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Running head: MIDTERM EXAM 1
Midterm Exam
Name
Institutional Affiliation
MIDTERM EXAM 2
Midterm Exam
Chapter 1
1. Explain the differences between international and domestic economic issues.
International economic issues are serious challenges that are facing the world economy.
These issues include world inequality, unbalanced economic growth, world poverty, and the
exhaustion of non-renewable resources, environmental hazards and global warming and
insufficient regulation of financial institutions.
Domestic economic issues are challenges that only affect a particular country’s economy
and have no universal effect. They include industrialization, income distribution, poverty,
population growth, pollution, corruption among others
2. Explain why seven themes recur in international economics, and discuss their
significance.
(a) The gains from trade –Much of international trade is valuable – not one person
would propose that Canada would cultivate its own apples. Most individuals, however, are
cynical over the advantages of trading for goods and services that a nation could manufacture for
itself.
(b) The pattern of trade- Economist feel that they need theory to back up thoughts
about international trade so that they can impact confidence and allow a discussion on the
impacts of international trade and propose modifications in policies towards trade.
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(c) Protectionism- If the notion of paybacks from commerce is the utmost significant
theoretic idea in international trade, the seemingly exogenous encounter between free trade and
protectionism is its most imperative policy subject.
(d) The Balance of Payments –is a methodical record of all international economic
transactions that are undertaken between people of one nation and people of other countries
during a particular year. It is made up of a current account and capital account.
(e) Exchange Rate Determination- the major variance between world economics and
various disciplines of economics is that nations have dissimilar currencies. Conversion of
currencies is possible in the financial markets but the relative prices of currency change over
time due to some factors in the different countries.
(f) International Policy Coordination- In a unified world economy a particular nation’s
economic policies usually impact other nations as well.
(g) International Capital Market- Global capital markets vary in many ways from capital
markets in different countries. Other nations must manage with distinctive guidelines that most
nations impose on foreign investment and risks involved.
International trade is a significant factor in improving living standards, providing job
opportunities and allowing consumers to choose from a variety of goods and services.
3. Provide your own definition of international economics.
International economics is a branch of economies that deals with global interactions
between different countries and impact global issues on the world economy. It studies the effect
of political and economic matters on international commerce. Global economics deals with the
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impacts on economic activity from international variances in productive resources and consumer
inclinations and the global institutions that have effect.
4. Explain the difference between International trade versus finance
International trade is the commercial activities between one country and another or other
nations; International trade includes the exchange of products or services and other factors of
production, for example capital and labor, across international borders while International
finance implies the flow of capital, financial investment across different countries. Globalization
has made it possible for international trade and international finance to be applicable.
Chapter 2
