chapter 1

costs of increased globalization

1) distribution effects that harm some subgroups 2) increased income distribution gaps 3) increased pollution

benefits of increased globalization

1) permits specialization in goods that a country has a comparative advantage 2) with trade, all nations can then consume beyond their production possibility frontiers = nations not constrained by their resources

salvatore's six international problems

1) slow growth and high unemployment after the Great Recession 2) trade protection 3) exchange rate volatility and financial crises 4) structural unemployment and slow growth in Europe, stagnation in Japan, restructuring problems in transition economies 5) deep poverty in developing nations 6) environmental degradation, climate change, and sustainable development

When interest rates increase in the United States, capital flows from abroad will: A increase B decrease C no change D none of the above

A increase capital funds in all countries tend to seek highest interest rates, so an increase in US interest rates will attract foreign capital

A summary statement of the value of all international transactions of the residents of a nation with the rest of the world during a particular period of time is called: A) Balance of payments B) Net exports C) GNP D) GDP

A) Balance of payments

_____________ has grown at a faster rate than ___________, indicating an increase in economic interdependence among nations. A) World trade, world production B) US GDP, world GDP C) World production, world trade D) Output in the US, incomes in the US

A) World trade, world production

Which of the following is a fallacy of international trade? A. Trade is a zero-sum activity B. Exports increase employment in exporting industries C. Import restrictions increase employment in import-competing industries D. Tariffs and quotas reduce trade volume

A. Trade is a zero-sum activity

The persistence of ___________ in exchange rates has led many in the international community to call for reforms of the current international monetary system. A. excessive volatility and disequilibria B. long run stability C. arbitrage opportunities D. equilibria

A. excessive volatility and disequilibria volatile exchange rates make the accuracy of information questionable

With respect to international trade in the real world: A. most nations impose some restrictions limiting the free flow of goods. B. most nations have eliminated all barriers to free trade. C. most nations have a completely closed economy. D. None of the other answers

A. most nations impose some restrictions limiting the free flow of goods.

The economic relationship and integration among nations is defined as: A microeconomics B economic interdependence C macroeconomics D open economies

B economic interdependence

In many developing nations, _________ provide employment opportunities at home and ____________ to pay for the many products that cannot be produced in the home country and must be imported. A imports, earnings B exports, earnings C exports, outputs D imports, outputs

B exports, earnings exports provide domestic employment and earnings with which to purchase domestic and imported goods

Trade restrictions usually benefit a small number of the ___________ in the nation at the expense of all the _________________. A) consumers, producers B) producers, consumers C) importers, exporters D) exporters, importers

B) producers, consumers trade restrictions benefit producers because of competition, but then goods cost more

The framework which facilitates the exchange of one national currency for another is: A) the central bank B) the foreign exchange market C) the bond market D) the World Trade Organization

B) the foreign exchange market

Slow growth in what two regions has recently led to calls for trade protectionism and dampened the growth of the entire world economy? A. US and South America B. Japan and Europe C. US and Europe D. Japan and South America

B. Japan and Europe

Increased globalization is fostered by: A. Increased tariffs and quotas B. Restrictions on the migration of labor C. Reduced transportation costs D. Restrictions on investment flows

C. Reduced transportation costs

A closed economy is one in which: A. Imports exactly equal exports, so that trade is balanced B. Domestic firms invest in industries overseas C. The home economy is isolated from foreign trade, i.e., there is autarky. D. Saving exactly equals investment at full employment

C. The home economy is isolated from foreign trade, i.e., there is autarky.

Which of the following countries are members of the North American trading bloc? A. US, Mexico, Brazil B. US, Canada, Greenland C. US, Canada, Mexico D. US, Mexico, Central America

C. US, Canada, Mexico

The increasing integration of economies around the world, particularly through trade and financial flows, is often called: A. outsourcing B. macroeconomics C. globalization D. autarky

C. globalization

The economic interdependence among nations has ___________ over recent history. A decreased B. remained the same C. increased D. none of the above

C. increased

The open-economy macroeconomic processes for correcting balance-of payments disequilibria through price and income effects are collectively called: A) discretionary fiscal policy B) foreign exchange market C) monetary policy D) international adjustment in the balance of payments

D) international adjustment in the balance of payments

A nation that has an open economy: A) allows private ownership of capital B) has flexible exchange rates C) has fixed exchange rates D) trades with other nations

D) trades with other nations

Globalization ____________: A. is sometimes blamed for many human and environmental problems. B. increases efficiency C. is sometimes blamed for increasing inequalities in income distribution in the world. D. All of the other three answers.

D. All of the other three answers.

international trade growth is increasing or decreasing?

increasing

international economics consists of:

international trade and international finance

relatively closed countries

no trade/autarky GNP that is traded is about 10%, like US and Japan

zero sum

one country must lose if one country gains from trade trade is not a zero sum, it is a mistaken belief

positive sum

overall all countries gain from trade trade is a positive sum

relatively open countries

trade with others GDP trader over 50%, like Korea and the Netherlands