Chapter 1 - Introduction

1.1   What Is International Economics About?

1) Historians of economic thought often describe ________ written by ________ and published in ________ as the first real exposition of an economic model

• A) "Of the Balance of Trade"; David Hume; 1776

• B) "Wealth of Nations"; David Hume; 1758

• C) "Wealth of Nations"; Adam Smith; 1758

• D) "Wealth of Nations"; Adam Smith; 1776

• E) "Of the Balance of Trade"; David Hume; 1758

2) From 1960 to 2019

• A) the U.S. economy roughly tripled in size.

• B) U.S. imports roughly tripled in size.

• C) the share of U.S. trade in the global economy roughly tripled in size compared with the economy as a whole.

• D) U.S. imports roughly tripled as compared to U.S. exports.

• E) U.S. exports roughly tripled in size.

3) From 1960 to 2019, both U.S. imports and exports have increased, ________ have grown more, leading to a large excess of ________.

• A) imports; imports over exports

• B) exports; exports over imports

• C) imports; exports over imports

• D) exports; imports over exports

4) The facts that U.S. imports and exports plunged in 2009 during the global economic crisis and in 2020 during the Covid-19 pandemic demonstrated the close links between

• A) world trade and the overall state of the world economy.

• B) crisis and unemployment.

• C) the pandemic and shortage of goods and services.

• D) the business cycle and trade policies.

5) The United States is less dependent on trade than most other countries because

• A) the United States is a relatively large country with diverse resources.

• B) the United States is a "Superpower."

• C) the military power of the United States makes it less dependent on anything.

• D) the United States invests in many other countries.

• E) many countries invest in the United States.

6) Theories of international economics from the 18th and 19th centuries are

• A) not relevant to current policy analysis.

• B) only of moderate relevance in today's modern international economy.

• C) highly relevant in today's modern international economy.

• D) the only theories that are actually relevant to modern international economy.

• E) not well understood by modern mathematically oriented theorists.

7) International economics ________ use the same fundamental methods of analysis as other branches of economics, because ________.

• A) does not; the level of complexity of international issues is unique

• B) does not; the interactions associated with international economic relations is highly mathematical

• C) does not; international economics takes a different perspective on economic issues

• D) does; international economists must reach an agreement with other economists on every economic issue

• E) does; the motives and behavior of individuals are the same in international trade as they are in domestic transactions

8) Because the Constitution forbids restraints on interstate trade

• A) the U.S. may not impose tariffs on imports from NAFTA countries.

• B) the U.S. may not affect the international value of the $ U.S.

• C) the U.S. may not put restraints on foreign investments in California if it involves a financial intermediary in New York State.

• D) the U.S. may not impose export duties.

• E) the U.S. may not disrupt commerce between Florida and Hawaii.

9) An important insight of international economics is that when countries sell goods and services to each other.

• A) the exchange is almost always mutually beneficial.

• B) one country always benefits at the expense of the other.

• C) it only benefits the low wage country.

• D) it only benefits the high wage country.

• E) it is almost never beneficial to both countries.

10) "Trade is generally harmful if there are large disparities between countries in wages."

• A) This is generally true.

• B) This is generally false.

• C) Trade theory has nothing to say about this issue.

• D) This is true if the trade partner ignores child labor laws.

• E) This is true if the trade partner uses prison labor.