WGU C211 Global Economics for
Managers|PA and OA|Explore New 260
Questions and Answers|100%
1. Question:
Explain the difference between comparative advantage and absolute advantage. Provide
an example of each.
Answer: Absolute advantage refers to the ability of a country to produce more of a good
or service with the same amount of resources compared to another country. Comparative
advantage, on the other hand, occurs when a country can produce a good at a lower opportunity
cost than another country, even if it does not have an absolute advantage.
Example of Absolute Advantage: If Country A can produce 10 tons of wheat using 5
workers, while Country B can only produce 6 tons with the same number of workers, Country A
has an absolute advantage in wheat production.
Example of Comparative Advantage: If Country A can produce either 10 tons of wheat
or 5 tons of rice, and Country B can produce either 6 tons of wheat or 4 tons of rice, Country A
has a comparative advantage in wheat (because it gives up less rice per ton of wheat produced)
while Country B has a comparative advantage in rice.
2. Question:
, Discuss the impact of tariff imposition on international trade and domestic markets.
Answer: Tariffs are taxes imposed on imported goods and services. They can lead to
higher prices for consumers, reduce the volume of imports, and potentially provoke retaliation
from trading partners. Domestically, tariffs can protect emerging industries from international
competition, support local jobs, and generate government revenue. However, they can also lead
to inefficiencies and reduce overall economic welfare by limiting consumer choices and
increasing costs.
3. Question:
How do exchange rate fluctuations affect multinational corporations (MNCs)?
Answer: Exchange rate fluctuations can significantly impact MNCs by altering the
relative cost of exporting goods, affecting the value of repatriated profits, and influencing
investment decisions. A stronger domestic currency can make exports more expensive and less
competitive, while a weaker currency can boost export competitiveness but increase the cost of
importing goods and services. MNCs may use hedging strategies to mitigate these risks.
4. Question:
Analyze the role of international financial institutions like the IMF and World Bank in
global economic stability.
Answer: The IMF provides short-term financial assistance to countries facing balance of
payments crises to stabilize exchange rates and restore economic growth. The World Bank
focuses on long-term economic development and poverty reduction by funding infrastructure
projects, education, and health initiatives. Both institutions aim to foster global economic
,stability and development, but they often face criticism regarding their policies' social and
economic impacts on developing countries.
5. Question:
What are the potential effects of a trade war on global supply chains?
Answer: A trade war can disrupt global supply chains by imposing tariffs and other trade
barriers that increase costs and reduce efficiency. Companies may need to source materials and
components from alternative suppliers, which can lead to delays and increased production costs.
Long-term trade conflicts can encourage firms to diversify supply chains or relocate production
facilities, affecting global economic integration and competitiveness.
6. Question:
Describe the concept of "economic globalization" and its main drivers.
Answer: Economic globalization refers to the increasing interdependence of world
economies due to the growing scale of cross-border trade of goods and services, capital flows,
and the spread of technology. Its main drivers include advances in transportation and
communication technologies, trade liberalization, international agreements (such as WTO
protocols), and the global expansion of multinational corporations.
7. Question:
Explain the Heckscher-Ohlin model of international trade and how it differs from the
Ricardian model.
, Answer: The Heckscher-Ohlin model posits that countries will export goods that utilize
their abundant factors of production and import goods that require factors in which they are
relatively scarce. This model emphasizes the role of a country’s factor endowments in
determining trade patterns. In contrast, the Ricardian model focuses on comparative advantage
derived from differences in labor productivity due to technological variations. The Ricardian
model assumes only one factor of production (labor), while Heckscher-Ohlin considers multiple
factors (labor and capital).
8. Question:
How do multinational corporations impact host and home countries economically?
Answer: Host Country: MNCs can bring foreign direct investment (FDI), create jobs,
transfer technology, and enhance infrastructure development. However, they may also lead to
market domination, repatriation of profits, environmental degradation, and socio-economic
inequality.
Home Country: MNCs can benefit from expanded markets, higher returns on capital,
and economies of scale. On the downside, they may contribute to job losses domestically due to
offshoring, increased vulnerability to global economic fluctuations, and potential national
security concerns.
9. Question:
Discuss the role of trade blocs such as the European Union (EU) in shaping global trade
patterns.
