Economics and Society Week 6 Quiz

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Questions and Answers

What is a key characteristic of globalisation as defined in the content?

Reduction in information exchange

Isolation of economies

Enhanced foreign investment flows (correct)

Decreased international trade

Which statement best describes the second wave of globalisation?

Led to a decrease in foreign investment

Occurred during the Great Depression

Begun before World War I

Resulted from the Bretton Woods system (correct)

What distinguishes trade globalisation from financial globalisation?

Financial globalisation increases with trade openness. (correct)

Trade globalisation deals with service exchanges, while financial globalisation deals with goods.

Trade globalisation is only relevant for developed countries.

Trade globalisation has no impact on financial markets.

What are the potential consequences of globalisation mentioned in the content?

Creation of global value chains Signup and view all the answers

What defines the first wave of globalisation?

Pre-WWI increase in trade and financial flows Signup and view all the answers

What does the term 'balance of payments' relate to in the context of globalisation?

The overall balance of goods and services within a country Signup and view all the answers

How has trade openness changed according to the content?

It has grown with the trade of manufactured goods. Signup and view all the answers

Which statement accurately reflects the role of the Bank for International Settlements (BIS)?

It distinguishes between trade and financial globalisation. Signup and view all the answers

What is a defining characteristic of a small nation that acts as a price taker in world markets?

It accepts the prevailing world prices for goods and services. Signup and view all the answers

What happens to consumer surplus when a country imports goods?

It increases due to lower prices available from imports. Signup and view all the answers

Which situation describes a country that does not have a comparative advantage in a certain good?

The world price is lower than the autarkic price, leading to imports. Signup and view all the answers

What is the primary outcome for domestic producers when a country opts for imports due to lower world prices?

They may suffer losses as their prices decrease. Signup and view all the answers

When a small nation finds that the world price for a good is greater than its autarky price, which action is expected?

The country will export the good. Signup and view all the answers

What are the distributional implications of international trade mentioned in the content?

Some producers may not gain and could be worse off. Signup and view all the answers

Which of the following correctly describes the relationship between import industries and domestic production?

Import industries may arise when domestic product prices are above world prices. Signup and view all the answers

Why might domestic consumers prefer imports over local goods?

Imports usually provide access to a greater variety of goods. Signup and view all the answers

What is the primary mission of the organization described?

To support central banks in achieving monetary and financial stability Signup and view all the answers

Which type of globalisation is characterized by the growth of manufactured goods trade?

Trade globalisation Signup and view all the answers

How does financial openness relate to trade openness according to the content?

Both are interconnected where trade openness increases financial openness Signup and view all the answers

What is a consequence of financial globalisation mentioned in the text?

Exports and imports depend heavily on international financing Signup and view all the answers

How has the phenomenon of global value chains (GVCs) been described in relation to trade?

Brought about unprecedented expansion in trade openness Signup and view all the answers

What characterizes financial globalisation?

Growth in international financial flows Signup and view all the answers

Which country has been a WTO member since December 11, 2001?

China Signup and view all the answers

What does the term 'trade openness' refer to in the context of globalization?

The extent to which a country engages in international trade Signup and view all the answers

Which of the following best describes the role of banks in international trade?

Banks typically follow their customers on a global scale Signup and view all the answers

Which of the following countries is listed among the top exporters and importers as a percentage of GDP in 2021?

Indonesia Signup and view all the answers

What is the relationship between foreign direct investment (FDI) and international trade?

FDI contributes positively to international trade Signup and view all the answers

What does the acronym 'BIS' stand for in the context of financial globalization?

Bank for International Settlements Signup and view all the answers

Which of the following years corresponds to the beginning of trade openness measurement for Singapore?

1960 Signup and view all the answers

Between which years does the trade openness data for the USA span?

1970-2021 Signup and view all the answers

What is one of the categories used to differentiate economies in the discussed sources?

Advanced economies and emerging market economies Signup and view all the answers

Which economic relationship does the McKinsey report focus on regarding China?

China and the world: inside a changing economic relationship Signup and view all the answers

What is the characteristic of a small nation in world markets?

It acts as a price taker. Signup and view all the answers

What happens when the world price (Pw) is lower than the autarky price?

The nation will become an importer. Signup and view all the answers

What occurs with consumer surplus when a small nation imports goods?

It increases due to lower prices. Signup and view all the answers

How does the introduction of imports affect producer surplus in a small nation?

It decreases because of price reduction. Signup and view all the answers

Which of the following best describes the relationship between imports and domestic production in a small nation?

Domestic production plus imports equals total consumption. Signup and view all the answers

What is the likely effect on consumer behavior with the presence of imports?

Consumers will benefit from lower prices. Signup and view all the answers

When imports are introduced, which of the following will primarily benefit?

Consumers. Signup and view all the answers

In the context of a small nation acting as an importer, what is the main economic consequence for domestic producers?

They will experience a reduction in market share. Signup and view all the answers

Study Notes

International Trade Dynamics

Small nations act as price takers in world markets for goods and services.
Trade can increase consumer surplus (CS) due to lower world prices compared to domestic prices.
Domestic production may decrease but often less significantly than consumer gains.
Net gains from trade are realized through shifts in consumer and producer surplus.

Import Industry Insights

Nations without a comparative advantage will import goods, especially when world prices are lower than domestic autarky prices.
The overall economy benefits from these imports as consumers enjoy reduced prices.
Domestic producers may face negative impacts without compensation, leading to distributional consequences.

Globalization Concepts

Globalization entails a shift to more integrated economies participating in foreign trade and investment.
It encompasses increased flows of trade, capital, and information, as well as enhanced mobility of individuals.
Historical context includes two major waves of globalization: pre-WWI with colonial investments and post-WWII with Bretton Woods stability.

Trade vs Financial Globalization

Trade globalization signifies how open a country is to international trade, with growth stemming from manufactured goods and global value chains.
Financial globalization involves the openness to international financial flows, increasing with trade openness.
Both forms of globalization are interconnected, as trade depends on and fosters financial relationships.

Trade Openness Statistics

Key economies are ranked based on trade openness measured as the sum of exports and imports as a percentage of GDP.
Historical trends in trade openness reveal significant changes among nations like Singapore, the USA, and China over time.

Small Nations' Market Behavior

If world price (Pw) is less than the autarky price for a good, the nation tends to import, increasing overall consumption.
Conversely, if Pw is greater than the autarky price, the country may consider exporting the product instead.
Consumer surplus increases with imports, while producer surplus may decrease due to competition from foreign goods.

Implications for Producers and Consumers

The distribution of gains from trade shows a transfer from producers (lower producer surplus) to consumers (higher consumer surplus).
Understanding these dynamics is crucial for analyzing the impacts of trade policies on domestic economies.

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Description

This quiz covers key concepts related to globalisation including its introduction, trends in trade and financial globalisation, as well as the benefits and risks associated with globalisation. Test your understanding of these important economic themes from Week 6 of the course.