POSC 2601 FINAL EXAM QUESTIONS & ANSWERS
The world economy is (BLANK) integrated on a global scale, generating wealth at a
(BLANK) pace - Answer -Increasingly, accelerating
A (BLANK) would agree that a government's most useful role is to interfere in
economics only to regulate markets in order to help them function efficiently. That is,
politics should serve the interests of economic efficiency. - Answer -liberal
T/F: In the free market, governments set the prices of goods and services - Answer -
false
The creation of wealth underlies state power. Economics should serve politics" is a
statement in line with BLANK - Answer -Mercantilism
The sources of backlash against free trade agreements are unlikely to include BLANK -
Answer -exporting firms
Applying quotas on imports is a policy that would be followed by a BLANK - Answer -
protectionist state
What are two types of protectionist policies? - Answer -tariffs and non-tariff barriers
A unilateral method of protecting domestic producers from __________ by imposing a
limit on the maximum volume of allowable imports is known as a quota. - Answer -
foreign comp.
Tax breaks, loans, and guaranteed high prices are examples of what type of
protectionism? - Answer -subsides (payments by a gov to a domestic industry)
Protectionism hurts an economy in which way? - Answer -consumers usually pa higher
prices for products
The balance of trade is the value of a state's imports relative to its __________. -
Answer -its exports
T/F: Comparative advantage is when states try to produce everything it needs by itself -
Answer -•False:
•Autarky
Autarkic states tend to exhibit what type of growth? - Answer -low
, When states specialize in producing the goods that they produce best and trading for
goods that other states are better at producing, they are operating according to
__________. - Answer -the comparative advantage
T/F: When national endowments (i.e. land, labor, and capital) are scarce, prices of
goods from those national endowments are cheap. - Answer -false
What are the three types of economic pressure? - Answer -- economic sanctions
- economic warfare
- trade wars
T/F: The WTO's framework relies on reciprocity - Answer -•True
•States to match each other's trade barriers
T/F: Goals of the WTO include trade without discrimination, fair competition, and
economic development - Answer -true
The principle that whenever a WTO member state lowers tariffs on certain kinds of
imports from one member state, all member states are entitled to the same treatment
with regard to their goods is known as the __________ concept. - Answer -most-
favored nation
T/F: A customs union is created when states decide to reduce trade barriers and adopt
a common tariff toward states that are not members of the group. - Answer -true
T/F: Multilateral agreements are easier to enforce than bilateral agreements - Answer -
false
T/F: The balance of payments is composed of the current account, capital account,
financial account, and a "balancing item" - Answer -true
current account - Answer -the net balance of payments made and received for current
period trade in goods and services, and net returns on investments at home and abroad
made before and during the current period
What type of exchange rate system is typically utilized in the world today? - Answer -
floating rate system
The principle determinant of the long-term value of a state's currency is __________. -
Answer -•D) the supply and demand of the currency
The system established after World War II to manage the world economy was the
__________. - Answer -•B) Bretton Woods system
The pillars of the international monetary system continue to be the __________ and the
World Bank. - Answer -•International Monetary Fund
The world economy is (BLANK) integrated on a global scale, generating wealth at a
(BLANK) pace - Answer -Increasingly, accelerating
A (BLANK) would agree that a government's most useful role is to interfere in
economics only to regulate markets in order to help them function efficiently. That is,
politics should serve the interests of economic efficiency. - Answer -liberal
T/F: In the free market, governments set the prices of goods and services - Answer -
false
The creation of wealth underlies state power. Economics should serve politics" is a
statement in line with BLANK - Answer -Mercantilism
The sources of backlash against free trade agreements are unlikely to include BLANK -
Answer -exporting firms
Applying quotas on imports is a policy that would be followed by a BLANK - Answer -
protectionist state
What are two types of protectionist policies? - Answer -tariffs and non-tariff barriers
A unilateral method of protecting domestic producers from __________ by imposing a
limit on the maximum volume of allowable imports is known as a quota. - Answer -
foreign comp.
Tax breaks, loans, and guaranteed high prices are examples of what type of
protectionism? - Answer -subsides (payments by a gov to a domestic industry)
Protectionism hurts an economy in which way? - Answer -consumers usually pa higher
prices for products
The balance of trade is the value of a state's imports relative to its __________. -
Answer -its exports
T/F: Comparative advantage is when states try to produce everything it needs by itself -
Answer -•False:
•Autarky
Autarkic states tend to exhibit what type of growth? - Answer -low
, When states specialize in producing the goods that they produce best and trading for
goods that other states are better at producing, they are operating according to
__________. - Answer -the comparative advantage
T/F: When national endowments (i.e. land, labor, and capital) are scarce, prices of
goods from those national endowments are cheap. - Answer -false
What are the three types of economic pressure? - Answer -- economic sanctions
- economic warfare
- trade wars
T/F: The WTO's framework relies on reciprocity - Answer -•True
•States to match each other's trade barriers
T/F: Goals of the WTO include trade without discrimination, fair competition, and
economic development - Answer -true
The principle that whenever a WTO member state lowers tariffs on certain kinds of
imports from one member state, all member states are entitled to the same treatment
with regard to their goods is known as the __________ concept. - Answer -most-
favored nation
T/F: A customs union is created when states decide to reduce trade barriers and adopt
a common tariff toward states that are not members of the group. - Answer -true
T/F: Multilateral agreements are easier to enforce than bilateral agreements - Answer -
false
T/F: The balance of payments is composed of the current account, capital account,
financial account, and a "balancing item" - Answer -true
current account - Answer -the net balance of payments made and received for current
period trade in goods and services, and net returns on investments at home and abroad
made before and during the current period
What type of exchange rate system is typically utilized in the world today? - Answer -
floating rate system
The principle determinant of the long-term value of a state's currency is __________. -
Answer -•D) the supply and demand of the currency
The system established after World War II to manage the world economy was the
__________. - Answer -•B) Bretton Woods system
The pillars of the international monetary system continue to be the __________ and the
World Bank. - Answer -•International Monetary Fund
