Question 1

Adherents to commercial liberalism agree that everyone benefits from unfettered free trade.

Accepted Answer

Adherents to commercial liberalism believe that free trade promotes economic growth, increases efficiency, and benefits all parties involved in international trade.

Question 2

The negotiating states at the 1944 Bretton Woods Conference agreed the global monetary regime should be based on fixed exchange rates.

Accepted Answer

The negotiating states at the 1944 Bretton Woods Conference agreed the global monetary regime should be based on fixed exchange rates.

Question 3

A country's money supply consists of currency minus government debt.

Accepted Answer

A country's money supply consists of currency in circulation (notes and coins) plus demand deposits (checking accounts). Government debt does not directly affect the money supply.

Question 4

Monetary policy affects two main economic variables: the supply of money in circulation and interest rates.

Accepted Answer

This statement is true. Monetary policy involves the actions taken by a central bank to influence the money supply and interest rates in an economy. By changing the supply of money and interest rates, monetary policy can affect many other economic variables such as inflation, economic growth, and employment.

Question 5

Unlike private investors, governments are not allowed to intervene in the currency market to affect the value of their own currency.

Accepted Answer

Governments do intervene in the currency market through various means such as buying or selling their own currency, adjusting interest rates, and implementing monetary policies.

Question 6

In contrast to liberalism, mercantilism advocates government regulation of economic life to increase state power and security.

Accepted Answer

Mercantilism is an economic theory that focuses on increasing the power and security of the state through government regulation and intervention in economic affairs, particularly with regards to trade and commerce. This is in contrast to liberalism, which advocates for a free market economy with minimal government intervention.

Question 7

Under a system of fixed exchange rates, the international market determines the value of a country's currency.

Accepted Answer

Under a system of fixed exchange rates, the government or central bank of a country sets the value of its currency in relation to another currency or a basket of currencies. This means that the market does not determine the value of the currency, but rather it is fixed by government intervention.

Question 8

An open international economy is a collective good.

Accepted Answer

An open international economy benefits all countries involved by promoting trade, investment, and economic growth. It also encourages cooperation and peace among nations. Therefore, it can be considered a collective good.

Question 9

The number of regional trade agreements has been declining during the age of globalization.

Accepted Answer

The number of regional trade agreements has actually been increasing during the age of globalization.

Question 10

Commercial liberalism is an economic philosophy that advocates free markets, open trade, and free flowing capital.

Accepted Answer

Commercial liberalism is indeed an economic philosophy that supports free markets, open trade, and free movement of capital.

Question 11

After the WTO superseded GATT, it successfully ended most global trade disputes.

Accepted Answer

While the WTO has helped manage and resolve some global trade disputes, it has not completely ended all such disputes.

Question 12

NAFTA is an example of a regional trade agreement (RTA).

Accepted Answer

NAFTA (North American Free Trade Agreement) is a regional trade agreement between the United States, Canada, and Mexico. It aims to promote trade and investment among the three member countries by eliminating trade barriers and reducing tariffs.

Question 13

Since the early 1970s, the world has had a system of fixed but adjustable exchange rates.

Accepted Answer

Since the early 1970s, the world has primarily operated under a system of floating exchange rates, following the collapse of the Bretton Woods system, which was a system of fixed exchange rates.

Question 14

According to hegemonic stability theory, a global free trade economy needs a single dominant leader to keep it open and stable.

Accepted Answer

According to hegemonic stability theory, a dominant leader is needed to provide public goods, such as security and open markets, to maintain stability in the global economy.

Question 15

The volume of international capital flows is less than the volume of international trade.

Accepted Answer

According to the World Bank, the volume of international capital flows has exceeded the volume of international trade since the early 2000s.

Question 16

Protestors at WTO meetings argue in favor of increasing trade liberalization.

Accepted Answer

Protestors at WTO meetings often argue against increasing trade liberalization, arguing that it negatively impacts workers, the environment, and developing countries.

Question 17

If a state has a balance of payments deficit, it is exporting more than it is importing.

Accepted Answer

If a state has a balance of payments deficit, it is importing more than it is exporting.

Question 18

The "balance of payments" is a calculation summarizing a country's financial transactions with the external world.

Accepted Answer

The definition of balance of payments is accurate.

Question 19

Most of the world's states consistently support the tenets of free trade.

Accepted Answer

Many countries have protectionist policies in place to protect domestic industries, and support for free trade can vary significantly depending on political, economic, and social contexts.

Question 20

Liberals emphasize the mutual gains (absolute gains) of global trade whereas mercantilists are more concerned with relative gains.

Accepted Answer

Liberals believe that global trade benefits all nations involved, creating absolute gains in the form of increased economic growth, productivity, and overall prosperity. Mercantilists, on the other hand, view trade more as a zero-sum game, where one nation's gain is another nation's loss. They prioritize maximizing relative gains over absolute gains.

Quiz 10: The Globalization of Trade and Finance

Adherents to commercial liberalism agree that everyone benefits from unfettered free trade.

The negotiating states at the 1944 Bretton Woods Conference agreed the global monetary regime should be based on fixed exchange rates.

A country's money supply consists of currency minus government debt.

Monetary policy affects two main economic variables: the supply of money in circulation and interest rates.

Unlike private investors, governments are not allowed to intervene in the currency market to affect the value of their own currency.

In contrast to liberalism, mercantilism advocates government regulation of economic life to increase state power and security.

Under a system of fixed exchange rates, the international market determines the value of a country's currency.

An open international economy is a collective good.

The number of regional trade agreements has been declining during the age of globalization.

Commercial liberalism is an economic philosophy that advocates free markets, open trade, and free flowing capital.

After the WTO superseded GATT, it successfully ended most global trade disputes.

NAFTA is an example of a regional trade agreement (RTA).

Since the early 1970s, the world has had a system of fixed but adjustable exchange rates.

According to hegemonic stability theory, a global free trade economy needs a single dominant leader to keep it open and stable.

The volume of international capital flows is less than the volume of international trade.

Protestors at WTO meetings argue in favor of increasing trade liberalization.

If a state has a balance of payments deficit, it is exporting more than it is importing.

The "balance of payments" is a calculation summarizing a country's financial transactions with the external world.

Most of the world's states consistently support the tenets of free trade.

Liberals emphasize the mutual gains (absolute gains) of global trade whereas mercantilists are more concerned with relative gains.