Unit 6: The Global Game Board

Which of these can a country have when there is an international division of labor?

• a gross domestic product

• social welfare programs

• specialized production

• protectionist policies

Which conditions would allow Country A to have an absolute advantage over Country B in the production of textiles?

• Country A's workers earn higher wages.

• Country B subsidizes its textiles industry.

• Country A can manufacture textiles more cheaply.

• Country B has a protective tariff on textile imports.

Under which circumstance would a country have a comparative advantage in the production of a certain good?

• It has a lower opportunity cost for production of that good.

• It has well-developed industrial capacities.

• It uses an assembly line to produce that good.

• It has a more highly skilled work force.

Why does the growth of international trade lead to a rising global standard of living?

• International trade enables specialization, which brings increased efficiency and greater competition.

• International trade creates profitable investment opportunities for currency speculators.

• International trade leads to trade wars that require countries to increase their productive capabilities.

• International trade results in a gain of comparative advantage for developing countries.

How did the colonizers benefit from the colonies they controlled?

• Workers in the colonizing countries were able to push for higher wages.

• The colonizers used the resources of their colonies to grow their own economies.

• Luxury goods manufactured in the colonies brought tariff revenues to the colonizers.

• The revenues generated from running colonies helped the colonizers lower their tariffs.

Why do protective tariffs lead to reduced international trade?

• There is a decreasing marginal return on sales when imports are protected.

• Protective tariffs increase the price of goods and limit the sale of those goods.

• Other countries usually respond to protective tariffs with boycotts and embargoes.

• Domestic producers have less incentive to increase production when they're protected.

Why does globalization give countries an incentive to reduce wages for their workers?

• Lower production costs help lure foreign investment.

• Multinational corporations don't have to bargain collectively.

• Increased international trade reduces the demand for skilled labor.

• Globalization reduces the cost of goods and services for consumers.

Why do the actions of central banks have an important effect on the global economy?

• Monetary policy is an important tool for protecting domestic industries.

• Interest rates on government bonds are responsible for foreign investment.

• The amount of capital mobility is dependent on regulations enforced by central banks.

• Control of the money supply determines how much money is available for international trade.

Which describes the role of the International Monetary Fund (IMF) in the global economy?

• coordinate banking regulations

• provide short-term emergency loans

• provide long-term development loans

• generate multilateral agreements

Why does the IMF impose conditions on its loans?

• promote the free-market system

• rid the world of command economies

• help manage the economies of struggling countries

• impose uniform regulations on the international banking system