International Economics: Theory and Policy 12th Global Edition by Paul Krugman test bank

Answer:  D
Difficulty:  Easy
AACSB:  Application of knowledge
 
32) International capital markets experience a kind of risk not faced in domestic capital markets, namely
A) "economic meltdown" risk.
B) Flood and hurricane crisis risk.
C) the risk of unexpected downgrading of assets by Standard and Poor.
D) the risk of currency fluctuations.
E) the risk of political upheaval.
Answer:  D
Difficulty:  Moderate
AACSB:  Application of knowledge
 

 
33) Since 1994, trade rules have been enforced by
A) the WTO.
B) the G10.
C) the GATT.
D) The U.S. Congress.
E) the European Union.
Answer:  A
Difficulty:  Easy
AACSB:  Application of knowledge
 
34) The international capital market is
A) the place where you can rent earth moving equipment anywhere in the world.
B) a set of arrangements by which individuals and firms exchange money now for promises to pay in the future.
C) the arrangement where banks build up their capital by borrowing from the Central Bank.
D) the place where emerging economies accept capital invested by banks.
E) exclusively concerned with the debt crisis that ended in the 1990s.
Answer:  B
Difficulty:  Easy
AACSB:  Application of knowledge
 
35) The international financial crisis of 2007 was the result of
A) failure of the Euro currency.
B) runaway inflation in the U.S.
C) a deep global recession.
D) the collapse of global currency markets.
E) defaults on U.S. mortgage-backed securities.
Answer:  E
Difficulty:  Easy
AACSB:  Application of knowledge
 
36) It is argued that global trade tends to be more important to countries with smaller economies than the U.S. Is this empirically verified?
Answer:  Yes. Figure 1-2 shows exports and imports as a percentage of national income in the U.S. and five other countries and notes that "International trade is even more important to most other countries than it is to the U.S."
Difficulty:  Moderate
AACSB:  Application of knowledge
 
37) It is argued that if a rich high wage country such as the United States were to expand trade with a relatively poor and low wage country such as Mexico, then U.S. industry would migrate south, and U.S. wages would fall to the level of Mexico's. What do you think about this argument?
Answer:  The student may think anything. The purpose of the question is to set up a discussion, which will lead to the models in the following chapters.
Difficulty:  Moderate
AACSB:  Reflective thinking
38) How are the patterns of international trade, that is the pattern of what different countries export and import, explained?
Answer:  Climate explains why Brazil exports coffee. Natural resources explains why Saudi Arabia exports oil. More generally, differences in labor productivity and in the availability of land, labor, and capital within different countries explain patterns of trade. More recent research suggests that there is a significant random component involved, as well.
Difficulty:  Moderate
AACSB:  Application of knowledge
 
39) International trade theory implies that international trade is beneficial to all trading countries. However, casual observation leads to the conclusion that official obstruction of international trade flows is widespread. How might you reconcile these two facts?
Answer:  This question is meant to allow students to offer preliminary discussions of issues, which will be explored in depth later in the book.
Difficulty:  Moderate
AACSB:  Application of knowledge
 
1.2   International Economics: Trade and Money
 
1) International economics can be divided into two broad sub-fields
A) macro and micro.
B) developed and less developed.
C) monetary and barter.
D) international trade and international money.
E) static and dynamic.
Answer:  D
Difficulty:  Easy
AACSB:  Application of knowledge
 
2) International trade analysis focuses on
A) the real transactions that involve a physical movement of goods or a tangible commitment of economic resources in the international economy.
B) the monetary side of the international economy.
C) the financial transactions such as foreign purchases of U.S. dollars.
D) the devaluation of currencies of the international economy.
Answer:  A
Difficulty:  Easy
AACSB:  Application of knowledge
 

 
3) International monetary analysis focuses on
A) the real side of the international economy.
B) the international trade side of the international economy.