International Economics Quizzes - Master Your Knowledge

Question 1

Analyze the multifaceted impacts of foreign direct investment (FDI) on economic development, considering both its potential advantages and disadvantages.

Accepted Answer

FDI can contribute to job creation, technology transfer, environmental degradation, and labor exploitation.

Answer

FDI invariably leads to economic growth.

Answer

FDI solely benefits developing countries.

Answer

FDI should be unrestricted in all circumstances.

Question 2

How can exchange rate fluctuations affect the stability of a country's financial system?

Accepted Answer

Exchange rate fluctuations can increase volatility in financial markets, potentially leading to a financial crisis.

Answer

Exchange rate fluctuations have no significant impact on the domestic financial system.

Answer

Exchange rate fluctuations always have positive effects on the domestic financial system.

Question 3

Analyze the consequences of persistent current account imbalances on global economic stability, considering the perspectives of both surplus and deficit countries.

Accepted Answer

Surplus countries may experience low interest rates and a strong currency, while deficit countries may face currency depreciation and inflation.

Accepted Answer

Current account imbalances can escalate into trade conflicts as countries compete for export markets.

Answer

Current account imbalances can stimulate economic growth by increasing investment and consumption.

Answer

Current account imbalances are self-correcting over time and have no significant impact on global economic stability.

Question 4

According to the Ricardian model of international trade, countries will:

Accepted Answer

Export goods in which they have a comparative advantage

Answer

Export goods in which they have an absolute advantage

Answer

Import goods in which they have a comparative advantage

Answer

Not trade at all

Question 5

Which of the following is an example of a non-tariff barrier to trade?

Accepted Answer

Quotas

Answer

Import tariffs

Answer

Currency exchange rates

Answer

Export subsidies

Question 6

What is the effect of an appreciating domestic currency on exports?

Accepted Answer

Exports become more expensive

Answer

Exports become cheaper

Answer

Exports remain the same price

Answer

Exports cease to exist

Question 7

Which of the following is a characteristic of a developing country?

Accepted Answer

Low literacy rates

Answer

High levels of foreign investment

Answer

Advanced transportation infrastructure

Answer

Specialized economy

Question 8

Which of the following accurately describes a trade deficit?

Accepted Answer

Imports exceed exports

Answer

Exports exceed imports

Answer

Exports equal imports

Answer

Foreign investment exceeds domestic investment

Question 9

According to the theory of purchasing power parity, the exchange rate between two currencies should:

Accepted Answer

Equalize the prices of a similar basket of goods in both countries

Answer

Fluctuate according to the relative strengths of the two economies

Answer

Be determined by the central banks of the two countries

Answer

Reflect the difference in inflation rates between the two countries

Question 10

Which of the following is a potential advantage of an adjustable exchange rate system?

Accepted Answer

It facilitates adjustments to external economic shocks.

Answer

It enhances price stability.

Answer

It mitigates inflation.

Answer

It attracts foreign investments.

Question 11

How are economic growth and economic development related?

Accepted Answer

Economic growth is a prerequisite for economic development.

Answer

Economic development is a prerequisite for economic growth.

Answer

Economic growth and economic development are unrelated concepts.

Answer

Economic development is a subset of economic growth.

Question 12

Which of the following is NOT a factor that influences the determination of the real exchange rate?

Accepted Answer

Fiscal policy

Answer

Interest rate differential

Answer

Inflation rate differential

Answer

Productivity differential

Question 13

According to which theory should countries specialize in the production and export of goods where they possess a:

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Competitive advantage

Answer

Strategic advantage

Question 14

Which concept describes the relationship between a country's exports and imports and its exchange rate?

Accepted Answer

Marshall-Lerner condition

Answer

Purchasing power parity

Answer

J-curve

Answer

Elasticity of demand

Question 15

The phenomenon where a country's currency is overvalued in the short term but adjusts to its equilibrium value in the long term is called:

Accepted Answer

J-curve

Answer

Dutch disease

Answer

Currency crisis

Answer

Speculative attack

Question 16

Which theory suggests that countries with comparable levels of income and development tend to engage in more trade with one another?

Accepted Answer

Gravity model

Answer

Ricardian model

Answer

Heckscher-Ohlin model

Answer

Leontief paradox

Question 17

In international economics, 'asymmetric information' refers to:

Accepted Answer

One party in a transaction possessing more or better information than the other party.

Answer

Both parties in a transaction having equal information.

Answer

One party in a transaction being unaware of the information held by the other party.

Answer

All information being publicly available.

Question 18

According to the theory of comparative advantage, countries should specialize in producing and exporting goods for which they have:

Accepted Answer

A comparative advantage.

Answer

An absolute advantage.

Answer

The lowest cost of production.

Answer

The highest demand.

Question 19

The Marshall-Lerner condition states that:

Accepted Answer

A depreciation in the exchange rate will improve the trade balance if the sum of import and export demand elasticities exceeds one.

Answer

A depreciation in the exchange rate will always worsen the trade balance.

Answer

An appreciation in the exchange rate will always improve the trade balance.

Answer

The trade balance is unaffected by exchange rate changes.

Question 20

According to the Heckscher-Ohlin model, countries will export goods that are:

Accepted Answer

Intensive in factors that the country has in abundance

Answer

Intensive in factors that the country has in scarcity

Answer

Produced with the latest technology

Answer

Subsidized by the government

Question 21

The term 'purchasing power parity' refers to:

Accepted Answer

The relationship between the exchange rate and the price of a basket of goods

Answer

The relationship between the exchange rate and the inflation rate

Answer

The relationship between the exchange rate and the interest rate

Answer

The relationship between the exchange rate and the GDP

Question 22

Which of the following is NOT a factor that can lead to international trade imbalances?

Accepted Answer

Natural disasters

Answer

Differences in productivity

Answer

Government subsidies

Answer

Exchange rate fluctuations

Question 23

The concept of 'comparative advantage' suggests that countries should:

Accepted Answer

Specialize in producing goods where they have the highest comparative advantage

Answer

Specialize in producing goods where they have the highest absolute advantage

Answer

Specialize in producing goods where they have the lowest absolute advantage

Answer

Specialize in producing goods where they have the lowest comparative advantage

Question 24

The World Trade Organization (WTO) aims to promote:

Accepted Answer

Free and fair trade

Answer

Protectionist policies

Answer

Multilateral trade agreements

Answer

Bilateral trade agreements

Question 25

The Marshall-Lerner condition states that a country's trade deficit will improve if the elasticity of demand for its exports is:

Accepted Answer

Greater than the elasticity of demand for its imports

Answer

Less than the elasticity of demand for its imports

Answer

Equal to the elasticity of demand for its imports

Answer

Zero

Question 26

The concept of purchasing power parity (PPP) suggests that exchange rates should:

Accepted Answer

Equalize the price level of a basket of goods and services across different countries

Answer

Reflect the relative productivity levels of different countries

Answer

Be determined solely by the demand and supply of currencies

Answer

Always be stable and predictable

Question 27

The concept of globalization refers to:

Accepted Answer

Increasing interconnectedness and interdependence among countries

Answer

Protectionist trade policies

Answer

Isolationist foreign policies

Answer

Declining economic growth

Question 28

Which of the following factors does NOT influence the quantity of imports demanded?

Accepted Answer

Domestic production level

Answer

Exchange rate

Answer

Consumer tastes and preferences

Answer

Relative prices

Question 29

According to which trade theory should countries specialize in producing and exporting goods where they have a comparative advantage?

Accepted Answer

Comparative advantage theory

Answer

Mercantilist theory

Answer

Protectionist theory

Answer

Absolute advantage theory

Question 30

Which benefit is associated with a fixed exchange rate system?

Accepted Answer

Ensuring exchange rate stability

Answer

Attracting foreign investment

Answer

Reducing international capital flows

Answer

Boosting trade competitiveness

Question 31

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

Accepted Answer

Promoting free trade and reducing trade barriers

Answer

Providing financial support to developing nations

Answer

Regulating international investments

Answer

Monitoring global economic policies

Question 32

How is the exchange rate connected to inflation?

Accepted Answer

A falling exchange rate can lead to higher inflation

Answer

A rising exchange rate can lead to higher inflation

Answer

The exchange rate has no impact on inflation

Answer

The relationship between the exchange rate and inflation is unpredictable.

Question 33

Compare the historical development and effectiveness of the International Trade Organization (ITO) and the World Trade Organization (WTO) in fostering global trade and economic integration.

Accepted Answer

The ITO never became operational, unlike the WTO, which has made substantial contributions.

Answer

The ITO was more influential than the WTO in promoting global trade and integration.

Answer

The ITO and WTO have had comparable impacts on global trade and integration.

Question 34

Which of the following factors does NOT influence exchange rate determination?

Accepted Answer

Technological advancements

Answer

Interest rate differentials

Answer

Inflation rate disparities

Answer

Government fiscal policies

Question 35

According to the Heckscher-Ohlin theory, countries tend to export goods that are

Accepted Answer

Intensively produced using their abundant factors of production

Answer

Intensively produced using their scarce factors of production

Answer

Produced at a low cost

Answer

Highly demanded by domestic consumers

Question 36

The term that describes countries becoming increasingly interconnected with the global economy is

Accepted Answer

Globalization

Answer

Regionalization

Answer

Protectionism

Answer

Internationalization

Question 37

The theory that suggests exchange rates should reflect the relative prices of goods across countries is known as

Accepted Answer

Purchasing Power Parity (PPP)

Answer

Balance of Trade

Answer

Fixed Exchange Rate

Answer

Central Bank Intervention

Question 38

The concept of comparative advantage implies that countries should specialize in producing and exporting goods where they have a

Accepted Answer

Relative advantage

Answer

Sole advantage

Answer

Cost advantage

Answer

Demand advantage

Question 39

Which of the following is **not** a determinant of trade between two countries?

Accepted Answer

Political stability

Answer

Transportation costs

Answer

Government policies

Answer

Relative prices of goods

Question 40

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

Accepted Answer

Abundant factors of production

Answer

Most technologically advanced factors of production

Answer

Scarce factors of production

Question 41

Which of the following is a benefit of a floating exchange rate system?

Accepted Answer

It allows a country to adjust its exchange rate in response to economic fluctuations.

Answer

It guarantees a stable exchange rate.

Answer

It prevents currency speculation.

Question 42

Which of the following countries is likely to experience the largest appreciation of its currency?

Accepted Answer

A country with a strong economy and a relatively high interest rate.

Answer

A country with a weak economy and a low interest rate.

Answer

A country with a stable economy and a moderate interest rate.

Question 43

Which of the following is a primary goal of economic development?

Accepted Answer

To improve the living standards of a country's population.

Answer

To increase a country's military power.

Answer

To reduce a country's trade deficit.

Question 44

Which of the following is a challenge to economic development?

Accepted Answer

Lack of access to technology and infrastructure.

Answer

High levels of education.

Answer

Abundance of natural resources.

Answer

Political stability.

Question 45

Which of the following is a benefit of foreign direct investment?

Accepted Answer

It can create jobs and boost economic growth.

Answer

It can only lead to the exploitation of workers.

Answer

It can undermine a country's economic sovereignty.

Question 46

Which of the following is a primary function of the World Trade Organization?

Accepted Answer

It facilitates trade negotiations and sets rules for international trade.

Answer

It provides direct financial aid to developing countries.

Answer

It regulates the global banking system.

Question 47

Which of the following is a key measure of a country's level of economic development?

Accepted Answer

GDP per capita

Answer

Military spending

Answer

Unemployment rate

Answer

Population growth rate

Question 48

Which of the following is a major challenge facing the global economy?

Accepted Answer

Climate change and its economic and environmental impacts.

Answer

Rapid technological innovation

Answer

Rising global educational levels

Answer

Increased global cooperation

Question 49

According to the Heckscher-Ohlin model, which of the following countries is likely to export labor-intensive goods?

Accepted Answer

A country with a relatively abundant supply of unskilled labor.

Answer

A country with a high level of technological development.

Answer

A country with a relatively scarce supply of capital.

Question 50

A tariff is defined as:

Accepted Answer

A tax imposed on imported goods.

Answer

A quota on the quantity of imported goods.

Answer

A subsidy paid to domestic producers.

Answer

A currency peg.

Question 51

Which of the following is a widely recognized measure of a country's level of economic development?

Accepted Answer

GDP per capita.

Answer

Literacy rate.

Answer

Infant mortality rate.

Answer

Population growth rate.

Question 52

The World Trade Organization (WTO) primarily aims to:

Accepted Answer

Promote free trade and reduce barriers to international trade.

Answer

Regulate the global financial system.

Answer

Provide financial assistance to developing countries.

Question 53

The concept of comparative advantage in international trade refers to the:

Accepted Answer

Ability of a country to produce a good or service at a lower opportunity cost than another country.

Answer

Ability of a country to produce more of a good or service than another country.

Question 54

The International Monetary Fund (IMF) is primarily responsible for:

Accepted Answer

Providing financial assistance to countries facing economic difficulties.

Answer

Promoting trade liberalization.

Answer

Regulating the global banking system.

Question 55

Which of the following is a potential benefit of foreign direct investment (FDI)?

Accepted Answer

Job creation in the host country.

Answer

Environmental degradation.

Answer

Increased competition in the domestic market.

Answer

Loss of economic sovereignty.

Question 56

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

Accepted Answer

Factors of production are immobile between countries.

Answer

All countries have identical production technologies.

Answer

Labor is the only factor of production.

Question 57

According to the theory of comparative advantage, countries should:

Accepted Answer

Specialize in producing and exporting goods where they have a lower opportunity cost.

Answer

Import all goods from countries with lower production costs.

Answer

Produce all goods domestically, regardless of cost.

Question 58

The International Monetary Fund (IMF) is an international organization that:

Accepted Answer

Promotes global economic stability.

Answer

Enforces international law.

Answer

Regulates international trade.

Answer

Provides humanitarian aid.

Question 59

Which of the following is a potential benefit of international trade?

Accepted Answer

Increased consumer choice.

Answer

Increased pollution.

Answer

Reduced economic growth.

Answer

Increased unemployment.

Question 60

Which of the following is a barrier to international trade?

Accepted Answer

Tariffs.

Answer

Open borders.

Answer

Currency stability.

Answer

Free trade agreements.

Question 61

The balance of payments is a record of 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 62

Which of the following is a measure of a country's economic development?

Accepted Answer

Gross domestic product (GDP) per capita.

Answer

Population size.

Answer

Military strength.

Question 63

The World Bank is an international organization that:

Accepted Answer

Provides financial assistance to developing countries.

Answer

Resolves international disputes.

Answer

Sets international trade rules.

Question 64

Which of the following is a major tenet of the Heckscher-Ohlin model of international trade?

Accepted Answer

Countries should specialize in producing and exporting goods that use their abundant factors of production.

Answer

Trade is beneficial to all countries, regardless of their size or economic conditions.