TEST BANK
TEST BANK
,International Trade Theory and Policy 11th Edition Krugman Test Bank
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Approximately what percent of all world production of goods and services is exported to other 1)
countries?
A) 100% B) 50% C) 10% D) 30% E) 90%
Answer: D
2) The gravity model offers a logical explanation for the fact that 2)
A) Intra-European Union trade exceeds international trade by the European Union.
B) trade between Asia and the U.S. has grown faster than NAFTA trade.
C) trade in services has grown faster than trade in goods.
D) the U.S. trades more with Western Europe than it does with Canada.
E) trade in manufactures has grown faster than in agricultural products.
Answer: A
3) The gravity model suggests that over time 3)
A) world trade will eventually be swallowed by a black hole.
B) trade between all countries will increase.
C) the value of trade between two countries will be proportional to the product of the two
countries' GDP.
D) trade between neighboring countries will increase.
E) trade between Earth and other planets will become important.
Answer: C
4) The gravity model explains why 4)
A) capital rich countries export capital intensive products.
B) countries with oil reserves tend to export oil.
C) European countries rely most often on natural resources.
D) intra-industry trade is relatively more important than other forms of trade between
neighboring countries.
E) trade between Sweden and Germany exceeds that between Sweden and Spain.
Answer: E
5) According to the gravity model, a characteristic that tends to affect the probability of trade existing 5)
between any two countries is
A) the distance between them.
B) the average weight/value of their traded goods.
C) their colonial-historical ties.
D) the number of different product varieties produced by their industries.
E) their cultural affinity.
Answer: A
1
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, 6) In general, which of the following do NOT tend to increase trade between two countries? 6)
A) mutual membership in preferential trade agreements
B) larger economies
C) the existence of well controlled borders between countries
D) linguistic and/or cultural affinity
E) historical ties
Answer: C
7) Why does the gravity model work? 7)
A) Large economies tend to avoid trading with small economies.
B) Large economies have relatively large incomes, and hence spend more on government
promotion of trade and investment.
C) Large economies have relatively larger areas, which raises the probability that a productive
activity will take place within the borders of that country.
D) Large economies became large because they were engaged in international trade.
E) Large economies tend to have large incomes and tend to spend more on imports.
Answer: E
8) We see that the Netherlands, Belgium, and Ireland trade considerably more with the United States 8)
than with many other countries.
A) This is explained by the gravity model, since these are all large countries.
B) This is explained by the gravity model, since they do not share borders.
C) This fails to be consistent with the gravity model, since these are small countries.
D) This fails to be consistent with the gravity model, since these are large countries.
E) This is explained by the gravity model, since these are all small countries.
Answer: C
9) The two neighbors of the United States do a lot more trade with the United States than European 9)
economies of equal size.
A) This is consistent with predictions from gravity models.
B) This relates to Belgium's trade record with the U.S.
C) This contradicts predictions from gravity models.
D) This is because these neighboring countries have exceptionally large GDPs.
E) This is irrelevant to any inferences that may be drawn from gravity models.
Answer: A
10) Which of the following does NOT explain the extent of trade between Ireland and the U.S.? 10)
A) large numbers of Irish-Americans
B) Gravity Model
C) multinational corporations
D) historical ties
E) cultural Linguistic ties
Answer: B
11) Since the early 1970s, world's trade as a share of world production has 11)
A) remained constant.
B) fluctuated widely with no clear trend.
C) increased.
D) increased slightly before dropping off.
E) decreased.
Answer: C
2
, 12) In the current Post-Industrial economy, international trade in services (including banking and 12)
financial services)
A) is relatively stagnant.
B) does not exist.
C) is an increasingly important component of global trade.
D) dominates world trade.
E) far surpasses the predictions of economist Alan Blinder.
Answer: C
13) In the early 20th century, the United Kingdom exported mainly 13)
A) services.
B) livestock.
C) technology intensive products.
D) manufactured goods.
E) primary products including agricultural.
Answer: D
14) In the early 20th century, the United Kingdom imported mainly 14)
A) manufactured goods.
B) from the United States.
C) services.
D) technology intensive products.
E) primary products including agricultural.
Answer: E
15) In the present, most of the exports from China are 15)
A) technology intensive products.
B) overpriced by world market standards.
C) manufactured goods.
D) primary products including agricultural.
E) services.
Answer: C
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
16) When comparing the composition of world trade in the early 20th century to the early 21st century, we find
major compositional changes. These include a relative decline in trade in agricultural and primary-products
(including raw materials). How would you explain this in terms of broad historical developments during this
period?
Answer: The typical composition of world production during this period experienced major changes. Focusing on
today's Industrialized Countries (primarily members of the OECD), the industrial-employment
composition was focused primarily on agriculture. Most value was in land. The predominant single
consumption category was food. Since then, the economies shifted from the agricultural to the
manufacturing sectors (continuing trends begun over a century earlier in the industrial revolution).
Incomes rose, and consumption shifted in favor of (increasingly affordable) manufactures. Both income
and price elasticities were greater in manufactures than in agricultural products. At the same time there
was a steady tendency for synthetic (manufactured) inputs to replace agricultural based raw materials
and industrial inputs. Hence, trade and, of course, international trade conformed to overall changes in
patterns of world production and consumption.
3
TEST BANK
,International Trade Theory and Policy 11th Edition Krugman Test Bank
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Approximately what percent of all world production of goods and services is exported to other 1)
countries?
A) 100% B) 50% C) 10% D) 30% E) 90%
Answer: D
2) The gravity model offers a logical explanation for the fact that 2)
A) Intra-European Union trade exceeds international trade by the European Union.
B) trade between Asia and the U.S. has grown faster than NAFTA trade.
C) trade in services has grown faster than trade in goods.
D) the U.S. trades more with Western Europe than it does with Canada.
E) trade in manufactures has grown faster than in agricultural products.
Answer: A
3) The gravity model suggests that over time 3)
A) world trade will eventually be swallowed by a black hole.
B) trade between all countries will increase.
C) the value of trade between two countries will be proportional to the product of the two
countries' GDP.
D) trade between neighboring countries will increase.
E) trade between Earth and other planets will become important.
Answer: C
4) The gravity model explains why 4)
A) capital rich countries export capital intensive products.
B) countries with oil reserves tend to export oil.
C) European countries rely most often on natural resources.
D) intra-industry trade is relatively more important than other forms of trade between
neighboring countries.
E) trade between Sweden and Germany exceeds that between Sweden and Spain.
Answer: E
5) According to the gravity model, a characteristic that tends to affect the probability of trade existing 5)
between any two countries is
A) the distance between them.
B) the average weight/value of their traded goods.
C) their colonial-historical ties.
D) the number of different product varieties produced by their industries.
E) their cultural affinity.
Answer: A
1
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, 6) In general, which of the following do NOT tend to increase trade between two countries? 6)
A) mutual membership in preferential trade agreements
B) larger economies
C) the existence of well controlled borders between countries
D) linguistic and/or cultural affinity
E) historical ties
Answer: C
7) Why does the gravity model work? 7)
A) Large economies tend to avoid trading with small economies.
B) Large economies have relatively large incomes, and hence spend more on government
promotion of trade and investment.
C) Large economies have relatively larger areas, which raises the probability that a productive
activity will take place within the borders of that country.
D) Large economies became large because they were engaged in international trade.
E) Large economies tend to have large incomes and tend to spend more on imports.
Answer: E
8) We see that the Netherlands, Belgium, and Ireland trade considerably more with the United States 8)
than with many other countries.
A) This is explained by the gravity model, since these are all large countries.
B) This is explained by the gravity model, since they do not share borders.
C) This fails to be consistent with the gravity model, since these are small countries.
D) This fails to be consistent with the gravity model, since these are large countries.
E) This is explained by the gravity model, since these are all small countries.
Answer: C
9) The two neighbors of the United States do a lot more trade with the United States than European 9)
economies of equal size.
A) This is consistent with predictions from gravity models.
B) This relates to Belgium's trade record with the U.S.
C) This contradicts predictions from gravity models.
D) This is because these neighboring countries have exceptionally large GDPs.
E) This is irrelevant to any inferences that may be drawn from gravity models.
Answer: A
10) Which of the following does NOT explain the extent of trade between Ireland and the U.S.? 10)
A) large numbers of Irish-Americans
B) Gravity Model
C) multinational corporations
D) historical ties
E) cultural Linguistic ties
Answer: B
11) Since the early 1970s, world's trade as a share of world production has 11)
A) remained constant.
B) fluctuated widely with no clear trend.
C) increased.
D) increased slightly before dropping off.
E) decreased.
Answer: C
2
, 12) In the current Post-Industrial economy, international trade in services (including banking and 12)
financial services)
A) is relatively stagnant.
B) does not exist.
C) is an increasingly important component of global trade.
D) dominates world trade.
E) far surpasses the predictions of economist Alan Blinder.
Answer: C
13) In the early 20th century, the United Kingdom exported mainly 13)
A) services.
B) livestock.
C) technology intensive products.
D) manufactured goods.
E) primary products including agricultural.
Answer: D
14) In the early 20th century, the United Kingdom imported mainly 14)
A) manufactured goods.
B) from the United States.
C) services.
D) technology intensive products.
E) primary products including agricultural.
Answer: E
15) In the present, most of the exports from China are 15)
A) technology intensive products.
B) overpriced by world market standards.
C) manufactured goods.
D) primary products including agricultural.
E) services.
Answer: C
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
16) When comparing the composition of world trade in the early 20th century to the early 21st century, we find
major compositional changes. These include a relative decline in trade in agricultural and primary-products
(including raw materials). How would you explain this in terms of broad historical developments during this
period?
Answer: The typical composition of world production during this period experienced major changes. Focusing on
today's Industrialized Countries (primarily members of the OECD), the industrial-employment
composition was focused primarily on agriculture. Most value was in land. The predominant single
consumption category was food. Since then, the economies shifted from the agricultural to the
manufacturing sectors (continuing trends begun over a century earlier in the industrial revolution).
Incomes rose, and consumption shifted in favor of (increasingly affordable) manufactures. Both income
and price elasticities were greater in manufactures than in agricultural products. At the same time there
was a steady tendency for synthetic (manufactured) inputs to replace agricultural based raw materials
and industrial inputs. Hence, trade and, of course, international trade conformed to overall changes in
patterns of world production and consumption.
3
