GMS200-BUS200-GMU Final Test
Questions Fully Solved.
Floating exchange rate - Answer determined by supply and demand, less predictable than
fixed or pegged
Fixed/Pegged exchange rate - Answer value of currency is fixed/pegged to another country's,
common in developing countries, usually pegged to USD
balance of trade equilibrium - Answer value of imports always = value of exports when on the
gold standard
IMF - Answer created during Bretton Woods.
Goal: maintain order in global financial system, makes loans to countries experiencing crisis
Currency crisis - Answer serious doubt exists as to whether a country's central bank has
sufficient foreign exchange reserves to maintain the country's fixed exchange rate.
Ex: Thailand: speculative attacks on their currency caused currency to collapse, spread to rest of
SE Asia
Banking crisis - Answer investors sell off assets or withdraw money from savings accounts
with the expectation that the value of those assets will drop if they remain at a financial
institution.
Ex: Iceland: iceland banks invested in risky derivatives, caused run on banks, govt refused
bailout, devalued currency to bring country back
Primary goods - Answer consists of raw or natural materials
secondary goods - Answer the manufacturing and assembly process. It involves converting
raw materials into components,
tertiary goods - Answer support production and distribution process
ex: insurance, transport, advertising, warehousing
mercantilism - Answer 16th/17th centuries
highest govt involvement
, positive sum game - Answer occurs when no one wins at someone else's expense
protectionism - Answer the theory or practice of shielding a country's domestic industries
from foreign competition by taxing imports.
tariffs - Answer taxes levied on imports that raise the cost of imports relative to domestic
products
what tariffs do - Answer Raise govt revenue
Provide protection to domestic producers
Consumers pay more
Tariffs Reduce efficiency of world market
import quotas - Answer trade restriction
limits quantity of goods that can be imported into a country in a given period of time.
why do govts intervene in trade? - Answer protect jobs
national security
retaliation
protecting consumers
to further foreign policy objectives
to protect human rights
nation state - Answer authoritative institutional framework for governing a defined territory.
Sovereignty has to be recognized by other nation states.
Monopoly over coercive power.
Rule of law - Answer law is supreme over government and individuals
civil law - Answer between individuals, includes companies.
based on codified law, opposite of common law.
Ex: contract law, employment law
Common law - Answer based on case law and precedent
Questions Fully Solved.
Floating exchange rate - Answer determined by supply and demand, less predictable than
fixed or pegged
Fixed/Pegged exchange rate - Answer value of currency is fixed/pegged to another country's,
common in developing countries, usually pegged to USD
balance of trade equilibrium - Answer value of imports always = value of exports when on the
gold standard
IMF - Answer created during Bretton Woods.
Goal: maintain order in global financial system, makes loans to countries experiencing crisis
Currency crisis - Answer serious doubt exists as to whether a country's central bank has
sufficient foreign exchange reserves to maintain the country's fixed exchange rate.
Ex: Thailand: speculative attacks on their currency caused currency to collapse, spread to rest of
SE Asia
Banking crisis - Answer investors sell off assets or withdraw money from savings accounts
with the expectation that the value of those assets will drop if they remain at a financial
institution.
Ex: Iceland: iceland banks invested in risky derivatives, caused run on banks, govt refused
bailout, devalued currency to bring country back
Primary goods - Answer consists of raw or natural materials
secondary goods - Answer the manufacturing and assembly process. It involves converting
raw materials into components,
tertiary goods - Answer support production and distribution process
ex: insurance, transport, advertising, warehousing
mercantilism - Answer 16th/17th centuries
highest govt involvement
, positive sum game - Answer occurs when no one wins at someone else's expense
protectionism - Answer the theory or practice of shielding a country's domestic industries
from foreign competition by taxing imports.
tariffs - Answer taxes levied on imports that raise the cost of imports relative to domestic
products
what tariffs do - Answer Raise govt revenue
Provide protection to domestic producers
Consumers pay more
Tariffs Reduce efficiency of world market
import quotas - Answer trade restriction
limits quantity of goods that can be imported into a country in a given period of time.
why do govts intervene in trade? - Answer protect jobs
national security
retaliation
protecting consumers
to further foreign policy objectives
to protect human rights
nation state - Answer authoritative institutional framework for governing a defined territory.
Sovereignty has to be recognized by other nation states.
Monopoly over coercive power.
Rule of law - Answer law is supreme over government and individuals
civil law - Answer between individuals, includes companies.
based on codified law, opposite of common law.
Ex: contract law, employment law
Common law - Answer based on case law and precedent
