Global Political Economy Exam with correct answers 2024
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Module
Global Political Econom
Institution
Global Political Econom
How to calculate index of openness? What it is? correct answers The index of openness is the ratio of trade to GDP:
Index of Openness = (Exports +Imports)/GDP
Remember: Openness does not reveal a country's trade policies or define its barriers to trade; it merely indicates how open that economy ...
How to calculate index of openness? What it is? correct answers The index of
openness is the ratio of trade to GDP:
Index of Openness = (Exports +Imports)/GDP
Remember: Openness does not reveal a country's trade policies or define its barriers to
trade; it merely indicates how open that economy is to global trade.
What does the book mean by integration (shallow v deep)? correct answers
Economists sometimes refer to the reduction of tariffs and the elimination of quotas as
shallow integration and negotiations over domestic policies that impact international
trade as deep integration. Deep integration is much more contentious than shallow
integration and much more difficult to accomplish since it involves domestic policy
changes that align a country with rules that are created abroad, or at least negotiated
with foreign powers.
What are regional trade agreements? correct answers RTAs are bilateral (two
countries) or plurilateral (several countries). The WTO is not an RTA because it is
worldwide in scope and not just regional. In trade jargon it is called a multilateral
agreement because it includes, potentially, all the countries of the world. Some
plurilateral agreements are quite large, such as the EU, which has twenty-eight
members, or the proposed free-trade area of the Pacific, called the Asia Pacific
Economic Cooperation group, which has twenty- one.
Five Types of Regional Trade Agreements correct answers Partial Trade Agreement -
Free Trade in outputs of one or a few industries
Free-trade area - free trade in outputs (goods and services) - NAFTAw
Customs union - free trade in outputs plus a common external tariff
Common Market - Custom union plus free movement of inputs (capital and labor)
Economic Union - common market plus substantial harmonization of economic policies,
including a common currency (US States)
Pros and Cons of Regional Trade Agreements correct answers Pros - build a freer,
more open trade. Easier to reach agreements. Allows trade barriers to change less
dramatically and can open up more. Can explore trade in new industries that
traditionally closed. Can be used as political threat to encourage agreements in WTO
and can solidify relations among countries. Create many new jobs in areas where
America has a competitive advantage such as business services and high-tech
industries. Lower government spending because less of a need to have subsidies.
Cons - undermine worldwide progress and can discriminate towards poorer countries.
Trade deals can displace workers from jobs where there are better economies of scales
in other countries (move jobs to Mexico), and oftentimes these agreements are written
, in favor of corporations to improve efficiency and provide cheap products. Can lead to
poor working conditions and environmental degradation in neighboring countries.
FDI; manufacturing and service correct answers Foreign Direct Investment is when a
firm invests directly in production or other facilities, over which it has effective control, in
a foreign country. Level of investment in nearly all countries highly correlates with
domestic savings rates.
Manufacturing FDI requires the establishment of production facilities. Service FDI
requires building service facilities or an investment foothold via capital contributions or
building office facilities.
Inward v Outward FDI correct answers Inward foreign direct investment - foreign direct
investment by a foreign firm establishing a facility within the domestic country. Contrasts
with outward FDI. Example is general motors deciding to open a factory in Pakistan.
They are going to need some capital. That capital is inward FDI for Pakistan.
Outward foreign direct investment - foreign direct investment by a domestic firm
establishing a facility abroad, contrasts with inward FDI.
Example is general motors decide to open a factory in Pakistan. They are going to need
some capital. That capital is outward FDI from the USA.
Forms of FDI correct answers - Acquisition - purchase of existing company in the
foreign country
- Greenfield Investments - set up a new company 'from the ground up' in the foreign
country.
o Examples:
§ Motorola invests money in china and builds a new plant for cell phones.
§ Starbucks purchased an existing UK firm British coffee and sells coffee/tea/desserts
under the name Starbuck
(eg. Samsung's investment in Austin, TX - FDI is real estate, facilities, not paper (eg
bonds, equities) investment, longer time horizon for investment, think long-term.
What are the items most protected in developed nations? correct answers Goods that
are most protected in higher income/developed nations are often agricultural products,
textiles (cf. cotton example in Chapter 3)
Three Features of Contemporary Economic Relations correct answers (1) Integration,
(2) Multilateral organizations, (3) RTAs Regional trade agreements (eg NAFTA,
MERCOSUR, EU)
Gini Coefficient correct answers Measures income distribution of a nation's residents;
the higher the number, the less egalitarian the country's distribution of wealth is.
What is the history of the World Bank/trade regimes? correct answers History of Intl.
Trade Régimes: 1945 Bretton Woods, origin of World Bank, what it has evolved into;
World Bank no longer rebuilding Europe; new mission is economic development &
poverty eradication
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