CHAPTER 53
International Trade, Investment, and Finance
How Instability Spreads Around the World
MULTIPLE CHOICE
604. What are the three mechanisms that transmit recessions and expansions from one country to
another?
a. exports of goods, exports of services, and exports of currency.
b. international trade, international investment, and international finance.
c. by consumers, by businesses, and by governments.
d. through the United Nations, the World Bank, and the International Labor Organization.
605. If the United States is the most important market for Bolivian exports, then a recession in
the U.S. is likely to
a. increase demand for goods imported from Bolivia.
b. lead to an economic expansion in Bolivia.
c. lead to an economic downturn in Bolivia.
d. have no effect on Boliv
606. Assume Toyota builds a new plant in Mississippi to produce the Prius. This is an example
of
a. international trade.
b. international investment.
c. economic imperialism.
d. international finance.
607. A resident of Canada purchases 1000 shares of stock in Dell Computers. This is an example
of
a. international trade.
b. international investment.
c. economic imperialism.
d. international finance.
608. How does a recession in the US affect the level of foreign investment undertaken by
American businesses?
a. businesses tend to increase the level of foreign investment during a recession.
b. businesses tend to decrease the level of foreign investment during a recession.
c. businesses tend to maintain the same level of foreign investment over the business cycle.
d. it is against the law businesses to engage in foreign investment during a recession.
609. In general, what is the attitude of businesses toward foreign investments compared to
domestic investment?
a. businesses are more cautious about making foreign investments.
b. businesses are more cautious about making domestic investment.
c. businesses are equally cautious about all investments.
d. businesses will engage either in foreign investment or domestic investment but not both.
610. A resident of Dubai buys $1,000,000 in US government bonds. This is an example of
a. international investment
b. international finance.
c. international trade.
d. international subcontracting
611. The global integration of the world economy means that
a. most industrial countries experience tend recessions at the same time.
b. a recession in one industrialized country will be offset by a boom in another country.
c. industrial countries are relatively immune from international financial instability.
d. most industrial countries now use the same currency.
612. The US imports approximately $45 billion in automobiles from Japan. If there is a
recession in the US, we can expect
a. US imports of automobiles from Japan will increase.
b. US imports of automobiles from Japan will decrease.
c. US imports of automobiles from Japan will remain the same.
d. US will import no automobiles from Japan.
613. The US imports approximately $45 billion in automobiles from Japan. If there is a
recession in the US, we can expect
a. that aggregate demand in Japan will increase
b. that aggregate demand in Japan will decrease.
c. that aggregate demand in Japan will remain the same
d. that Japan will have no aggregate demand.