International Economics: Master the Global Economy

Question 1

How do technological advancements, particularly e-commerce and artificial intelligence (AI), affect international trade and finance?

Accepted Answer

E-commerce and AI enhance efficiency, convenience, and competitiveness in international trade and finance.

Answer

Technological advancements hinder trade and financial globalization.

Answer

Technological advancements have no significant impact on international trade and finance.

Answer

E-commerce has influenced international trade, but AI has not impacted international finance.

Question 2

Which of the following is NOT a key determinant of a country's comparative advantage?

Accepted Answer

Cultural preferences

Answer

Labor productivity

Answer

Natural resource endowment

Answer

Government policies and regulations

Question 3

The balance of payments records a country's transactions with:

Accepted Answer

The rest of the world

Answer

Domestic businesses and households

Answer

Government entities

Answer

International organizations

Question 4

Which of the following is NOT a type of exchange rate regime?

Accepted Answer

Dual exchange rate

Answer

Fixed exchange rate

Answer

Floating exchange rate

Answer

Managed exchange rate

Question 5

What is the primary function of the International Monetary Fund (IMF)?

Accepted Answer

To provide financial assistance to countries experiencing economic crises

Answer

To regulate global financial markets

Answer

To promote economic development in developing countries

Answer

To coordinate exchange rate policies among member countries

Question 6

What is the concept of "globalization" in economics?

Accepted Answer

The increasing interconnectedness and interdependence of the world economy

Answer

The spread of democracy and human rights around the world

Answer

The decline of nation-states and the rise of global governance

Answer

The rapid advancement and diffusion of technology

Question 7

Which of the following is a key assumption of the Heckscher-Ohlin model of trade?

Accepted Answer

Countries specialize in producing goods that use their abundant factors of production

Answer

Factors of production are equally mobile between countries

Answer

The relative cost of production between countries is constant

Answer

All goods are perfectly substitutable

Question 8

What is the primary objective of the World Trade Organization (WTO)?

Accepted Answer

To promote free trade and reduce barriers to trade

Answer

To regulate international trade in agricultural products

Answer

To provide financial assistance to developing countries

Answer

To protect intellectual property rights solely

Question 9

What is the central concept behind the Mundell-Fleming model?

Accepted Answer

The relationship between exchange rates, output, and interest rates in an open economy

Answer

The impact of monetary and fiscal policy on the economy in a closed economy

Answer

The effects of international trade on economic growth

Answer

The determinants of the current account surplus

Question 10

Which of the following is NOT a key determinant of the exchange rate?

Accepted Answer

Fiscal policy

Answer

Interest rate differentials

Answer

Inflation rate differentials

Answer

Economic growth

Question 11

According to the Heckscher-Ohlin model, countries tend to export goods that intensively use their:

Accepted Answer

Abundant and relatively inexpensive factors of production

Answer

Scarce and relatively expensive factors of production

Answer

Factors of production that are equally abundant in all countries

Answer

Factors of production that are not used in the production of the exported goods

Question 12

The current account of a country's balance of payments includes:

Accepted Answer

Both exports and imports of goods and services, as well as income payments and receipts

Answer

Exports and imports of goods and services

Answer

Income payments and receipts

Answer

Capital inflows and outflows

Question 13

Which of the following is NOT a major factor influencing patterns of international trade?

Accepted Answer

Availability of natural resources

Answer

Comparative advantage

Answer

Factor endowments

Answer

Government policies

Question 14

According to the Heckscher-Ohlin theory, countries will export goods:

Accepted Answer

That are produced more efficiently using their relatively abundant factors of production

Answer

That are produced more efficiently using their relatively scarce factors of production

Answer

That are heavily subsidized by the government

Answer

That are in high demand in the global market

Question 15

According to the Ricardian model of comparative advantage, countries will specialize in producing and exporting goods for which they have a:

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Competitive advantage

Answer

Natural advantage

Question 16

The foreign exchange market is primarily used for:

Accepted Answer

Exchanging currencies

Answer

Trading stocks

Answer

Buying and selling bonds

Answer

Trading commodities futures

Question 17

According to the Heckscher-Ohlin model, countries will tend to export goods that require inputs that are relatively:

Accepted Answer

Abundant and low-cost

Answer

Scarce and high-cost

Answer

Evenly distributed

Answer

Imported and expensive

Question 18

What is the primary purpose of a floating exchange rate system?

Accepted Answer

To allow for the exchange rate to fluctuate according to market forces

Answer

To maintain a fixed value of the currency against a specific currency

Answer

To connect the currency value to a set of different currencies

Answer

To protect the currency against speculative attacks

Question 19

The idea of comparative advantage emphasizes:

Accepted Answer

Relative differences in productivity across countries

Answer

Absolute differences in productivity across countries

Answer

The economic size of different countries

Answer

The availability of natural resources

Question 20

Which of the following factors can contribute to ongoing trade deficits?

Accepted Answer

Low levels of domestic savings

Answer

Diversification of export offerings

Answer

Accumulation of foreign exchange reserves

Answer

Appreciation of the domestic currency

Question 21

What is the primary function of the World Trade Organization (WTO)?

Accepted Answer

To promote free trade and diminish trade restrictions

Answer

To regulate global monetary transactions

Answer

To offer economic assistance to developing countries

Answer

To coordinate international monetary policy

Question 22

Differentiate between a tariff and a quota.

Accepted Answer

A tariff is a tax imposed on imported goods, while a quota sets a limit on their quantity.

Answer

A tariff sets a limit on the quantity of imported goods, while a quota is a tax imposed on them.

Answer

There is no distinction between a tariff and a quota.

Answer

A tariff is a government subsidy for exported goods, while a quota is a government subsidy for imported goods.

Question 23

According to the Ricardian model of international trade, countries engage in trade because:

Accepted Answer

Countries can specialize in producing goods where they have a comparative advantage.

Answer

They have identical production possibilities frontiers.

Answer

One country has an absolute advantage in producing all goods.

Answer

Trade leads to factor price equalization.

Question 24

Which of the following is NOT a potential benefit of international trade?

Accepted Answer

Environmental degradation

Answer

Increased consumer choice

Answer

Reduced unemployment

Answer

Increased economic growth

Question 25

The primary objective of a fixed exchange rate regime is to:

Accepted Answer

Stabilize the value of one currency relative to another.

Answer

Allow for free movement of capital flows.

Answer

Promote economic growth.

Answer

Reduce inflation.

Question 26

The World Trade Organization (WTO) is an international organization that:

Accepted Answer

Promotes free trade and reduces trade barriers.

Answer

Regulates international financial markets.

Answer

Provides humanitarian aid to developing countries.

Answer

Promotes peace and security.

Question 27

Which of the following is NOT a measure of trade protectionism?

Accepted Answer

Free trade agreements

Answer

Tariffs

Answer

Quotas

Answer

Subsidies

Question 28

A trade deficit occurs when a country:

Accepted Answer

Imports more than it exports.

Answer

Exports more than it imports.

Answer

Has a balanced trade account.

Answer

Has a positive trade balance.

Question 29

What is the primary purpose of a floating exchange rate regime?

Accepted Answer

To allow the currency's value to fluctuate freely

Answer

To maintain a fixed value of the currency

Answer

To control the supply of money

Answer

To stabilize the economy

Question 30

Which of the following factors typically does NOT influence the balance of payments?

Accepted Answer

Natural disasters

Answer

Trade in goods and services

Answer

Financial transactions

Answer

Government transfers

Question 31

Which type of company typically has subsidiaries in multiple countries?

Accepted Answer

Multinational corporation

Answer

Domestic company

Answer

Transnational corporation

Answer

Global company

Question 32

What is a distinctive characteristic of a currency crisis?

Accepted Answer

Sudden and severe depreciation of a currency

Answer

Gradual appreciation of a currency

Answer

Extended period of high inflation

Answer

Moderate recession

Question 33

What is the primary purpose of an exchange rate?

Accepted Answer

To determine the price of one currency in terms of another

Answer

To control the flow of goods and services between countries

Answer

To maintain a balance of payments equilibrium

Answer

To facilitate international financial transactions

Question 34

Which of the following is a characteristic of a fixed exchange rate regime?

Accepted Answer

The government intervenes to maintain a specific value for the currency

Answer

The exchange rate fluctuates freely according to market forces

Answer

The government sets a target rate but allows for some flexibility

Answer

The currency is pegged to a basket of other currencies and gold

Question 35

What is the difference between a trade surplus and a trade deficit?

Accepted Answer

A trade surplus occurs when exports exceed imports, while a trade deficit occurs when imports exceed exports

Answer

A trade deficit occurs when exports exceed imports, while a trade surplus occurs when imports exceed exports

Answer

A trade surplus occurs when both exports and imports are equal, while a trade deficit occurs when there is no trade

Answer

There is no difference between a trade surplus and a trade deficit

Question 36

Which of the following is a primary role of the World Bank?

Accepted Answer

Providing loans to developing countries

Answer

Promoting international trade

Answer

Setting global economic policies

Answer

Regulating the global financial system

Question 37

What is the main purpose of the International Monetary Fund (IMF)?

Accepted Answer

To provide financial assistance to countries experiencing balance of payments problems

Answer

To regulate the global financial system

Answer

To set interest rates worldwide

Answer

To promote economic development in developing countries

Question 38

Which factor plays a central role in determining the direction of trade flows between two nations?

Accepted Answer

Relative abundance and costs of production inputs

Answer

Fluctuations in currency exchange rates

Answer

Government regulations and policies

Answer

Consumer preferences and demand

Question 39

The elasticity of demand for a nation's imports measures the degree to which:

Accepted Answer

Import demand responds to changes in the domestic price of imports.

Answer

Import demand responds to changes in domestic income.

Answer

Import demand responds to changes in currency exchange rates.

Answer

Import demand responds to changes in global economic output.

Question 40

Which of the following is not a determinant of the demand for imported goods?

Accepted Answer

Innovation and technological advancement

Answer

Domestic income

Answer

Prices of domestic versus imported goods

Answer

Tastes and preferences of consumers

Question 41

According to the Heckscher-Ohlin theory, a country with a relatively abundant supply of labor will tend to:

Accepted Answer

Export labor-intensive goods

Answer

Import labor-intensive goods

Answer

Export capital-intensive goods

Answer

Import capital-intensive goods

Question 42

The balance of payments is a comprehensive record of:

Accepted Answer

All economic transactions between a country and the rest of the world

Answer

Only the flow of goods and services

Answer

Only the flow of financial capital

Answer

Only the movement of labor

Question 43

The International Monetary Fund (IMF) was established primarily to:

Accepted Answer

Promote international monetary cooperation and financial stability

Answer

Provide financial assistance to developing countries

Answer

Regulate the global banking system

Answer

Set exchange rates between currencies

Question 44

The purchasing power parity (PPP) theory suggests that:

Accepted Answer

The exchange rate between two currencies should equal the ratio of their price levels

Answer

The price of a basket of goods should be identical in different countries

Answer

The value of a country's currency is solely determined by its economic fundamentals

Answer

Inflation rates and exchange rates are strongly correlated

Question 45

The World Trade Organization (WTO) is primarily responsible for:

Accepted Answer

Establishing and enforcing rules for international trade

Answer

Providing financial aid to developing countries

Answer

Regulating the global banking system

Answer

Promoting human rights

Question 46

A tariff is a tax on:

Accepted Answer

Imports

Answer

Exports

Answer

Both imports and exports

Answer

Neither imports nor exports

Question 47

A balance of payments deficit occurs when:

Accepted Answer

A country imports more than it exports

Answer

A country exports more than it imports

Answer

A country's currency is overvalued

Answer

A country's currency is undervalued

Question 48

Which of the following is NOT a type of foreign direct investment (FDI)?

Accepted Answer

Portfolio investment

Answer

Greenfield investment

Answer

Mergers and acquisitions

Answer

Joint ventures

Question 49

How have technological advancements, such as Blockchain and cryptocurrencies, influenced international finance and trade?

Accepted Answer

Facilitated cross-border transactions and reduced exchange rate volatility

Answer

Increased transaction costs and reduced transparency

Answer

Led to a decline in global trade due to increased uncertainty

Answer

Increased government regulation of international financial markets

Question 50

In the context of mitigating systemic risks in the global financial system, what is a key advantage of international collaboration and policy coordination?

Accepted Answer

Enhanced monitoring of potential risks through information sharing

Answer

Promotion of economic growth through increased trade and investment

Answer

Reduced financial instability by imposing capital controls

Answer

Controlled inflation by raising interest rates

Question 51

How does globalization affect economic inequality, labor markets, and income distribution on both domestic and international levels?

Accepted Answer

Globalization generally increases economic inequality within and between nations.

Answer

Globalization has little impact on economic inequality and income distribution.

Answer

Globalization primarily benefits developing countries, reducing economic inequality.

Answer

Globalization promotes income equality within countries but reduces it between countries.

Question 52

According to the Heckscher-Ohlin theory, countries tend to export goods that utilize their relatively:

Accepted Answer

Abundant factors of production

Answer

Scarce factors of production

Answer

Advanced technologies

Answer

Subsidized industries

Question 53

Under a flexible exchange rate system, which of the following factors does NOT influence exchange rates?

Accepted Answer

Central bank interventions

Answer

Interest rate differentials

Answer

Inflation rate differentials

Answer

Trade balances

Question 54

The primary purpose of the balance of payments is to record a country's:

Accepted Answer

Transactions with the rest of the world

Answer

Domestic economic activity

Answer

Monetary policy decisions

Answer

Government revenue and expenditure

Question 55

Which of the following is NOT a potential benefit of international trade?

Accepted Answer

Reduced living standards

Answer

Increased consumer choice

Answer

Stimulation of economic growth

Answer

Promotion of innovation

Question 56

The primary function of the World Trade Organization (WTO) is to:

Accepted Answer

Promote free trade and reduce trade barriers

Answer

Control international monetary policy

Answer

Provide financial assistance to developing countries

Answer

Resolve international trade disputes

Question 57

The exchange rate primarily reflects the price of:

Accepted Answer

One currency in terms of another

Answer

Goods and services in international trade

Answer

Financial assets across borders

Answer

Gold and other precious metals

Question 58

The primary purpose of the International Monetary Fund (IMF) is to:

Accepted Answer

Provide financial assistance and loans to countries

Answer

Invest in developing countries

Answer

Offer trade insurance to businesses

Answer

Provide monetary policy guidance to central banks

Question 59

Which fundamental assumption underlies the Ricardian model of international trade?

Accepted Answer

Nations specialize in producing goods where they enjoy a comparative advantage.

Answer

Nations possess identical production technologies.

Answer

Transportation costs are nonexistent.

Answer

Consumer preferences are uniform across borders.

Question 60

What primary factor determines the real exchange rate?

Accepted Answer

Relative price levels of traded goods.

Answer

Demand and supply of imports and exports.

Answer

Interest rate disparities between countries.

Answer

Government interventions in the foreign exchange market.

Question 61

Which of the following is NOT a potential benefit of international trade?

Accepted Answer

Job creation in export-oriented industries.

Answer

Widened consumer options.

Answer

Reduced consumer prices.

Answer

Accelerated economic growth.

Question 62

What is the primary objective of the World Trade Organization (WTO)?

Accepted Answer

To foster free and equitable trade among member nations.

Answer

To provide financial assistance to developing countries.

Answer

To regulate international investment.

Answer

To enforce intellectual property laws.

Question 63

Which characteristic is unique to a floating exchange rate regime?

Accepted Answer

Exchange rate is determined by market forces.

Answer

Central bank intervenes to maintain exchange rate stability.

Answer

Exchange rate is pegged to the value of another currency.

Answer

Exchange rate is fixed by government decree.

Question 64

In the global economy, how can nations effectively balance the pursuit of economic growth with the urgent need to address climate change and environmental degradation?

Accepted Answer

Incorporate sustainable practices and green technologies to promote economic growth

Answer

Prioritize economic growth without considering environmental consequences

Answer

Enforce strict environmental regulations that may limit economic activity