WGU C211 GLOBAL ECONOMICS
COMPREHENSIVE EXAM QUESTIONS
AND ANSWERS.
1. Which theory suggests that nations should accumulate gold and silver by encouraging
exports and discouraging imports?
A. Absolute Advantage
B. Heckscher-Ohlin Theory
C. Comparative Advantage
D. Mercantilism
Answer: D
Conceptual Explanation: Mercantilism is the oldest trade theory, advocating that a
country should maintain a trade surplus to accumulate wealth in the form of gold and
silver.
2. What is the primary difference between Absolute Advantage and Comparative Advantage?
A. Absolute advantage focuses on lower opportunity cost.
B. Absolute advantage focuses on being the most efficient producer, while comparative
advantage focuses on lower opportunity costs.
,C. Comparative advantage focuses on total output per unit of labor.
D. There is no difference between the two theories.
Answer: B
Conceptual Explanation: Absolute advantage (Smith) refers to the ability to produce more
of a good with the same resources; Comparative advantage (Ricardo) refers to the ability to
produce a good at a lower opportunity cost.
3. What does the Heckscher-Ohlin theory emphasize in international trade?
A. Product life cycles
B. First-mover advantages
C. Government subsidies
D. Factor endowments such as land, labor, and capital
Answer: D
Conceptual Explanation: The Heckscher-Ohlin theory states that countries will export
goods that make intensive use of factors that are locally abundant.
4. Which institution was created to promote international monetary cooperation and provide
temporary financial assistance to countries with balance of payments problems?
A. World Bank
B. World Trade Organization
C. International Monetary Fund (IMF)
, D. United Nations
Answer: C
Conceptual Explanation: The IMF focuses on global monetary stability and helps
countries with short-term liquidity or balance of payment crises.
5. What is the main goal of the World Bank?
A. To provide long-term loans for economic development and poverty reduction
B. To regulate international trade tariffs
C. To manage the global supply of gold
D. To settle legal disputes between nations
Answer: A
Conceptual Explanation: The World Bank’s primary mission is to provide long-term
financing for development projects in developing nations to reduce poverty.
6. In the context of FDI, what is ‘Horizontal FDI’?
A. Investing in a different industry than the home country
B. Moving upstream or downstream in the value chain
C. Producing the same products in a host country as at home
D. Exporting raw materials only
Answer: C
COMPREHENSIVE EXAM QUESTIONS
AND ANSWERS.
1. Which theory suggests that nations should accumulate gold and silver by encouraging
exports and discouraging imports?
A. Absolute Advantage
B. Heckscher-Ohlin Theory
C. Comparative Advantage
D. Mercantilism
Answer: D
Conceptual Explanation: Mercantilism is the oldest trade theory, advocating that a
country should maintain a trade surplus to accumulate wealth in the form of gold and
silver.
2. What is the primary difference between Absolute Advantage and Comparative Advantage?
A. Absolute advantage focuses on lower opportunity cost.
B. Absolute advantage focuses on being the most efficient producer, while comparative
advantage focuses on lower opportunity costs.
,C. Comparative advantage focuses on total output per unit of labor.
D. There is no difference between the two theories.
Answer: B
Conceptual Explanation: Absolute advantage (Smith) refers to the ability to produce more
of a good with the same resources; Comparative advantage (Ricardo) refers to the ability to
produce a good at a lower opportunity cost.
3. What does the Heckscher-Ohlin theory emphasize in international trade?
A. Product life cycles
B. First-mover advantages
C. Government subsidies
D. Factor endowments such as land, labor, and capital
Answer: D
Conceptual Explanation: The Heckscher-Ohlin theory states that countries will export
goods that make intensive use of factors that are locally abundant.
4. Which institution was created to promote international monetary cooperation and provide
temporary financial assistance to countries with balance of payments problems?
A. World Bank
B. World Trade Organization
C. International Monetary Fund (IMF)
, D. United Nations
Answer: C
Conceptual Explanation: The IMF focuses on global monetary stability and helps
countries with short-term liquidity or balance of payment crises.
5. What is the main goal of the World Bank?
A. To provide long-term loans for economic development and poverty reduction
B. To regulate international trade tariffs
C. To manage the global supply of gold
D. To settle legal disputes between nations
Answer: A
Conceptual Explanation: The World Bank’s primary mission is to provide long-term
financing for development projects in developing nations to reduce poverty.
6. In the context of FDI, what is ‘Horizontal FDI’?
A. Investing in a different industry than the home country
B. Moving upstream or downstream in the value chain
C. Producing the same products in a host country as at home
D. Exporting raw materials only
Answer: C
