PLSC-3389 - International Political Economy - All Quiz Answers

PLSC-3389 - International Political Economy - All Quiz Answers

Which of the following is NOT one of the principal goals of state action in the IPE, according to Stephan Krasner?

PROMOTING DEMOCRACY!

• Other options/principal goals:

• Pursuit of political power

• Aggregating National Income

• Promoting economic growth

• Maintaining social stability

In his approach to international relations, Krasner is an idealist.

False. Realist.

Krasner argues that firms are more important actors than states in the IPE

False.

According to Krasner, _______ states are more likely to get welfare benefits from free trade.

Small.

But Krasner argues that _______ states are more vulnerable to social instability when they open themselves to trade.

Small.

Looking at tariff levels in the 19th century, Krasner concludes that they were _______ from 1820 to 1879

Declining.

The push for free trade in Europe in the 19th century began in _______.

Great Britain

The Zollverein was a(n) _______ formed among the German states.

Customs Union.

The Corn Laws helped push Britain towards a policy of free trade.

False. The REPEAL of the Corn Laws was a push towards free trade.

Throughout the 19th and well into the 20th centuries, the United States followed a policy of _______.

Protectionism.

During most of the 19th century, according to Krasner, global trade was sustained by US military and economic power.

False.

_______ was the great financial hub of the world economy in the 19th century.

The City (London).

The _______ was the "lender of last resort" in the 19th century IPE.

Bank of England.

During the Interwar Period (1919–1939), the United States replaced Britain as the hegemonic power.

False.

During the Interwar Period, sterling (the British pound) lost much of its value.

True.

Following passage by the US Congress of the Reciprocal Trade Agreements Act of 1934, the _______ took greater responsibility for US trade policy.

President.

The Smoot-Hawley Act (1930) was a _______ policy.

Mercantilist.

According to Krasner, British commitment to free trade continued long after Britain's power in the IPE had declined.

True.

Krasner embraces transnationalism and he agrees with the argument that with the rise of economic interdependence since 1945, state power is less important in the IPE.

False.

Krasner argues that the hegemony of a leading power _______ necessary for the creation and maintenance of a free trading system.

IS!

Mercantilism is closely associated with the period of nation-building and absolutism in Europe in the sixteenth and seventeenth centuries.

True.

Mercantilists are strong proponents of the theory of comparative advantage.

False.

David Ricardo opposed repeal of the Corn Laws.

False. Ricardo was in favor of free trade, thus in favor of the repeal of the Corn Laws.

Ricardo (like Karl Marx) argued that the value or price of a commodity is equal to or can be inferred from the amount of _______ that goes into producing it.

Labor.

In the nineteenth century, which of the following countries was most committed to liberalism and free trade?

Britain.

In Cheryl Schonhardt-Bailey's essay on repeal of the Corn Laws, we can see a classic example of the political economy of protectionism where the costs of protectionism are _______ while the benefits are _______.

Diffuse, Specific. The costs of protectionism are diffuse, while the benefits are specific.

In her essay we also can see that the big winners from Repeal of the Corn Laws were the _______ whereas the losers were the _______.

Industrialists, Agriculturalists.

A _______ is more likely to worry about the balance of trade (ratio of exports to imports).

Mercantilist.

Liberals argue that international trade permits specialization, and specialization increases _______.

Output.

According to Ricardo, trade can be mutually beneficial even if one country has an absolute advantage in the production of all goods.

True.

Ricardo argues that in the long run, specialization and trade depend upon _______ advantage.

Comparative.

A tariff is a tax imposed by the government on imports, the purpose being to cut down on imports in order to protect domestic industry and workers from foreign competition. Are such policies consistent with a "liberal" perspective on international political economy?

No.

Are such policies consistent with a mercantilist perspective?

YES!

Which of the following is NOT true?

a. The U.S. has an absolute advantage in the production of both products.

b. The U.S. has the greatest cost advantage in the production of computers.

c. France has the least comparative disadvantage in the production of wine.

d. The U.S. should trade computers for wine.

e. By trading computers for wine, the U.S. is able to produce more wine.

D is NOT true: The U.S. should trade computers for wine.

In this example, the cheapest way for the U.S. to obtain wine is to make computers and trade them with France. Likewise, the cheapest way for France to obtain computers is to make wine and trade it with the United States.

True.

Among the gains from trade are:

a. declining per unit production costs (economies of scale).

b. higher quality goods due to competition between domestic and foreign firms.

c. lower prices and a greater variety of goods available to consumers.

d. all of the above.

e. b and c, but not a.

D. All of the above.

Liberals argue that governments should stimulate exports and restrict imports.

False.

In the Marxist-Leninist perspective on political economy, _______ are the principal actors in the IPE.

Social Classes.

Lenin argued that imperialism was the highest stage of capitalism because…

a. it helped to create new markets

b. it offered another outlet for productive investment

c. it involved massive outlays of capital and fostered the rise of finance and banking

d. all of the above

e. a and b, but not c

D. All of the above: It helped to create new markets, it offered another outlet for productive investment, and it involved massive outlays of capital and fostered the rise of finance and banking.

The Stolper-Samuelson theorem predicts that protection leads to an increase in the income of a nation's _______ factor. It therefore follows that free trade would be a threat to a nation's _______ factor, and that a nation's _______ factor will support free trade.

Scarce, Scarce, Abundant.

According to Heckscher and Ohlin, the MOST important cause of the difference in relative commodity prices and trade between nations is a difference in

Factor Endowments.

The factor proportions and factor intensity argument advanced by Ohlin states a country can produce a good more cheaply by matching its _______ factor with the factor intensity of the good because when a nation has relatively _______ of a particular factor, the cost of that factor to a producer will be comparatively _______.

Abundant, More, lower.

The prices of the factors of production, according to Ohlin's theory, are responsive to changes in demand, which result from adjustments due to specialization/trade.

True.

One of the most significant predictions of Ohlin's theory is that…

Trade leads to a movement towards factor-price equalization.

Looking at the diagram above, point A represents the _______-trade terms of trade for the home country (U.S.).

Pre.

The post-trade terms of trade allow the home country to produce the same amount of _______ but consume more _______.

Food, Toys.

Likewise, the foreign country can produce the same amount of _______ but consume more _______.

Toys, Food.

Once trade opens, the home and foreign countries have a whole range of new consumption options, and they can move beyond their old production frontiers.

True.

The home country (U.S.) reaches a _______ indifference curve by participating in world trade.

Higher.

According to this model, when we compare the internal and external terms of trade (TOT), the home country (U.S.) has a comparative advantage in the production of _______.

Food.

Whereas the foreign country (China) has a comparative advantage in the production of _______.

Toys.

According to the Stolper-Samuelson theorem, the _______ industry is likely to seek protection in the home country (U.S.).

Toy.

Whereas the _______ industry is likely to seek protection in the foreign country (China).

Food.

The policy conclusion to be drawn from this illustration of modern trade theory is that governments should do everything possible to make sure that industries are producing the right products, at the right price, for internal and external consumption.

False.

Peter Gourevitch seeks to explain the rise of _______ as a response to the Great Depression of 1873.

Protectionism.

In Germany of the Second Reich, the so-called "marriage of iron and rye" was a political coalition that favored _______.

Protectionism.

Expansion of the suffrage in Third Republic France, according to Gourevitch, favored the forces of _______.

Protectionism.

In Britain the Great Depression of the 1870s and the consequent fall in grain prices led the English landowning aristocracy to demand higher tariffs on imported foodstuffs.

False.

Which of the following factors is most important in explaining tariff policies in Europe and the United States during the period 1873–1896, according to Gourevitch?

Economic Interests.

The Leontief paradox showed that the U.S. imported more _______-intensive products than it exported

Capital.

Historically, the _______ party favored protectionism, while the _______ party favored free trade

Republican, Democrat.

According to Bailey, et al., the 1934 Reciprocal Trade Agreements Act (RTAA) led to lower tariffs and export growth.

True.

Eichengreen stresses the role of _______ in the passage of the Smoot-Hawley tariff.

a. interest groups
b. political parties
c. rotten boroughs
d. all of the above

D. All of the above: Interest groups, Political parties, Rotten boroughs.

According to Eichengreen, World War I _______ the hand of labor unions in the U.S., thereby contributing to a _______ in protectionism.

Strengthened, Rise.

Eichengreen argues that Smoot-Hawley was the result of logrolling, where unrelated and opposing interests coalesced to pass a protectionist trade bill.

True.

In general, protectionism leads to a(n) _______ in the volume of trade.

Decrease.

The fall in the volume of trade will lead to a _______ in production and output, and in turn to a _______ in GDP.

Decline, Decline.

Dumping is the practice of selling a product in a foreign market at a price that is _______ the price it charges in the domestic market and _______ its unit cost of production.

Below, Below.

The US trade deficit with China reflects macroeconomic imbalances in the two countries. China produces _______ than it spends, whereas the U.S. spends _______ than it produces.

More, More.

The trade deficit is largely the result of a _______ national savings rate in China, and a _______ national savings rate in the U.S.

High, Low.

By imposing a tariff, the U.S. can eliminate the trade deficit with China.

False.

Subsidies help to promote free trade.

False.

The U.S. has never pursued an 'infant industries' policy.

False.

The ratio between a country's export and import prices represents a nation's _______.

Terms of Trade.

This graph shows the tariff equilibrium in the home market. When a tariff is imposed, the immediate winners are _______ whereas the big losers are _______.

Producers, Consumers.

Looking at the tariff equilibrium, we can say that a new welfare component arises that does not exist with free trade, namely the additional revenue (area c) that benefits _______.

Government.

Areas b and d in the graph represent a net welfare _______ for society resulting from the country's restrictive trade policy.

Loss.

List THREE points that Truman makes in his 1957 SMU speech in favor of free trade:

1. Slows and contains the spread of Communism.

2. It is beneficial to all parties involved.

3. America is stable and doesn’t have a need for protectionist policies anymore. They would only stifle industry and profit.

The GATT System is based on _____ principles.

Liberal.

_____ is the GATT principle which states that foreign goods must be treated the same as domestic goods with respect to tax, regulation, transportation, and distribution. 

Non-discrimination.

In the initial GATT rounds developing countries were exempt from reciprocity and allowed to free ride in the system. 

True.

In the early GATT rounds, tariffs on agricultural goods were reduced. 

True.

The _____ Round of GATT tackled barriers to trade in services and brought increased protections for intellectual property.

Uruguay.

The Doha Round has been a _____. 

Failure.

According to Richard Baldwin, the proliferation of bilateral and regional trade agreements has given a boost to GATT/WTO and strengthened the multilateral process. 

False.

The idea that the “inclinations and circumstances of consumers on both sides [i.e. in each trading partner]” will determine where between the two internal cost ratios the terms of trade will lie is known as _____. 

Reciprocal Demand.

Offer curves are geometric devices that show how the interaction of supply and demand determines the equilibrium terms of trade between the two trading nations. 

True.

Looking at Country B’s offer curve (next page), we can say that country B will trade product Y for X at 1 to 1 when it reaches point E. 

True.

Beyond point E the terms of trade become _____ favorable to country B.

More.

If we draw a line from 0 through any point on the offer curve, we can see the connection between Y: X exchange ratios. These lines (like T in the diagram above) represent the _____.  

Terms of Trade.

Along the O-E line, Y is exchanged for X at a ratio of _____. 

1:1.

Looking at the trade equilibrium with offer curves for countries A and B (and products Y and X), the point at which both countries maximize the gains from trade is _____.

Point E.

If the demand for Y in country B increases, the offer curve for country B will shift _____ and _____ the Y axis.  

Upwards, Towards.

And the terms of trade for country B will become _____ favorable. 

Less.

By imposing a tariff, a country can alter the terms of trade in its favor. 

True.

The Committee on Foreign Investment in the United States (CFIUS) is charged with ensuring that trade is fair, and that the U.S. had a level playing field. 

False.

Which of the following represents a non-tariff barrier (NTB)?  

All of the above. (Import quotas, voluntary export restraint, domestic content requirement *rules of origin).  

Government procurement requirements _____ prohibited under WTO rules. 

Are not.