International Political Economy
IPE (International Political Economy) correct answers the interdisciplinary science that
examines the dynamic interactions between markets, states and societies, and how the
tensions and conflicts between these arenas both affect and reflect conditions outside
the nation-state and society
State / Nation correct answers Nation, state and nation-state are three different
concepts. A nation defines a group of people with a shared sense of cultural identity and
territoriality. A state is a legal concept describing a a social group that occupies a
territory and is organized under common political institutions and an effective
government. A nation-state, synonymous with the term country -- since the 1648 Peace
of Westphalia, this has been the major political (sovereign) unit of the international
system.
Peace of Westphalia correct answers the nation-state was born out of this 1648
________________diplomatic summit -- emphasized the ideas of sovereignty and self-
determination as basic principles of the state and thus the global system
factor endowments correct answers the amount of land, labor, capital, and
entrepreneurship that a country possesses and can exploit for manufacturing --
commonly referenced as part of the Heckscher-Ohlin model
division of labor correct answers The main focus of Adam Smith's The Wealth of
Nations lies in the concept of economic growth. ____________, or specialization is
essentially the breaking down of large jobs into many tiny components. Under this
regime each worker becomes an expert in one isolated area of production, thus
increasing his efficiency. Also also implies assigning each worker to the job that suits
him best (different attributes and knowledge)
Specialization correct answers essentially the breaking down of large jobs into many
tiny components. Under this regime each worker becomes an expert in one isolated
area of production, thus increasing his efficiency. This saves time and enhances overall
gains from exchange and trade. Ultimately, this resulted from uneven distribution and
attributes but led to greater abundance of the necessities and conveniences of life
(similar to division of labor)
absolute advantage correct answers this is the idea that ability of a party (an individual,
or firm, or country) to produce more of a good or service than competitors, using the
same amount of resources (Adam Smith "The tailor does not make his own shoes, but
buys them from the shoemaker")
,comparative advantage correct answers producer can do both areas efficiently but
specializes anyways b/c not enough resources and can make more money (**Ricardo
built this idea off of Smith's idea of absolute advantage) included in this is the idea of an
inherent opportunity cost
opportunity cost correct answers cost of any activity measured in terms of the value of
the best alternative that is not chosen (that is foregone). It is the sacrifice related to the
second best choice available to someone, or group, who has picked among several
mutually exclusive choices
Free market correct answers This is the core of Adam Smith's thesis: giving everyone
freedom to produce and exchange goods as they pleased (free trade) and opening all
markets to competition (international as well as domestic). This became known as the
invisible hand
zero-sum game correct answers gains by one party equal the losses for the others.
Plays a major role in the realist-mercantilist perspective (not liberal thought)
Positive sum game correct answers any interaction between actors that makes all
participants simultaneously better off -- this is the liberalist argument of the benefits of a
free marker
stag hunt correct answers basically we must decide whether to act in our own interest
or cooperate to save the group (referring to giving up sovereignty in exchange for the
regulation and benefits of IOs) : Jean Jaques Rousseau's analogy of the five hunters
trying to catch a stag (deer) by cooperating with one another. The analogy forces us to
consider whether it is rational to cooperate to solve problems with one another, or not
to--given that someone else may choose not to cooperate and ruin things for everyone.
The analogy is often applied to security situations that require cooperation to move
forward on a problem like arms control.
trade correct answers the commercial exchange (buying and selling on domestic or
international markets) of goods and services
hazards of specialization correct answers ...
exports vs imports correct answers goods sent to other countries to sell vs goods sold
in our country from other countries
stocks / equities correct answers stocks are ownership shares in companies called
equities / equities may be reserved for private ownership (family business) or may be
sold to the public and traded
bonds / securities correct answers notes of debt - also commonly called "paper" - paid
out at an established rate of return or interest over a specified period of time (are
effectively tradable loans to governments and private firms)
,balance of payments correct answers registers an accounting of all of the international
monetary transactions between the residents of one nation and those of other nations in
a given year -- much like a personal check book
statistical discrepancies correct answers the idea that in measuring balance of
payment, measures are inexact so we must keep track of the margin of
___________________
foreign debt (govt or private) correct answers debt we owe to other countries; 2/3 of
debt comes from other countries, people, companies and the rest comes from
government owing itself
foreign assets correct answers Represents the total fixed and current assets outside
the home country
current account correct answers that part of the balance of payments recording a
nation's exports and imports of goods and services and transfer payments
capital account correct answers Includes all payments related to the purchase and sale
of assets and to borrowing and lending activities. Components include outflow of U.S.
capital and inflow of foreign capital (simply put, international investment)
official reserves correct answers The quantities consisting of foreign currencies that the
central banks of nations hold with the IMF, and stocks of gold
macroeconomic policy correct answers Utilizes government spending and tax policy to
influence economic growth.
• Government spending is a direct source of demand for specific goods and services.
• Increased govt. spending leads to GDP growth.
• Decreased govt. spending leads to GDP declines.
Tax policy affects how much money people and firms have to spend in the economy.
• Tax increases reduce the amount of money available to spend in the economy by
citizens.
fiscal policy correct answers all economic activity by the government, a government
policy for dealing with the budget (especially with taxation and borrowing)
taxation / tax cuts correct answers designed to equitabley distribute wealth, to protect
new industries, or to uplift social conditions / may result in too few dollars chasing too
few goods and therefore cause inflation
government spending correct answers Government expenditures, both chosen and
required for a variety of programs and entitlements.
, balanced budgets correct answers when revenues equal expenditure (no deficit or
surplus)
monetary policy correct answers deliberate government efforts to increase the supply
or velocity of currency
central bank correct answers a government monetary authority that issues currency
and regulates the supply of credit and holds the reserves of other banks and sells new
issues of securities for the government, A bank whose chief function is the control of the
nation's money supply; in the United States, the Federal Reserve System Ex) The main
goal of the Federal Reserve is to maintain and control the money supply; they do this
through Monetary Policies such as regulating domestic financial institutions and
influence domestic and foreign exchange rates
interest rates correct answers the percentage of a sum of money charged for its use.
Usually lenders will add this onto the amout of money borroted from them. Discount:
The discount rate is the interest rate charged to commercial banks and other depository
institutions on loans they receive from their regional Federal Reserve Bank's lending
facility--the discount window. SubPrime: characterized by higher interest rates and less
favorable terms in order to compensate for higher credit risk. Prime: a term applied in
many countries to a reference interest rate used by banks
open market operations correct answers Purchases and sales of government and
certain other securities in the open market through the Domestic Trading Desk at the
Federal Reserve Bank of New York, with the purpose of influencing the volume of
money and credit in the economy
economic growth correct answers An increase in the total output of an economy. It
occurs when a society acquires new resources or when it learns to produce more using
existing resources.
GDP/GNP correct answers total goods/services produced by a country // GDP + net
transfers of profits from firms and individuals operating abroad
inflation correct answers increased prices for goods and services combined with the
reduced value of money
soft / hard currency correct answers 1: not widely accepted currency - usually limited to
its home country or region. a currency that is not fully convertible. However, even a hard
currency can be weak relative to another currency because of the relative exchange
rates over time. , fluctuates in value and are not considered stable. They are not easily
converted 2: Currencies including USD, JPY, GBP and EUR, that are generally
accepted in international trade transactions because the money is issued by large
countries with reliable and predictably stable political economies.,
IPE (International Political Economy) correct answers the interdisciplinary science that
examines the dynamic interactions between markets, states and societies, and how the
tensions and conflicts between these arenas both affect and reflect conditions outside
the nation-state and society
State / Nation correct answers Nation, state and nation-state are three different
concepts. A nation defines a group of people with a shared sense of cultural identity and
territoriality. A state is a legal concept describing a a social group that occupies a
territory and is organized under common political institutions and an effective
government. A nation-state, synonymous with the term country -- since the 1648 Peace
of Westphalia, this has been the major political (sovereign) unit of the international
system.
Peace of Westphalia correct answers the nation-state was born out of this 1648
________________diplomatic summit -- emphasized the ideas of sovereignty and self-
determination as basic principles of the state and thus the global system
factor endowments correct answers the amount of land, labor, capital, and
entrepreneurship that a country possesses and can exploit for manufacturing --
commonly referenced as part of the Heckscher-Ohlin model
division of labor correct answers The main focus of Adam Smith's The Wealth of
Nations lies in the concept of economic growth. ____________, or specialization is
essentially the breaking down of large jobs into many tiny components. Under this
regime each worker becomes an expert in one isolated area of production, thus
increasing his efficiency. Also also implies assigning each worker to the job that suits
him best (different attributes and knowledge)
Specialization correct answers essentially the breaking down of large jobs into many
tiny components. Under this regime each worker becomes an expert in one isolated
area of production, thus increasing his efficiency. This saves time and enhances overall
gains from exchange and trade. Ultimately, this resulted from uneven distribution and
attributes but led to greater abundance of the necessities and conveniences of life
(similar to division of labor)
absolute advantage correct answers this is the idea that ability of a party (an individual,
or firm, or country) to produce more of a good or service than competitors, using the
same amount of resources (Adam Smith "The tailor does not make his own shoes, but
buys them from the shoemaker")
,comparative advantage correct answers producer can do both areas efficiently but
specializes anyways b/c not enough resources and can make more money (**Ricardo
built this idea off of Smith's idea of absolute advantage) included in this is the idea of an
inherent opportunity cost
opportunity cost correct answers cost of any activity measured in terms of the value of
the best alternative that is not chosen (that is foregone). It is the sacrifice related to the
second best choice available to someone, or group, who has picked among several
mutually exclusive choices
Free market correct answers This is the core of Adam Smith's thesis: giving everyone
freedom to produce and exchange goods as they pleased (free trade) and opening all
markets to competition (international as well as domestic). This became known as the
invisible hand
zero-sum game correct answers gains by one party equal the losses for the others.
Plays a major role in the realist-mercantilist perspective (not liberal thought)
Positive sum game correct answers any interaction between actors that makes all
participants simultaneously better off -- this is the liberalist argument of the benefits of a
free marker
stag hunt correct answers basically we must decide whether to act in our own interest
or cooperate to save the group (referring to giving up sovereignty in exchange for the
regulation and benefits of IOs) : Jean Jaques Rousseau's analogy of the five hunters
trying to catch a stag (deer) by cooperating with one another. The analogy forces us to
consider whether it is rational to cooperate to solve problems with one another, or not
to--given that someone else may choose not to cooperate and ruin things for everyone.
The analogy is often applied to security situations that require cooperation to move
forward on a problem like arms control.
trade correct answers the commercial exchange (buying and selling on domestic or
international markets) of goods and services
hazards of specialization correct answers ...
exports vs imports correct answers goods sent to other countries to sell vs goods sold
in our country from other countries
stocks / equities correct answers stocks are ownership shares in companies called
equities / equities may be reserved for private ownership (family business) or may be
sold to the public and traded
bonds / securities correct answers notes of debt - also commonly called "paper" - paid
out at an established rate of return or interest over a specified period of time (are
effectively tradable loans to governments and private firms)
,balance of payments correct answers registers an accounting of all of the international
monetary transactions between the residents of one nation and those of other nations in
a given year -- much like a personal check book
statistical discrepancies correct answers the idea that in measuring balance of
payment, measures are inexact so we must keep track of the margin of
___________________
foreign debt (govt or private) correct answers debt we owe to other countries; 2/3 of
debt comes from other countries, people, companies and the rest comes from
government owing itself
foreign assets correct answers Represents the total fixed and current assets outside
the home country
current account correct answers that part of the balance of payments recording a
nation's exports and imports of goods and services and transfer payments
capital account correct answers Includes all payments related to the purchase and sale
of assets and to borrowing and lending activities. Components include outflow of U.S.
capital and inflow of foreign capital (simply put, international investment)
official reserves correct answers The quantities consisting of foreign currencies that the
central banks of nations hold with the IMF, and stocks of gold
macroeconomic policy correct answers Utilizes government spending and tax policy to
influence economic growth.
• Government spending is a direct source of demand for specific goods and services.
• Increased govt. spending leads to GDP growth.
• Decreased govt. spending leads to GDP declines.
Tax policy affects how much money people and firms have to spend in the economy.
• Tax increases reduce the amount of money available to spend in the economy by
citizens.
fiscal policy correct answers all economic activity by the government, a government
policy for dealing with the budget (especially with taxation and borrowing)
taxation / tax cuts correct answers designed to equitabley distribute wealth, to protect
new industries, or to uplift social conditions / may result in too few dollars chasing too
few goods and therefore cause inflation
government spending correct answers Government expenditures, both chosen and
required for a variety of programs and entitlements.
, balanced budgets correct answers when revenues equal expenditure (no deficit or
surplus)
monetary policy correct answers deliberate government efforts to increase the supply
or velocity of currency
central bank correct answers a government monetary authority that issues currency
and regulates the supply of credit and holds the reserves of other banks and sells new
issues of securities for the government, A bank whose chief function is the control of the
nation's money supply; in the United States, the Federal Reserve System Ex) The main
goal of the Federal Reserve is to maintain and control the money supply; they do this
through Monetary Policies such as regulating domestic financial institutions and
influence domestic and foreign exchange rates
interest rates correct answers the percentage of a sum of money charged for its use.
Usually lenders will add this onto the amout of money borroted from them. Discount:
The discount rate is the interest rate charged to commercial banks and other depository
institutions on loans they receive from their regional Federal Reserve Bank's lending
facility--the discount window. SubPrime: characterized by higher interest rates and less
favorable terms in order to compensate for higher credit risk. Prime: a term applied in
many countries to a reference interest rate used by banks
open market operations correct answers Purchases and sales of government and
certain other securities in the open market through the Domestic Trading Desk at the
Federal Reserve Bank of New York, with the purpose of influencing the volume of
money and credit in the economy
economic growth correct answers An increase in the total output of an economy. It
occurs when a society acquires new resources or when it learns to produce more using
existing resources.
GDP/GNP correct answers total goods/services produced by a country // GDP + net
transfers of profits from firms and individuals operating abroad
inflation correct answers increased prices for goods and services combined with the
reduced value of money
soft / hard currency correct answers 1: not widely accepted currency - usually limited to
its home country or region. a currency that is not fully convertible. However, even a hard
currency can be weak relative to another currency because of the relative exchange
rates over time. , fluctuates in value and are not considered stable. They are not easily
converted 2: Currencies including USD, JPY, GBP and EUR, that are generally
accepted in international trade transactions because the money is issued by large
countries with reliable and predictably stable political economies.,
