Would large economies such as the US that have large populations tend to have lower or higher openness indicators?
Lower
The index of openness for a nation that had $400 million in exports, $400 million in imports, and GDP of $1600 would be?
0.5
A relative measure of the importance of trade is?
trade as a percentage of GDP
The openness indicator is measured as?
exports + imports / GDP
An important factor that increased international capital flows in the second half of the nineteenth century was
technological innovations
Labor mobility was
greater in 1900 than 1999
One important difference between the international economy of today and the economy of 100 years ago is
the presence of international bodies such as the IMF and world bank
Economists overwhelmingly support more open markets because trade
leads to a better allocation of resources inside countries
One of the most important ways in which local instabilities are quickly spread to the international economy is through the mobility of
capital
T/F: Smaller countries tend to have lower openness measures than large countries
False
Increasing free trade may
A. increase competition and innovation
B. bring a variety of choices for consumers
C. promote efficient allocation of resources
T/F: Since the end of WW2, world trade has grown much faster than world output.
True
T/F: Daily foreign exchange transactions have grown from about $15 billion in 1973 to more than $3.2 trillion today, according to the bank for international settlements
True
Compare and contrast globalization as it existed in the late 19th century with today
-in % terms, significant portion of world economic activity was engaged in trade in both
-in 19th, trade was mostly agricultural products and commodities
-today trade is more capital goods
-labor may have been more mobile in past due to changes in immigra
Institutions are
a set of rules governing behavior,, whether written or not
Which of the following is an example of an institution whose primary concern is global stability?
IMF
The international organization that serves as a forum for trade discussions and the development of trade rules is
WTO
Which of the following was a creation of the Bretton Woods Conference? World Bank, IMF, IBRD, WTO
World bank, IMF, IBRD
Original mission of the world bank was to
provide financial assistance for the reconstruction of war damaged nations
Primary mission of World Bank today is
provide capital to underdeveloped countries
From the late 1940s til the creation of the WTO, the organization that was primarily responsible for conducting rounds of trade negotiations was
GATT
Most Favored Nation (MFN) status means that a country treats another country
the same as its other trading partners
Which of the following are criticisms to the IMF?
A. Lacks openness in decision making process
B. Serves the interests of wealthier countries
C. Violates national sovereignty
D. Heavily bureaucratic and gives harmful advice
E. All of the above
All of the above
The international organization that serves as a forum for the trade discussions and the development of trade rules is
WTO
Until the Uruguay round of trade negotiations, the following sectors were nOT included in the rules for international trade
Agriculture and apparel
Trade policies in which industries have been the most contentious in the Doha round?
Agriculture, particularly US subsidies and EU tariffs and developing nation tariffs on imported manufactured goods
T/F: WTO talks in the late 1990s led to the openings in both financial services and telecommunications
True
The Tokyo round of the GATT negotiations was notable because it was the first round that
began establishing rules on subsidies
A free trade agreement plus a common set of tariffs toward non-members is called
a customs union
T/F: A common market is more deeply integrated than a customs union.
True
Which of the following is a feature of a common market?
A. Free trade in goods and serves between the members
B. Common external barriers to trade
C. Factor mobility
D. All of the above
All of the above
If a good or service does not get used up as it is consumed, then it is said to be
nonrival
An important function of international institutions during times of crisis is to
prevent free riding
IMF conditionality refers to
Requirement for the borrowing member to carry out economic reforms in exchange for a loan
With a partial trade agreement
two or more countries agree to liberalize trade in a selected group of categories
Which of the following is NOT a feature of a common market?
A. Substantial coordination of macroeconomic policies among the members
B. Free trade in goods and services between the members
C. Common external barriers to trade
D. Factor Mobility
A. substantial coordination of macroeconomic policies among the members
Which round of GATT first addressed subsidies
Tokyo round
What result of the Uruguay round was the most significant for global trade?
the creation of the WTO
The IRBD part of the world bank is set up to lend to whom and for what types of projects?
Developing nations governments for specific development projects or major government economic policy adjustments
Which round of GATT led to the formation of the WTO
The Uruguay round
Which multilateral institution serves as the lender of last resort
The IMF
How is the IMF funded?
it collects fees called quotas from its members
Adam smith was critical of
merchantilism
Which of the following would lead to economic growth in Adam Smith's economic analysis?
A. Specialization
B. Division of labor
C. Larger national market
D. All of the above
D. All of the above
If the world price for a good is above a nations pre-trade equilibrium price, then the nation
will export the good
What is the source of comparative advantage
higher relative productivity level
Based on theory of comparative advantage, nations maximize their well being when they
allocate resources more efficiently
If a country has lower overall productivity levels than its trading partners, then it will
have a lower standard of living than its trading partners
All of the following are true:
A. trade between two nations reduces their opp cost
B. trade makes nations dependent on each other
C. trade between nations will not benefit all citizens
D. the principle of comparative advantage applies to all countries eve
true
A country possesses a comparative advantage in the production of a product if
the opportunity cost, in terms of the amount of other products that it gives up to produce this product, is lower than it is for its trading partners
If two countries agree to specialize and trade based on comparative advantage
both countries will consume outside their respective production possibilities curve
If one nation is able to produce a good at a lower OC than another, it has
the comparative advantage in that good
Suppose Mexico can produce 5 autos or 10 corn. Suppose the US can produce 4 autos or 20 corn. If OCs are constant for both countries, what would be the feasible range of potential terms of trade?
1/2 and 1/5 auto for 1 corn
Suppose Paraguay can produce 12 wheat or 3 corn. Suppose Bolivia can produce 4 wheat or 2 corn. Suppose OCs are constant. Given these production possibilities, determine the comparative advantage for each country.
Paraguay = comparative advantage in wheat
Bolivia = comparative advantage in corn
Suppose Paraguay can produce 12 wheat or 3 corn. Suppose Bolivia can produce 4 wheat or 2 corn. Suppose OCs are constant. Which of the following is a potentially agreeable trade agreement?
bolivia trades one corn to paraguay for 3 units of wheat
Suppose that Canada can produce 15 timber or 3 film and Mexico can produce 9 timber or 3 film. OCs are constant. Which of the following are true?
A. Canada has an absolute advantage in timber production
B. Mexico has a comparative advantage in film
C. OCs
D. All of the above
Suppose Sandy can produce 10 reports or make 2 calls. Suppose Tim can produce 2 reports or make 1 call. The opportunity cost for Sandy of producing one report in terms of call is?
1/5 of a sales call
Economic restructuring that takes place as a result of opening to trade with other countries
improves the nations allocation of resources
A production possibilities curve that is bowed out represents the case of
increasing costs
The Stopler-Samuelson theorem predicts
the income distribution effects of trade
If the price of a good rises, then the effect on the income of the factors that are used intensively in its production will be
to raise income by a greater percentage than the rise in prices
After trade opens, the short run impact on the income of the variable factor will be
intermediate, depending on the consumption pattern of the owners of the variable factor
Forecasts of the income distribution impacts of NAFTA predicted that the biggest losers in the US would be
unskilled workers
Empirical tests of the theory of CA have provided strong support for the ricardian model and mixed support for the heckscher-ohlin model.
True
What is a proposition of the Heckscher-Ohlin model
countries will completely specialize in the product in which the have a comparative advantage if free trade is allowed to occur
Wage inequality has been on the rise in virtually all high income industrial economies since the 70s. The causes are probably numerous, but the leading explanation for the greatest share of the increase in inequality is
technological changes which increased the relative demand for skilled workers
Suppose that brazil is capital abundant and Chile is natural resource abundant. If timber is natural resource intensive and computers are capital intensive, then according to the Heckscher-Ohlin theorem, Chile should export goods that
intensively use natural resources
Using the HO model, assume that the US is capital abundant and Mexico is labor abundant. If soybeans are capital intensive and avocados are labor intensive, it would be reasonable to expect the US to
increase soybean production, but still produce some avocados
What does research thus far suggest about job loss and offshoring
outsourcing can be complementary and not just a substitute for domestic labor
Using the specific factors model, assume that strawberry production requires the specific factor of land, tractor production requires capital, and labor is variable. If the US is capital abundant compared to mexico, and mexico is land abundant compared to
the owners of capital in the US will see a larger increase in their incomes in % terms than increase in the price of tractors
Which of the following would be associated with the early phase of the product cycle?
A. Large amounts of production in low income developing countries
B. Standardized product with an assembly line style production process
C. Sophisticated marketing and c
sophisticated marketing and customer feedback
Chinese exports of toys and footwear
A. can be explained by factor endowments, CA
B. relative abundance of low skilled labor
C. All of the above
D. None of the above
All of the above
T/F: The United States has relative scarcity in unskilled labor
true
If the case studies are correct in their analysis of factor abundance,
chinese unskilled labor should see their income rise as trade increases
The relocation of service industry to another country is
offshoring
T/F: The nation as a whole is better off from trade as long as the gains from the winners exceed the losses from the losers
True