Question 1

Which of the following is an example of a speculative attack on a currency?

Accepted Answer

A)  National governments decide to engage in competitive devaluations against a given country. 
B)  International organizations such as the WTO and the IMF attempt to reorder the currency's system. 
C)  Private investors sell domestic currency and buy foreign currency, betting that the domestic currency will soon be devaluated. 
D)  Casinos in Las Vegas allow the proliferation of bets for and against a given currency. 
E)  A country is at war, and the enemy country "freezes" all the accounts denominated in the local currency. 
A)  National governments decide to engage in competitive devaluations against a given country. 
B)  International organizations such as the WTO and the IMF attempt to reorder the currency's system. 
C)  Private investors sell domestic currency and buy foreign currency, betting that the domestic currency will soon be devaluated. 
D)  Casinos in Las Vegas allow the proliferation of bets for and against a given currency. 
E)  A country is at war, and the enemy country "freezes" all the accounts denominated in the local currency.

Question 2

The financial crises of the 1990s pointed out that small developing countries have a vulnerability to globalization in terms of _____.

Accepted Answer

A)  environment 
B)  labor standards 
C)  international capital flows 
D)  the judicial system 
E)  child labor 
A)  environment 
B)  labor standards 
C)  international capital flows 
D)  the judicial system 
E)  child labor

Question 3

The phrase "race to the bottom" refers to the situation in which globalization results in countries competing for international investment by imposing low or no environmental regulations or labor standards.

Accepted Answer

A) True 
 B)False

Question 4

Supporters of globalization believe that free trade and international investment result in all countries raising their living standards.

Accepted Answer

A) True 
 B)False

Question 5

To counteract the depreciation of the national currency against the U.S. dollar, the central bank of a country can intervene in the foreign exchange market. Which of the following imposes a restriction on this ability of the central banks to maintain a fixed exchange rate?

Accepted Answer

A)  The central banks have a limited amount of international reserve. 
B)  The central banks have a limited amount of domestic currency. 
C)  Unrestricted sale of foreign currency will cause inflation in the domestic economy. 
D)  The supply of dollars is perfectly elastic in the foreign exchange market. 
E)  The central banks need to maintain a certain amount of its assets in the form of gold. 
A)  The central banks have a limited amount of international reserve. 
B)  The central banks have a limited amount of domestic currency. 
C)  Unrestricted sale of foreign currency will cause inflation in the domestic economy. 
D)  The supply of dollars is perfectly elastic in the foreign exchange market. 
E)  The central banks need to maintain a certain amount of its assets in the form of gold.

Question 6

The figure given below shows the demand curves for dollars arising out of Thai demand for U.S. goods and services and the supply of dollars arising out of the U.S. demand for Thai goods, services, and financial assets. D₁ and S₁ are the original demand and supply curves.?Figure 18.2
  
-Refer to Figure 18.2. Assume that the foreign exchange market is initially at equilibrium when the demand and supply curves are D₁ and S₁ respectively. When the demand curve shifts from D₁ to D₂, the Thai government intervenes to restore the original equilibrium. If Figure 18.2 describes these changes, which of the following will be true?

Accepted Answer

A)  The baht depreciates slightly, as the equilibrium exchange rate goes down from E to F. 
B)  The baht depreciates, as the equilibrium exchange rate goes up from E to G. 
C)  The baht appreciates, as the equilibrium exchange rate goes down from E to D. 
D)  The equilibrium exchange rate goes up from D to G. 
E)  The baht appreciates slightly, as the equilibrium exchange rate goes up from E to F. 
A)  The baht depreciates slightly, as the equilibrium exchange rate goes down from E to F. 
B)  The baht depreciates, as the equilibrium exchange rate goes up from E to G. 
C)  The baht appreciates, as the equilibrium exchange rate goes down from E to D. 
D)  The equilibrium exchange rate goes up from D to G. 
E)  The baht appreciates slightly, as the equilibrium exchange rate goes up from E to F.

Question 7

Which of the following is a probable consequence of the presence of accounting rules that allow firms to hide the financial impact of actions that would harm investors?

Accepted Answer

A)  Investors may be able to enforce market efficiency. 
B)  The WTO will disenfranchise the country that allows this to happen. 
C)  Investors will immediately organize a speculative attack and the price of stocks will inflate. 
D)  The balance-of-payments deficit will increase, leading the economy into a debt trap. 
E)  Investors may not be able to adequately judge when the risk of investing in a firm rises. 
A)  Investors may be able to enforce market efficiency. 
B)  The WTO will disenfranchise the country that allows this to happen. 
C)  Investors will immediately organize a speculative attack and the price of stocks will inflate. 
D)  The balance-of-payments deficit will increase, leading the economy into a debt trap. 
E)  Investors may not be able to adequately judge when the risk of investing in a firm rises.

Question 8

Which of the following multinational agreements allows the international movement of workers?

Accepted Answer

A)  NATO 
B)  The European Union 
C)  The group of G-8 
D)  NAFTA 
E)  The United Nations Accords 
A)  NATO 
B)  The European Union 
C)  The group of G-8 
D)  NAFTA 
E)  The United Nations Accords

Question 9

Any movement to reduce the globalization of the world's economies will make workers in the poorest countries worse off than they would otherwise be.

Accepted Answer

A) True 
 B)False

Question 10

The figure given below shows the demand curves for dollars arising out of Thai demand for U.S. goods and services and the supply of dollars arising out of the U.S. demand for Thai goods, services, and financial assets. D₁ and S₁ are the original demand and supply curves.?Figure 18.1
  
-Refer to Figure 18.1. Assume that there is a market perception that the value of Thai assets will decrease in the near future. This affects the current equilibrium exchange rate. What can the Thai central bank do to restore the previous value of the baht?

Accepted Answer

A)  Increase the demand for U.S. dollars 
B)  Sell Thai bahts in the foreign exchange market 
C)  Sell dollars in the foreign exchange market 
D)  Appeal to the WTO for help 
E)  Buy back outstanding Thai bonds in open market operations 
A)  Increase the demand for U.S. dollars 
B)  Sell Thai bahts in the foreign exchange market 
C)  Sell dollars in the foreign exchange market 
D)  Appeal to the WTO for help 
E)  Buy back outstanding Thai bonds in open market operations

Question 11

Countries in which one would see a spread of ideas, information, images, and people would be categorized under _____ globalization.

Accepted Answer

A)  economic 
B)  social 
C)  ethical 
D)  cultural 
E)  political 
A)  economic 
B)  social 
C)  ethical 
D)  cultural 
E)  political

Question 12

Which of the following is true of the crises experienced in the 1990s?

Accepted Answer

A)  Most of the economic crises occurred in Mexico. 
B)  Each of the countries affected by the crisis in Southeast Asia owed substantial long-term debt to foreigners. 
C)  During this time, bank loans were a sizable fraction of GDP in all the crisis countries except Mexico. 
D)  Stock prices dropped by an amount ranging from 21 percent in Malaysia to 35 percent in Korea. 
E)  Exchange rate against the U.S. dollar dropped substantially in the Philippines. 
A)  Most of the economic crises occurred in Mexico. 
B)  Each of the countries affected by the crisis in Southeast Asia owed substantial long-term debt to foreigners. 
C)  During this time, bank loans were a sizable fraction of GDP in all the crisis countries except Mexico. 
D)  Stock prices dropped by an amount ranging from 21 percent in Malaysia to 35 percent in Korea. 
E)  Exchange rate against the U.S. dollar dropped substantially in the Philippines.

Question 13

Which of the following is not a defining characteristic of globalization?

Accepted Answer

A)  Increased cross-border flow of trade in goods 
B)  Increased cross-border flow of trade in services 
C)  Increased international mobility of information 
D)  Increased frequency of wars 
E)  Increased mobility of individuals across borders 
A)  Increased cross-border flow of trade in goods 
B)  Increased cross-border flow of trade in services 
C)  Increased international mobility of information 
D)  Increased frequency of wars 
E)  Increased mobility of individuals across borders

Question 14

Globalization had to be put into effect to revive developed economies after the financial crises of the 1990s.

Accepted Answer

A) True 
 B)False

Question 15

Suppose, before the Asian financial crisis, the Thai baht was fixed against the dollar at a rate of 26 bahts for one U.S. dollar. If the exchange rate were allowed to float freely, the market would then set the rate at 35 bahts for one dollar. Under these circumstances, we say that the baht was:

Accepted Answer

A)  about to appreciate. 
B)  fixed below its par value. 
C)  overvalued. 
D)  undervalued. 
E)  revalued. 
A)  about to appreciate. 
B)  fixed below its par value. 
C)  overvalued. 
D)  undervalued. 
E)  revalued.

Question 16

International trade constantly increased throughout the twentieth century.

Accepted Answer

A) True 
 B)False

Question 17

There are certain variables that are so obviously related to past crises that they may serve as warning indicators of potential future crises. Identify one such variable from the following.

Accepted Answer

A)  Barriers to trade 
B)  Short-term international investment 
C)  Flexible exchange rates 
D)  Rising international reserves 
E)  Fluctuating share prices 
A)  Barriers to trade 
B)  Short-term international investment 
C)  Flexible exchange rates 
D)  Rising international reserves 
E)  Fluctuating share prices

Question 18

Which of the following resulted in the financial crisis in 2007-08?

Accepted Answer

A)  Falling international reserves 
B)  Short-term investments made by China in the US 
C)  Lack of transparency 
D)  Bad loans on U.S. mortgages 
E)  Fixed rates of interest 
A)  Falling international reserves 
B)  Short-term investments made by China in the US 
C)  Lack of transparency 
D)  Bad loans on U.S. mortgages 
E)  Fixed rates of interest

Question 19

Supporters of globalization argue that multinational firms pay higher wages than local firms, and provide greater benefits for workers than existed in the country prior to globalization.

Accepted Answer

A) True 
 B)False

Question 20

An increase in the supply of U.S. dollars in the foreign exchange market would cause the dollar to appreciate with respect to other currencies.

Accepted Answer

A) True 
 B)False

Which of the following is an example of a speculative attack on a currency?

The financial crises of the 1990s pointed out that small developing countries have a vulnerability to globalization in terms of _____.

The phrase "race to the bottom" refers to the situation in which globalization results in countries competing for international investment by imposing low or no environmental regulations or labor standards.

Supporters of globalization believe that free trade and international investment result in all countries raising their living standards.

To counteract the depreciation of the national currency against the U.S. dollar, the central bank of a country can intervene in the foreign exchange market. Which of the following imposes a restriction on this ability of the central banks to maintain a fixed exchange rate?

Which of the following is a probable consequence of the presence of accounting rules that allow firms to hide the financial impact of actions that would harm investors?

Which of the following multinational agreements allows the international movement of workers?

Any movement to reduce the globalization of the world's economies will make workers in the poorest countries worse off than they would otherwise be.

Countries in which one would see a spread of ideas, information, images, and people would be categorized under _____ globalization.

Which of the following is true of the crises experienced in the 1990s?

Which of the following is not a defining characteristic of globalization?

Globalization had to be put into effect to revive developed economies after the financial crises of the 1990s.

Suppose, before the Asian financial crisis, the Thai baht was fixed against the dollar at a rate of 26 bahts for one U.S. dollar. If the exchange rate were allowed to float freely, the market would then set the rate at 35 bahts for one dollar. Under these circumstances, we say that the baht was:

International trade constantly increased throughout the twentieth century.

There are certain variables that are so obviously related to past crises that they may serve as warning indicators of potential future crises. Identify one such variable from the following.

Which of the following resulted in the financial crisis in 2007-08?

Supporters of globalization argue that multinational firms pay higher wages than local firms, and provide greater benefits for workers than existed in the country prior to globalization.

An increase in the supply of U.S. dollars in the foreign exchange market would cause the dollar to appreciate with respect to other currencies.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters

Exam 18: Globalization

Which of the following is an example of a speculative attack on a currency?

The financial crises of the 1990s pointed out that small developing countries have a vulnerability to globalization in terms of _____.

The phrase "race to the bottom" refers to the situation in which globalization results in countries competing for international investment by imposing low or no environmental regulations or labor standards.

Supporters of globalization believe that free trade and international investment result in all countries raising their living standards.

To counteract the depreciation of the national currency against the U.S. dollar, the central bank of a country can intervene in the foreign exchange market. Which of the following imposes a restriction on this ability of the central banks to maintain a fixed exchange rate?

Which of the following is a probable consequence of the presence of accounting rules that allow firms to hide the financial impact of actions that would harm investors?

Which of the following multinational agreements allows the international movement of workers?

Any movement to reduce the globalization of the world's economies will make workers in the poorest countries worse off than they would otherwise be.

Countries in which one would see a spread of ideas, information, images, and people would be categorized under _____ globalization.

Which of the following is true of the crises experienced in the 1990s?

Which of the following is not a defining characteristic of globalization?

Globalization had to be put into effect to revive developed economies after the financial crises of the 1990s.

Suppose, before the Asian financial crisis, the Thai baht was fixed against the dollar at a rate of 26 bahts for one U.S. dollar. If the exchange rate were allowed to float freely, the market would then set the rate at 35 bahts for one dollar. Under these circumstances, we say that the baht was:

International trade constantly increased throughout the twentieth century.

There are certain variables that are so obviously related to past crises that they may serve as warning indicators of potential future crises. Identify one such variable from the following.

Which of the following resulted in the financial crisis in 2007-08?

Supporters of globalization argue that multinational firms pay higher wages than local firms, and provide greater benefits for workers than existed in the country prior to globalization.

An increase in the supply of U.S. dollars in the foreign exchange market would cause the dollar to appreciate with respect to other currencies.

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters