Global Political Economy
tariff correct answers indirect limit on imports
imposes a TAX on imports
quota correct answers direct limit on imports
regulate NUMBER of imports
purpose of tariffs and quotas correct answers encourages consumers to switch to
cheaper domestic goods
Value added tax correct answers Price of a good minus the cost of intermediate goods
(labor, capital, etc.) used to produce it
what is the value added tax when importing $100 worth of wood and parts used to make
a table, then selling the table for $500? correct answers $400 value added tax
consumer surplus correct answers value of a good or service that is in excess of what a
consumer has to pay
economy wide effects of tariffs correct answers deadweight loss: difference in
production and consumption
allocative efficiency: production is aligned with consumer preferences
tariffs higher for developing countries and lower for industrialized economies correct
answers
why do most economists discourage the use of tariffs correct answers tariffs result in
an inefficient allocation of economic resources
Rare earth minerals export quota in China correct answers export quotas limit global
supply, drive up demand, and increase global prices
Current account correct answers tracks flow of goods and services between country
and world
credit and debit
Financial account correct answers record of financial transactions between a country
and the rest of the world
assets: bank accounts, stocks, bonds, capital, FDI
financial derivatives: complex financial contracts, derived from interest rates
, Capital account correct answers records transfer of specialized capital such as debt
forgiveness and transfer of real estate such as military bases or embassies
Capital account for U.S. in 2020-2022 correct answers
greatest loss of jobs correct answers automation
3 components of current account correct answers 1. trade balance: records of exports
and imports of goods and services
2. primary income: income received from abroad minus income paid abroad
3. secondary income: transfers made abroad minus transfers received from abroad
trade deficit correct answers negative trade balance
goods
trade surplus correct answers positive trade balance
services
largest component of US current account correct answers trading of goods
volatility correct answers how easy or hard it is for flow to reverse-- FDI is least volatile
reserve assets correct answers monetary gold and foreign currency that can be used to
settle international payments
current, capital, and financial accounts are... correct answers interdependent
how are current account deficits harmful? correct answers if a sudden stop in foreign
financing occurs, forces large cuts in spending and consumption
could undermine confidence in the country and its currency
how are current account deficits beneficial? correct answers indicated economic
strength if caused by large inflows of foreign capital and a rise in imports
Sudden Stops correct answers sudden stoppage of financial inflow
destabilizing of outflow of financial capital
involved in most financial crises
fixed currency correct answers
flexible currency correct answers
pegged exchange rate correct answers one currency is anchored to another currency
instead of to gold
free floating exchange rate correct answers
tariff correct answers indirect limit on imports
imposes a TAX on imports
quota correct answers direct limit on imports
regulate NUMBER of imports
purpose of tariffs and quotas correct answers encourages consumers to switch to
cheaper domestic goods
Value added tax correct answers Price of a good minus the cost of intermediate goods
(labor, capital, etc.) used to produce it
what is the value added tax when importing $100 worth of wood and parts used to make
a table, then selling the table for $500? correct answers $400 value added tax
consumer surplus correct answers value of a good or service that is in excess of what a
consumer has to pay
economy wide effects of tariffs correct answers deadweight loss: difference in
production and consumption
allocative efficiency: production is aligned with consumer preferences
tariffs higher for developing countries and lower for industrialized economies correct
answers
why do most economists discourage the use of tariffs correct answers tariffs result in
an inefficient allocation of economic resources
Rare earth minerals export quota in China correct answers export quotas limit global
supply, drive up demand, and increase global prices
Current account correct answers tracks flow of goods and services between country
and world
credit and debit
Financial account correct answers record of financial transactions between a country
and the rest of the world
assets: bank accounts, stocks, bonds, capital, FDI
financial derivatives: complex financial contracts, derived from interest rates
, Capital account correct answers records transfer of specialized capital such as debt
forgiveness and transfer of real estate such as military bases or embassies
Capital account for U.S. in 2020-2022 correct answers
greatest loss of jobs correct answers automation
3 components of current account correct answers 1. trade balance: records of exports
and imports of goods and services
2. primary income: income received from abroad minus income paid abroad
3. secondary income: transfers made abroad minus transfers received from abroad
trade deficit correct answers negative trade balance
goods
trade surplus correct answers positive trade balance
services
largest component of US current account correct answers trading of goods
volatility correct answers how easy or hard it is for flow to reverse-- FDI is least volatile
reserve assets correct answers monetary gold and foreign currency that can be used to
settle international payments
current, capital, and financial accounts are... correct answers interdependent
how are current account deficits harmful? correct answers if a sudden stop in foreign
financing occurs, forces large cuts in spending and consumption
could undermine confidence in the country and its currency
how are current account deficits beneficial? correct answers indicated economic
strength if caused by large inflows of foreign capital and a rise in imports
Sudden Stops correct answers sudden stoppage of financial inflow
destabilizing of outflow of financial capital
involved in most financial crises
fixed currency correct answers
flexible currency correct answers
pegged exchange rate correct answers one currency is anchored to another currency
instead of to gold
free floating exchange rate correct answers
