International Relations Chapter 9
Why was the recent possibility that Greece would default on its debt of so much concern to other states?
A Greek default would have likely reverberated through other world economies.
What precipitated the 2008 global economic crisis?
A US housing crisis related to falling home prices and bad loans
If a group of US investors wanted to expand its portfolio to include foreign direct investment, which of the following could the investors buy?
A future factory in Sweden.
In the 1990's, why did Argentina peg its Peso to the US Dollar?
Argentina believed that the relative stablility of the US economy would help stop runaway inflation in Argentina.
Why were precious metals used as currency?
Because people around the world trusted that precious metals could be exchanged for goods.
Why is China weary of reformingitss currency to float freely?
China is afraid that a free-floating currency will increase the value of the Yuan relative to other currencies, resulting in lost jobs due to lower exports.
Why is it harder for Multinational Corporations to lobby their host government than it is to lobby their home government?
Citizens and politicians of the host country may resent foreigners trying to influence them.
Which of the following is a central tenet of Keynesian economics?
Deficit spending stimulates economic growth
Why are some people in foreign states weary of foreign direct investment by multinational corporations?
Foreign direct investments can disrupt traditional ways of life and cultures.
Which of the following statements accurately represents liberal economists views on foreign direct investment?
Foreign investment is good for the state where it is taking place because it increases economic efficiency and generates wealth.
Why are central banks only able to have a limited impact on the economy through currency intervention?
Governments only control a small fraction of total wealth.
In 2010 - 2012 what was the situation in Greece that caused a worldwide slump in the financial markets ?
Greece was having a hard time paying its debt obligations.
How do high interest rates affect an economy?
High interest rates discourage investment.
What is likely to happen if a state prints more money to relieve a deficit?
Higher inflation.
How has financial integration been beneficial to the world economy?
It has allowed investors easier access to markets around the world.
Which of the following best describes the transition from communism to capitalism in Eastern Europe and Russia?
It was a challenging transition that involved inflation and economic depression. These states are still not fully intergrated into the international economy.
Which of the following is considered a foreign direct investment?
Owning a company in a foreign country.
Who carries out the most currency exchange and other international economic transactions?
Private firms and individuals.
What caused the 1997 Asian financial crisis?
Speculation led to inflated prices for real estate and stocks; banks then used these overvalued assets as collateral for loans.
Why are American merchantilists concerned about purchasing local industries?
Such foreign investment is long-term and can lead to unwelcome changes in the way industries have traditionally been run.
What did the International Monetary Fund create that states can use to buy currencies and is the closest thing that exists to a world currency?
The Special Drawing Right.
Which of the following statements best describes the US budget deficit and balance of trade since 1970?
The United States has typically had both a budget deficit and a trade deficit.
If you wanted to get a favorable vote at the International Monetary Fund, which state would you most like to have on your side?
The United States.
What was the primary cause of the 2001 recession in the United States?
The burst of the investment bubble.
What does the 2008 - 2009 financial crisis best illustrate?
The interdependence of the world financial markets.
What happens when the US Dollar rises relative to other currencies?
The price of imports becomes more affordable for US consumers
What disadvantage does a state face when pegging its currency to the currency of a stronger and more stable state, such as pegging a currency to the US Dollar?
The state limits soverignty over its own monetary policy.
What happens if a state applies Keynesian economics but the economy does not recover?
The state would have additional debt.
Where has globalization had the biggest impact?
The world financial market.
Why might a state wish to keep the value of its currency artificially low?
To allow its exports to remain cheap
Why do companies seek stable political environments and avoid investing in states on the brink of war?
War generally disrupts business and profit.
What is a budget deficit?
When a government spends more than it receives in revenue.
How has worldwide foreign direct investment changed since 1970?
While there is a strong trend toward more foreign direct investment, it also rises and falls with the global economy.
