods of analysis as other branches of economics, because .

From 1950 to 2015