International Political Economy
IPE (International Political Economy) correct answers International political economy is
the study of the "interplay" of economics and politics in the world arena.
i) the study of the political basis of economic actions, the ways in which government
policies affect market operations.
i.e.) the evolution of European Union; gov't subsidies; Japan and Korean auto
transplants in the U.S....
ii) the economic basis of political action, the ways in which economic forces mold
government policies.
i.e.) imperialism; policy demands for (conflicts about) free trade or protectionism;
liberalization; industrial policy...
--> two focuses are complementary (politics and markets are in a "constant" state of
mutual interaction);
* important questions are about effects of various political (and economic) "conditions"
that mold preferences, choices of policy coalitions of individuals, groups, firms and even
states.
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.
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 the ability to produce a good at a lower
opportunity cost than another producer
the 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
, 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.
IPE (International Political Economy) correct answers International political economy is
the study of the "interplay" of economics and politics in the world arena.
i) the study of the political basis of economic actions, the ways in which government
policies affect market operations.
i.e.) the evolution of European Union; gov't subsidies; Japan and Korean auto
transplants in the U.S....
ii) the economic basis of political action, the ways in which economic forces mold
government policies.
i.e.) imperialism; policy demands for (conflicts about) free trade or protectionism;
liberalization; industrial policy...
--> two focuses are complementary (politics and markets are in a "constant" state of
mutual interaction);
* important questions are about effects of various political (and economic) "conditions"
that mold preferences, choices of policy coalitions of individuals, groups, firms and even
states.
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.
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 the ability to produce a good at a lower
opportunity cost than another producer
the 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
, 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.
