International Economics, 6e (Gerber)
Chapter 13 The United States in the World Economy
13.1 Introduction: A New World Economy
1) There are no questions for this section.
Topic: Introduction: A New World Economy
13.2 Background and Context
1) Purchasing power parity (PPP) measurements of income are a way to make international
comparisons by correcting for national differences in
A) unemployment.
B) inflation.
C) prices of goods and services.
D) economic growth.
E) government subsidies.
2) Few countries have a higher GDP per capita than the weighted average of Canada, Mexico
and the U.S.
3) Even though Mexico is a developing country, the NAFTA market is very rich.
4) Why is the U.S. putting less emphasis on multilateral and more emphasis on bilateral trade
agreements?
5) Describe the trends in U.S. manufacturing employment and U.S. manufacturing output over
the last 40 years. What factors have contributed to these?
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13.3 The NAFTA Model
1) Under NAFTA, environmental standards are
A) harmonized around Mexican rules.
B) harmonized around U.S. rules.
C) harmonized around Canadian rules.
D) harmonized around a combination of the rules in all three countries.
E) not harmonized.
2) Twenty-four years before CUSTA, another agreement between the same countries covered
trade in
A) textiles.
B) steel.
C) autos.
D) agriculture.
E) telecommunications.
3) Which of the following is most important in determining the number of jobs in an economy?
A) Macroeconomic policies
B) Trade policies
C) Urban policies
D) Environmental policies
E) Tax policies
4) One area of labor issues that the labor side agreement to NAFTA does not open to foreign
consultation or investigation is
A) the use of child labor.
B) worker exposure to unsafe conditions.
C) minimum wages.
D) worker’s rights to organize.
5) The main area of economic activity that Canada chose not to open to free trade is
A) agriculture.
B) oil and gas.
C) lumber.
D) the cultural industries.
E) financial services.
6) U.S. opponents of NAFTA argued that the agreement will hurt the United States. In their
view, NAFTA’s greatest harm will be its
A) harmonization of labor policies.
B) harmonization of environmental policies.
C) harmonization of the use of pesticides and herbicides.
D) job destruction and downward pressure on U.S. wages.
E) harmonization of product safety standards.
7) The single most important reason for Canada’s seeking a free trade agreement with the United
States was to
A) ensure its access to the U.S. market.
B) ensure its ability to join NAFTA.
C) harmonize its environmental laws with the United States.
D) avoid international outsourcing in low wage countries.
E) ensure the continuation of its social programs.
8) One problem with NAFTA that is not shared by other trade blocs is that
A) national environmental laws differ greatly.
B) the countries are at very different stages of economic development.
C) the countries speak different languages.
D) the countries are not natural trading partners.
E) the United States and Mexico have a history of conflict.
9) A slowing U.S. economy and increased enforcement of immigration laws will reduce
________ factors for Mexican immigration to the United States.
A) demand growth
B) demand pull
C) supply push
D) supply growth
E) network
10) President Salinas of Mexico devised a strategy to restore Mexican growth by encouraging
A) large inflows of foreign capital.
B) large increases in domestic savings.
C) large interest rate cuts.
D) an expansion of import substitution industrialization policies.
E) more government ownership of industrial firms.
11) Which of the following is NOT a reason Mexico and Canada wanted a free trade agreement
with the United States?
A) Mexico wanted increased direct foreign investment.
B) Canada wanted to guarantee access to the U.S. market.
C) Mexico wanted the United States to lower its high barriers to Mexican products.
D) Canada wanted its firms to become more globally competitive.
E) Mexico wanted to institutionalize its economic reforms.
12) Free trade agreements between the United States and Canada started with the auto industry in
the year 1965.
13) In Canada, there are no preferences given to Canadian tv networks and programming over
U.S. networks and programming.
14) Most Mexican workers can increase their wages if they migrate to the United States, a
demand-pull factor for migration.
15) What lessons did Mexico’s policy makers learn from the 1980s debt crisis? What reforms
did President Salinas pursue? What were his main goals?
16) What type of economic policy did Mexico follow from the end of World War II until the
1980s? Describe the three-stage strategy that supporters of this policy emphasized. What was
the outcome of these policies for Mexico’s manufacturing sector?
17) When did NAFTA go into effect?
18) Why are trade agreements between the U.S. and Mexico more controversial than trade
agreements between the U.S. and Canada?
19) What two trends was Canada trying to address in negotiating CUSTA?
20) In negotiating NAFTA, what two side agreements were reached?
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21) What is the main problem with rules of origin?
13.4 New and Old Agreements
1) One reason why most economists forecast that the effects of NAFTA on the U.S. economy
would be small is because
A) NAFTA does not bring down tariffs far enough.
B) the Mexican economy is small relative to the U.S. economy.
C) NAFTA trade opening provisions only cover a handful of sectors.
D) Mexico was not expected to live up to its obligations under the agreement.
E) the United States was not expected to live up to its obligations under the agreement.
2) What is the significant feature of a preferential arrangement?
3) What are bilateral investment treaties?
4) What is the United States primary trade promotion initiative with Africa?