International Economics: Theory and Policy

TEST BANK

For

International Economics: Theory and Policy

Eleventh Edition Paul R. Krugman Maurice Obstfeld Marc Melitz 1 / 4

1 Copyright © 2018 Pearson Education, Inc.

International Economics: Theory and Policy, 11e (Krugman et al.)

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.

• "Of the Balance of Trade," David Hume, 1776
• "Wealth of Nations," David Hume, 1758
• "Wealth of Nations," Adam Smith, 1758
• "Wealth of Nations," Adam Smith, 1776
• "Of the Balance of Trade," David Hume, 1758

Answer: E

Page Ref: 1

Difficulty: Easy

2) From 1950 to 2015

• the U.S. economy roughly tripled in size.
• U.S. imports roughly tripled in size.
• the share of U.S. trade in the global economy roughly tripled in size.
• U.S. imports roughly tripled as compared to U.S. exports.
• U.S. exports roughly tripled in size.

Answer: C

Page Ref: 1

Difficulty: Easy

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

• the United States is a relatively large country with diverse resources.
• the United States is a "Superpower."
• the military power of the United States makes it less dependent on anything.
• the United States invests in many other countries.
• many countries invest in the United States.

Answer: A

Page Ref: 2

Difficulty: Easy

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

• not relevant to current policy analysis.
• only of moderate relevance in today's modern international economy.
• highly relevant in today's modern international economy.
• the only theories that are actually relevant to modern international economy.
• not well understood by modern mathematically oriented theorists.

Answer: C

Page Ref: 2

Difficulty: Easy 2 / 4

2 Copyright © 2018 Pearson Education, Inc.5) An important insight of international trade theory is that when two countries engage in voluntary trade

• one country always benefits at the expense of the other.
• it is almost always beneficial to both countries.
• it only benefits the low wage country.
• it only benefits the high wage country.
• it is almost never beneficial to both countries.

Answer: B

Page Ref: 4

Difficulty: Easy

6) If there are large disparities in wage levels between countries, then

• trade is likely to be harmful to both countries.
• trade is likely to be harmful to the country with the high wages.
• trade is likely to be harmful to the country with the low wages.
• trade is likely to be harmful to neither country.
• trade is likely to have no effect on either country.

Answer: D

Page Ref: 4

Difficulty: Easy

7) The benefits of international trade are derived from trade in

• tangible goods only.
• intangible goods only.
• goods but not services.
• services but not goods.
• anything of value.

Answer: E

Page Ref: 4

Difficulty: Easy

8) Which of the following does NOT belong?

A) NAFTA

• Uruguay Round
• World Trade Organization
• non- tariff barriers
• major free trade agreements of the 1990s

Answer: D

Page Ref: 6

Difficulty: Easy 3 / 4

3 Copyright © 2018 Pearson Education, Inc.9) International economics ________ use the same fundamental methods of analysis as other branches of economics, because ________.

• does not, the level of complexity of international issues is unique
• does not, the interactions associated with international economic relations is highly

mathematical

• does not, international economics takes a different perspective on economic issues
• does not, international economic policy requires cooperation with other countries
• does, the motives and behavior of individuals are the same in international trade as they are in

domestic transactions

Answer: E

Page Ref: 3

Difficulty: Easy

10) Because the Constitution forbids restraints on interstate trade

• the U.S. may not impose tariffs on imports from NAFTA countries.
• the U.S. may not affect the international value of the $ U.S.
• the U.S. may not put restraints on foreign investments in California if it involves a financial

intermediary in New York State.

• the U.S. may not impose export duties.
• the U.S. may not disrupt commerce between Florida and Hawaii.

Answer: E

Page Ref: 4

Difficulty: Easy

11) Which of the following is NOT a major concern of international economic theory?

• protectionism
• the balance of payments
• exchange rate determination
• bilateral trade relations with China
• the international capital market

Answer: D

Page Ref: 4

Difficulty: Easy

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

• This is generally true.
• This is generally false.
• Trade theory has nothing to say about this issue.
• This is true if the trade partner ignores child labor laws.
• This is true if the trade partner uses prison labor.

Answer: B

Page Ref: 4

Difficulty: Easy

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