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True / False
1. With globalization, the world is moving from hundreds of national economies toward one large world economy.
a.
True
b.
False
2. In recent years, the Chinese government’s actions have had an impact on interest rates in the United States.
a.
True
b.
False
3. Globalization is necessarily bad for U.S. workers.
a.
True
b.
False
4. Capitalism is the economic system that best describes what is currently happening in the world economy.
a.
True
b.
False
5. Studies have shown that tipping is much less common in countries where caring and personal relationships are highly
valued, as opposed to the values of success and materialism.
a.
True
b.
False
6. In recent years, tariff rates have declined in the United States, China, and India.
a.
True
b.
False
7. Globalization first appeared on the world stage two decades ago.
a.
True
b.
False
8. International trade (a key component of globalization) has been linked to lower prices in numerous studies.
a.
True
b.
False
9. The consumer price index (CPI) increased at a slower rate during the period 1990-2004 than the import price index.
a.
True
b.
False
10. Everyone agrees that globalization causes greater income inequality between rich and poor countries.
a.
True
b.
False
11. All economists agree that the worldwide benefits of globalization are likely to be greater than the worldwide costs.
a.
True
b.
False
12. When World War II ended, the new era of globalization began.
a.
True
b.
False
13. Computers and the Internet make it possible for people to communicate with others over long distances, reducing the
probability that people will trade with one another.
a.
True
b.
False
14. The average tariff rate in the US today is about 40 percent, but it was only 1.6 percent in 1946.
a.
True
b.
False
15. Harvard University admits a larger percentage of applicants than does India’s Indian Institute of Technology.
a.
True
b.
False
16. An example of offshoring is when a foreign country sets up operations in the United States and employs American
employees.
a.
True
b.
False
17. Net exports represent the difference between exports and imports.
a.
True
b.
False
18. In a two-country world (consisting of country X and country Y), an increase in Real GDP in country X will shift
country Y’s AD curve leftward.
a.
True
b.
False
19. A depreciation of the dollar relative to another currency will raise U.S. exports, lower U.S. imports, and raise U.S. net
exports.
a.
True
b.
False
20. The J-curve summarizes the phenomenon that occurs when import spending initially falls after a depreciation of a
country’s currency and then import spending later rises.
a.
True
b.
False
21. According to J-curve theory, imports initially increase after a country’s currency depreciates, but in the long run
imports decrease.
a.
True
b.
False
22. A depreciation in the dollar relative to the yen would make Japanese-produced input X more expensive for U.S.
producers.
a.
True
b.
False
23. When the dollar depreciates, this shifts the AD curve rightward and the SRAS curve leftward, leading to a higher price
level.
a.
True
b.
False
24. When the dollar depreciates, this shifts the AD curve rightward and the SRAS curve leftward, which will always lead
to a higher Real GDP.
a.
True
b.
False
25. When the dollar appreciates, this shifts the AD curve leftward and the SRAS curve rightward, which will typically
lead to an unchanged Real GDP.
a.
True
b.
False
26. When real interest rates fall in the United States relative to interest rates in Japan, the yen appreciates and the dollar
depreciates.
a.
True
b.
False
27. Increased deficit financing, following the use of expansionary fiscal policy by the U.S., will raise U.S. interest rates
and causes the dollar to appreciate.
a.
True
b.
False
28. Expansionary fiscal policy raises Real GDP more in a closed economy than in an open economy.
a.
True
b.
False
29. In a two-country world consisting of Japan and the United States, a contraction in the Japanese economy will lead to
lower Real GDP in the United States.
a.
True
b.
False
Multiple Choice
30. Globalization
a.
is the growing integration of the national economies of the world to such an extent that a single worldwide
economy may be emerging.
b.
is any type of foreign trade.
c.
is specifically foreign trade between countries that have entered into a formal free trade agreement.
d.
will necessarily lead to higher unemployment rates in the United States.
31. Which of the following factors are repeated in many different definitions of globalization?
a.
creation of a smaller world
b.
movement toward a world economy
c.
people living across the world from one another having a greater impact upon each other
d.
all of the above
32. In recent years, the Chinese government has _____________ bonds issued by the U.S. government which has
_____________ interest rates in the United States beyond what they would have been otherwise.
a.
bought; lowered
b.
bought; raised
c.
sold; lowered
d.
sold; raised
33. Globalization is closely aligned with which of the following?
a.
increased free enterprise
b.
more government control of markets
c.
less freedom of movement for people
d.
less freedom of movement for goods
34. According to the textbook, in which of the following countries was tipping found to occur very infrequently?
a.
Mexico
b.
United States
c.
Egypt
d.
Vietnam
35. In 1946 the average tariff rate in the United States was around ___________ percent, while the average tariff in 2012
was about ____________ percent.
a.
14.0; 2.4
b.
18.7; 12.8
c.
40.0; 1.8
d.
30.2; 21.0
36. In the early 1900s tariffs accounted for ____________ of all federal government revenues, whereas today they account
for less than ____________ percent.
a.
one-tenth; 4
b.
half; 0.5
c.
one-quarter; 5
d.
half; 2
37. Fifteen years ago, China _________________ with the countries of Europe. Today, China
______________________ most European countries.
a.
traded a great deal; is not a trading partner with
b.
traded a great deal; is rarely a trading partner for
c.
did not trade much; is one of the top five trading partners for
d.
did not trade much; is rarely a trading partner for
38. In economics, the term foreign exchange trading means
a.
buying and selling foreign goods.
b.
buying and selling foreign services.
c.
buying and selling foreign assets (such as, real estate).
d.
buying and selling foreign currencies.
39. According to the textbook, some people refer to the period from ___________________ as the First Era of
globalization.
a.
the late 1700s to the late 1800s
b.
the mid-1900s to the late 1980s
c.
the late 1600s to the mid-1800s
d.
the mid-1800s to the late 1920s
40. The Cold War
a.
hampered globalization because it created a political barrier between countries which reduced the likelihood
that those countries would engage in trade with one another.
b.
enhanced globalization because it helped to encourage countries to engage in trade with one another.
c.
ended with the building of the Berlin Wall in the early 1960s.
d.
a and c
41. Between 1980 and 2000, income per person in India
a.
doubled.
b.
tripled.
c.
quadrupled.
d.
decreased by 25 percent.
42. Between 1940 and 2000, income per person in China
a.
doubled.
b.
tripled.
c.
quadrupled.
d.
decreased by 5 percent.
43. Economist David Friedman has compared free international trade to
a.
the Holocaust.
b.
the Cold War.
c.
a technology.
d.
a revolution.
44. Between 1977 and 2004, the inflation-adjusted prices for an array of goods traded between countries __________
while the inflation-adjusted prices for an array of goods not traded between countries _____________________.
a.
fell; increased.
b.
rose; increased as well.
c.
fell; decreased as well.
d.
rose; decreased.
45. One study from the United Kingdom (cited in the textbook) showed that almost ______ times as many firms that faced
global competition reported innovations in product or process compared to firms that did not face global competition.
a.
three
b.
six
c.
nine
d.
twelve
46. Economists are fairly confident that globalization leads to a(n) _____________ standard of living based on their
comparisons of countries with __________________ characteristics.
a.
increased; similar
b.
increased; very few similar
c.
decreased; similar
d.
decreased; very few similar
47. North Korea has ____________ the process of globalization, while South Korea has _______________ it. A likely
result of this is that South Koreans have a much ______________ standard of living than North Koreans.
a.
embraced; avoided; higher
b.
embraced; avoided; lower
c.
avoided; embraced; lower
d.
avoided; embraced; higher
48. _______________ is the practice of hiring people in other countries to do a job that was once done domestically.
a.
Offshoring
b.
Onshoring
c.
Insourcing
d.
Megasourcing
49. In 2000, the top 100 transnational companies produced about _____________ percent of the entire world’s output.
a.
2.1
b.
4.3
c.
10.5
d.
22.1
50. In 2000, the top 100 transnational companies produced about _____________ percent of the entire world’s output,
which was approximately as much as what ________________ produced that year.
a.
4.1; Japan
b.
4.3; the United Kingdom
c.
10.9; China
d.
25.1; the United States
51. It is often easier to see the ___________ of globalization than it is to see the _____________. This is because the
costs tend to be more ________________, while the benefits tend to be __________________.
a.
costs; benefits; concentrated; widely dispersed.
b.
benefits; costs; concentrated; widely dispersed.
c.
costs; benefits; widely dispersed; concentrated.
d.
benefits; costs; widely dispersed; concentrated.
52. Some of the benefits of globalization include
a.
increased international trade.
b.
greater income per person.
c.
lower prices for goods.
d.
greater product variety.
e.
all of the above
53. Which of the following statements is false?
a.
India and China are examples of countries that have been opening up their economies to globalization.
b.
Globalization will cause some people to lose jobs, but even without globalization, some people will lose jobs.
c.
The end of the Cold War is one of the factors that many believe has lead to an increase in globalization.
d.
Income per person has decreased in China and India in recent decades.
54. Between 1990 and 2003, college tuition went up 130 percent, which is __________ the increase in the prices of
housing, gasoline, and medical care.
a.
slightly more than
b.
less than
c.
about the same as
d.
considerably more than
55. The _____________ the size of the potential customer base for a given product (for example, music), the
______________ is the variety of goods we are likely to see.
a.
larger; greater
b.
smaller; smaller
c.
larger; smaller
d.
smaller; greater
e.
a and b
56. Which of the following statements is false?
a.
In recent years, the Chinese government has bought U.S. government bonds, raising interest rates in the United
States.
b.
Among the key features of globalization is the growing integration of the national economies of the world.
c.
Globalization is associated with a movement toward more free enterprise.
d.
It is becoming increasingly common for Americans to work for foreign companies that have offices in the
United States.
57. Which of the following statements is true?
a.
Economists are fairly certain that globalization leads to an increased standard of living.
b.
During the 1990s, the annual percentage change in output per person was negative in globalized developing
countries, but positive in less globablized countries.
c.
When it comes to globalization it is generally easier to see the benefits than to see the costs.
d.
The benefits of globalization are more visible than the costs, since they tend to be concentrated on a relatively
smaller group of people.
58. The problems of physical distance can be _____________ by technology which can serve to ___________ trade.
a.
increased; discourage
b.
reduced; enhance
c.
increased; enhance
d.
reduced; discourage
59. The end of the Cold War is generally marked by the fall of the Berlin Wall in
a.
1961.
b.
1969.
c.
1979.
d.
1989.
e.
1994.
60. If an economy’s exports are $600 billion and its imports are $750 billion, its net exports are
a.
$1,550 billion
b.
$150 billion
c.
-$150 billion
d.
1.07.
61. If an economy’s exports are $560 billion and its net exports are -$130 billion, its imports are
a.
$690 billion.
b.
$430 billion.
c.
-$430 billion.
d.
-$690 billion.
62. A rise in net exports shifts the
a.
AD curve leftward.
b.
AD curve rightward.
c.
SRAS curve leftward.
d.
SRAS curve rightward.
63. If Germany’s Real GDP rises, this tends to ________________ United States exports, shifting the United States AD
curve to the ___________________.
a.
raise; right
b.
raise; left
c.
lower; right
d.
lower; left
64. If Germany’s Real GDP falls, this tends to ______________ United States exports, shifting the United States AD
curve to the ________________.
a.
raise; right
b.
raise; left
c.
lower; right
d.
lower; left
65. If Japan’s Real GDP rises, this tends to _________________ United States exports, shifting the United States AD
curve to the __________________.
a.
raise; right
b.
raise; left
c.
lower; right
d.
lower; left
66. If Japan’s Real GDP falls, this tends to _________________ United States exports, shifting the United States AD
curve to the _____________________.
a.
raise; right
b.
raise; left
c.
lower; right
d.
lower; left
67. If the United States goes into a recession, this tends to shift Japan’s AD curve _______________ because Japan will
___________________.
a.
rightward; import less from the United States
b.
rightward; export less to the United States
c.
leftward; import less from the United States
d.
leftward; export less to the United States
68. When the United States recovers from a recession, this tends to shift Germany’s AD curve _________________,
which _____________ Germany’s price level.
a.
rightward; raises
b.
rightward; lowers
c.
leftward; raises
d.
leftward; lowers
69. Suppose a British camera has a price of 200 British pounds. To a United States camera importer, its price rises from
$360 to $380. This might happen when the dollar ________________ against the British pound, which means the British
pound has a __________ dollar price.
a.
depreciates; higher
b.
depreciates; lower
c.
appreciates; higher
d.
appreciates; lower
70. Suppose a case of French wine has a price of 1,500 euros. To a U.S. wine importer, its price falls from $300 to
$280. This could happen as a result of the dollar ___________ against the euro, which means the euro has a
____________ dollar price.
a.
depreciating; higher
b.
depreciating; lower
c.
appreciating; higher
d.
appreciating; lower
71. As the dollar appreciates, the dollar price of imported goods ___________ ultimately shifting the United States AD
curve to the _______________.
a.
rises; right
b.
rises; left
c.
falls; right
d.
falls; left
72. As the dollar appreciates, the foreign price of United States goods ______________, ultimately shifting the United
States AD curve ________________.
a.
rises; rightward
b.
rises; leftward
c.
falls; rightward
d.
falls; leftward
73. As the dollar depreciates, the dollar price of imported goods _________, ultimately shifting the United States AD
