Globalization and Public Goods Quiz

A situation where countries compete by lowering standards in areas like labor or environment to attract businesses, leading to negative consequences for workers and the environment.

When countries give up some of their national sovereignty to work together on issues like trade, environment, and labor, creating rules that apply to all participating countries.

A system where decisions are made by experts, focusing on technical solutions rather than public opinion.

A balance between expertise and public input in decision-making, allowing citizens to participate and influence policies.

The challenge of creating and maintaining democratic governance in a globalized world, ensuring that citizens can participate in and influence global decision-making.

A good that is available to everyone without diminishing its availability to others, regardless of who uses it. It cannot easily exclude anyone from using it.

A good that is freely available to everyone without diminishing its availability to others, but it is possible to exclude certain individuals from accessing it.

The cost of searching for a trading partner with the desire to exchange the goods or services you have for what you want.

An economic system where goods and services are directly exchanged for other goods and services without the use of money.

A financial situation where a country implements strict measures to reduce spending and government debt, often in times of economic crisis or recession.

The Balance of Payments (BoP) identity states that the sum of the current account (CA), the financial/capital account (F), and official reserves flows must equal zero. This means that any inflow of funds must be matched by an outflow of funds within the economy.

The current account measures all transactions related to the trade of goods and services, income from investments, and unilateral transfers (e.g., remittances). It reflects the country's net income from its international activities.

The financial account tracks all international transactions involving financial assets and liabilities. It includes investments in stocks, bonds, real estate, and other financial instruments.

Official reserves flows represent changes in a country's foreign exchange holdings. Central banks manage these reserves to intervene in currency markets and ensure macroeconomic stability.

External equilibrium occurs when net international flows of goods and financial assets balance each other. This means that a country's imports are financed through exports or financial transactions.

Intertemporal budget constraint requires a balanced current account over time, avoiding excessive borrowing and depletion of reserves. This ensures long-term macroeconomic stability.

In a short-run perspective, external equilibrium is achieved when the BoP is balanced through financing methods, like borrowing. However, this is not sustainable in the long-term.

The longer-run perspective focuses on long-term sustainability. This involves balancing the current account through adjustments to income and expenditures, ensuring no systematic debt accumulation or depletion of reserves.

The ability to exchange money for another asset at a fixed price, even if the supplier has no control over the asset's value.

The risk that the issuer of money might not be able to convert their liabilities back into the promised asset, even if they owe it to depositors.

Lower costs of providing goods or services as the scale of production increases. For instance, the cost of producing money decreases as the amount of money supplied grows.

The ability of a lender to loan out deposits knowing not all depositors will withdraw their funds at the same time, allowing for profitable lending activity.

The premium paid for borrowing money due to the opportunity cost of capital, meaning the borrower forgoes the potential to invest the money elsewhere.

The tendency of firms to grow larger due to economies of scale, potentially leading to monopolies as smaller competitors are driven out of business.

The added value that a good or service gains as more people use it, such as increased network effects and social acceptance.

The opportunity cost of holding cash, meaning the potential returns forgone by not investing it.

Companies that are willing to take on higher risks in order to earn higher potential returns.

The situation where two currencies issued by different entities in the same country may fluctuate in value against each other, leading to uncertainty and potential confusion for transactions.

A situation where a country's commitment to fixed exchange rates is not credible because the benefits of maintaining convertibility are outweighed by the costs of restricting monetary policy.

The idea that all countries cannot simultaneously aim for and achieve trade surpluses. This arises as the total of world exports must equal the total of world imports due to the closed nature of the global economy.

A situation where a country abandons its commitment to a fixed exchange rate and allows its currency to fluctuate freely in the market.

The concept that in a world with 'N' currencies, only 'N-1' currencies can have independent exchange rates. The last exchange rate is determined by the relationship between the first 'N-1' currencies.

In the global economy, countries must find ways to manage their sovereign targets (like exchange rates and trade balances) in a way that is compatible with other countries' goals.

The process of countries working together to manage exchange rates and trade balances. This can involve formal agreements (like the Bretton Woods system) or informal coordination.

A situation where banks compete aggressively to gain market share by offering loans to riskier borrowers. This can lead to a domino effect where a bank failure triggers broader financial instability.

A situation where banks increase their lending activities faster than others, often by lowering interest rates on loans and accepting riskier borrowers. This can lead to instability and losses for banks if borrowers fail to repay.

The process by which a government takes control of the money supply, typically through nationalizing the central bank or regulating the banking system. This aims to stabilize the economy and prevent financial crises.

The use of government power to enforce the use of a specific currency as the sole legal tender within a country, even if citizens might prefer other forms of money. This can be a tool for managing inflation and controlling the economy.

A situation where an individual bank expands its lending activities faster than others, often by accepting riskier borrowers and low interest rates. This can lead to financial instability if borrowers fail to repay.

A situation where the government uses its power to control the money supply to achieve specific economic goals, such as financing wars or stimulating the economy.

A situation where several banks fail to repay their debts, leading to a loss of confidence in the banking system and a potential financial crisis. This often involves customers withdrawing their deposits, triggering a domino effect.

A situation where a bank is unable to meet its obligations to its depositors due to a lack of available cash. This can lead to distrust and panic, impacting the overall banking system.

A situation where a large number of banks fail simultaneously, causing severe economic disruption and widespread panic. This can lead to a loss of faith in the banking system and a deep economic recession.

A situation where the government acts as a lender of last resort, providing emergency loans to banks facing liquidity problems. This helps stabilize the banking system and prevent a widespread crisis.

The process of converting a currency into a more stable or valuable form, often done during periods of economic uncertainty or political instability.

A situation where the value of a currency decreases compared to other currencies, often due to inflation or economic instability. This can make imports more expensive and exports less competitive.

A situation where the value of a currency increases compared to other currencies, often due to strong economic growth or low inflation. This can make exports cheaper and imports more expensive.

A situation where a government issues more currency than is backed by gold or other hard assets, leading to a potential decrease in the currency's value and increased inflation. This is often done to finance government spending or to stimulate the economy.

A situation where the general price level of goods and services rises over time, reducing the purchasing power of money. This can be caused by factors like over-issuing currency, increased demand, or supply shortages.