Global Political Economy Final exam with correct answers 2024
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Module
Global Political Econom
Institution
Global Political Econom
Quotas correct answers the application of a quantitative restriction against goods or services from another region
Currency Controls correct answers limit the availability of foreign currency for the purchase of foreign goods
Voluntary Export Restraints correct answers Voluntary Export Res...
Quotas correct answers the application of a quantitative restriction against goods or
services from another region
Currency Controls correct answers limit the availability of foreign currency for the
purchase of foreign goods
Voluntary Export Restraints correct answers Voluntary Export Restraints: one country
agrees to limit its exports to a third country, usually because the importing country
threatens to place barriers against the goods of the exporting country.
Factor Endowment Theory correct answers Factor Endowment Theory: Developed by
Eli Heckscher and Bertil Ohlin, countries will have a comparative advantage in those
industries that concentrate on the natural advantages or the endowment of countries.
Comparative Advantage Theory correct answers if a country specializes in the
produces of goods and services where it is more efficient comparted to its competitors it
will be better off
Infant Industry Theory correct answers state should intervene to protect industries that
have the potential to develop efficient production but would be destroyed by
international competiton at the moment.
National Security Theory correct answers countries need to be self-sufficient in the
production of certain strategic industries
Unequal Exchange Theory correct answers radical theory that suggests that costs
structures have been determined by imperialist plinder, and this makes it dificult for
poorer countries to deevelop. Protectionism is needed to help poor countries operate on
a level playing field. With protection, they will continued to be exploited in free trade.
Growth of Trade since WWII correct answers -Since the end of WWII, trade has
increased more rapidly than production. Which is a clear indicator of the increased
internationalization of economic activities and the greater interconnectedness that has
characterize the world economy.
-growth in trade has been uneven and there have been periods of recession when trade
growth has slowed, but the overall trend has been positive. Majority of trade occurs
between developed countries too.
-process of trade liberalization under GATT has been uneven geographically too.
,-1947-1973 was one of unpresedneted expansion for the world economy.
-in 1973 there was new unemployement, oil crisis, staglflation, Countries started to use
non-tariff baries again, GATT failed to stop this use.
Most Favored Nation Clause correct answers clause in GATT/WTO. Ensure that any
concession granted to one member must be extended to all members. With exception of
customs unions and free trade areas.
Guiding principles of International Trade regime correct answers Non discirmination:
MFN clause
Reciprocity: when one county loweres tariffs, other country does the same.
Transparency: any discrimination must be clearly visible, any tariffs must be known and
NTBs like import quotas are banned
MUlilaterlaism: we want to include the maximum number of countries.
TRIPS correct answers The Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) is an international agreement administered by the World Trade
Organization (WTO) that sets down minimum standards for many forms of intellectual
property (IP) regulation as applied to nationals of other WTO Members
Specifically, TRIPS requires WTO members to provide copyright rights, covering
content producers including performers, producers of sound recordings and
broadcasting organizations; geographical indications, including appellations of origin;
industrial designs; integrated circuit layout-designs; patents; new plant varieties;
trademarks; trade dress; and undisclosed or confidential information. TRIPS also
specifies enforcement procedures, remedies, and dispute resolution procedures
RTAs (REgional Trade Agreements) correct answers past two decades have seen an
increase in creation of RTAs, like NAFTA, ASEAN, TPP. Solution to difficulty of
negotiate multilateral WTO agreements. Some think that these regional deals are
discriminatory and innifiecient and will do damge to the natural flow of free trade.
FDI (Foreign Direct Investment) correct answers invesment made oustide the home
country of the investing company in which control over the resources transffered
remaisn with the investor.
An example of foreign direct investment would be an American company taking a
majority stake in a company in China. Another example would be a Canadian company
setting up a joint venture to develop a mineral deposit in Chile.
Bretton Woods System correct answers -US dollar fixed to gold, encouraging epople to
have faith in the unchanigng value of the key currency. Other currencies were fixed to
, the U.S. dollar. this allowed other countries to have their exchange rate adjusted as
needed. Bretton woods built IMF, World Bank.
Triffin Dilemma correct answers world needed US in dollars to participate in the
international economy, as US dollars flood out into teh world the balance between
dollars and gold would deteriorate until people lost faith that the US would honor its
commitment to gold. Eventually there would be more dollars outside the US than gold
inside, and the US would not be able to redeem dollars for gold.
in 1960 the US foreign monetary liabilties exceeded US gold reseves. In 1971 US broke
link with gold. (Nixon Shock)
-currencies were allowed to float, this led to incrased capital mobility and increased
acitivy in foreign exchange markets. Profits could now be made by exchanging
currencies.
Marshall PLan correct answers US give money to rebuld western Europe and standup
to threat of COmmunist takeover in Europe
Mundell Fleming Model correct answers stresses the tension between maintaining the
ability of money to cross borders freely and the existence of fixed or minimally floating
currencies, and the ability of a country to set its own interest rates to influence economic
growth. Governments have to choose two priorities, out of independent monetary
supply, stable exchange rates and free flows of capital. If independent monetary policy
and capital flows, then exchange rates will move. If independent monetary policy and a
fixed exchange rate, capital flows must be curbed. If capital flows and a fixed exchange
rate, monetary autonomy must be sacrificed.
Rise of the Euro correct answers -countries tried to coordinate their economies as a
result of turbulence in foreign exchange markets. This was because in the 1980s there
was a rising U.S. trade deficit and exchange rate volatility.
-European solution to this problem was the creation of the ECU, a composite currency
for bookkeeping purposes. Also created Exchange rate mechanism which laid the
ground work for a single currency, the Euro.
-In 2002, many European countries phased out their national currencies and introduced
the Euro. Operation of Euro is overseen by the European Central bank, which sets a
single interest rate for all member states.
-Euro provides members with price stability which menas low inflation.
-some objected to Euro because countries would lose their ability to devalue their
currency if an economic shock hit their country.
-a single monetary policy might now suit all the different countries.
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