Econ Of Globalization. Spring 2009; Final Exam

Front 1

The three principal inputs in the production process are

Back 1

capital, labor, and total factor productivity

Front 2

In 1798 Malthus predicted

Back 2

that the limited natural resources will constrain the population size

Front 3

The most sustainable engine of growth is:

Back 3

total factor productivity

Front 4

Which of the following gained the most from technological advances in the 1950-1990 period?

Back 4

Developed OECD nations

Front 5

Between1973-1992, labor input was the most important factor to explain growth in

Back 5

United States

Front 6

Holding all other things constant, a firm has the following production schedule:
Units of Labor 0 1 2 3 4
Units of Output0 80 140 180 200

This firm exhibits

(see Quiz)

Back 6

diminishing marginal product of labor

Front 7

The two basic forms of capital used in production are

Back 7

buildings and machinery

Front 8

Which of the following nations had the largest real GDP per capita in 2000?

Back 8

Luxembourg

Front 9

In the last 40 years world poverty:

Back 9

has been decreasing

Front 10

A small increase in growth rate (GDP) leads to __________ in the long-run.

Back 10

Large increase in standard of living.

Front 11

The marginal product of capital may be decreasing because

Back 11

each additional machine has fewer workers to operate it

Front 12

Dramatic economic growth in Asian countries in the latter half of the 20th century was primarily due to

Back 12

capital accumulation

Front 13

Long run increases in an economy’s output, achieved without increasing either the capital stock, total labor hours employed, or other inputs can result from

Back 13

technological progress

Front 14

A steady state may be defined as

Back 14

a point at which the capital stock per worker is stabilized

Front 15

Convergence refers to

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poorer countries growing more rapidly than rich countries

Front 16

During the 20th century, convergence occurred most clearly

Back 16

between Japan and US

Front 17

The observation that poorer nations grow more rapidly than richer ones if they share the same steady state, and more slowly if they don’t, is known as

Back 17

conditional convergence

Front 18

Which of the following is not included in Institutions?

Back 18

Years of schooling

Front 19

Developed economies need to engage in research and development more than do developing economies because developed economies

Back 19

have largely exhausted the gains from capital accumulation

Front 20

Which of the following is part of the production function?

Back 20

total factor productivity

Front 21

A country that can produce goods or services at a lower cost than another country, is said to have __________ over the other country

Back 21

an absolute advantage

Front 22

Consider the following monthly production possibilities for two countries per 100 workers:
Country A Country B
Product Labor Output Labor Output
Food 100 workers 60 tons 100 workers 50 tons
Equipment 100 workers 100 units 100 workers 120 units

By specializing and trading, total global output in food can be increased __________ and total global output in machines can be increased __________ per 100 workers.

(See Quiz 4)

Back 22

10 tons; 20 units

Front 23

The major US trading partners are:

Back 23

Canada, Mexico, China

Front 24

The earliest statement of the principle of comparative advantage is associated with:

Back 24

David Ricardo

Front 25

Table 1:
Output per worker per day
Country Tons of steel VCRs
South Korea 80 40
Japan 20 20

Referring to Table 1, the opportunity cost of one VCR in Japan is:

(See question #5, Quiz 4)

Back 25

1 ton of steel

Front 26

Table 1:
Output per worker per day
Country Tons of steel VCRs
South Korea 80 40
Japan 20 20

Refer to Table 1. According to the principle of comparative advantage:

(See question 6, Quiz 4)

Back 26

South Korea should export steel

Front 27

If a production possibilities curve is bowed out (i.e., concave) in appearance, production occurs under conditions of:

Back 27

Increasing opportunity costs

Front 28

Referring to Figure 1, the relative cost of aluminum in terms of steel is:

(See question 8, Quiz 4)

Back 28

2.0 tons

Front 29

A tariff is efficient for:

Back 29

A large country

Front 30

The different effects of a tariff in a large country and a small country is because

Back 30

a tariff by a large country changes the global price.

Front 31

Which of the following has been suggested as a benefit of free trade?

Back 31

lower costs through economies of scales

Front 32

A country might be willing to impose a tariff on imports for all of the following reasons, except:

Back 32

to encourage imports

Front 33

An economic union entails

I. free trade among member countries.
II. common barriers to trade for non-member countries.
III. coordination of economic policies

Back 33

I, II and III

Front 34

The World Trade Organization was established by the ____ of multilateral trade negotiations:

Back 34

Uruguay Round

Front 35

The principle of normal trade relations (most-favored-nation) treatment was established with the passage of the

Back 35

Reciprocal Trade Agreements Act of 1934

Front 36

The most recent round of multilateral trade negotiations is the:

Back 36

Doha Round

Front 37

The presence of scale economies:

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a) Generates more varieties
c) Results in lower prices

e) a and c

Front 38

If Country 1 is granted most favored nation (MFN) status by Country 2 then

Back 38

Country 1 will automatically be granted any reductions in trade barriers that are given to all countries with MFN status.

Front 39

In general, when a small country imposes a tariff this represents a wealth transfer from __________ to __________.

Back 39

domestic consumers; domestic producers

Front 40

Rank the following regional trade blocks from highest to lowest according to their share of global trade in 2001.

Back 40

IV, III, I, II

Front 41

All of the following drive changes in the long run exchange rates except:

Back 41

Government surplus

Front 42

The British pound is worth 2.3198 Swiss francs and the Mexican peso is worth 0.14512 Swiss francs. How many pesos is the British pound worth?

Back 42

15.985

Front 43

Under a flexible exchange rate system, countries allow their currency to:

Back 43

fluctuate so as to clear the exchange market

Front 44

An appreciation in the value of the U.S. dollar against the British pound would tend to:

Back 44

Discourage the British from buying American goods

Front 45

In the interbank market for foreign exchange, the ____ refers to the price that a bank is willing to pay for a unit of foreign currency.

Back 45

Bid rate

Front 46

The most important (in terms of dollar value) type of foreign exchange transaction by U.S. banks is the:

Back 46

Spot transaction

Front 47

Given a system of floating exchange rates, weaker U.S. preferences for imports would trigger:

Back 47

A decrease in the demand for imports and a decrease in the demand for foreign currency

Front 48

A contract that grants the holder the right to buy a given amount of a foreign currency at a predetermined exchange rate until or on a specified date is a currency

Back 48

call option.

Front 49

If wheat costs $4 per bushel in the United States and 2 pounds per bushel in Great Britain, then in the presence of purchasing-power parity the exchange rate should be:

Back 49

$2.00 per pound

Front 50

That identical goods should cost the same in all nations, assuming it is costless to ship goods between nations and there are no barriers to trade, is a reflection of the:

Back 50

Law of one price

Front 51

In the last 40 years (prior to the current recession), the most severe recession in
US was between:

Back 51

1981-1982

Front 52

Which one of the following variables is not included in the production function?

Back 52

Inflation

Front 53

Which one of the following nations had the highest real GDP per capita in 2000,
according to recent statistics?

Back 53

Luxumbourg

Front 54

In most countries, the Malthusian predictions have not been realized because

Back 54

technology is improving

Front 55

Which of the following is not one of the gains from economic growth?

Back 55

Cheap Labor Force

Front 56

The diminishing marginal product of capital implies:

Back 56

that additions to the capital stock produce more incremental output in poor
countries than in rich countries

Front 57

Between 1973-1992, labor input was the most important factor to explain growth
in:

Back 57

United States

Front 58

A steady state may be defined as

Back 58

a point at which the capital stock per worker is stabilized

Front 59

The FOMC (Federal Open Market Committee) moved aggressively to change the
target federal funds rate in meetings on January 22 and January 30, 2008. Which
of the following events would most likely cause the FOMC to decrease the target
federal funds rate in future meetings?

Back 59

Rising unemployment and continued weakness in consumption and
investment expenditures

Front 60

Countries with higher initial levels of GDP per capital

Back 60

should have lower subsequent growth rates.

Front 61

The best long run growth strategy for developing economies is probably:

Back 61

to increase the capital stock

Front 62

All of the following statements are true, except:

Back 62

Recessions tend to last longer than expansions

Front 63

During the 20th century, convergence occurred most clearly

Back 63

within OECD countries

Front 64

What is the main reason for fast growth in Asian countries after 1950?

Back 64

Huge investment rates and high capital accumulation

Front 65

In which one of the following cases we observe an increase in productivity?

Back 65

If capital stock increases at a faster rate than labor supply

Front 66

Which statement is true when thinking of the European countries in the last 30
years?

Back 66

Central Bank kept increasing interest rates

Front 67

Which of the following is not included in Institutions:

Back 67

Years of schooling

Front 68

According to the “Too much productivity?” article, which of the following is a
potential cost of faster productivity growth?

Back 68

More job loss

Front 69

A boom phase in the economy is typically accompanied by:

Back 69

increases in macroeconomic variables such as consumption and investment

Front 70

Developed economies need to engage in research and development more than do
developing economies because developed economies

Back 70

have largely exhausted the gains from capital accumulation

Front 71

The production function of a country relates:

Back 71

the capital and labor input to the output

Front 72

The difference between real GDP and the trend real GDP is the

Back 72

cyclical part of real GDP

Front 73

World growth data shows that from 1960 to 2000:

Back 73

a) the US and other OECD countries grew at moderate rates.
b) sub-Saharan African countries grew at low rates or declined.
c) some countries particularly East Asian countries grew rapidly.

d) all of the above

Front 74

What is the difference between Real GDP and Nominal GDP?

Back 74

Real GDP is adjusted for inflation.

Front 75

Some variables that can cause differences in growth rates of income per capita or
levels of income per capita among countries are:

Back 75

a) Measures of human capital
b) Market distortions
c) Geography

d) All of the above

Front 76

Economic growth differs from business cycles in that

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economic growth is a long run phenomenon; business cycles are short term

Front 77

The 2000-2002 recession of the US economy hit the hardest:

Back 77

The technology sector

Front 78

The 1997-2006 housing boom/bubble in the US history was driven by all of the
following except:

Back 78

Expectations of permanent home price depreciation

Front 79

The period known as the Great Moderation in US is characterized by:

Back 79

Low output volatility and Low Inflation rates

Front 80

Convergence refers to:

Back 80

poorer countries growing more rapidly than rich countries

Front 81

The semi-official arbiter of when US recessions begin and end is:

Back 81

the National Bureau of Economic Research

Front 82

Which of the following is not an element of total factor productivity?

Back 82

hours worked by the labor force

Front 83

The observation that poorer nations grow more rapidly than richer ones if they
share the same steady state, and more slowly if they don’t, is known as

Back 83

conditional convergence

Front 84

The additional output produced by adding one extra unit of capital to the
production:

Back 84

the marginal product of capital

Front 85

Which of the following variables typically moves in the opposite direction from
real GDP?

Back 85

the unemployment rate

Front 86

Which of the following gained the most from technological advances in the
1950-1990 period?

Back 86

Developed OECD nations

Front 87

Which one of the following statements regarding the Federal Reserve Bank is not
accurate:

Back 87

used only expansionary policies in the last 10 years

Front 88

According to the “Economic Growth in the European Union” which of the
following statements correctly describes the relationship between the level of
GDP per capita and economic growth?

Back 88

a) High GDP per capita implies a high growth rate of GDP per capita.
b) Low GDP per capita implies a low growth rate of GDP per capita.
c) Slow productivity growth implies that GDP per capita will decrease.

d) None of these statements are correct.

Front 89

A large negative output gap

Back 89

implies excessive unemployment

Front 90

According to the Solow growth model, rich countries:

Back 90

tend to grow slower than poor ones

Front 91

Referring to Figure 1 (below) the relative cost of steel in terms of aluminum is:

See #1, Exam 2. Version B

Back 91

0.5 tons

Front 92

Which one of the following is not an objection to outsourcing?

Back 92

access to local markets

Front 93

When a nation requires fewer resources than another nation to produce a product, the
nation is said to have a:

Back 93

Absolute advantage in the production of the product

Front 94

Offshoring is:

Back 94

relocation of an organizational function to a foreign country

Front 95

According to article” French Riots - Are Labor Policies Part of the Problem?” which of
the following aspects of French labor policy does not necessarily marginalize young, less
qualified workers?

Back 95

Unionization

Front 96

International trade allows countries to specialize in the production of goods and
services in which they have an absolute advantage. This usually leads to:

Back 96

a. big countries exploiting small countries which lack these advantages.
b. an increase in total global output.
c. more efficient allocation of a country’s scarce resources
d. both a) and b)

e. both b) and c)

Front 97

As suggested by the Aplia article “Winners and Losers from Trade”, who would
benefit the most if the WTO was abolished and rich countries did not have to eliminate their barriers to trade in textiles?

Back 97

Textile workers in the United States

Front 98

Increasing opportunity costs suggest that:

Back 98

Resources are not perfectly shiftable between the production of two goods

Front 99

In a two-country, two-product world, the statement "Japan enjoys a comparative
advantage over France in steel relative to bicycles" is equivalent to:

Back 99

France having a comparative advantage over Japan in bicycles relative to
steel

Front 100

Which one of the following statement is not accurate?

Back 100

Manufacturing output is decreasing in the US

Front 101

Tariffs are not defended on the ground that they:

Back 101

Improve the terms of trade of foreign nations

Front 102

A lower tariff on imported aluminum would most likely benefit:

Back 102

Domestic consumers of aluminum

Front 103

In a large country setting part of a tariff is forward shifted to __________ and part is
backward shifted to __________.

Back 103

domestic consumers; foreign producers

Front 104

In relation to outsourcing, the domestic reduction in wages is due to:

Back 104

a. firings
b. acceptance of lower wages by workers being afraid to be replaced

d. a and b

Front 105

Firms undertake multinational operations in order to:

Back 105

a. Hire low-wage workers
b. Manufacture in nations they have difficulty exporting to
c. Obtain necessary factor inputs

d. All of the above

Front 106

If Country D has an absolute advantage over Country E in the production of all goods
and services then

Back 106

both countries may still be able to gain from international trade with each
other.

Front 107

Consider the following monthly production possibilities for two countries per 100
workers:
Country A Country B
Product Labor Output Labor Output
Food 100 workers 500 tons 100 workers 600 tons
Equipment 100 workers 200 units 100 workers 120 units
To maximize total global output Country A should produce __________ and Country
B should produce __________.

See question 17, Exam Version B

Back 107

only equipment; only food

Front 108

Which one of the following statement is most probably inaccurate?

Back 108

Immigration does not seem to affect the wages of low skilled native workers and
prior immigrants

Front 109

Chevrolet’s contract with Dell for IT services is an example of:

Back 109

domestic outsourcing

Front 110

Table 1. Output Possibilities of the U.S. and the U.K.
Output per Worker per day
Country Tons of Steel Televisions
United States 5 45
United Kingdom 10 20

See Question 20, Exam 2, Version B

Back 110

Referring to Table 1, the United States has the absolute advantage in the production
of:

Televisions

Front 111

Referring to Table 1, the United Kingdom has a comparative advantage in the
production of:

Back 111

Steel

Front 112

Refer to Table 1. If trade opens up between the United States and the United
Kingdom, American firms should specialize in producing:

Back 112

Televisions

Front 113

Referring to Table 1, the opportunity cost of producing one ton of steel in the
United States is:

Back 113

9 televisions

Front 114

Arguments for U.S. trade restrictions include all of the following except:

Back 114

Improving incomes for developing countries

Front 115

NAFTA is a:

Back 115

Free trade area

Front 116

Unlike Adam Smith, David Ricardo's trading principle emphasizes the:

Back 116

Role of comparative costs

Front 117

The General Agreement on Tariffs and Trade and its successor, the World Trade
Organization, have resulted in:

Back 117

Reductions in trade barriers via multilateral negotiations

Front 118

Which of the following represents the stage where economic integration is least
complete?

Back 118

Free trade area

Front 119

If we consider the interests of both consumers and producers, then a policy of tariff reduction in the France (assume small country) auto industry is:

Back 119

In the interest of the France as a whole, but not in the interest of autoproducing
states

Front 120

The World Trade Organization provides for all of the following except:

Back 120

Bilateral tariff reductions

Front 121

The principle of normal trade relations (most-favored-nation) treatment was
established with the passage of the:

Back 121

Reciprocal Trade Agreements Act of 1934

Front 122

The shift in demand towards more skilled workers in the US is due to:

Back 122

a. Increase in the use of computers and high technology
c. Outsourcing of the less skilled jobs to other countries
d. a and b

e. a and c

Front 123

Which one of the followings statements is not true?

Back 123

Offshore outsourcing is usually expected to decrease offshore employment

Front 124

The different effects of a tariff in a large country and a small country is because

Back 124

a tariff by a large country changes the global price

Front 125

Which of the following has not been suggested as a benefit of free trade?

Back 125

Domestic labor force gains from outsourcing the production

Front 126

The presence of scale economies:

Back 126

a. Generates more varieties
c. Results in lower prices

e. a and c

Front 127

All of the following are potential advantages of an international joint venture
except:

Back 127

Operating at diseconomy-of-scale output levels

Front 128

As the result of the migration to the United States:

Back 128

Low skilled native U.S. workers lose

Front 129

Chevrolet contracts with a call center in India. This is an example of:

Back 129

offshore outsourcing

Front 130

A country can produce 500,000 machine parts per week and produce 200,000
board feet of lumber. If the country could also produce 600,000 machine parts and
175,000 board feet of lumber per week then the

Back 130

average opportunity cost of 1 machine part is 0.25 board feet of lumber.