Test Bank For
International Economics Theory and Policy, 12th edition Paul R. Krugman,
Maurice Obstfeld, Marc Melitz
Chapter 1-22
Chapter 1 Introduction
1.1 What Is International Economics About?
1) Historians of economic thought often describe ________ written by ________ and published in
________ as the first real exposition of an economic model.
A) "Of the Balance of Trade"; David Hume; 1776
B) "Wealth of Nations"; David Hume; 1758
C) "Wealth of Nations"; Adam Smith; 1758
D) "Wealth of Nations"; Adam Smith; 1776
E) "Of the Balance of Trade"; David Hume; 1758
Answer: E
Difficulty: Easy
AACSB: Application of knowledge
2) From 1960 to 2019
A) the U.S. economy roughly tripled in size.
B) U.S. imports roughly tripled in size.
C) the share of U.S. trade in the global economy roughly tripled in size compared with the
economy as a whole.
D) U.S. imports roughly tripled as compared to U.S. exports.
E) U.S. exports roughly tripled in size.
Answer: C
Difficulty: Easy
AACSB: Application of knowledge
3) From 1960 to 2019, both U.S. imports and exports have increased, ________ have grown more,
leading to a large excess of ________.
A) imports; imports over exports
B) exports; exports over imports
C) imports; exports over imports
D) exports; imports over exports
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
4) The facts that U.S. imports and exports plunged in 2009 during the global economic crisis and in
2020 during the Covid-19 pandemic demonstrated the close links between
A) world trade and the overall state of the world economy.
B) crisis and unemployment.
C) the pandemic and shortage of goods and services.
D) the business cycle and trade policies.
1
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, Answer: A
Difficulty: Easy
AACSB: Application of knowledge
5) The United States is less dependent on trade than most other countries because
A) the United States is a relatively large country with diverse resources.
B) the United States is a "Superpower."
C) the military power of the United States makes it less dependent on anything.
D) the United States invests in many other countries.
E) many countries invest in the United States.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
6) Theories of international economics from the 18th and 19th centuries are
A) not relevant to current policy analysis.
B) only of moderate relevance in today's modern international economy.
C) highly relevant in today's modern international economy.
D) the only theories that are actually relevant to modern international economy.
E) not well understood by modern mathematically oriented theorists.
Answer: C
Difficulty: Easy
AACSB: Application of knowledge
7) International economics ________ use the same fundamental methods of analysis as other
branches of economics, because ________.
A) does not; the level of complexity of international issues is unique
B) does not; the interactions associated with international economic relations is highly
mathematical
C) does not; international economics takes a different perspective on economic issues
D) does; international economists must reach an agreement with other economists on every
economic issue
E) does; the motives and behavior of individuals are the same in international trade as they are in
domestic transactions
Answer: E
Difficulty: Easy
AACSB: Application of knowledge
8) Because the Constitution forbids restraints on interstate trade
A) the U.S. may not impose tariffs on imports from NAFTA countries.
B) the U.S. may not affect the international value of the $ U.S.
C) the U.S. may not put restraints on foreign investments in California if it involves a financial
intermediary in New York State.
D) the U.S. may not impose export duties.
E) the U.S. may not disrupt commerce between Florida and Hawaii.
Answer: E
Difficulty: Easy
2
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, AACSB: Application of knowledge
9) An important insight of international economics is that when countries sell goods and services
to each other,
A) the exchange is almost always mutually beneficial.
B) one country always benefits at the expense of the other.
C) it only benefits the low wage country.
D) it only benefits the high wage country.
E) it is almost never beneficial to both countries.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
10) "Trade is generally harmful if there are large disparities between countries in wages."
A) This is generally true.
B) This is generally false.
C) Trade theory has nothing to say about this issue.
D) This is true if the trade partner ignores child labor laws.
E) This is true if the trade partner uses prison labor.
Answer: B
Difficulty: Easy
AACSB: Application of knowledge
11) If there are large disparities in wage levels between countries, then
A) trade is likely to be harmful to both countries.
B) trade is likely to be harmful to the country with the high wages.
C) trade is likely to be harmful to the country with the low wages.
D) trade is likely to be harmful to neither country.
E) trade is likely to have no effect on either country.
Answer: D
Difficulty: Easy
AACSB: Application of knowledge
12) If there are large disparities in productivity between countries, then
A) trade is likely to be harmful to neither country.
B) trade is likely to be harmful to the country with the high wages.
C) trade is likely to be harmful to the country with the low wages.
D) trade is likely to be harmful to both countries.
E) trade is likely to have no effect on either country.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
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, 13) Which of the following statements is TRUE?
A) Trade is mutually beneficial when countries exchange goods and services.
B) Trade is harmful if large disparities exist between countries in productivity.
C) Trade is harmful if large disparities exist between countries in wages.
D) Trading with less-advanced, lower-wage countries will drag down a country's standard of
living.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
14) The benefits of international trade are derived from trade in
A) tangible goods only.
B) intangible goods only.
C) goods but not services.
D) services but not goods.
E) anything of value.
Answer: E
Difficulty: Easy
AACSB: Application of knowledge
15) Which of the following statements is NOT TRUE?
A) International trade will have no effects on income distribution.
B) International trade may hurt particular groups within nations.
C) International trade can adversely impact owners of resources that are specific to industries that
compete with imports.
D) International trade can alter the distribution of income between broad groups, such as workers
and the owners of capital.
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
16) Who sells what to whom
A) has been a major preoccupation of international economics.
B) is not a valid concern of international economics.
C) is not considered important for government foreign trade policy since such decisions are made
in the private competitive market.
D) is determined by political rather than economic factors.
E) is less important than international economic theory.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
4
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International Economics Theory and Policy, 12th edition Paul R. Krugman,
Maurice Obstfeld, Marc Melitz
Chapter 1-22
Chapter 1 Introduction
1.1 What Is International Economics About?
1) Historians of economic thought often describe ________ written by ________ and published in
________ as the first real exposition of an economic model.
A) "Of the Balance of Trade"; David Hume; 1776
B) "Wealth of Nations"; David Hume; 1758
C) "Wealth of Nations"; Adam Smith; 1758
D) "Wealth of Nations"; Adam Smith; 1776
E) "Of the Balance of Trade"; David Hume; 1758
Answer: E
Difficulty: Easy
AACSB: Application of knowledge
2) From 1960 to 2019
A) the U.S. economy roughly tripled in size.
B) U.S. imports roughly tripled in size.
C) the share of U.S. trade in the global economy roughly tripled in size compared with the
economy as a whole.
D) U.S. imports roughly tripled as compared to U.S. exports.
E) U.S. exports roughly tripled in size.
Answer: C
Difficulty: Easy
AACSB: Application of knowledge
3) From 1960 to 2019, both U.S. imports and exports have increased, ________ have grown more,
leading to a large excess of ________.
A) imports; imports over exports
B) exports; exports over imports
C) imports; exports over imports
D) exports; imports over exports
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
4) The facts that U.S. imports and exports plunged in 2009 during the global economic crisis and in
2020 during the Covid-19 pandemic demonstrated the close links between
A) world trade and the overall state of the world economy.
B) crisis and unemployment.
C) the pandemic and shortage of goods and services.
D) the business cycle and trade policies.
1
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, Answer: A
Difficulty: Easy
AACSB: Application of knowledge
5) The United States is less dependent on trade than most other countries because
A) the United States is a relatively large country with diverse resources.
B) the United States is a "Superpower."
C) the military power of the United States makes it less dependent on anything.
D) the United States invests in many other countries.
E) many countries invest in the United States.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
6) Theories of international economics from the 18th and 19th centuries are
A) not relevant to current policy analysis.
B) only of moderate relevance in today's modern international economy.
C) highly relevant in today's modern international economy.
D) the only theories that are actually relevant to modern international economy.
E) not well understood by modern mathematically oriented theorists.
Answer: C
Difficulty: Easy
AACSB: Application of knowledge
7) International economics ________ use the same fundamental methods of analysis as other
branches of economics, because ________.
A) does not; the level of complexity of international issues is unique
B) does not; the interactions associated with international economic relations is highly
mathematical
C) does not; international economics takes a different perspective on economic issues
D) does; international economists must reach an agreement with other economists on every
economic issue
E) does; the motives and behavior of individuals are the same in international trade as they are in
domestic transactions
Answer: E
Difficulty: Easy
AACSB: Application of knowledge
8) Because the Constitution forbids restraints on interstate trade
A) the U.S. may not impose tariffs on imports from NAFTA countries.
B) the U.S. may not affect the international value of the $ U.S.
C) the U.S. may not put restraints on foreign investments in California if it involves a financial
intermediary in New York State.
D) the U.S. may not impose export duties.
E) the U.S. may not disrupt commerce between Florida and Hawaii.
Answer: E
Difficulty: Easy
2
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, AACSB: Application of knowledge
9) An important insight of international economics is that when countries sell goods and services
to each other,
A) the exchange is almost always mutually beneficial.
B) one country always benefits at the expense of the other.
C) it only benefits the low wage country.
D) it only benefits the high wage country.
E) it is almost never beneficial to both countries.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
10) "Trade is generally harmful if there are large disparities between countries in wages."
A) This is generally true.
B) This is generally false.
C) Trade theory has nothing to say about this issue.
D) This is true if the trade partner ignores child labor laws.
E) This is true if the trade partner uses prison labor.
Answer: B
Difficulty: Easy
AACSB: Application of knowledge
11) If there are large disparities in wage levels between countries, then
A) trade is likely to be harmful to both countries.
B) trade is likely to be harmful to the country with the high wages.
C) trade is likely to be harmful to the country with the low wages.
D) trade is likely to be harmful to neither country.
E) trade is likely to have no effect on either country.
Answer: D
Difficulty: Easy
AACSB: Application of knowledge
12) If there are large disparities in productivity between countries, then
A) trade is likely to be harmful to neither country.
B) trade is likely to be harmful to the country with the high wages.
C) trade is likely to be harmful to the country with the low wages.
D) trade is likely to be harmful to both countries.
E) trade is likely to have no effect on either country.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
3
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, 13) Which of the following statements is TRUE?
A) Trade is mutually beneficial when countries exchange goods and services.
B) Trade is harmful if large disparities exist between countries in productivity.
C) Trade is harmful if large disparities exist between countries in wages.
D) Trading with less-advanced, lower-wage countries will drag down a country's standard of
living.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
14) The benefits of international trade are derived from trade in
A) tangible goods only.
B) intangible goods only.
C) goods but not services.
D) services but not goods.
E) anything of value.
Answer: E
Difficulty: Easy
AACSB: Application of knowledge
15) Which of the following statements is NOT TRUE?
A) International trade will have no effects on income distribution.
B) International trade may hurt particular groups within nations.
C) International trade can adversely impact owners of resources that are specific to industries that
compete with imports.
D) International trade can alter the distribution of income between broad groups, such as workers
and the owners of capital.
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
16) Who sells what to whom
A) has been a major preoccupation of international economics.
B) is not a valid concern of international economics.
C) is not considered important for government foreign trade policy since such decisions are made
in the private competitive market.
D) is determined by political rather than economic factors.
E) is less important than international economic theory.
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
4
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