Question 1

The expansion of multinational service industries in areas such as data processing, back-office accounting, software development, and call centers is better known as foreign ______.

Accepted Answer

The expansion of multinational service industries in areas like data processing and call centers is commonly referred to as outsourcing, where services are contracted out to external companies, often in foreign countries.

Question 2

Which term describes the net flows of capital, both portfolio and foreign direct investment, into and out of a country?

Accepted Answer

The capital account refers to the net flows of capital, both portfolio and foreign direct investment, into and out of a country. The current account, on the other hand, refers to the net balance of trade and services, while the savings account refers to an individual's account at a financial institution used for saving money. The investment account is a more general term that can refer to any type of investment, including domestic investments.

Question 3

According to economists, trade and investment make up the ______ economy.

Accepted Answer

Trade and investment are tangible and physical transactions that involve the exchange of goods, services and assets. Therefore, they make up the real economy. The financial and monetary economies are more abstract and deal with intangible things like money, credit, and interest rates. The term "indirect economy" is not commonly used in economics.

Question 4

To what principle did Adam Smith trace the wealth of nations?

Accepted Answer

Adam Smith traced the wealth of nations to the principle of specialization, whereby individuals and businesses focus on producing what they are most efficient at, and then trading with others to obtain goods and services they need. This division of labor leads to increased productivity and overall economic growth.

Question 5

Which term describes the net border flows of goods and services, along with government transfers and net income on capital investment?

Accepted Answer

The current account measures the net border flows of goods and services, as well as government transfers and net income on capital investment. The capital account measures the investment flows between countries, while portfolio investment refers to investment in financial assets such as stocks and bonds. Macroeconomic policy refers to government efforts to influence the overall economy.

Question 6

Which type of market exchanges instruments derived from existing loans and financial assets, hedging them against future changes in prices, earnings, or interest?

Accepted Answer

Derivatives are financial instruments that derive their value from underlying assets such as loans, stocks, or bonds. They are used to hedge against future changes in prices, earnings, or interest rates. Futures and options are types of derivatives. Securities and bonds are different types of financial instruments.

Question 7

When a state gives another state most-favored-nation status, what does it entail?

Accepted Answer

When a state gives another state most-favored-nation status, it means that the state will apply its lowest tariff level to all states it has given most-favored-nation status. This is done to promote trade between the two states and eliminate discriminatory treatment of other states.

Question 8

The action of central banks buying and selling their own currency in large enough quantities to affect the price of that currency is better known as ______.

Accepted Answer

The action of central banks buying and selling their own currency in large enough quantities to affect the price of that currency is called an exchange market intervention. This is typically done to influence the exchange rate of a currency, in order to make exports more competitive or to stabilize the value of the currency. A dirty float refers to a floating exchange rate system where a country's central bank intervenes in the foreign exchange market to influence the value of the currency. Trade adjustment refers to the process by which a country seeks to reduce imbalances in its international trade, such as by lowering its trade deficit. Opportunity cost refers to the cost of forgoing the next best alternative when making a decision.

Question 9

Taxes on goods and services when they cross state borders are better known as ______.

Accepted Answer

Tariffs are taxes on goods and services when they cross state borders, while subsidies are payments made by the government to support a certain industry or group. Quotas are limitations on the amount of a certain product that can be imported or exported, and price controls are government regulations on the prices of certain goods or services.

Question 10

Competitive advantage calls for which of the following?

Accepted Answer

Governments lowering protection and subsidies for trade creates a more competitive environment, which can lead to competitive advantage.

Question 11

Trade adjustment assistance helps workers displaced by trade by ______.

Accepted Answer

Trade adjustment assistance provides cash benefits or training programs to workers who have been displaced by trade. This helps them to acquire new skills and find new employment opportunities. While the program may offer some services to help with the psychological effects of job loss, its primary focus is on providing tangible support to help workers transition to new jobs. Wage insurance is not typically included in trade adjustment assistance programs.

Question 12

What is the principal factor that drives people to migrate among countries?

Accepted Answer

Wages have consistently been identified as the primary factor that drives people to migrate among countries. In search of better economic opportunities and higher salaries, people often move to countries where they can earn more money and improve their standard of living.

Question 13

Which of the following sectors is a primary focus of the Doha Round of negotiations to liberalize trade, with developing countries hoping to be able to export goods produced in this sector to developed countries?

Accepted Answer

The Doha Round of negotiations primarily focuses on liberalizing trade in the agricultural sector, with developing countries hoping to gain greater access to developed country markets for their agricultural products. This has been a highly contentious issue in the negotiations, with developed countries seeking to protect their own agricultural industries through a variety of trade barriers and subsidies.

Question 14

Which country has emerged as a surplus country to finance the response to the Eurozone crisis?

Accepted Answer

Germany has emerged as a surplus country and has been financing the response to the Eurozone crisis through its robust economy and exports. Greece, Portugal, and Spain, on the other hand, have been struggling with high levels of debt and economic downturns.

Question 15

Which perspective is most likely to see a current account surplus as desirable, with the logic that it's better to be a lender than a borrower?

Accepted Answer

The realist perspective in international relations often views a current account surplus as desirable because it reflects a nation's economic strength and independence. Realists believe it is better to be a lender than a borrower, as this enhances a country's power and security by not being beholden to others.

Question 16

Which perspective is most likely to emphasize opportunities to match labor skills and economic needs across national boundaries in order to increase common material benefits?

Accepted Answer

The liberal perspective emphasizes the benefits of free trade and open markets, and therefore is likely to emphasize the opportunities to match labor skills and economic needs across national boundaries in order to increase common material benefits.

Question 17

In product markets where the economies of scale are so large that only one firm can make a profit in that product in world markets, that firm is said to exploit ______.

Accepted Answer

When only one firm can make a profit in a product market due to large economies of scale, it leads to a situation of monopoly. This allows the firm to charge higher prices and earn greater profits, which are known as monopoly rents. Therefore, the best choice is B, monopoly rents.

Question 18

Developing industries that require protection to get started are better known as ______ industries.

Accepted Answer

Infant and nascent industries both refer to industries that are in the early stages of development and require protection to get started. Protected and competitive industries are not necessarily associated with early stages of development.

Question 19

Leading up to the 2008-2009 financial crisis, the insurance on securities sold by American International Group was called ______.

Accepted Answer

The insurance on securities sold by American International Group was called credit default swaps, which played a significant role in the financial crisis by insuring risky home mortgages and causing financial institutions to suffer huge losses when those mortgages defaulted.

Question 20

Which term refers to the relationship in which two countries can produce more goods from the same resources if each specializes in the goods it produces most efficiently at home and the two trade these goods internationally?

Accepted Answer

The term that refers to the described relationship is comparative advantage. This theory was developed by economist David Ricardo and suggests that even if one country is more efficient in producing all goods than another country, both countries could still benefit from trade if they specialize in producing the goods they have a comparative advantage in and then trade with each other. This allows both countries to produce more goods overall and to trade for goods they do not produce as efficiently.

Quiz 9: Realist and Liberal Perspectives on Globalization: Security, Domestic Economy, Trade, Investment, and Finance