Master Advanced International Economics for Business Success

Question 1

A key characteristic of the contemporary international monetary system is:

Accepted Answer

Flexible exchange rates

Answer

Fixed exchange rates

Answer

Gold-backed currencies

Answer

Absence of central banks

Question 2

Currency appreciation refers to:

Accepted Answer

An increase in the value of a currency relative to other currencies

Answer

A decrease in the value of a currency relative to other currencies

Answer

No change in the value of a currency relative to other currencies

Answer

The replacement of one currency with another

Question 3

The primary objective of trade policy is to:

Accepted Answer

Reduce trade barriers, thereby promoting international trade

Answer

Protect domestic industries from foreign competition

Answer

Facilitate economic growth and development

Answer

Ensure equitable income distribution across countries

Question 4

According to the neoclassical growth model, the main driver of economic development is:

Accepted Answer

Advancements in technology, leading to increased productivity

Answer

Accumulation of physical capital, such as machinery and equipment

Answer

Improvements in education and skills, enhancing human capital

Answer

Government intervention through fiscal and monetary policies

Question 5

In a floating exchange rate regime:

Accepted Answer

The value of the currency is determined by market forces of supply and demand

Answer

The central bank actively intervenes to maintain a fixed exchange rate

Answer

The currency is pegged to the value of another currency or a basket of currencies

Answer

Exchange rate adjustments occur only in response to significant economic shocks

Question 6

The term 'trade deficit' refers to a situation where a country's:

Accepted Answer

Imports exceed its exports

Answer

Exports exceed its imports

Answer

Current account balance is negative

Answer

Capital account balance is positive

Question 7

The overarching goal of macroeconomic stabilization policy is to:

Accepted Answer

All of the above, aiming to achieve macroeconomic balance and stability

Answer

Control inflation and maintain price stability

Answer

Promote sustainable economic growth and job creation

Answer

Reduce unemployment and minimize economic downturns

Question 8

According to the Heckscher-Ohlin theorem, which country would have a comparative advantage in exporting textiles and importing machinery?

Accepted Answer

Country B: Abundant labor, low-skilled labor force

Answer

Country A: Abundant capital, skilled labor force

Answer

Country C: Low savings rate, high foreign investment

Answer

Country D: High economic growth, stable political environment

Question 9

Which type of economic development strategy prioritizes government intervention and protectionist policies?

Accepted Answer

Import-substitution industrialization

Answer

Export-oriented industrialization

Answer

Market-led development

Answer

Neoliberalism

Question 10

What is the primary objective of the international monetary system?

Accepted Answer

To facilitate international trade and investment

Answer

To ensure stable exchange rates

Answer

To control inflation

Answer

To guarantee full employment

Question 11

What is the definition of a tariff?

Accepted Answer

A tax levied on imported goods

Answer

A subsidy granted to exported goods

Answer

A quota restricting the quantity of imported goods

Answer

A currency exchange rate

Question 12

Which of the following characterizes a flexible exchange rate regime?

Accepted Answer

The exchange rate is determined by market forces of supply and demand

Answer

The government fixes the exchange rate at a predetermined level

Answer

The exchange rate is linked to another currency, maintaining a fixed ratio

Answer

The exchange rate is set and controlled by a central bank

Question 13

What is the phenomenon known as the "J-curve" effect in international trade?

Accepted Answer

An initial worsening of the trade deficit following a currency devaluation

Answer

An immediate improvement in the trade deficit after a currency devaluation

Answer

No change in the current account balance after a currency devaluation

Answer

A sharp decline in the stock market after a currency devaluation

Question 14

What is the primary mission of the World Trade Organization (WTO)?

Accepted Answer

To promote free trade and reduce trade barriers between member countries

Answer

To provide financial aid to developing nations

Answer

To regulate global labor standards

Answer

To ensure the enforcement of human rights

Question 15

Which of the following is a criticism often leveled against the implementation of neoliberal economic policies?

Accepted Answer

They may exacerbate economic inequality

Answer

They encourage a reduction in government regulations

Answer

They universally promote free markets

Answer

They prioritize environmental concerns

Question 16

According to the theory of comparative advantage, countries should:

Accepted Answer

Specialize in producing and exporting goods for which they have a comparative advantage, even if it means importing other goods

Answer

Specialize in producing and exporting goods for which they have an absolute advantage

Answer

Produce all goods domestically to achieve self-sufficiency

Answer

Import all goods from other countries to lower production costs

Question 17

Which of the following is a potential benefit of free trade?

Accepted Answer

Increased consumer choice and lower prices

Answer

Higher prices for domestic producers

Answer

Job losses in import-competing industries

Answer

Reduced innovation incentives

Question 18

The World Trade Organization (WTO) is primarily responsible for:

Accepted Answer

Promoting global free trade and reducing trade barriers

Answer

Setting tariffs and quotas for international trade

Answer

Enforcing economic sanctions against countries violating trade agreements

Answer

Providing financial assistance to developing countries for economic development

Question 19

Which of the following is a type of exchange rate regime where the value of the domestic currency is pegged to a specific value or a basket of currencies?

Accepted Answer

Fixed exchange rate

Answer

Floating exchange rate

Answer

Crawling peg

Answer

Managed float

Question 20

The term 'globalization' refers to:

Accepted Answer

Increasing interdependence and interconnectedness among countries

Answer

The decline of multinational corporations

Answer

The process of developing economies becoming more isolated

Answer

The elimination of trade barriers

Question 21

Which of the following is NOT considered an advantage of international trade?

Accepted Answer

Guaranteed employment for all workers

Answer

Increased specialization and efficiency

Answer

Wider variety of goods and services for consumers

Answer

Lower production costs

Question 22

Which of the following is a characteristic commonly associated with developing economies?

Accepted Answer

Low per capita income

Answer

High levels of foreign investment

Answer

Well-developed infrastructure

Answer

Diversified industrial base

Question 23

The exchange rate between two currencies is primarily determined by:

Accepted Answer

Supply and demand for those currencies

Answer

Inflation rates in the respective countries

Answer

Interest rate differentials

Answer

Government regulations

Question 24

The exchange rate between two currencies is primarily determined by:

Accepted Answer

The forces of supply and demand in the foreign exchange market, influenced by economic factors

Answer

Government intervention, such as setting fixed exchange rates or implementing capital controls

Answer

Inflation rates, as higher inflation can erode the value of a currency

Answer

Interest rates, as higher interest rates can attract foreign investment and strengthen a currency

Question 25

The concept of purchasing power parity (PPP) suggests that:

Accepted Answer

The exchange rate between two currencies should reflect the relative cost of a basket of goods and services in each country

Answer

The price of a specific good should be identical in all countries, regardless of currency differences

Answer

The value of a currency is determined by the amount of gold it is backed by

Answer

The balance of trade between two countries should always be in equilibrium

Question 26

Which of the following is a key feature of a floating exchange rate regime, allowing currencies to fluctuate freely?

Accepted Answer

The value of the currency is determined by market forces, such as supply and demand

Answer

The government sets a fixed value for the currency and intervenes to maintain it

Answer

The currency is pegged to a specific basket of foreign currencies, limiting its fluctuation

Answer

The currency is freely convertible but subject to government regulations and controls

Question 27

The World Bank is primarily focused on:

Accepted Answer

Providing loans and grants to developing countries for infrastructure, education, and healthcare

Answer

Regulating the global financial system and preventing financial crises

Answer

Promoting free trade by reducing trade barriers and negotiating trade agreements

Answer

Monitoring global economic trends and providing data and analysis to policymakers

Question 28

Identify the primary driver of international trade:

Accepted Answer

A combination of all the above

Answer

Variations in factor endowments between countries

Answer

Technological advancements that enhance production efficiency

Answer

Government policies designed to promote or restrict trade

Question 29

According to the theory of comparative advantage, a country should prioritize producing goods in which it:

Accepted Answer

Has a comparative advantage

Answer

Has an absolute advantage

Answer

Consumes domestically

Answer

Has the greatest absolute advantage

Question 30

The concept of purchasing power parity (PPP) suggests that:

Accepted Answer

Exchange rates should adjust to equalize the purchasing power of different currencies

Answer

Prices of identical goods should be the same in all countries

Answer

The value of a currency is primarily determined by its trade balance

Answer

Inflation rates should be identical across all countries

Question 31

Which of the following is NOT a benefit of the international monetary system?

Accepted Answer

Hinders international trade

Answer

Provides stability in exchange rates

Answer

Reduces transaction costs

Answer

Promotes economic growth

Question 32

Which country is the largest trading partner of the United States?

Accepted Answer

China

Answer

Canada

Answer

Mexico

Answer

Japan

Question 33

The Heckscher-Ohlin model predicts that a country with abundant labor will export:

Accepted Answer

Labor-intensive goods

Answer

Capital-intensive goods

Answer

Natural resource-intensive goods

Answer

High-technology goods

Question 34

The World Bank is an international organization that primarily focuses on:

Accepted Answer

Promoting economic development in developing countries

Answer

Providing loans to developing countries

Answer

Resolving international trade disputes

Answer

Managing the global monetary system

Question 35

The concept of comparative advantage suggests that countries should:

Accepted Answer

Specialize in producing goods where they have a lower opportunity cost

Answer

Aim to produce all goods domestically

Answer

Protect their domestic industries from foreign competition

Answer

Focus on producing goods that they can import cheaply

Question 36

According to the Comparative Advantage theory, countries should:

Accepted Answer

Specialize in producing goods for which they have a comparative advantage

Answer

Produce goods with the highest absolute productivity

Answer

Produce goods with the lowest absolute costs

Answer

Protect domestic industries regardless of comparative advantage

Question 37

The International Monetary Fund (IMF) primarily focuses on:

Accepted Answer

Providing financial assistance to developing countries

Answer

Promoting currency exchange rates

Answer

Enforcing trade agreements

Answer

Publishing economic research

Question 38

Which of the following is NOT a potential consequence of exchange rate volatility?

Accepted Answer

Higher consumer spending

Answer

Reduced investment flows

Answer

Increased uncertainty for businesses

Answer

Currency crises

Question 39

The concept of 'Dutch Disease' refers to:

Accepted Answer

A decline in the manufacturing sector due to dependence on natural resource exports

Answer

An increase in inflation due to rapid economic growth

Answer

A rise in the value of the currency due to capital inflows

Answer

A fall in the stock market due to a loss of investor confidence

Question 40

According to which theory of trade should nations specialize in producing and exporting goods where they possess a higher relative efficiency?

Accepted Answer

Comparative advantage theory

Answer

Absolute advantage theory

Answer

Heckscher-Ohlin theory

Answer

Ricardian theory

Question 41

What is the term used to describe the relative value of a nation's currency in comparison to other currencies?

Accepted Answer

Exchange rate

Answer

Inflation rate

Answer

Interest rate

Answer

GDP

Question 42

According to the Ricardian model of trade, countries should specialize in producing goods where they have:

Accepted Answer

A comparative advantage

Answer

An absolute advantage

Answer

A lower cost of production

Answer

A higher demand

Question 43

The International Monetary Fund (IMF) was established primarily to:

Accepted Answer

Maintain global financial stability

Answer

Provide aid to developing countries

Answer

Promote international trade

Answer

Encourage economic development

Question 44

The concept of comparative advantage suggests that countries should:

Accepted Answer

Produce goods at the lowest opportunity cost

Answer

Produce goods at the lowest absolute cost

Answer

Avoid specialization in production

Answer

Prioritize self-sufficiency

Question 45

Which of the following characterizes a fixed exchange rate regime?

Accepted Answer

Central bank intervention to maintain a specific exchange rate

Answer

Free fluctuation of the exchange rate based on market forces

Answer

Government adjustment of the exchange rate to achieve a target inflation rate

Answer

Determination of the exchange rate by the balance of payments

Question 46

Which of the following is **not** a primary goal of trade policy?

Accepted Answer

Reducing income inequality

Answer

Promoting economic growth

Answer

Protecting domestic industries

Answer

Maximizing consumer welfare

Question 47

Which of the following is NOT a crucial factor influencing the direction and volume of international trade?

Accepted Answer

Weather patterns

Answer

Relative resource endowments

Answer

Technological advancements

Answer

Government regulations

Question 48

According to the theory of comparative advantage, countries should specialize in producing and exporting:

Accepted Answer

Goods in which they have a comparative advantage

Answer

Goods in which they have an absolute advantage

Answer

Goods for which they have the lowest production costs

Answer

Goods with the highest domestic demand

Question 49

The International Monetary Fund (IMF) is primarily responsible for:

Accepted Answer

Monitoring global economic stability and providing financial assistance

Answer

Setting international exchange rate policies

Answer

Promoting international trade

Answer

Enforcing trade agreements between countries

Question 50

Which of the following is NOT a factor contributing to trade protectionism?

Accepted Answer

Increased consumer surplus

Answer

Political pressures

Answer

Infant industry arguments

Answer

National security concerns

Question 51

The Heckscher-Ohlin model predicts that countries will export goods that are:

Accepted Answer

Intensive in factors of production that are relatively abundant in the country.

Answer

Intensive in factors of production that are relatively scarce in the country.

Answer

Produced using the most advanced technology.

Question 52

Which of the following is a benefit of economic development?

Accepted Answer

Improved living standards

Answer

Depletion of natural resources

Answer

Environmental degradation

Answer

Increased trade protectionism

Question 53

The international monetary system is designed to:

Accepted Answer

Facilitate international trade and investment

Answer

Control inflation rates within individual countries

Answer

Eliminate currency fluctuations

Answer

Provide financial assistance to developing countries

Question 54

Which of the following is NOT a component of the balance of payments?

Accepted Answer

Foreign direct investment

Answer

Exports

Answer

Capital inflows

Answer

Imports

Question 55

The concept of purchasing power parity suggests that the exchange rate between two currencies should:

Accepted Answer

Equalize the cost of a basket of goods and services in both countries

Answer

Be fixed by the central banks of both countries

Answer

Fluctuate freely based on market forces

Question 56

Which of the following is a benefit of a flexible exchange rate regime?

Accepted Answer

Allows for automatic adjustment to external shocks

Answer

Provides stability in trade and investment flows

Answer

Eliminates exchange rate risk for businesses

Answer

Reduces the need for government intervention in the foreign exchange market

Question 57

The World Bank's International Development Association (IDA) provides financial assistance to:

Accepted Answer

Low-income countries

Answer

All developing countries

Answer

High-income countries

Answer

Middle-income countries

Question 58

Which of the following is a key challenge facing the global economy?

Accepted Answer

Climate change

Answer

Technological advancements

Answer

Rising interest rates

Answer

Increased globalization

Question 59

The North American Free Trade Agreement (NAFTA) is an example of a:

Accepted Answer

Regional trade agreement

Answer

Multilateral trade agreement

Answer

Bilateral trade agreement