SGS 303 Global Trends Final Exam

Daly argues that transport costs do not fully reflect the cost of trade because: Governments subsidize energy costs through investment tax credits They do not reflect military expenditures to ensure access to petroleum They do not account for the environmental damage caused by fossil fuel combustion All of the above

All of the above

Rodrik argues that global standards are unlikely to be a solution to product safety concerns because: Nobody can agree upon what "safe" means Even if everyone can agree upon a standard, many developing countries are likely to lack the resources to enforce it The United States will never give up is sovereignty on this issue All of the above

All of the above

In international finance the term "gold standard" means: Only gold coins could be used as currency Paper money could be used to buy gold at market prices Central banks made a commitment to exchange gold for local currency at a fixed price Standard weights and measures were used to calculate the value of gold across countries

Central banks made a commitment to exchange gold for local currency at a fixed price

Under the standard economic argument opening a country to trade Creates winners and losers, but the gains to the winners are larger than the losses to the losers Creates winners and losers, but the gains to the winners are smaller than the losses to the losers Benefits everybody in the long run Hurts everybody in the long run

Creates winners and losers, but the gains to the winners are larger than the losses to the losers

In the 1800s why could international lenders believe that foreign governments outside Europe and North America would repay their debts? A government would never risk its reputation by defaulting European or American military forces would intervene to ensure debt repayment Under the gold standard default was impossible They couldn't, that's why there was little lending during this period

European or American military forces would intervene to ensure debt repayment

A country only benefits from trade if the value of its exports exceed the value of its imports. True False

False

A country only benefits from trade to the extent that it can produce goods using less labor than its competitors. True False

False

A poor country cannot benefit from trade with a rich country because it will just be exploited. True False

False

A rich country cannot benefit from trade with a poor country because it cannot compete with the low wages. True False

False

Access to global markets and finance is sufficient for a country to accumulate the skills, technology, and public institutions necessary for sustained economic growth. True False

False

According to Rodrik, labelling (such as Fair Trade) is a likely solution to the global governance problem since it allows consumers to make their own choices without imposing any restrictions on exporting countries. True False

False

According to textbook models, trade has huge benefits and only modest distributionary impacts. True False

False

After independence, India became one of the first countries to discard state intervention in the economy in favor of free markets. True False

False

As was the case for trade, from the outset the Bretton Woods institutions strongly encouraged the liberalization of capital flows across borders. True False

False

Britain's vote to leave the EU can be rationalized by a simple calculation of costs and benefits. True False

False

China provides a perfect example of a country that experienced spectacular growth by scrupulously following the "Washington consensus" of free trade, free capital flows, deregulation, and balanced budgets. True False

False

Consistent with its free-market ideology, the IMF encouraged East Asian countries to have flexible market-determined exchange rates. True False

False

Daly believes that one thing neoclassical economists get right is their recognition that the earth cannot accommodate a global population that consumes at the level of citizens in rich countries. True False

False

Financial globalization adds stability to emerging market economies since bargain hunting investors pour money in when times are bad and take profits out when times are good. True False

False

Free markets have a built-in mechanism to ensure that the scale of production is compatible with the capacity of the ecological system to accommodate it. True False

False

Free trade can be relied upon to give countries an incentive to reduce transboundary pollutants (pollutants that cross international borders). True False

False

Hayek's followers had the most influence over policy in the years immediately following World War II. True False

False

IMF loans are made strictly on the basis of economic merit, not political influence. True False

False

In general, the technology effect of trade liberalization dominates the scale effect, meaning that on net the environmental impact of globalization has been positive. True False

False

India's "permit raj" showed that using extensive regulation to prevent firms from importing foreign goods could greatly enhance a developing country's economic efficiency. True False

False

It was not until the neo-liberal era of the 1990s that the notion of ecological limits to growth began to take form. True False

False

Malaysia suffered the most from the Asian financial crisis because it ignored the IMF and imposed capital controls. True False

False

Poor countries are necessarily made better off by adopting the high intellectual property right standards of developed countries since they will gain more from the increased innovation than they lose from the higher product prices. True False

False

Rodrik argues that going forward we need to reject the right of individual countries to safeguard their domestic institutional choices in order to avoid a race to the bottom. True False

False

Rodrik argues that rather than getting bogged down in a specific country's complicated details, a successful development strategy requires implementing a list of a few tried-and-true universally applicable reforms. True False

False

Rodrik thinks that a good strategy is to first remove trade restrictions, then deal with any distributional consequences afterwards when they arise. True False

False

Since 2000, the IMF has never had a program in an advanced industrialized country. True False

False

Since markets are self-creating, self-regulating, self-stabilizing, or self-legitimating they do not need states to thrive. True False

False

Specialization in primary commodities encouraged skill accumulation and smaller better-educated families. True False

False

The Clinton administration's quick action to bailout Thailand in 1997 prevented a more widespread crisis. True False

False

The East Asian crisis ended once countries undertook the reforms imposed by IMF conditionality. True False

False

The GATT came under intensive criticism as being neo-colonialist due to its requirement that developing countries match tariff reductions from developed countries, even though their industries often could not compete on those terms. True False

False

The GATT's effectiveness depended on its strong enforcement powers. True False

False

The Pinochet regime in Chile showed that free markets could not flourish with an authoritarian government. True False

False

The US is the only country that has not had to change its domestic policies due to a WTO ruling. True False

False

The United States has never had to borrow from the IMF. True False

False

The World Bank has been able to insulate itself from political pressure (e.g., from the United States) in its lending policy. True False

False

The World Trade Organization was designed to ensure that globalization remained subservient to domestic political considerations. True False

False

The development of the U.S. manufacturing base in the 1800s was a result of its free trade policies. True False

False

The trade balance can be considered a country's "bottom line": A surplus is a signal of economic strength, a deficit a sign of weakness. True False

False

Rodrik argues that the East Asian miracle can offer the following lesson: Unleashing markets is the best way to foster development Globalization is always an engine for growth Globalization needs to be tamed for growth to occur All of the above.

Globalization needs to be tamed for growth to occur

In the 1980s Bolivian government revenues were less than expenditures. To cover the gap, the central bank began to print money. What was the result? Inflation rates of over 1000 percent The government was easily able to pay off its foreign creditors An economic boom A sharp reduction in poverty

Inflation rates of over 1000 percent

Why did the volume of international trade collapse during the 1930s? Many countries imposed high tariffs to protect politically powerful sectors during the Great Depression It didn't, that was the period in which free trade reached its peak Germany's surprise attack on Japan ground trade to a halt The rise of global piracy made international shipping too risky

Many countries imposed high tariffs to protect politically powerful sectors during the Great Depression

Rodrik claims we can have at most two of what three things? Nation state, economic globalization, democracy Economic globalization, prosperity, equality Liberty, fraternity, equality Democracy, fairness, markets

Nation state, economic globalization, democracy

What does Rodrik argue is the danger of giving governments too much power in the global economic system? Protectionism Autarky Income inequality Environmental degradation

Protectionism Autarky

According to Rodrik, during the wave of globalization in the 1600s, how did the granting of powerful privileges to monopolies such as the British East India company advance global economic integration? Spurring technological innovation Reducing transportation costs Reducing transaction costs Increasing consumer sovereignty

Reducing transaction costs

Who is better off economically? The bottom 10 percent of a rich country The top 10 percent of a poor country Neither a nor b Both a and b

The bottom 10 percent of a rich country

IMF conditionality is most effective when The client government is completely in agreement with the importance of the policy requirements The client government is completely opposed to the policy requirements The client government wishes to undertake the policies, but investors doubt its ability to do so on its own. All of the above

The client government wishes to undertake the policies, but investors doubt its ability to do so on its own.

Which of the following is not a reason why the classical arguments in favor of free trade might be wrong Trade may cause a highly polluting sector to expand Trade may contribute to a distribution of wealth that society finds inequitable Trade may cause a sector that generates knowledge spillovers to shrink Trade may cause workers to lose their jobs in an import competing sector

Trade may cause workers to lose their jobs in an import competing sector

A country's standard of living is primarily determined by its worker productivity, not its trade balance. True False

True

A deliberate government policy of keeping its currency undervalued relative to the U.S. dollar was a key to China's economic success. True False

True

A weakness in the Bretton Woods system of capital controls was that firms often found ways to avoid them either by locating in unregulated countries or developing new un-regulated financial products. True False

True

According to James Tobin, due to market imperfections and the risk of widespread crisis, free financial markets need sophisticated regulation to be an engine of growth. True False

True

According to Rodrik a "deserving" argument against free trade would be that the gains from trade are small relative to the distributional costs. True False

True

According to Rodrik a "deserving" argument against free trade would be that the trade must entail practices that violate norms and social contracts. True False

True

Although academic advocates of international capital liberalization recommended that domestic markets first be adequately regulated and subject to competition, this advice was often not heeded in practice. True False

True

Although the WTO has been ineffectual at reducing tariffs, global tariffs have continued to fall due to regional free trade agreements and unilateral tariff reductions. True False

True

An undervalued currency makes a country's exports cheaper while protecting import-competing domestic producers. True False

True

Available evidence suggests that the pollution haven hypothesis is likely to be valid, but that its effect is small, concentrated in a few sectors, and overwhelmed by other determinants of trade. True False

True

By requesting assistance from the IMF countries should be concerned that they may be sending a signal to international markets that they are a risky investment. True False

True

By withdrawing from the Trans-Pacific Partnership, the United States has limited its ability to influence how international standards are written in high tech areas such as digital trade, to the potential detriment of U.S. companies. True False

True

Daly argues that free trade encourages industries to shift their production to countries with the lowest environmental standards. True False

True

Daly defines sustainable development as development without growth - satisfying human wants by increasing efficiency of resource use, improving social institutions, without increasing resource throughput. True False

True

Disputes settled by WTO judges are compulsory and binding on member nations. True False

True

Economic globalization can allow nations to better leverage the skills, technology, and public institutions that they already possess. True False

True

Economic models suggest that the impact of Brexit will be a decline in UK income per capita. True False

True

Education and age were the strongest predictors of the Brexit vote, with "leave" voters tending to be older and less educated. True False

True

Financial panics can sometimes be explained by situations when one party to a transaction has better information about its value than the other. True False

True

Free movement of labor and harmonized regulations across the EU are two areas of deep integration that contributed to the Brexit vote. True False

True

Globalization has allowed rich countries to increase their consumption of goods, while shifting the environmental costs of "dirty" production to poorer countries. True False

True

IMF insistence on balanced budgets in the face of a recession worsened the East Asian financial crisis. True False

True

If countries are weighted by population, the reduction in global income inequality since 1980 has been driven almost exclusively by China and India. True False

True

In developing countries, one would expect foreign owned multinational corporations to implement better environmental management practices than their privately-owned domestic rivals. True False

True

Income inequality across countries has worsened from 1980 - 2000 if each country is given equal weight (China, for example, is treated the same as Luxembourg). True False

True

Increased globalization means that governments have reduced latitude to develop policies fitted to their countries' unique circumstances. True False

True

Keynes argued that to control unemployment governments should run budget deficits when the economy slowed down and surpluses when the economy heated up. True False

True

Margaret Thatcher's government shifted the United Kingdom's economic policy from Keynesian to a free market approach. True False

True

Rodrik thinks there is a strong correlation between a nation's exposure to international trade and the size of its government because citizens demand greater protection from the risks and insecurities of the market. True False

True

Ronald Reagan was a believer in Hayek's free market philosophy. True False

True

Shallow integration requires little of domestic policy. True False

True

Since World War II, the spectacular growth in mass production and consumption saw an associated increase in the use of natural resources. True False

True

Thailand's large foreign debt caused its currency (the Baht) to fall in value relative to the U.S. dollar in 1997. True False

True

The "Bretton Woods" regime of fixed yet adjustable exchange rates from 1950-1970 was remarkably crisis free. True False

True

The "Environmental Kuznets Curve" suggests that environmental degradation initially increases as a country's economy grows, but then declines with economic growth once a country becomes sufficiently wealthy. True False

True

The "polluter pays principle" holds that those who cause environmental degradation should bear the its costs. True False

True

The Clinton administration actively intervened to bailout the Mexican government in 1994. True False

True

The International Bank for Reconstruction and Development earns a profit on its loans. True False

True

The Porter hypothesis states that environmental regulation can actually improve competitiveness by forcing firms to use their resources more efficiently. True False

True

The WTO was consistent with the Reagan/Thatcher view that markets were the primary driver of human welfare and that government intervention typically made things worse. True False

True

The existence of states (or differences across states) is a source of transaction costs for global markets. True False

True

The fact that free trade led some countries to specialize in commodity extraction while others specialized in manufactured goods is exactly the opposite of what standard economic models would predict. True False

True

The plight of the billion people in the world's poorest countries has improved dramatically since the 1990s. True False

True

Why did the Soviet economic system collapse? Workers had few incentives to produce goods people needed President Reagan told Gorbachev to tear down the Berlin Wall It could not compete with low cost Chinese imports None of the above

Workers had few incentives to produce goods people needed

In The Economist article "Globalization and its Critics," the author refutes those who argue that the state should rein in globalization by arguing that government bureaucrats are too inept to do so properly profit-seeking firms will only try to influence state action at the public's expense doing so will cause a trade war none of the above

profit-seeking firms will only try to influence state action at the public's expense

What technological innovations spurred globalization in the 1800s? the telegraph the steamship the railroad the astrolabe

the telegraph the steamship the railroad