Contemporary Economics Midterm PDF

CONTEMPORARY - MIDTERM 1. Which economist is known as the "Father of Modern Economics"? B. Adam Smith 2. What is the ASEAN Free Trade Area (AFTA) designed to do? D. To promote free trade among ASEAN nations 3. What does Adam Smith's concept of the "invisible hand" suggest? C. It suggests that ind...

CONTEMPORARY - MIDTERM 1. Which economist is known as the "Father of Modern Economics"? B. Adam Smith 2. What is the ASEAN Free Trade Area (AFTA) designed to do? D. To promote free trade among ASEAN nations 3. What does Adam Smith's concept of the "invisible hand" suggest? C. It suggests that individuals pursuing self-interest benefit society. 4. What is the primary focus of David Ricardo's theory of comparative advantage? C. The benefits of specialization and trade based on opportunity costs 5. What is the purpose of the United Nations? A. To promote peace and international cooperation 6. What is one potential downside of market integration? D. Loss of local businesses 7. What is a key attribute of today's global system? A. Interconnectedness of global economies 8. What role do multinational enterprises (MNEs) play in globalization? C. MNEs facilitate international trade and investment that drives globalization 9. How does protectionism affect developing countries according to the Friedrich List? D. Protectionism allows developing countries to nurture their industries. In a recent economic summit, leaders discussed the impact of tariff acts on market integration. Some countries argued that protectionism hinders global trade expansion, while others emphasized national sovereignty and local competition. The debate highlighted winners and losers in the global marketplace. 10. How does protectionism affect market integration? A. It restricts free trade and limits competition. In a recent economic summit, leaders discussed the impact of tariff acts on market integration. Some countries argued that protectionism hinders global trade expansion, while others emphasized national sovereignty and local competition. The debate highlighted winners and losers in the global marketplace. 11. What is a potential outcome of increased global trade expansion? B. Greater economic interdependence among nations. 12. What is the significance of the Global Interstate System? B. It facilitates international cooperation and trade among nations. 13. What are some positive effects of globalization on governments? A. Economic growth and policy innovation 14. What is market integration? D. Interconnected markets 15. What is vertical integration? C. expands by merging with companies at different production or distribution stages. 16. What is horizontal integration? A. Acquisition of similar companies A country is debating whether to adopt free trade policies. Economists argue about the benefits of comparative and absolute advantages, with some referencing Adam Smith's ideas on specialization and David Ricardo's theory of comparative advantage. Others suggest the Heckscher-Ohlin model for understanding factor endowments in trade. 17. How does Adam Smith's theory support the case for free trade? C. It emphasizes specialization and efficiency. A country is debating whether to adopt free trade policies. Economists argue about the benefits of comparative and absolute advantages, with some referencing Adam Smith's ideas on specialization and David Ricardo's theory of comparative advantage. Others suggest the Heckscher-Ohlin model for understanding factor endowments in trade. 18. What key concept explains why a country should specialize in producing goods so it can make it more efficiently? A. Comparative Advantage 19. How do MNEs impact state sovereignty in the context of globalization? C. They can undermine local regulations and influence policy-making. In a recent summit, leaders from various nations discussed the increasing influence of multinational enterprises (MNEs) on state sovereignty. They highlighted how globalization has reshaped interstate relations and economic policies, leading to both opportunities and challenges for local economies. 20. What is a key attribute of the global interstate system as discussed in the summit? C. Interdependence among nations due to economic ties. 21. What are the two main types of internationalism? A. Liberal Internationalism and Socialist Internationalism A developing country is debating whether to adopt protectionist trade policies to support its nascent industries or to embrace liberalism and open its markets. Economists are divided, with some advocating for Friedrich List's Infant Industry Argument while others emphasize the benefits of free trade in stimulating economic development. 22. How does Friedrich List's argument support protectionism? B. It supports developing new industries until they are competitive. A developing country is debating whether to adopt protectionist trade policies to support its nascent industries or to embrace liberalism and open its markets. Economists are divided, with some advocating for Friedrich List's Infant Industry Argument while others emphasize the benefits of free trade in stimulating economic development. 23. What impact did COVID-19 have on the debate between protectionism and liberalism? B. It highlighted vulnerabilities in global supply chains. The United Nations (UN) has been increasingly involved in peacekeeping missions worldwide. Recently, they deployed a mission to a conflict-ridden region to protect civilians and facilitate humanitarian aid. The UN also focuses on promoting human rights and sustainable development through various programs. 24. How does the UN approach the protection of civilians in conflict zones? D. Through peacekeeping missions and conflict resolution efforts The United Nations (UN) has been increasingly involved in peacekeeping missions worldwide. Recently, they deployed a mission to a conflict-ridden region to protect civilians and facilitate humanitarian aid. The UN also focuses on promoting human rights and sustainable development through various programs. 25. Why is sustainable development important for the UN's agenda? A. It ensures long-term global stability and prosperity A company specializing in consumer electronics decides to acquire a component manufacturer to reduce production costs and increase control over its supply chain. This move aims to enhance efficiency and streamline operations. 26. What type of integration strategy is the company employing? C. Vertical Integration A company specializing in consumer electronics decides to acquire a component manufacturer to reduce production costs and increase control over its supply chain. This move aims to enhance efficiency and streamline operations. 27. How does this strategy potentially improve market efficiency? C. By lowering costs and enhancing production oversight In analyzing global economic disparities, a researcher examines the historical emergence of World-Systems Theory. They focus on how colonial impacts shaped economic structures and the critique of Eurocentrism in understanding development. The researcher also evaluates the strengths and weaknesses of this theory in explaining contemporary global relations. 28. How did colonial impacts contribute to the formation of the World-Systems Theory? A. They created imbalanced economic ties among nations. In analyzing global economic disparities, a researcher examines the historical emergence of World-Systems Theory. They focus on how colonial impacts shaped economic structures and the critique of Eurocentrism in understanding development. The researcher also evaluates the strengths and weaknesses of this theory in explaining contemporary global relations. 29. What is a key critique of Eurocentrism within World-Systems Theory? C. It overlooks non-European contributions to global history. 1. Describe the differences between absolute advantage and comparative advantage in trade theory. Absolute Advantage: Ability to produce more goods with the same resources than another country. Comparative Advantage: Ability to produce a good at a lower opportunity cost than another country, leading to specialization and trade benefits. 2. Explain how market integration can lead to both winners and losers in the economy. Market integration can create winners and losers by: Winners: Increased access to larger markets, lower prices, and greater competition can boost profits for efficient firms. Losers: Inefficient firms may struggle or fail, leading to job losses and economic displacement in certain sectors or regions. 3. What challenges do developing nations face in an integrated global market? Developing nations face several challenges in an integrated global market, including: Limited access to technology Poor infrastructure Trade barriers Economic instability Vulnerability to global price fluctuations Lack of skilled labor Dependence on a narrow range of exports 4. How does the Heckscher-Ohlin model explain patterns of trade between countries? - The Heckscher-Ohlin model explains trade patterns based on countries' factor endowments. Countries export goods that use their abundant factors (like labor or capital) intensively and import goods that use their scarce factors. This leads to specialization and efficient resource allocation in global trade. 5. Discuss the impact of World War II and the Great Depression on international economic integration. - World War II and the Great Depression significantly disrupted international economic integration. The Great Depression led to protectionist policies and trade barriers, while WWII caused destruction and shifted economies. Post-war efforts like the Bretton Woods system aimed to rebuild and promote global cooperation and trade. 6. How did the COVID-19 pandemic influence trade policies globally? The COVID-19 pandemic influenced global trade policies by: Increasing protectionism and export restrictions Promoting local sourcing and supply chain resilience Accelerating digital trade and e-commerce Encouraging health and safety regulations in trade practices Shifting focus to essential goods and services 7. What are the criticisms of the world-systems theory, and who are its main critics? - Criticisms of world-systems theory include its deterministic view, oversimplification of global dynamics, and neglect of local factors. Main critics are Immanuel Wallerstein, who developed the theory, and scholars like Andre Gunder Frank and Giovanni Arrighi, who argue for more nuanced approaches to global interactions. 8. Analyze the relationship between nationalism and internationalism in the context of the Global Interstate System. - Nationalism emphasizes loyalty to one's nation, often prioritizing national interests. In contrast, internationalism promotes global cooperation and unity. In the Global Interstate System, these concepts can conflict, as nations may pursue self-interest while also needing collaboration to address global challenges like trade, security, and climate change. 9. Discuss the role of the UN in promoting sustainable development goals (SDGs). The UN promotes Sustainable Development Goals (SDGs) by: Setting global targets for social, economic, and environmental progress Facilitating international cooperation and partnerships Providing resources and expertise to countries Monitoring progress and encouraging accountability among nations. 10. What strategies can businesses use to enhance competitiveness in a global market? Businesses can enhance competitiveness by: Adopting innovative technologies Improving product quality Reducing costs through efficiency Expanding into new markets Building strong brand identity Fostering customer relationships Investing in employee training and development 11. What historical factors have shaped the current global interstate system? Historical factors shaping the global interstate system include: Colonialism and imperialism World Wars and their aftermath The Cold War and ideological conflicts Economic globalization International organizations (e.g., UN, NATO) Nationalism and state sovereignty movements 12. Evaluate the effectiveness of free trade agreements like AFTA in promoting regional trade. Free trade agreements like AFTA promote regional trade by: Reducing tariffs and trade barriers Encouraging investment and economic cooperation Enhancing market access for member countries Stimulating competition and efficiency Overall, they can boost economic growth and integration in the region. 13. How does the concept of globalism differ from globalization? Globalism: an ideology promoting global cooperation and interconnectedness, often emphasizing shared values and governance. Globalization: the process of increasing economic, cultural, and political interdependence among countries, driven by trade, technology, and communication. 14. What are the implications of MNEs for national sovereignty and regulatory power? - MNEs can challenge national sovereignty by influencing local economies and politics. They may undermine regulatory power through tax avoidance, lobbying, and setting standards that favor their interests, potentially leading to conflicts between national policies and corporate goals. 15. How does globalization affect local economies and job markets? Globalization affects local economies and job markets by: Increasing competition from foreign companies Creating new job opportunities in export sectors Potentially leading to job losses in industries unable to compete Encouraging investment and innovation Influencing wages and working conditions 16. A country, in an effort to boost its economy, has recently signed multiple free trade agreements with neighboring nations. These agreements aim to reduce tariffs and promote competition among local businesses. However, some domestic industries are struggling due to increased imports, leading to job losses. The government is now debating whether to implement protectionist measures to safeguard these industries.What are the potential short-term effects of implementing protectionist measures on the country's economy? - Short-term effects may include job preservation in struggling industries, but could also lead to higher prices for consumers and retaliation from trading partners. 17. A country, in an effort to boost its economy, has recently signed multiple free trade agreements with neighboring nations. These agreements aim to reduce tariffs and promote competition among local businesses. However, some domestic industries are struggling due to increased imports, leading to job losses. The government is now debating whether to implement protectionist measures to safeguard these industries.How might economic globalization influence competition and innovation within this country? - Economic globalization can enhance competition by exposing local firms to international markets, potentially driving innovation as companies strive to improve efficiency and product quality. 18. A government is debating whether to implement tariffs on imported goods. Proponents argue that protecting local industries will boost the economy, while opponents cite theories of free trade as a better approach for long-term growth. They reference Adam Smith's and David Ricardo's principles, emphasizing comparative and absolute advantages in international trade.According to David Ricardo's theory of comparative advantage, what should the government prioritize when considering trade policies? - The government should focus on producing goods where it has the lowest opportunity cost compared to other nations, promoting efficiency and mutual benefits from trade. 19. In the aftermath of COVID-19, a developing country is debating whether to adopt protectionist trade policies to support its nascent industries or to embrace liberalism and open its markets. Economists are divided: some argue that protectionism will help local businesses grow, while others warn it could lead to inefficiencies and retaliation from trading partners. The government seeks guidance on how to balance economic development with global trade relations. Considering Friedrich List's theories, what would be his likely recommendation regarding the adoption of protectionist policies in this context?  - List would likely advocate for protectionism to nurture infant industries until they can compete globally. 20. In the aftermath of COVID-19, a developing country is debating whether to adopt protectionist trade policies to support its nascent industries or to embrace liberalism and open its markets. Economists are divided: some argue that protectionism will help local businesses grow, while others warn it could lead to inefficiencies and retaliation from trading partners. The government seeks guidance on how to balance economic development with global trade relations.What potential negative impact of protectionism should the government consider when evaluating trade policies post-COVID-19? - The government should consider that protectionism may lead to trade wars, reduced market access, and higher prices for consumers. 21. In a recent summit, leaders from various countries discussed the increasing influence of multinational enterprises (MNEs) on global politics and economics. They highlighted how these entities often operate beyond national regulations, raising concerns about sovereignty. Additionally, they debated the effects of globalization on interstate relations, particularly in developing nations where local economies are heavily impacted by foreign investments.How do multinational enterprises challenge traditional notions of state sovereignty in the context of the global interstate system? - Multinational enterprises can undermine state sovereignty by exerting economic power that influences domestic policies and regulations, often prioritizing profit over local interests 22. In a recent summit, leaders from various countries discussed the increasing influence of multinational enterprises (MNEs) on global politics and economics. They highlighted how these entities often operate beyond national regulations, raising concerns about sovereignty. Additionally, they debated the effects of globalization on interstate relations, particularly in developing nations where local economies are heavily impacted by foreign investments.From a Marxist perspective, what is a potential negative effect of globalization on developing countries within the global interstate system? - Globalization may exacerbate inequalities by allowing developed nations to exploit resources and labor in developing countries, leading to economic dependency and hindering local development. 23. In a recent seminar, students discussed the World-Systems Theory and its implications on global socio-economic structures. They examined how historical events, such as colonialism, shaped the current dynamics between core, semi-peripheral, and peripheral nations. Some students argued thatEurocentrism in historical narratives has skewed perceptions of development and progress across different regions.How did colonial impacts contribute to the establishment of the core-periphery model within World-Systems Theory? - Colonialism created unequal economic relationships, exploiting resources from peripheral nations for the benefit of core nations, thus establishing a hierarchical global system. 24. What are the country categories according to World-Systems Theory 1. Core countries: These are highly developed, economically strong nations with advanced technologies and high levels of industrialization. They often dominate global trade and politics. 2. Semi-periphery countries: These nations have some characteristics of both core and peripheral countries. They are developing but have more industrialization and economic stability than peripheral countries. 3. Peripheral countries: These are less developed nations with weaker economies, often reliant on agriculture and raw material exports. They typically have limited industrialization and lower levels of political influence. 25. Give the two monetary Institutions created after the Bretton Woods System 1. International Monetary Fund 2. World Bank 26. What is the Bretton Woods System for? - An International Monetary System that would ensure exchange rate stability, prevent competitive devaluations, and promote economic growth. 27. Enumerate the words in the PESTLE Analysis Framework. - Politics, Economics, Social, Technology, Legal, and Environment.