IT Econ exam 3

The​ trade-to-GDP ratio for the U.S. changed by a factor of around _______ from 1960 to 2010.

+3

Which of the following is a criticism of import substitution​ industrialization?

-There is widespread rent seeking. -There is misallocation of resources when governments make production decisions. -There is a constant tendency toward overvalued exchange rates. -There is urban bias.

How many countries were members of the EMU when the Euro was​ introduced?

12

The Lost Decade refers to the years between approximately

1980 and 1990.

If Korea grows at​ 10% a​ year, about how many years will it take for Korean GDP to​ double?

7.2 years.

Which of the following contributed to the debt crisis of the​ 1980s?

A fall in primary commodity prices.

Which of the following is a con of multiple nations having a single​ currency?

A single currency may cause the loss of an independent monetary policy and the sovereign control of a​ country's money supply.

Which changes in education policies helped the​ high-performance Asian economies succeed in export​ promotion?

Additional resources focused on primary and secondary education.

Which of the following is an example of widening of economic​ integration?

Admitting more members to the union.

Which of the following contributed to the​ "East Asian​ miracle"?

An emphasis on education.

Which of the following was NOT part of Korean industrial​ policies?

Bailing out bankrupt firms without any attempt to dispose distressed firms

Why is the​ trade-to-GDP ratio for Canada greater than that for the United​ States?

Because Canada has a smaller population and​ GDP, it cannot specialize in producing as many goods.

Which item was not cited as how industrial policies in HPAE are different from other​ countries' industrial​ policies?

Benefits were assured in the form of domestic market power.

Which of the following is not a reason for Canada proposing and signing the​ Canadian-U.S. Free Trade​ Agreement?

Canada wanted to take advantage of the currency in the United States.

​High-performance Asian economies chose trade policies that had some common features. What were the​ similarities?

Compared to other developing​ countries, they promoted exports but were relatively open to imports.

Which of the following was NOT a major productivity benefit of the increase in U.S. and Canadian intraindustry​ trade?

Competition would allow wasteful social programs in Canada to be eliminated

Which of the following was NOT a major productivity benefit of the increase in U.S. and Canadian intraindustry​ trade?

Competition would allow wasteful social programs in Canada to be eliminated.

Which of the following best characterizes the economic growth in Latin America from the end of World War II until the debt crisis of the​ 1980s?

Countries tended to be focused on inward​ development, have unequal distributions of​ income, and were unstable.

Which of the following is NOT a reason why Mexican migration has​ slowed?

Economic conditions in Mexican border cities have improved.

Which of the following is not a way in which manufactured exports might contribute to economic​ growth?

Exports create fewer possibilities for additional FDI.

Why do economic populism policies leave its supporters worse off than before the cycle​ begins?

Extremely high rates of inflation cause wage earners to give up all their gains. Capital flight and the perception that policies are unsustainable depress​ investment, which reduces growth and real wages. Any increase in wages falls behind the increase in prices and wage earners lose ground.

Which of the following is NOT an example of deepening of economic​ integration?

Fixing exchange rates between countries

GDP per capita can be measured using market exchange rates or purchasing power parity. If one is interested in learning about living standards in​ Mexico, as compared with the U.S. it is best to compare

GDP per capita using purchasing power parity.

The single most important factor in the 1992 crisis of the EMS was

German reunification efforts.

What factor did NOT cause the U.S. to shift its focus to a more bilateral or plurilateral trade approach from a multilateral​ approach?

Growing power of the U.S. in the world economy allowed the U.S. to choose its trade partners more carefully.

Which of the following groupings correctly represents the Four Tigers​ (or Four​ Dragons)?

Hong​ Kong, Singapore, South​ Korea, and Taiwan

What was the key issue of political affiliation that the EU originators​ debated?

How much authority the collective would have vs. how much authority each country would have.

Which of the following were motivating factors in the 1990s drive to start a monetary union in the​ EU? I. Eliminate currency conversion costs II. Avoid the effects of exchange rate uncertainty on trade and investment III. Reduce conflict over monetary policy by having one central bank

I and II

The two largest EU expenditure categories are​ for: I. agricultural support II. ​ security, in the form of customs and military III. cohesion funds

I and III

Which of the following trade policies have developing countries used to restrict imports of manufactured goods so that the domestic market is preserved for domestic​ producers?

Import substitution

​_____________ is an economic development strategy that uses industrial policies to target industries producing import competing goods. The goal of this policy is to develop the industrial capacity of the economy. Which of the following is not a method of creating industrial​ policies?

Import substitution industrialization Taxing exported goods

Which characteristic about the EU is not​ correct?

It has​ inter-mixed its separate cultures.

Which of the following statements regarding​ import-substituting industrialization is NOT​ true?

It leads to more income equality.

Which of the following was NOT a result of​ import-substituting industrialization?

It showed that the​ infant-industry argument is universally valid.

What does the European​ Union's Common Agricultural Policy​ do?

It supports farm prices via subsidies.

The HPAE with the least expansive economy in the period 1995- 2010 is

Japan

In what areas are there NAFTA side​ agreements? Which of the following is a con of the NAFTA side​ agreements? Which of the following is a pro of the NAFTA side​ agreements?

Labor standards and environmental standards Trade issues are mixed with nontrade matters and it leads to protectionism through the back door. The agreements create institutional mechanisms by which countries can initiate formal complaints about the lack of enforcement of standards.

Which of the following has not been promoted by​ HPAE?

Large job creation in the government sector

Which of the following statements is false regarding economic growth in the HPAE compared with economic growth of Latin​ America?

Latin America has reduced income inequality through investment in primary and secondary​ education, land​ reform, and the creation of rural infrastructure such as​ roads, water and sanitation​ systems, and health care.

Which of the following is most important in determining the number of jobs in an​ economy?

Macroeconomic policies

The disappointment with​ import-substitution policies is in part​ because:

Many countries pursuing this strategy experienced​ long-term economic inefficiencies.

The international debt crisis of early 1982 was precipitated when​ _____ could not pay its international debts.

Mexico

​___________ refers to the stabilization and structural reform policies that would be recommended in the Washington Consensus. It stresses minimal government involvement in the economy. In Latin America in the 1980s and​ 1990s, it included the removal of government from much of the economic decision making and a turn toward​ market-based allocative mechanisms.

Neoliberalism

How can passage through a demographic transition lead to higher savings and investment​ rates?

Passage through the demographic transition increases the ratio of economically productive people to the total population. This creates a larger pool of income out of which savings and investment can take place.

Which of the following nations have not recently utilized​ export-led growth​ policies?

Philippines

Which of the following was a proximate cause of the debt​ crisis? What were the responses of the United States and other industrial countries to the debt​ crisis?

Recessions in most of the​ world's industrial countries They created rounds of new lending to the countries that were unable to pay or refinance their debt.

Which of the following is not a directive in the implementation of the Single Market​ Program?

Reduce income differences between member countries. Eliminate immigration and customs controls. Establish policy to prevent mergers that increase market power.

The fairly consistent economic growth experienced by Chile in the late 1980s

Rejected the conventional Latin American reliance on import substitution.

Which of the following is NOT part of the European​ Union?

SWITZERLAND

_______ are designed to stop inflation and eliminate large budget deficits.

Stabilization policies

________ are designed to open the economy to more​ market-based decision making.

Structural adjustment policies

________ include trade​ reforms, privatizations, and deregulation.

Structural adjustment policies

Which country is surrounded by EU​ countries, but not in the EU​ itself?

Switzerland

Which of the following is NOT part of the European​ Union?

Switzerland

Which of the following items is not an example of an expenditure switching​ policy? Which of the following items is not an example of an expenditure reducing​ policy?

Tax increase Currency devaluation or depreciation

Which of the following is correct when comparing the European Union with the NAFTA​ region?

The EU has a larger population than the NAFTA​ region; however, the NAFTA region is larger in terms of total GDP. Each nation in NAFTA is allowed to set its own external trade and economic policy while EU countries are subject to the EU agreements. ​ Additionally, some EU countries use a single currency while NAFTA countries do not.

Which of the following is not a gain from trade the European Union expected to create with the implementation of the Single European​ Act?

The European Union expected that a single currency would reduce printing and minting costs of money.

Which of the following is not a reason for Mexico proposing and signing the North American Free Trade​ Agreement?

The Mexican government wanted to borrow more in order to spend and stimulate the national economy.

Which of the following is not an institution of the European​ Union?

The Supreme Court

Which of the following is not an institution of the European​ Union? Which of the following is not a responsibility of the institutions of the European​ Union?

The Supreme Court The parliament serves as a conduit through which citizens of the EU can express opinions. The council is responsible for enacting laws based on the proposals submitted by the commission. The commission is charged with enforcing the treaties and introducing new laws.

Which of the following is NOT a benefit of a single​ currency?

The central bank can stabilize economic fluctuations across countries.

Which of the following was a trade reform in Latin America in the late 1980s and​ 1990s?

The creation of new trade blocs such as NAFTA and the revitalization of old ones such as the Central American Common Market

In what order did the three main stages of deepening occur in the European Community after the passage of the Treaty of​ Rome?

The creation of the European Monetary​ System, the passage of the Single European​ Act, and the passage of the Treaty on European Union​ (Maastricht Treaty).

The Single European Act is a case in which it was difficult to create an agreement in spite of the fact that there was near unanimity in support for an agreement. If everyone wanted the​ agreement, why was it hard to​ negotiate?

The problem with public procurement as some nations were unwilling or incapable of opening government purchases to​ non-national firms. There were differing national standards for​ products, safety​ codes, industrial​ processes, and skill certification. The variation in​ value-added taxes between the​ high-tax countries and the​ low-tax ones.

NAFTA has much more tension over issues such as immigration and environmental and labor standards than other trade blocs. What is the most likely​ reason?

There is more variation in GDP per capita among NAFTA members than among members in other trade blocs.

Which of the following is a reason why claims about job creation and job destruction due to NAFTA are likely to be misleading and​ inaccurate?

There is the problem of trying to know what would have happened without the agreement. There is the problem that if an American firm that buys supplies from other American firms moves to Mexico or​ Canada, the inputs that the firm buys suddenly become exports. Yet no new jobs are created. Measurements of job destruction are marred by the fact that imports from Mexico may displace imports from some other country.​ Hence, there is no new job destruction associated with the increase in imports from Mexico.

Which of the following is a reason that assisted in the Mexican economy having market reforms and market opening in the​ mid-1980s?

There was a widespread recognition that market forces needed to play a much larger role in the economy. There was a need to gain additional foreign investment and to lessen the role of government. The debt crisis that began in 1982.

The experience of​ Chile's foreign sector in the last two decades of the 20th Century supports the proposition that economic growth is supported by

Trade liberalization policies

The founding document of the European Economic​ Community, and the document that continues to provide the basis for the European Union is the

Treaty of Rome.

Which of the following will cause increases in a​ country's total factor​ productivity?

Use of new​ technology, or innovation that makes capital more productive. The introduction of new management or organizational form that improves firm efficiency.

Which of the following is a pro for the East Asian industrial policies following the growth in the​ HPAE?

With the industrial​ policies, manufacturing in general and manufactured exports experienced enormous growth.

The Latin American debt crisis in the 1980s was triggered by

a fall in the relative price of goods produced in Latin America.

Between 1960 and 2008 U.S. manufacturing experienced

a large increase in​ value-added and a small decrease in employment.

The results in the debate of high HPAE growth seem to indicate

capital accumulation as the most likely cause.

One of the functions of deliberation councils is to

coordinate government policy and private investment.

Most​ high-performance Asian economies created deliberation councils. These councils help foster investment by

coordinating information flows between businesses and policymakers.

Import substitution industrialization in Latin America

created disincentives to export.

A slowing U.S. economy and increased enforcement of immigration laws will reduce​ ________ factors for Mexican immigration to the United States.

demand pull

The single most important reason for​ Canada's seeking a free trade agreement with the United States was to

ensure its access to the U.S. market.

Critics of the World​ Bank's analysis of East Asian industrial policies argue that

even though growth was the same in the targeted industries as it was in the non-targeted ones, they would have grown slower without the policies.

For long stretches of the twentieth​ century, Latin America was one of the ____ growing regions of the world.

fastest

For long stretches of the twentieth​ century, Latin America was one of the _______ growing regions of the world.

fastest

If a​ country's income grows at the rate of 5 percent a​ year, it doubles in about

fourteen and one-half years

Countries that are members of the Asian and Pacific Economic​ Cooperation, or​ APEC, plan to meet goals that include

free trade and investment among member countries.

Any given rate of growth of labor productivity can be broken down into the share that is due to more capital and the share that is due to more skills or education. In the economics​ literature, such an exercise is called

growth accounting.

In the 1970s many Latin American countries had overvalued exchange rates. Due to overvalued exchange​ rates, many countries in Latin America

had the ability to support Import Substitution​ policy, due to the ability to import capital goods cheaply.

The current day European Union

has GDP and population that are similar in size to the GDP and population of countries in the NAFTA.

Policy approaches to inflation reduction are controversial. The difference between​ "orthodox" and​ "heterodox" policies for controlling inflation is that

heterodox policies advocate for wage and price​ controls, while orthodox policies do not.

Since​ 1994, rules by the General Agreement on Tariffs and Trade​ (GATT), allow countries to implement export promotion policies

if the country is lower​ income, with GDP per capita less than​ $1000 per person.

Fiscal discipline helps countries to stimulate investment and to reduce capital flight by

increasing the government​ credibility, and therefore increasing investor confidence.

One drawback to a single currency is that

individual nations cannot use monetary policy to stabilize the economy.

The principle of subsidiarity in the EU is used to decide which policies are the authority of national governments or of EU institutions. Subsidiarity

is based on the principle that the EU only has authority to tackle issues that are more effectively handled through international action than by individual nations acting alone.

U.S. opponents of NAFTA argue that the agreement will hurt the United States. In their​ view, NAFTA's greatest harm will be its

job destruction and downward pressure on U.S. wages.

President Salinas of Mexico devised a strategy to restore Mexican growth by encouraging

large inflows of foreign capital.

Canadian opponents of CUSTA worried that it would

lead to U.S. news and media overwhelming Canadian​ culture, and that it would force Canada to abandon some of its social programs.

One key result of HPAE macroeconomic policies is increasing income growth. This result

leads to higher​ savings, causing higher​ investment, and more future income.

HPAEs share many characteristics. One of the economic characteristics not shared is

living standards.

​"Demographic transition" refers to the switch from high birth rates and high death rates to

low birth rates and low death rates experienced during modernization.

Structural reform focuses on

making resources allocation more efficient by privatizing state​ enterprises, liberalizing trade and improving the regulatory environment.

The Single European​ Act, which was implemented in​ 1993, included

measures to ensure the free movement of​ goods, services,​ capital, and labor.

The 1980s are referred to as the​ "Lost Decade." This is because Latin American countries in the 1980s experienced

negative​ growth, high​ inflation, increased poverty.

Under​ NAFTA, environmental standards are

nor harmonized

Under​ NAFTA, environmental standards are

not harmonized.

Current European Union institutions are financed by

payments by member countries and a share of tariff revenue collections.

It terms of which of the following attributes is the EU market the largest in the​ world?

population

Economic populist policies usually lead to overvalued exchange rates and large trade deficits because

populist policies involve large increases in government expenditures paid for by printing money​ (usually because there is no market for government​ bonds), and tax systems are inadequate​ and, ultimately, this leads to rapid inflation. domestic prices increase faster than the depreciation of the nominal exchange​ rate; the real rate must appreciate. appreciating exchange rates lead to overvaluation and large import flows together with a decline in exports.

Purchasing power parity​ (PPP) measurements of income are a way to make international comparisons by correcting for national differences in

prices of goods and services.

Inflationary tendencies and even hyperinflation in many Latin American countries have been exacerbated by the tendency of governments to

print money to finance policies to stimulate the economy.

Demographers project that between 2010 and 2040 the population in the current 27 EU member countries will

remain fairly​ stable, though the number of older individuals will increase.

Government economic intervention usually leads to a benefit​ (or value) for targeted recipients. Private interests try to garner these benefits. This activity is​ called:

rent seeking.

All of the following are true of the HPAE except

restrictions on imports of capital goods have helped to favor the development of domestic technology.

Several phases occur throughout a typical cycle of economic populism. Indicate the usual order in which the following phases take place. ____________​: Populist governments begin a program of​ "reactivation, redistribution, and​ restructuring." In this​ program, macroeconomic constraints of budgets and foreign exchange are ignored and budget deficits are run up. ______________​: Inflation can become severe while the use of the government budget to stimulate production leads to large deficits. Capital begins to flee the country as everyone anticipates that the policies are not sustainable and that the currency will be devalued. _______________​: There is widespread disillusionment with current​ policy, often as a result of a recession or a period of very slow growth. _________________​: Growth leads to imports and trade deficits and the beginning of bottlenecks in the economy as shortages develop. Policymakers often raise wages and freeze prices as part of the redistribution package. Prices begin to rise in spite of the attempts to freeze them.

second phase fourth phase first phase third phase

Proponents of Import Substitution Industrialization argued that the best implementation is for countries to start with

simple consumer​ goods, and to move over time towards complex and high value industrial goods.

The main way that _________ are implemented is through a cut in government expenditures.

stabilization policies

The economic success of​ high-performance Asian economies was supported by

stable macroeconomic policies. health and education policies that helped workers to become more skilled. strong and credible commitments to share the benefits of growth across society.

The economic success of​ high-performance Asian economies was supported by

strong and credible commitments to share the benefits of growth across society. stable macroeconomic policies. health and education policies that helped workers to become more skilled.

One problem with NAFTA that is not shared by other trade blocs is that

the countries are at very different stages of economic development.

The main area of economic activity that Canada chose not to open to free trade is

the cultural industries.

​Prebisch-Singer predictions, which can be termed​ "export pessimism," referred to the prediction that Latin American exports would fall due to

the decline in the terms of trade between primary commodities and manufactured goods

The 1957 Treaty of Rome resulted in

the formation of the European Economic Community​ (EEC).

The Washington Consensus had a number of macroeconomic guidelines. They include

the implementation of more open trade​ policies, and privatization of government industries.

One reason why most economists forecast that the effects of NAFTA on the U.S. economy would be small is because

the mexican economy is small relative to the U.S economy

Total factor productivity is

the quantity of output per unit of input.

In 2004 and 2007 the EU extended membership to a number of countries in Central and Eastern Europe. The preconditions for entry by these new members did NOT include

the requirement that the countries have​ stable, functioning democracies. the requirement that the new members adopt​ EU-wide rules regulating such areas as technical​ standards, banking supervision and statistical reporting requirements. the presence of a​ market-based economy

ISI policies were brought to an end primarily by

their inability to solve the crises of 1980s the growing perception that they were creating long-term economic inefficiencies

Trade agreements such as the NAFTA force governments to consider the effects on​ jobs,

trade agreements raise these issues​ politically, even though jobs are more tightly connected to national labor​ market, fiscal and monetary policies.

Even though Mexico is a developing​ country, the NAFTA market is very rich.

true

Few countries have a higher GDP per capita than the weighted average of​ Canada, Mexico and the U.S.

true

Most Mexican workers can increase their wages if they migrate to the United​ States, a demand

true

Government economic intervention​ (industrial policy) usually does not include the following​ area:

union support to workers in specific industries

The​ "Four Freedoms" do NOT include the right to

vote in local elections.

What was the key document that set out a plan towards a European Monetary​ Union?

​(Maastricht) Treaty on European Union

One area of labor issues that the labor side agreement to NAFTA does not open to foreign consultation or investigation is

​worker's rights to organize.