WGU C211 GLOBAL ECONOMICS
PRACTICE EXAM QUESTIONS AND
ANSWERS.
1. According to the theory of comparative advantage, why should a nation trade even if it is
more efficient at producing all goods than another nation?
A. To ensure that total global production is minimized
B. To focus resources on industries where its relative efficiency is highest
C. To prevent other nations from developing their own industries
D. Because the Gold Standard requires a trade balance
Answer: B
Conceptual Explanation: Comparative advantage suggests nations should specialize in
goods they can produce at a lower opportunity cost, maximizing global efficiency.
2. Which of the following describes a ‘Customs Union’ in regional economic integration?
A. A group that removes internal trade barriers and adopts a common external tariff
B. A group that only removes internal trade barriers
C. A group that shares a common currency and central bank
D. A group that coordinates social and political policies exclusively
,Answer: A
Conceptual Explanation: A customs union goes beyond a free trade area by establishing a
common external trade policy toward non-members.
3. Which institution is primarily responsible for providing long-term loans to developing
countries for infrastructure and economic development?
A. International Monetary Fund (IMF)
B. World Bank
C. World Trade Organization (WTO)
D. Federal Reserve
Answer: B
Conceptual Explanation: The World Bank focuses on long-term economic development
and poverty reduction, whereas the IMF focuses on short-term financial stability.
4. What occurs when a country’s currency depreciates?
A. Its exports become more expensive for foreigners
B. Its imports become cheaper for domestic consumers
C. There is no effect on the trade balance
D. Its exports become cheaper for foreigners
Answer: D
, Conceptual Explanation: Currency depreciation makes a country’s goods cheaper in the
international market, potentially increasing exports.
5. Which type of unemployment occurs during a general economic downturn or recession?
A. Cyclical unemployment
B. Structural unemployment
C. Frictional unemployment
D. Seasonal unemployment
Answer: A
Conceptual Explanation: Cyclical unemployment is directly related to the swings in the
business cycle.
6. Purchasing Power Parity (PPP) is used to adjust GDP to account for differences in:
A. Tax rates across countries
B. Total population size
C. The cost of living and inflation between countries
D. Technological advancement
Answer: C
Conceptual Explanation: PPP adjusts for the fact that a dollar can buy more in some
countries than in others, reflecting the actual standard of living.
PRACTICE EXAM QUESTIONS AND
ANSWERS.
1. According to the theory of comparative advantage, why should a nation trade even if it is
more efficient at producing all goods than another nation?
A. To ensure that total global production is minimized
B. To focus resources on industries where its relative efficiency is highest
C. To prevent other nations from developing their own industries
D. Because the Gold Standard requires a trade balance
Answer: B
Conceptual Explanation: Comparative advantage suggests nations should specialize in
goods they can produce at a lower opportunity cost, maximizing global efficiency.
2. Which of the following describes a ‘Customs Union’ in regional economic integration?
A. A group that removes internal trade barriers and adopts a common external tariff
B. A group that only removes internal trade barriers
C. A group that shares a common currency and central bank
D. A group that coordinates social and political policies exclusively
,Answer: A
Conceptual Explanation: A customs union goes beyond a free trade area by establishing a
common external trade policy toward non-members.
3. Which institution is primarily responsible for providing long-term loans to developing
countries for infrastructure and economic development?
A. International Monetary Fund (IMF)
B. World Bank
C. World Trade Organization (WTO)
D. Federal Reserve
Answer: B
Conceptual Explanation: The World Bank focuses on long-term economic development
and poverty reduction, whereas the IMF focuses on short-term financial stability.
4. What occurs when a country’s currency depreciates?
A. Its exports become more expensive for foreigners
B. Its imports become cheaper for domestic consumers
C. There is no effect on the trade balance
D. Its exports become cheaper for foreigners
Answer: D
, Conceptual Explanation: Currency depreciation makes a country’s goods cheaper in the
international market, potentially increasing exports.
5. Which type of unemployment occurs during a general economic downturn or recession?
A. Cyclical unemployment
B. Structural unemployment
C. Frictional unemployment
D. Seasonal unemployment
Answer: A
Conceptual Explanation: Cyclical unemployment is directly related to the swings in the
business cycle.
6. Purchasing Power Parity (PPP) is used to adjust GDP to account for differences in:
A. Tax rates across countries
B. Total population size
C. The cost of living and inflation between countries
D. Technological advancement
Answer: C
Conceptual Explanation: PPP adjusts for the fact that a dollar can buy more in some
countries than in others, reflecting the actual standard of living.
