International Finance: Theory and Policy 11th Global Edition by Paul R. Krugman Test bank
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.
Page Ref: 32
Difficulty: Moderate
33) 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.
Page Ref: 33
Difficulty: Moderate
34) 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.
Page Ref: 32
Difficulty: Moderate
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
Page Ref: 37
Difficulty: Easy
2) International monetary analysis focuses on
A) the real side of the international economy.
B) the international trade side of the international economy.
C) the international investment side of the international economy.
D) the issues of international cooperation between Central Banks.
E) the monetary side of the international economy, such as currency exchange.
Answer: E
Page Ref: 37
Difficulty: Easy
3) The distinction between international trade and international money is NOT entirely clear because
A) real developments in the trade accounts do not have monetary implications.
B) the balance of payments includes only real measures.
C) developments caused by purely monetary changes have no real effects.
D) trade models focus on real, or barter relationships.
E) most international trade involves monetary transactions.
Answer: E
Page Ref: 37
Difficulty: Easy