World Economy
Final Assessment Review
(Questions & Solutions)
2025
1
, Question 1:
Which of the following most accurately characterizes economic
globalization?
A. The isolation of domestic markets to promote local industries.
B. The process by which national economies become increasingly
interdependent through trade, capital flows, technology, and labor
mobility.
C. The imposition of trade tariffs to protect emerging industries.
D. The enforcement of fixed exchange rates among developed countries.
Correct ANS: B
Rationale:
Economic globalization refers to the growing interdependence of
national economies due to liberalized trade, increased capital flows,
technological diffusion, and labor market integration.
---
Question 2:
According to the Heckscher–Ohlin model, which factor determines a
country’s export pattern?
A. The absolute levels of productivity in different sectors.
B. The differences in factor endowments, such as labor and capital.
C. The government’s fiscal policy decisions.
D. Consumer taste and preferences exclusively.
Correct ANS: B
Rationale:
The Heckscher–Ohlin model asserts that countries export goods that
intensively use their abundant factors and import goods that use their
scarce factors.
2
, ---
Question 3:
Which measure best encapsulates the “impossible trinity” (or trilemma)
in international macroeconomics?
A. A country can simultaneously pursue free capital mobility, fixed
exchange rates, and an independent monetary policy.
B. A country must choose two out of: fixed exchange rates, free capital
mobility, and an independent monetary policy.
C. Monetary policy independence is always prioritized over exchange rate
policies.
D. Free trade policies eliminate the need for other macroeconomic
instruments.
Correct ANS: B
Rationale:
The impossible trinity states that a nation cannot simultaneously have all
three policies; it must sacrifice one in order to achieve the other two.
---
Question 4:
Which concept explains the phenomenon where multinational
corporations establish production networks across multiple countries to
minimize costs?
A. Comparative advantage.
B. Global vertical integration.
C. Import substitution industrialization.
D. Domestic outsourcing.
Correct ANS: B
Rationale:
Global vertical integration involves breaking up the production process
and locating its stages in different countries to capitalize on cost
3
Final Assessment Review
(Questions & Solutions)
2025
1
, Question 1:
Which of the following most accurately characterizes economic
globalization?
A. The isolation of domestic markets to promote local industries.
B. The process by which national economies become increasingly
interdependent through trade, capital flows, technology, and labor
mobility.
C. The imposition of trade tariffs to protect emerging industries.
D. The enforcement of fixed exchange rates among developed countries.
Correct ANS: B
Rationale:
Economic globalization refers to the growing interdependence of
national economies due to liberalized trade, increased capital flows,
technological diffusion, and labor market integration.
---
Question 2:
According to the Heckscher–Ohlin model, which factor determines a
country’s export pattern?
A. The absolute levels of productivity in different sectors.
B. The differences in factor endowments, such as labor and capital.
C. The government’s fiscal policy decisions.
D. Consumer taste and preferences exclusively.
Correct ANS: B
Rationale:
The Heckscher–Ohlin model asserts that countries export goods that
intensively use their abundant factors and import goods that use their
scarce factors.
2
, ---
Question 3:
Which measure best encapsulates the “impossible trinity” (or trilemma)
in international macroeconomics?
A. A country can simultaneously pursue free capital mobility, fixed
exchange rates, and an independent monetary policy.
B. A country must choose two out of: fixed exchange rates, free capital
mobility, and an independent monetary policy.
C. Monetary policy independence is always prioritized over exchange rate
policies.
D. Free trade policies eliminate the need for other macroeconomic
instruments.
Correct ANS: B
Rationale:
The impossible trinity states that a nation cannot simultaneously have all
three policies; it must sacrifice one in order to achieve the other two.
---
Question 4:
Which concept explains the phenomenon where multinational
corporations establish production networks across multiple countries to
minimize costs?
A. Comparative advantage.
B. Global vertical integration.
C. Import substitution industrialization.
D. Domestic outsourcing.
Correct ANS: B
Rationale:
Global vertical integration involves breaking up the production process
and locating its stages in different countries to capitalize on cost
3
