Economy and Globalization Definition Questions

Economy and Globalization Definition Questions

[Question1]Below are twenty concepts, 1-20, and on the next page are twenty definitions, A-T. Match each definition to its concept by writing the correct letter in the left-hand margin.

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____ 1. Globalization

____ 2. World Trade Organization (WTO)

____ 3. General Agreement on Tariffs and Trade (GATT)

____ 4. Rent

____ 5. Primary products

____ 6. Export dependence

____ 7. Current account

____ 8. Capital account

____ 9. Free trade

____ 10. Income elasticity of demand

____ 11. Price elasticity of demand

____ 12. Export earnings instability

____ 13. Commodity terms of trade

____ 14. Prebisch-Singer hypothesis

____ 15. Barter transactions

____ 16. Comparative advantage

____ 17. Specialization

____ 18. Absolute advantage

____ 19. Factor endowment trade theory

____ 20. Factor price equalization

A The portion of a country’s balance of payments that reflects the market value of the country’s “visible” (e.g., commodity trade) and “invisible” (e.g., shipping services) exports and imports.

B A country’s reliance on exports as the major source of financing for development activities.

C The argument that the commodity terms of trade for primary-product exports of developing countries tends to decline over time.

D The importation and exportation of goods without any barriers in the form of tariffs, quotas, or other restrictions.

E The ratio of a country’s average export price to its average import price.

F Products derived from all extractive occupations—farming, lumbering, fishing, mining and quarrying, foodstuffs, and raw materials.

G The portion of a country’s balance of payments that shows the volume of private foreign investment and public grants and loans that flow into and out of the country.

H Wide fluctuations in developing-country earnings on commodity exports resulting from low price and income elasticities of demand leading to erratic movements in export prices.

I The increasing integration of national economies into expanding international markets.

J This international body has operated since 1995.

K In macroeconomics, the share of national income going to the owners of the productive resource (i.e., landlords). In everyday usage, the price paid for the use of property (e.g., buildings, housing). In microeconomics, economic rent is the payment to a factor of production over and above its highest opportunity cost. In public choice theory, rent refers to those excess payments that are gained as a result of government laws, policies, or regulations.

L The responsiveness of the quantity of a commodity demanded to changes in the consumer’s income, measured by the proportionate change in quantity divided by the proportionate change in income.

M This international body was set up in 1947.

N The responsiveness of the quantity of a commodity demanded to a change in its price, expressed as the percentage change in quantity demanded divided by the percentage change in price.

O The neoclassical model of free trade, which postulates that countries will tend to specialize in the production of the commodities that make use of their abundant factors of production (land, labor, capital, etc.).

P In factor endowment trade theory, the proposition that because countries trade at a common international price ratio, factor prices among trading partners will tend to equalize.

Q Concentration of resources in the production of relatively few commodities.

R The trading of goods directly for other goods in economies not fully monetized.

S Production of a commodity with the same amount of real resources as another producer but at a lower absolute unit cost.

T Production of a commodity at a lower opportunity cost than any of the alternative commodities that could be produced.

[Question2]Below are twenty concepts, 1-20, and on the next page are twenty definitions, A-T. Match each definition to its concept by writing the correct letter in the left-hand margin.

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____ 1. North-South trade models

____ 2. Vent-for-surplus theory of international trade

____ 3. Synthetic substitutes

____ 4. Product cycle

____ 5. Returns to scale

____ 6. Monopolistic market control

____ 7. Oligopolistic market control

____ 8. Increasing returns

____ 9. Product differentiation

____ 10. Risk

____ 11. Uncertainty

____ 12. Growth poles

____ 13. Industrial policy

____ 14. Tariff

____ 15. Quota

____ 16. Subsidy

____ 17. Gains from trade

____ 18. Balanced trade

____ 19. Enclave economies

____ 20. Foreign-exchange earnings

A A situation in which a small number of rival but not necessarily competing firms dominate an industry.

B The sum total of all foreign currency receipts less expenditures during a given fiscal year.

C A situation in which the output of an industry is controlled by a single producer (or seller) or by a group of producers who make joint decisions.

D Regions that are more economically and socially advanced than others around them, such as urban centers versus rural areas or highway corridors in developing countries.

E A situation in which neither the actual outcome nor even the precise probabilities of the various possible outcomes are known.

F A payment by the government to producers or distributors in an industry for such purposes as preventing the decline of that industry, expanding employment, increasing exports, or reducing selected prices paid by consumers.

G Small, economically developed regions in developing countries in which the remaining areas have experienced much less progress.

H Attempts by producers to distinguish their product from similar ones through advertising or minor design changes.

I A situation in which the value of a country’s exports and the value of its imports are equal.

J Commodities that are artificially produced but can be substituted for the natural commodities (e.g., manufactured rubber, cotton, wool, camphor, and pyrethrum).

K The contention that opening world markets to developing countries through international trade allows those countries to make better use of formerly underutilized land and labor resources so as to produce larger primary-product outputs, the surpluses of which can be exported.

L The increase in output and consumption resulting from specialization in production and free trade with other economic units, including persons, regions, or countries.

M In international trade, a physical limitation on the quantity of any item that can be imported into a country.

N Deliberate effort by governments to guide the market by coordinating and supporting specific industrial activities.

O A disproportionate increase in output that results from a change in the scale of production.

P Trade and development theories that focus on the unequal exchange between the North developed countries and the South developing countries in an attempt to explain why the South gains less from trade than the North.

Q How much output expands when all inputs are proportionately increased.

R A situation in which the probabilities of the various possible outcomes are known, but the actual outcome is not known.

S In international trade, the progressive replacement of more developed countries by less developed countries in the production of manufactures of increasing complexity.

T A fixed-percentage tax on the value of an imported commodity levied at the point of entry into the importing country.

[Question3]Below are twenty-seven concepts, 1-27, and twenty-seven definitions, A-AA. Match each definition to its concept by writing the correct letter in the left-hand margin.

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____ 1. Outward-looking development policies

____ 2. Inward-looking development policies

____ 3. Import substitution

____ 4. Export promotion

____ 5. International commodity agreement

____ 6. Multifiber Arrangement (MFA)

____ 7. Trade deficit

____ 8. Infant industry

____ 9. Official exchange rate

____ 10. Free-market exchange rate

____ 11. Overvalued exchange rate

____ 12. Nontariff trade barrier

A Rate at which the central bank will buy and sell the domestic currency in terms of a foreign currency such as the U.S. dollar.

B A newly established industry, usually protected by a tariff barrier as part of a policy of import substitution.

C A barrier to free trade that takes a form other than a tariff, such as quotas or (possibly arbitrary) sanitary requirements.

D An official exchange rate set at a level higher than its real or shadow value.

E Policies that stress economic self-reliance on the part of developing countries, including domestic development of technology, the imposition of barriers to imports, and the discouragement of private foreign investment.

F Rate determined solely by international supply and demand for domestic currency expressed in terms of, say, U.S. dollars.

G Policies that encourage exports, often through the free movement of capital, workers, enterprises, and students; a welcome to multinational corporations; and open communications.

H Government efforts to expand the volume of a country’s exports through increasing export incentives, decreasing disincentives, and other means in order to generate more foreign exchange and improve the current account of its balance of payments or achieve other objectives.

I A set of nontariff quotas established by developed countries on imports of cotton, wool, synthetic textiles, and clothing from individual developing countries.

J A deliberate effort to replace consumer imports by promoting the emergence and expansion of domestic industries.

K A formal agreement by sellers of a common internationally traded commodity (e.g., coffee, sugar) to coordinate supply to maintain price stability.

L An excess of import expenditures over export receipts measured on the current account.

Match each definition to its concept by writing the correct letter in the left-hand margin.

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____ 13. Nominal rate of protection

____ 14. Effective rate of protection

____ 15. Value added

____ 16. Exchange control

____ 17. Dual exchange rate (parallel exchange rate)

____ 18. Devaluation

____ 19. Depreciation (of currency)

____ 20. Flexible exchange rate

____ 21. Managed float

____ 22. Wage-price spiral

____ 23. Undervalued exchange rate

____ 24. Trade optimists

____ 25. Trade pessimists

____ 26. New protectionism

____ 27. Trade liberalization

M The erection of various nontariff trade barriers by developed countries against the manufactured exports of developing nations.

N A fluctuating exchange rate that allows central bank intervention to reduce erratic currency fluctuations.

O A vicious cycle in which higher consumer prices (e.g., as a result of devaluation) cause workers to demand higher wages, which in turn cause producers to raise prices and worsen inflationary forces.

P Theorists who argue that without tariff protection or quantitative restrictions on trade, developing countries gain little or nothing from an export-oriented, open-economy posture.

Q An ad valorem percentage tariff levied on imports.

R A governmental policy designed to restrict the outflow of domestic currency and prevent a worsened balance of payments position by controlling the amount of foreign exchange that can be obtained or held by domestic citizens.

S The exchange value of a national currency that is free to move up and down in response to shifts in demand and supply arising from international trade and finance.

T The degree of protection on value added as opposed to the final price of an imported product—usually higher than the nominal rate of protection.

U Removal of obstacles to free trade, such as quotas, nominal and effective rates of protection, and exchange controls.

V Theorists who believe in the benefits of free trade, open economies, and outward-looking development policies.

W The decline over time in the value or price of one currency in terms of another as a result of market forces of supply and demand.

X A lowering of the official exchange rate between one country’s currency and all other currencies.

Y Amount of a product’s final value that is added at each stage of production.

Z Foreign-exchange-rate system with a highly overvalued and legally fixed rate applied to capital- and intermediate-goods imports and a second, illegal (or freely floating) rate for imported consumption goods.

AA An official exchange rate set at a level lower than its real or shadow value.

[Question4]Below are eleven concepts, 1-11, and eleven definitions, A-K. Match each definition to its concept by writing the correct letter in the left-hand margin.

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____ 1. Industrialization strategy approach

____ 2. Economic integration

____ 3. Economic union

____ 4. Regional trading bloc

____ 5. Customs union

____ 6. Free-trade area

____ 7. Common market

____ 8. Autarky

____ 9. Trade creation

____ 10. Trade diversion

____ 11. Uruguay Round

A A closed economy that attempts to be completely self-reliant.

B Shift upon formation of a customs union, in the location of production from higher-cost to lower-cost member states.

C A round of the GATT negotiations, started in Uruguay in 1986 and signed in 1994, designed to promote international free trade.

D Shift, upon formation of a customs union, of the location of production of formerly imported goods from a lower-cost nonmember state to a higher-cost member state.

E A form of economic integration in which free trade exists among member countries, but members are free to levy tariffs on nonmember countries.

F An economic coalition among countries within a geographic region, usually characterized by liberalized internal trade and uniform restrictions on external trade, designed to promote regional economic integration and growth.

G A form of economic integration in which there is free internal trade, a common tariff, and the free movement of labor and capital among partner states.

H A school of thought in trade and development that emphasizes the importance of overcoming market failures through government policy to encourage technology transfer and exports of progressively more advanced products.

I The merging to various degrees of the economies and economic policies of two or more countries in a region.

J The full integration of two or more economies into a single economic entity.

K A form of economic integration in which two or more nations agree to free all internal trade while levying a common external tariff on all nonmember countries.

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