In order for a country to specialize its production, what must there be?

A. A global economy

B. A free-market system

C. Government subsidies

D. An international division of labor

Answer: D

The existence of an international division of labor among countries enables those countries to have what?

A. A gross domestic product

B. Social welfare programs

C. Specialized production

D. Protectionist policies

Answer: C

The global economy can have specialized production because of what?

A. Trade sanctions

B. World Bank loans

C. The free-market system

D. The international division of labor

Answer: D

Country X would have an absolute advantage over Country Y in the production of automobiles under what conditions?

A. Country X's workers earn higher wages.

B. Country Y subsidizes its automobile industry.

C. Country X can manufacture cars more cheaply.

D. Country Y has a protective tariff on car imports.

Answer: C

Country A would have an absolute advantage over Country B in the production of computers under what circumstance?

A. Companies in Country A can produce computers at a lower cost

B. Country B was the target of a trade embargo by Country A.

C. The government of Country B subsidizes its computer industry.

D. Country A had a higher minimum wage than Country B.

Answer: A

Country X would enjoy an absolute advantage in the production of clothing under what circumstance?

A. Its production costs for clothing were the lowest in the world.

B. Its tariffs on clothing were the highest in the world.

C. It had the largest clothing industry in the world.

D. It had the lowest minimum wage in the world.

Answer: A

What gives a country a comparative advantage?

A. When its trade barriers are higher than the world average

B. When its infrastructure is more advanced than in other countries

C. When its workers don't need to be paid as much as other workers

D. When it gives up less than others to engage in a particular type of production

Answer: D

Under what circumstance would a country have a comparative advantage in the production of a certain good?

A. It has a more highly skilled work force.

B. It has well-developed industrial capacities.

C. It uses an assembly line to produce that good.

D. It has a lower opportunity cost for production of that good.

Answer: D

Country X would have a comparative advantage in the production of cotton under what circumstance?

A. Country X was able to impose a high tariff on cotton imported from other countries.

B. Country X had a large domestic textile and apparel industry that could use the cotton.

C. Country X didn't have to give up a more profitable form of production in order to grow cotton.

D. Country X could sell cotton more cheaply in the international marketplace than any other country.

Answer: C

Why does interdependence bring economic growth?

A. Interdependence strengthens governments, allowing great tax revenues.

B. Interdependence enables specialized production, which is more efficient.

C. Interdependence increases international competition, which leads to lower prices.

D. Interdependence creates greater protection for domestic producers, which enables them to raise prices.

Answer: B

Why do some countries fear increasing economic interdependence?

A. Interdependence increases the power of developing countries.

B. Interdependence leads to higher prices for goods and services.

C. Interdependence leads countries to commit human rights violations.

D. Interdependence involves a loss of control over the national economy.

Answer: A

Why does the growth of international trade lead to a rising global standard of living?

A. International trade enables specialization, which brings increased efficiency and greater competition.

B. International trade creates profitable investment opportunities for currency speculators.

C. International trade leads to trade wars that require countries to increase their productive capabilities.

D. International trade results in a gain of comparative advantage for developing countries.

Answer: A

Which of these best characterizes the flow of wealth during the period of colonization?

A. There was a one-way flow of investment from Europe to Asia.

B. There was uneven industrialization in favor of the underdeveloped colonies.

C. There was a one-way flow of wealth from the colonies to their colonial masters.

D. There was mutual benefit from the flow of goods back and forth between colonies and their colonizers.

Answer: C

What was the result of developed countries extracting resources from their colonies?

A. There was a one-way flow of wealth favoring the colonizers.

B. Developed countries lost jobs to the colonies because labor was cheaper there.

C. The colonizers used these resources to help the colonies build their infrastructure.

D. Trade wars began among the colonies to attract investment from developed countries.

Answer: A

How did the colonizers benefit from the colonies they controlled?

A. Workers in the colonizing countries were able to push for higher wages.

B. The colonizers used the resources of their colonies to grow their own economies.

C. Luxury goods manufactured in the colonies brought tariff revenues to the colonizers.

D. The revenues generated from running colonies helped the colonizers lower their tariffs.

Answer: B

Why do high tariff levels restrict international trade?

A. There is a decreasing marginal return on sales when tariff levels are high.

B. It is more difficult to protect domestic producers when there are high tariffs.

C. Traded goods cost more when there are high tariffs, and this limits their sale.

D. High tariff levels make it difficult for countries to enforce consumer-protection regulations.

Answer: C

Why do protective tariffs lead to reduced international trade?

A. There is a decreasing marginal return on sales when imports are protected.

B. Protective tariffs increase the price of goods and limit the sale of those goods.

C. Other countries usually respond to protective tariffs with boycotts and embargoes.

D. Domestic producers have less incentive to increase production when they're protected.

Answer: B

Why does reducing trade barriers promote increased international trade?

A. Free trade leads to lower prices and greater sales.

B. The reduction of tariffs also lowers workers' wages.

C. The loss of subsidies causes businesses to increase profits.

D. The free market gives domestic producers an absolute advantage.

Answer: A

Match each current trend in the global economy with one of its economic effects:

A. Improved communication

B. Trade liberalization

C. Infrastructure development

D. Industrialization

Cheaper transportation

Greater productivity

Easier outsourcing

Increased trade

C. Cheaper transportation

D. Greater productivity

A. Easier outsourcing

B. Increased trade

Match each current trend with one of its economic effects.

A. Improved communication

B. Trade liberalization

C. Infrastructure development

D. Industrialization

Facilitates less expensive international trade

Provides an incentive for countries to export more goods

Increases productivity and lowers prices

Makes it easier for international businesses to operate efficiently

C. Facilitates less expensive international trade

B. Provides an incentive for countries to export more goods

D. Increases productivity and lowers prices

A. Makes it easier for international businesses to operate efficiently

Match each current trend in the global economy with the benefit it provides.

A. Improved communication

B. Free-trade policies

C. Development of infrastructure

D. Industrialization

Helps developing countries

Reduces distribution costs

Increases the mobility of goods and labor

Facilitates international trade

D. Helps developing countries

C. Reduces distribution costs

B. Increases the mobility of goods and labor

A. Facilitates international trade

Why does globalization give countries an incentive to reduce wages for their workers?

A. Lower production costs help lure foreign investment.

B. Multinational corporations don't have to bargain collectively.

C. Increased international trade reduces the demand for skilled labor.

D. Globalization reduces the cost of goods and services for consumers.

Answer: A

Why does globalization lead to a reduction in wages in developed countries?

A. Labor unions have moved their operations to developing countries.

B. A high volume of international trade reduces the demand for skilled labor.

C. Increased mobility allows producers to move jobs to lower-cost labor markets.

D. Globalization results in lower prices that give workers greater purchasing power.

Answer: C

Why does globalization lead to a reduction in prices for goods and services?

A. Consumers buy less when there are more goods available on the market.

B. Globalization increases both supply and demand for all goods and services.

C. There is a decreasing marginal utility to goods produced in developing countries.

D. Competition for jobs drives down wages, which helps companies lower their prices.

Answer: D

Why do central banks play an important role in the global economy?

A. They are able to limit capital mobility.

B. They set each country's monetary policies.

C. They regulate the currency exchange market.

D. They print all of the money used for international trade.

Answer: B

Why do the actions of central banks have an important effect on the global economy?

A. Monetary policy is an important tool for protecting domestic industries.

B. Interest rates on government bonds are responsible for foreign investment.

C. The amount of capital mobility is dependent on regulations enforced by central banks.

D. Control of the money supply determines how *D. much money is available for international trade.

Answer: D

Why do central banks play an important role in the global economy?

A.They charge tariffs on trades that take place in the currency exchange market.

B. They control the foreign currency reserves that are used for international trade.

C. They prevent foreign companies from removing profits from their national economy.

D. They have control over the interest rates charged on the debts owed by their governments.

Answer: B

Which of these is a gift of money from one government to another?

A. Foreign aid

B. Trade sanctions

C. No-interest loans

D. Agricultural subsidies

Answer: A

Why is foreign aid given?

A. In order to help needy countries

B. In order to grow the global economy

C. In order to protect domestic industries

D. In order to stimulate foreign investment

Answer: A

What is the main purpose of foreign aid?

A. Eliminate colonization

B. Stabilize the currency market

C. Retaliate against trade sanctions

D. Alleviate poverty and underdevelopment

Answer: D

Match each international organization with its purpose:

A. Bank for International Settlements (BIS)

B. International Monetary Fund (IMF)

C. World Bank

D. World Trade Organization (WTO)

Reduce poverty

Promote free trade

Create financial stability

Prevent economic crises

C. Reduce poverty

D. Promote free trade

A. Create financial stability

B. Prevent economic crises

Match each international organization with one of its functions:

A. Bank for International Settlements (BIS)

B. International Monetary Fund (IMF)

C. World Bank

D. World Trade Organization (WTO)

Generate multilateral trade agreements

Coordinate banking regulations

Provide long-term development loans

Provide short-term emergency loans

D. Generate multilateral trade agreements

A. Coordinate banking regulations

C. Provide long-term development loans

B. Provide short-term emergency loans

Match each international organization with one of its purposes:

A. Bank for International Settlements (BIS)

B. International Monetary Fund (IMF)

C. World Bank

D. World Trade Organization (WTO)

Make economic policy recommendations

Provide a forum for coordinating banking regulations

Mediate and resolve trade disputes

Promote sustainable development

B. Make economic policy recommendations

A. Provide a forum for coordinating banking regulations

D. Mediate and resolve trade disputes

C. Promote sustainable development

Why does the IMF impose conditionality on countries that accept its loans?

A. The IMF wants to get all countries to accept free- trade policies.

B. The IMF wants to help fix the economies of countries that need its help.

C. The IMF wants to impose uniform regulations on the international banking system.

D. The IMF wants to make sure that the money it loans results in sustainable development.

Answer: B

Why does the IMF require countries that accept its loans to follow its policy recommendations?

A. The IMF wants to control the global money supply.

B. The IMF wants to rid the world of command economies.

C. The IMF wants to help struggling countries better manage their economies.

D. The IMF wants to help governments in developing countries to eliminate poverty.

Answer: C

Why does the IMF impose conditions on its loans?

A. To promote the free-market system

B. To rid the world of command economies

C. To help manage the economies of struggling

countries

D. To impose uniform regulations on the international banking system

Answer: C

What is the main purpose of the loans made by the World Bank?

A. To help countries achieve sustainable development

B. To make profits for its shareholders

C. To help create multilateral trade agreements

D. To prevent future economic crises

Answer: A

Why does the World Bank charge little or no interest on the loans it makes?

A. Its main purpose is to promote development, not make profits.

B. It gives only short-term emergency loans to very needy countries.

C. It wants to get countries to accept its loans along with its policy recommendations.

D. Its loans are for such large amounts that no country could afford to pay interest on them.

Answer: A

What does the World Bank hope will result from the loans it makes to developing countries?

A. Increased ability to profit from exports

B. An improved climate for foreign investment

C. A reduction in the taxes charged to their citizens

D. Stabilized exchange rates for their national currencies

Answer: B

How does the WTO help stabilize the global economy?

A. By preventing large swings in currency exchange rates

B. By providing money to bail countries out of emergency situations

C. By keeping central banks from enacting radical monetary policies

D. By assuring that producers will have open access to necessary resources

Answer: D

How does the WTO promote global free trade?

A. By enforcing strict banking regulations

B. By creating multilateral trade agreements

C. By providing loans for sustainable development

D. By helping developing countries build their infrastructure

Answer: B

What is the main goal of the WTO?

A. To enable governments to give out less foreign aid

B. To help developing countries build their industrial capacity

C. To assure that international trade flows smoothly and freely

D. To prevent multinational corporations from exploiting workers

Answer: C

Match each economic activity with one of its purposes:

A. World Bank loans

B. Foreign aid

C. Trade embargo

D. Outsourcing

Reduce production costs

Punish an offending government

Provide emergency relief

Eliminate poverty

D. Reduce production costs

C. Punish an offending government

B. Provide emergency relief

A. Eliminate poverty

Match each economic activity with its main purpose:

A. IMF loans

B. Foreign aid

C. Boycott

D. Offshoring

Help needy governments

Reduce production costs

Influence economic decisions

Stabilize the global economy

B. Help needy governments

D. Reduce production costs

C. Influence economic decisions

A. Stabilize the global economy

Match each economic activity with its main purpose:

A. WTO agreements

B. Boycott

C. Offshoring

D. Foreign aid

Help needy governments

Reduce production costs

Punish unfair practices

Promote free trade

D. Help needy governments

C. Reduce production costs

B. Punish unfair practices

A. Promote free trade

Why has globalization led to an increasing income gap between rich and poor countries?

A. Countries with well-established infrastructure and productive capacities have more competitive

industries.

B. The reduced production costs provided by low

wages in developing countries enable companies

to make larger profits.

C. Reduced transportation costs have enabled

developed countries to extract more natural

resources from their colonies.

D. Laborers from developing countries migrate to

developed countries in search of better-paying jobs

Answer: A

Why are the majority of the world's countries left on the margins of globalization?

A. Many countries are too underdeveloped to take advantage of the opportunities presented by increasing international trade.

B. Many countries don't have sufficient natural resources to fuel high levels of industrial production.

C. Many countries continue to rely on protectionist policies that limit their imports and exports.

D. Many countries have laws requiring such high wages that foreign producers don't want to invest.

Answer: A

Why hasn't globalization benefited the majority of the world's underdeveloped countries?

A. Underdeveloped countries rely on exporting agricultural goods to developed countries.

B. Underdeveloped countries use protectionist policies to isolate themselves from international trade.

C. Underdeveloped countries don't have the natural resources needed to fuel high levels of industrial production.

D. Underdeveloped countries don't have the productive capacities necessary to take advantage of increasing international trade.

Answer: D

Match each type of country with one of its central features.

A. Developed

B. Developing

C. Underdeveloped

D. New globalizer

Rapid economic growth

Little infrastructure or industry

Low standard of living

High level of productive capacity

D. Rapid economic growth

C. Little infrastructure or industry

B. Low standard of living

A. High level of productive capacity

Match each type of country with one of its central features:

A. Developed

B. Developing

C. Underdeveloped

D. New globalizer

Rapidly increasing levels of exports

Little infrastructure or industry

Low standard of living

High level of productive capacity

D. Rapidly increasing levels of exports

C. Little infrastructure or industry

B. Low standard of living

A. High level of productive capacity

Match each type of country with one of its central features:

A. Developed

B. Developing

C. Underdeveloped

D. New globalizer

High level of productive capacity

Low levels of industrial capacity

High levels of foreign investment

Low standard of living

A. High level of productive capacity

C. Low levels of industrial capacity

D. High levels of foreign investment

B. Low standard of living

Why don't developing countries usually benefit from free-trade policies?

A. The only way they can collect revenues is through tariffs.

B. They rely primarily on agricultural exports for their income.

C. They have little economic power to influence the global economy.

D. Their industries are too weak to compete in the international market.

Answer: D

Why don't many developing countries benefit from the spread of free trade?

A. They have large trade deficits.

B. They have weak domestic industries.

C. They cannot afford to give foreign aid.

D. They don't possess important natural resources.

Answer: B

Because most developing countries have weak domestic industries, they do not benefit from what?

A. Foreign aid

B. IMF advice

C. World Bank loans

D. Free-trade policies

Answer: D

Why has globalization contributed to the rise of international terrorism?

A. Money laundering is easy in the chaotic international banking system.

B. There are environmental problems that result from ruthless global competition.

C. Globalization can bring about dislocation and inequality.

D. Weakened national security results from foreign ownership.

Answer: C

How has globalization contributed to the recent increase in international terrorism?

A. The downsides of globalization affect many people who often feel they have nowhere to turn other than violence.

B. The lack of centralized banking regulations makes it possible for terrorists to profit from foreign investment.

C. Increased labor migration makes it possible for terrorists to infiltrate critical infrastructure points.

D. Globalization requires ruthless competition that can usually only be accomplished through force and coercion.

Answer: A

Why do many people object to globalization?

A. They object because of the reductions in wages brought about by globalization.

B. They want to protect the domestic industries that are vital to their homelands.

C. They understand how much environmental damage can be caused by international competition.

D. They feel that globalization mainly serves the interests of the United States at the expense of other countries.

Answer: D

Why don't companies doing business in countries with repressive governments object to the human rights abuses?

A. New technologies enable repressive governments to censor the news more effectively.

B. The lack of a world government makes it
problematic to define universal norms of human rights.

C. Companies taking advantage of low labor costs don't make trouble for repressive governments.

D. Increased interdependence means that democratic countries rely on repressive governments for political support.

Answer: C

Why don't companies that do business in countries where human rights are violated tend to fight against these abuses?

A. They tend to care more about a safe investment climate than about human rights.

B. They lack the political influence to do anything about the problems.

C. They must obey the laws of the countries where they invest.

D. They don't directly benefit from the abusive policies.

Answer: A

How has globalization helped work against human rights violations around the world?

A. Improved global communications brings these abuses to the world's attention.

B. Companies have boycotted abusive governments as a punishment for these practices.

C. Revolutions against abusive governments have made the investment climate insecure.

D. Violating human rights is too costly to be profitable in the competitive international marketplace.

Answer: A

Why is globalization potentially damaging to the environment?

A. Future production relies on safeguarding the earth's limited natural resources.

B. Most governments can't afford to enforce environmental-protection regulations.

C. Protecting the environment increases production costs and reduces competitiveness.

D. Technology has improved to the point where environmental protection is unnecessary.

Answer: C

What is the primary reason that globalization leads to greater global pollution?

A. Environmental protection is expensive, and
reduces a company's competitiveness in the global market.

B. Increased carbon monoxide output results from both industrialization and infrastructure development.

C. Environmental regulations are enforced by nations rather than an international organization.

D. Companies that outsource and offshore their production have to use more energy to transport their finished goods.

Answer: A

Why does globalization lead to increasing environmental damage?

A. Sustainable development relies on the increasing use of non-renewable energy sources.

B. Environmental-protection regulations increase compliance costs and decrease economic competitiveness.

C. Technological development leads to less pollution but greater consumption of non-renewable energy.

D. Consumer boycotts and government regulations undermine companies' attempts to reduce their output of waste.

Answer: B

Match each practice with an example of its use.

A. Offshoring

B. Boycott

C. Trade sanctions

D. Conditionality

The IMF requires a loan recipient to privatize its oil industry.

Japan imposes a 100% tariff on cars coming from Europe and the United States.

Consumers refuse to buy goods from companies that use child labor.

A U.S. car company begins making certain car parts in Bangladesh.

D. The IMF requires a loan recipient to privatize its oil industry.

C. Japan imposes a 100% tariff on cars coming from Europe and the United States.

B. Consumers refuse to buy goods from companies that use child labor.

A. A U.S. car company begins making certain car parts in Bangladesh.

Match each global business practice with an example of its use.

A. Outsourcing

B. Boycott

C. Conditionality

A U.S. computer company buys its memory chips from a company in Taiwan.

The IMF asks a government to cut its taxes before receiving an emergency loan.

A group of consumers refuses to buy clothing made in Indonesian sweatshops.

A. A U.S. computer company buys its memory chips from a company in Taiwan.

C. The IMF asks a government to cut its taxes before receiving an emergency loan.

B. A group of consumers refuses to buy clothing made in Indonesian sweatshops.

Match each global business practice with an example of its use.

A. Embargo

B. Insourcing

C. Conditionality

The IMF requires a government receiving a loan to balance its budget.

The United States forbids its citizens from doing business with a government that has ties to terrorist groups.

A South Korean car company opens a factory in the United States.

C. The IMF requires a government receiving a loan to balance its budget.

A. The United States forbids its citizens from doing business with a government that has ties to terrorist groups.

B. A South Korean car company opens a factory in the United States.

Which of these would cause job loss in the United States?

A. A high minimum wage in another country

B. Insourcing by a Japanese company

C. Inexpensive imported televisions

D. A tariff-reduction agreement

Answer: C

Why has globalization led to some job loss in the United States?

A. Excessive spending by U.S. consumers has led to a budget deficit.

B. Protective tariffs prevent the United States from having a trade surplus.

C. Foreign investment has shifted to developing countries.

D. Labor costs are lower in other countries.

Answer: D

Why do lower labor costs in other countries lead to job loss in the United States?

A. Workers migrate in search of better-paying jobs.

B. It enables foreign producers to undersell domestic producers.

C. Foreign producers are able to insource and make higher profits.

D. Foreign governments can charge higher tariffs and make more revenues.

Answer: B

What has been the main benefit of globalization for the United States?

A. Economic growth

B. Increased wages

C. Increased exports

D. Greater job security

Answer: A

What has been the main drawback of globalization for the United States?

A. Higher prices

B. Wage reductions

C. Lost tariff revenues

D. Slow economic growth

Answer: B

Which of these is a problem that globalization poses for the U.S. government?

A. Loss of tariff revenues

B. Increased security concerns

C. Migration of U.S. workers abroad

D. Opposition to its human rights abuses

Answer: B

All of the following have been negative effects of globalization except what?

A. A greater gap between rich and poor countries

B. Great damage to the environment

C. Increased international terrorism

D. Higher prices for consumers

Answer: D

What is one reason why some people are critical of globalization?

A. It leads to increased damage to the environment.

B. It undermines the purchasing power of consumers.

C. It gives governments too much control over the global economy.

D. It provides only comparative advantage instead of absolute advantage.

Answer: A

Which of these is a reason why many don't support globalization?

A. It undermines the purchasing power of consumers.

B. It only benefits a handful of the world's countries.

C. It gives too much power to repressive governments.

D. It leads to increased environmental-protection costs.

Answer: B