Question 1

Which member country of the European Union apparently came very close to defaulting on its debt?
A)United Kingdom
B)Ireland
C)Italy
D)Greece

Accepted Answer

Greece experienced a severe debt crisis and came very close to defaulting on its debt, which led to a bailout from the European Union and the International Monetary Fund.

Question 2

Why were services, such as insurance, banking, and consulting, left out of the original General Agreement on Tariffs and Trade (GATT)agreement?
A)Because they are an ever-smaller part of international trade and do not matter
B)Because they cannot be included in free trade arrangements, as each country has different standards
C)Because leading service firms put pressure on government to reduce discrimination in services and these interests are extremely powerful politically
D)Because there was too much disagreement and debate among the members of the organization in regard to services

Accepted Answer

C

Question 3

What do trends indicate about the relationship between states and globalization?
A)States have lost control over globalization.
B)Globalization is slowing down, so we see the resurgence of state significance.
C)States still control whether to decrease barriers to commerce, indicating that globalization is at the whim of state power.
D)Any state that retreats from globalization will find that it is difficult, but well worth it.

Accepted Answer

A

Question 4

What is one reason why the General Agreement on Tariffs and Trade (GATT)dispute resolution mechanism was criticized by weaker and poorer countries?
A)Because the United States enacted high tariffs on goods from poor nations
B)Because the dispute resolution process was so fast that it did not give enough time for an accused country to mount a case
C)Because the dispute mechanism had very strong enforcement measures
D)Because weaker countries were forced by the United States to accept certain decisions

Accepted Answer

The GATT dispute resolution mechanism was criticized by weaker and poorer countries because they felt coerced by more powerful nations, like the United States, into accepting decisions that were not in their favor. This perceived imbalance in power and influence led to concerns about fairness and equity in the dispute resolution process.

Question 5

Which of the following statements is true?
A)For most countries, foreign trade is growing much faster than the domestic economy.
B)The portion of each country's economy that is either sold as exports or bought as imports is decreasing.
C)Domestic economies in most of the world are growing faster than foreign trade.
D)Trade is the only form of globalization.

Accepted Answer

Foreign trade is growing at a faster rate than the domestic economy in most countries, driven by globalization, advancements in transportation, and trade agreements that facilitate easier and more efficient cross-border transactions.

Question 6

In economics, a recession is defined as which of the following?
A)A decline in output of less than 5 percent
B)A decline in output of less than 10 percent
C)A decline in output of less than 20 percent
D)A decline in output of less than 25 percent

Accepted Answer

The answer of In economics, a recession is defined as...

Question 7

Which concept is described as a compromise between economic liberalism and state intervention?
A)Fair trade
B)Economic structuralism
C)Embedded liberalism
D)Mutuality

Accepted Answer

Embedded liberalism is a concept that represents a compromise between the free market principles of economic liberalism and the need for state intervention to protect domestic economies and provide social welfare. It emerged after World War II, aiming to combine the efficiency of markets with the need for social stability and protection against market excesses.

Question 8

What is a quota?
A)A qualitative limit on the kind of imported goods
B)A quantitative limit on the number of imported goods
C)A quantitative limit on the number of exported goods
D)A qualitative limit on the kind of exported goods

Accepted Answer

A quota is a quantitative limit on the number of imported goods, restricting the amount of a specific good that can be imported into a country.

Question 9

The General Agreement on Tariffs and Trade (GATT)replaced the earlier concept of reciprocity with which of the following?
A)Nondiscrimination
B)Mutuality
C)Coercive negotiation
D)Collective action

Accepted Answer

Nondiscrimination, specifically the principle of Most Favored Nation (MFN), is a core concept of GATT, ensuring that trade advantages granted by any member to any other country must be extended to all GATT members.

Question 10

Which of the following components is part of what makes up globalization?
A)International investment has become dominated by a few international businesses.
B)International trade has increased relative to domestic trade.
C)International investment has decreased.
D)The world is defined by many separate markets.

Accepted Answer

Globalization involves the increase of international trade relative to domestic trade, as it signifies the integration of markets and economies worldwide.

Question 11

Which of the following reasons does not explain Greece's difficulty in financing its debt?
A)Greece's abandoning of the euro in exchange for the drachma
B)The global recession
C)Higher interest rates
D)High levels of borrowing

Accepted Answer

Greece has not abandoned the euro in exchange for the drachma; it still uses the euro as its currency. The other options are factors that have contributed to Greece's financial difficulties.

Question 12

What were the objectives of the Bretton Woods system?
A)To fight communism and enrich the United States
B)To promote free trade and increase global wealth
C)To rebuild Europe and democratize the developing world
D)To ensure continued U.S. presence in Asia and expand global capitalism

Accepted Answer

The Bretton Woods system aimed to promote free trade and increase global wealth through the establishment of a series of financial agreements and institutions (like the IMF and the World Bank) that sought to ensure economic stability and foster international economic cooperation after World War II.

Question 13

Why did governments have greater control over currency prices in the past?
A)Because governments were stronger and more centralized
B)Because governments controlled more currency than private actors
C)Because the cost of exchanging currency was higher in the past
D)Because governments had a monopolistic control over currency markets

Accepted Answer

The answer of Why did governments have greater control over...

Question 14

One major problem of the General Agreement on Tariffs and Trade (GATT)was the exclusion of certain classes of products. What was one of the most significant classes of product originally excluded from GATT?
A)Agricultural
B)Manufactured
C)Automotive
D)Pharmaceuticals

Accepted Answer

Agricultural products were significantly excluded from the initial agreements under GATT, leading to various trade distortions and challenges in global agricultural markets.

Question 15

What are voluntary export restraints (VERs)?
A)Limits on the number of an item that can be imported
B)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
C)Restrictions that items to be sold as a domestic product must have a certain percentage of its final product components assembled domestically
D)Quotas that are agreed upon and sanctioned by the WTO

Accepted Answer

Voluntary export restraints (VERs) are a trade policy tool where an exporting country agrees to limit the quantity of goods exported to another country. This is often done to avoid more severe trade restrictions or tariffs that the importing country might impose.

Question 16

Which of the following are considered tariffs?
A)Voluntary export restraints
B)Health and environmental regulations
C)Quotas
D)Taxes on imports

Accepted Answer

Tariffs are taxes imposed by a government on goods and services imported from other countries. Taxes on imports are the direct definition of tariffs, aiming to increase the price of foreign goods to encourage domestic consumption of local alternatives.

Question 17

Why did the Greek crisis threaten to spread to the rest of Europe?
A)Because there were not any other states struggling with debt
B)Because of arbitrage and capital mobility
C)Because of the International Monetary Fund
D)Because many banks that were owed monies by Greek businesses were headquartered in other European states

Accepted Answer

The Greek crisis threatened to spread to the rest of Europe because many European banks had significant exposure to Greek debt. If Greece defaulted, it could have led to a banking crisis in other European countries, potentially destabilizing the entire Eurozone.

Question 18

What term describes the agreement that one state's tariffs on goods would be the same as its trading partner's tariff?
A)Reciprocity
B)Globalization
C)Trade equality
D)Nondiscrimination

Accepted Answer

Reciprocity in trade agreements refers to the practice where two countries agree to apply the same tariff rates to each other's goods, ensuring a mutual benefit and fairness in trade relations.

Question 19

What does the most favored nation principle mean?
A)That one nation is selected to benefit the most from free trade
B)That if a state lowers a tariff toward one General Agreement on Tariffs and Trade (GATT)member, it is obliged to give all members the same low tariff
C)That regional trading partners are given favorable trading terms
D)That the GATT ensures that one country receives preferential trade treatment

Accepted Answer

The most favored nation (MFN) principle requires a country to provide any concessions, privileges, or immunities granted in a trade agreement to one nation to all other World Trade Organization (WTO) member countries. This ensures equal trading opportunities among all WTO members by preventing discriminatory trade practices.

Question 20

What is comparative advantage based on under globalization?
A)Military strength
B)State control of international financial institutions
C)State accumulation of large amounts of capital
D)Factors such as technology, education, and network effects

Accepted Answer

Comparative advantage in the context of globalization is based on factors such as technology, education, and network effects, which enable countries to produce certain goods or services more efficiently than others.

Quiz 11: The Globalization of Trade and Finance

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

Why were services, such as insurance, banking, and consulting, left out of the original General Agreement on Tariffs and Trade (GATT) agreement?

What do trends indicate about the relationship between states and globalization?

What is one reason why the General Agreement on Tariffs and Trade (GATT) dispute resolution mechanism was criticized by weaker and poorer countries?

Which of the following statements is true?

In economics, a recession is defined as which of the following?

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

What is a quota?

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

Which of the following components is part of what makes up globalization?

Which of the following reasons does not explain Greece's difficulty in financing its debt?

What were the objectives of the Bretton Woods system?

Why did governments have greater control over currency prices in the past?

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

What are voluntary export restraints (VERs) ?

Which of the following are considered tariffs?

Why did the Greek crisis threaten to spread to the rest of Europe?

What term describes the agreement that one state's tariffs on goods would be the same as its trading partner's tariff?

What does the most favored nation principle mean?

What is comparative advantage based on under globalization?