Question 1

Describe the practice of dollar convertibility.How did this impact the international economy? How did it impact the U.S.'s domestic economy? Why was it ultimately unsustainable? What system took its place?

Accepted Answer

Dollar convertibility refers to the ability to exchange U.S. dollars for gold at a fixed rate. This practice was established after World War II with the Bretton Woods Agreement, which pegged the value of the U.S. dollar to gold and other currencies to the U.S. dollar. This system was intended to promote stability in international trade and finance.

The impact of dollar convertibility on the international economy was significant. It provided a sense of security and stability in international trade, as the U.S. dollar was seen as a reliable and stable currency. However, it also led to imbalances in trade and finance, as countries could accumulate large amounts of U.S. dollars and exchange them for gold, leading to a drain on U.S. gold reserves.

In the U.S.'s domestic economy, dollar convertibility led to a period of economic growth and prosperity, as the U.S. dollar became the dominant currency in international trade and finance. However, it also led to inflation and trade deficits, as the U.S. printed more dollars than it had gold to back them up.

Ultimately, dollar convertibility was unsustainable because the U.S. could not maintain the fixed exchange rate of the dollar to gold. This led to the collapse of the Bretton Woods system in the early 1970s, and the U.S. dollar was no longer convertible to gold. Instead, a system of floating exchange rates was adopted, where the value of currencies is determined by supply and demand in the foreign exchange market.

In conclusion, the practice of dollar convertibility had a significant impact on the international and domestic economies, leading to both stability and imbalances. However, it was ultimately unsustainable due to the inability to maintain the fixed exchange rate of the U.S. dollar to gold, leading to the adoption of a new system of floating exchange rates.

Question 2

If a state has a balance of payments deficit, it is exporting more than it is importing.

Accepted Answer

A) True 
 B)False  False

Question 3

Protestors at WTO meetings argue in favor of increasing trade liberalization.

Accepted Answer

A) True 
 B)False  False

Question 4

Commercial liberalism is an economic philosophy that advocates free markets, open trade, and free flowing capital.

Accepted Answer

A) True 
 B)False

Question 5

In what ways can private investors affect a currency's value? In what ways can a government's central bank affect the value of the state's currency? How are the role and the interests of the government different from that of a private investor?

Accepted Answer

The answer of In what ways can private investors affect...

Question 6

Which of the following is (are) protectionist policies?

Accepted Answer

A)  Quotas on imports
B)  Tariffs on foreign goods
C)  Outsourcing labor
D)  Both options a and b are true.
E)  Both options a and c are true.

Question 7

Which of the following is the world's reserve currency?

Accepted Answer

A)  Euro
B)  Dollar
C)  Yen
D)  Pound
E)  Renminbi

Question 8

Dollar convertibility refers to

Accepted Answer

A)  the ability to exchange dollars for any other currency.
B)  the ability to convert dollars to commodities such as exported goods.
C)  the ability of the World Bank to devalue the dollar.
D)  the pricing of a barrel of oil in U.S.dollars.
E)  the U.S.commitment to exchange gold for dollars.

Question 9

The "balance of payments" is a calculation summarizing a country's financial transactions with the external world.

Accepted Answer

A) True 
 B)False

Question 10

Nontariff barriers include

Accepted Answer

A)  safety regulations.
B)  licensing requirements.
C)  health requirements.
D)  Both options a and c are true.
E)  All of the above are true.

Question 11

A country's money supply consists of currency minus government debt.

Accepted Answer

A) True 
 B)False

Question 12

Globalization is

Accepted Answer

A)  an exclusively economic phenomenon.
B)  an exclusively political phenomenon.
C)  an economic and political phenomenon.
D)  an economic, political, and cultural phenomenon.
E)  None of the above is true.

Question 13

NAFTA is an example of a regional trade agreement (RTA).

Accepted Answer

A) True 
 B)False

Question 14

The negotiating states at the 1944 Bretton Woods Conference agreed the global monetary regime should be based on fixed exchange rates.

Accepted Answer

A) True 
 B)False

Question 15

The volume of international capital flows is less than the volume of international trade.

Accepted Answer

A) True 
 B)False

Question 16

A good that everyone benefits from and from which no one can be excluded is a(n)

Accepted Answer

A)  exported good.
B)  free rider.
C)  collective or public good.
D)  commercial good.
E)  benefit.

Question 17

Unlike private investors, governments are not allowed to intervene in the currency market to affect the value of their own currency.

Accepted Answer

A) True 
 B)False

Question 18

According to hegemonic stability theory, a global free trade economy needs a single dominant leader to keep it open and stable.

Accepted Answer

A) True 
 B)False

Question 19

During a meeting of the World Trade Organization, anti-WTO activists descended upon the trade talks in Seattle, WA.Why were the protestors there? What were their complaints? Were they justified? Write an essay in which you decide whether the World Trade Organization is a friend or foe.

Accepted Answer

The answer of During a meeting of the World Trade...

Question 20

Liberals believe that free markets

Accepted Answer

A)  are engines of progress.
B)  expand political rights.
C)  benefit only wealthy nations.
D)  Both options a and b are true.
E)  All of the above are true.

Exam 10: The Globalization of Trade and Finance

Describe the practice of dollar convertibility.How did this impact the international economy? How did it impact the U.S.'s domestic economy? Why was it ultimately unsustainable? What system took its place?

If a state has a balance of payments deficit, it is exporting more than it is importing.

Protestors at WTO meetings argue in favor of increasing trade liberalization.

Commercial liberalism is an economic philosophy that advocates free markets, open trade, and free flowing capital.

In what ways can private investors affect a currency's value? In what ways can a government's central bank affect the value of the state's currency? How are the role and the interests of the government different from that of a private investor?

Which of the following is (are) protectionist policies?

Which of the following is the world's reserve currency?

Dollar convertibility refers to

The "balance of payments" is a calculation summarizing a country's financial transactions with the external world.

Nontariff barriers include

A country's money supply consists of currency minus government debt.

Globalization is

NAFTA is an example of a regional trade agreement (RTA).

The negotiating states at the 1944 Bretton Woods Conference agreed the global monetary regime should be based on fixed exchange rates.

The volume of international capital flows is less than the volume of international trade.

A good that everyone benefits from and from which no one can be excluded is a(n)

Unlike private investors, governments are not allowed to intervene in the currency market to affect the value of their own currency.

According to hegemonic stability theory, a global free trade economy needs a single dominant leader to keep it open and stable.

During a meeting of the World Trade Organization, anti-WTO activists descended upon the trade talks in Seattle, WA.Why were the protestors there? What were their complaints? Were they justified? Write an essay in which you decide whether the World Trade Organization is a friend or foe.

Liberals believe that free markets