Chapter-11.Pdf

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1. What does the difference between growth rates in trade and gross domestic product (GDP) represent? a. trade integration b. trade deficit c. trade surplus d. balance of trade

2. Global trade integration has become most rapid as a result of the increasing trade participation of states from which region? a. Global North b. Global South c. Latin America d. Southeast Asia

3. Which region fueled the Global South’s increases in global exports? a. Europe b. North America c. South America d. Asia

4. Toyota vehicles in the United States are manufactured in Kentucky using parts obtained from thousands of suppliers from locations around the word. Which concept refers to this type of manufacturing? a. globalization of production b. globalization of labor c. intra-firm trade d. outsourcing

5. Which of the following is a particularity contentious aspect of globalization? a. globalization of labor b. globalization of capital c. trade d. intra-firm trade

6. Which concept refers to the cross-national trade of international goods and services within the same company? a. insourcing b. intra-firm trade c. globalization of production d. globalization of labor

7. When Toyota Motors Manufacturing Canada trades with Toyota Motors Manufacturing Mississippi, what are the two entities engaging in? a. intra-firm trade b. inter-firm trade

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c. insourcing d. outsourcing

8. What does GATT stand for? a. General Agreement on Tariffs and Trade b. Global Agreement on Tariffs and Trade c. Global Agreement on Trade Talks d. General Agreement on Transnational Trade

9. What was the primary goal of the GATT? a. to provide a forum for countries to coordinate their tariffs, imposts, and excises b. to encourage free trade among countries by reducing trade barriers c. to facilitate free flow of labor d. to facilitate free flow of capital

10. Which of the following are the three primary principles of GATT? a. interdependence, coordination, and reciprocity b. interdependence, transparency, and reciprocity c. reciprocity, nondiscrimination, and transparency d. reciprocity, free trade, and transparency

11. Which of the following are the two forms of nondiscrimination? a. most-favored nation principle and national treatment b. most-favored nation principle and transparency c. transparency and integration d. tit-for-tat and reciprocity

12. In The Wealth of Nations, Adam Smith argues for the idea of a nation specializing in the production of what goods? a. goods in the production of which it has an absolute advantage b. goods in the production of which it has a comparative advantage c. goods with low barriers of entry d. goods with low relative opportunity costs

13. What is a country pursuing if it chooses to produce oil because it has large oil reserves and world’s lowest production costs? a. comparative advantage b. absolute advantage c. laissez-faire capitalism d. diminishing returns

14. Which of the following can be described as economic nationalism? a. mercantilism Copyright Cengage Learning. Powered by Cognero. Page 2

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b. neoliberalism c. Marxism d. social liberalism

15. How do mercantilists view trade? a. as a zero-sum game b. as a positive-sum game c. as a quest for absolute advantage d. as a quest for comparative advantage

16. Which of the following statements captures one of the major differences between liberalism and mercantilism? a. Liberalism views economic relations as conflictual while mercantilism sees economic relations as harmonious. b. According to mercantilism, the goal of economic activity is to maximize global welfare, whereas liberalism emphasizes national interests. c. Mercantilism argues that politics determines economics whereas liberalism claims that economics determines politics. d. Liberalism argues that politics determines economics whereas mercantilism claims that economics determines politics.

17. Which school of economics promises that the “invisible hand” will maximize efficiency? a. liberal b. mercantilist c. Marxist d. scholastic

18. Which of the following are agreements in which exporting countries agree to restrict shipments of a particular product to a country to deter it from imposing an even more onerous import quota? a. orderly market arrangements b. nontariff barriers c. export quotas d. voluntary export restrictions

19. According to hegemonic stability theory, what do hegemons provide? a. a world government b. multilateral politics c. public goods d. common goods

20. What are the two basic characteristics of public goods? a. nonexclusivity and nonrivalry b. exclusivity and nonrivalry c. exclusivity and rivalry

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d. collectivity and rivalry

21. Which concept describes the transnationalization of the productive process in which finished goods rely on inputs from multiple countries outside their final market? a. intra-firm trade b. globalization of production c. trade integration d. globalization of finance

22. How is the degree of trade integration measured? a. the difference between growth rates in trade and gross domestic product (GDP) b. the average export volume divided by the average gross domestic product (GDP) c. gross domestic product (GDP) minus gross national product (GNP) d. the difference between total export volume and gross domestic product (GDP)

23. How might the growth of foreign direct investment (FDI) produce a level of social homogeneity? a. Countries adopt similar institutions to facilitate economic activity. b. FDI decreases economic interdependence. c. FDI leads countries to subsidize their domestic industries. d. FDI is a primary agent of protectionism.

24. The globalization and outsourcing of labor is most problematic for which sector of laborers? a. professionals b. highly skilled c. low-skilled d. supervisory

25. Which of the following are the primary agents in the globalization of production? a. hegemons b. labor unions c. multinational corporations (MNCs) d. intergovernmental organizations (IOs)

26. What do the liberal economic theory and empirical evidence show regarding the effects of outsourcing? a. Even if outsourcing decreases the wage levels of some states, the decreasing wage level is offset by an increase in purchasing power. b. Even if outsourcing decreases the wage levels of some states, low wage levels tend to result in high levels of unemployment. c. Even if outsourcing decreases the wage levels of some states, inflation tends to occur in globalized states. d. Even if outsourcing decreases the wage levels of some states, in the long run, there is no incentive for companies to hire domestic labor.

27. Which GATT principle calls for mutual lowering of trade barriers between trading partners? Copyright Cengage Learning. Powered by Cognero. Page 4

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a. reciprocity b. convertibility c. nondiscrimination d. outsourcing

28. Which of the following statements best captures the most-favored-nation (MFN) principle? a. States cannot rely on comparative advantage in their trade policies. b. Goods produced at home are treated the same for import and export agreements. c. Tariff preferences granted to one state must be granted to all others exporting the same product. d. Import quotas can be used to regulate trade, but export quotas cannot be used.

29. Which GATT principle of nondiscrimination calls for all foreign goods to be treated equally with domestic goods, and prevents countries from enacting policies, such as taxes, to give their products an advantage over foreign products? a. national treatment b. most-favored-nation status c. transparency d. liberalization

30. What was the name of the meeting that changed the GATT to WTO? a. the Brazil Round b. the Uruguay Round c. Paris Talks d. the Vienna Conference

31. Which famous economist is credited with the idea of comparative advantage? a. Adam Smith b. David Ricardo c. John Maynard Keynes d. Milton Friedman

32. Which of the following best describes comparative advantage? a. If a state can produce the highest volume of wool in the world, that state should produce wool regardless of opportunity cost. b. If a state can produce equal amounts of wine and wool, that state should produce whichever good is more expensive and desirable in the global economy. c. If a state can produce wine at a lower opportunity cost than wool, that state should produce wine even if it could produce more wool than any other state in the world. d. States should avoid producing wine, as wool is a more valuable resource to the economy.

33. According to the mercantilist school of thought, how can states maximize their wealth and welfare? a. by playing an active role in the economy and accumulating resources b. by letting the “invisible hand” control economic decisions

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c. by opening trade borders and removing barriers to trade d. by focusing on industries in which they have a comparative advantage

34. What type of gains is commercial liberal theory mostly concerned with? a. relative gains b. absolute gains c. diminishing gains d. commercial gains

35. What question is likely to emerge when actors experience the collective action dilemma? a. Who will benefit from the provision of goods? b. How will free riders be excluded? c. Why pay for the good if the good can be enjoyed without paying? d. How will the hegemon react?

36. Which concept describes a good that everyone benefits from and from which no one can be excluded? a. exported good b. free rider c. collective, or public good d. commercial good

37. Economic sanctions have been used with increasing frequency since World War II. What does research say about the effectiveness of economic sanctions? a. Research has shown that sanctions are seldom effective in impairing the military potential of its targets. b. Research has shown that sanctions actually slow down the threat of military actions between two countries. c. Research has shown that sanctions are successful against autocratic leaders, such as Fidel Castro of Cuba. d. Research has shown that sanctions are useless in achieving any kind of policy goal.

38. Which best defines a quota? a. taxes assessed on goods coming into a country b. the selling of a product as a price below the cost in the home market c. a restriction on the quantity of goods that can be imported to or exported from a country d. taxes assessed on goods leaving domestic market

39. How might the Prisoner’s Dilemma apply to free trade and protectionism? a. All states have an incentive to cooperate in free trade policies, and those who do not cooperate are excluded from the global system. b. Even though it is in everyone’s best interest for all states to have free trade, individual states have an incentive to enact protectionist policies. c. Free trade is the most desirable outcome in the global economy; therefore, all states will comply with the global norms of cooperation. d. Trade is bad for people who are incarcerated.

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40. Which term best describes taxes placed on another exporting state’s alleged selling of a product at a price below the cost to produce it? a. strategic trade policy b. voluntary export restrictions c. orderly market arrangements d. antidumping duties

41. Imagine that a country requires imported bananas to be of certain size and curvature. A reasonable observer might conclude that such a preposterous requirement constitutes which of the following? a. an agricultural policy b. a subsidy c. a nontariff barrier d. an antidumping duty

42. Which policy refers to government support for particular domestic industries to help them gain competitive advantages over foreign producers? a. domestic subsidies b. import substitution c. antidumping policy d. strategic trade policy

43. Which best defines an infant industry? a. an industry that is not yet strong enough to compete effectively in the global marketplace b. an industry that is new to the practice of voluntary export restraints c. an industry that is accused of “dumping” products below the cost of production d. an industry that recently began selling exports

44. What was the impact of the 2008 financial crisis on world trade? a. World trade fell by 45 percent in 2008. b. The decrease in trade was steeper and more sudden than the drop that accompanied the Great Depression. c. The countries affected by the crisis turned to protectionism. d. Global trade continued as before.

45. Which of the following integrates the economies of members through the reduction of trade barriers? a. World Trade Organizations (WTOs) b. plurilateral agreements c. regional trade agreements (RTAs) d. tariff exchanges

46. Globalization of labor is a very controversial issue. Why do so many people fear it? What do the studies indicate? Are MNCs an integral component of this issue? What are the pros and cons of MNCs? Explanation should include issues such as child labor, immigration, slave labor, and unions.

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47. At the systemic level, one of the most influential theories of global trade is hegemonic stability theory. (a) Why is the presence of a global hegemon desirable? What benefits or goods do hegemons provide? (b) Describe the problems that arise when the hegemon is no longer willing or able to effectively carry out its role.

48. Since its inception, the World Trade Organization has often been descended upon by activists during its Ministerial Meetings. Select one such event and discuss why the protestors were there. What were their complaints? Were they justified? Write an essay in which you decide whether the World Trade Organization is a friend or foe.

49. Compare and contrast liberalism and mercantilism. What are the strengths and weaknesses of each theoretical approach? Which do you believe states should follow? Why?

50. We’re always encouraged to “buy domestic.” It is politically popular to support policies that limit import competition and reduce the number of jobs that are outsourced to other countries. According to liberal economic trade theory, however, these policies and the accompanying encouragement to buy domestic-made goods are actually harming our overall welfare in the long run. Explain why liberal theory knows this to be true. Do you agree with the conclusions of liberal theory? If not, why?