Y376 International Political Economy

Y376 International Political Economy

Midterm Examination

March 3, 2011

This exam is in two parts. The first part is multiple choice and answers must be marked on the computer grading (Scantron) sheet. The second part is an essay question. The essay must be written in one or more blue books. Be sure to write your name at the top of the computer sheet and fill in the corresponding circles below your name and write your name on each of the blue books you use.

Part I. Multiple Choice (30 minutes):

1.World oil prices increased to over $140 per barrel in the summer of 2008 primarily because of ______.

a)rapid growth in demand from India and China

b)increased exploitation of reserves in the Caspian region

c)reduction in aggregate OPEC production levels

d)the usual increase in summer travel

2.The way many large banks dealt with the international debt crisis of the 1980s was to ______.

a)sell off some of their bad loans at a discount on secondary loan markets

b)write off the bad loans immediately

c)punish the loan officers who made the bad loans

d)encourage smaller banks to stop lending to the Third World

3.In the last two decades, the United States was involved in fairly intense disputes with ______over its under-valued currency.

a)India

b)Japan

c)Western Europe

d)China

4.U.S. economic aid to Iraq has been substantial but did not work as intended primarily because ______.

a)not enough money was spent

b)most of the money went to corrupt Iraqi contractors

c)Halliburton spent it on corporate jets

d)the insurgency and the sectarian violence interfered with reconstruction efforts

5.The HIPC program was designed to deal with the debt problems of _____ countries.

a)formerly communist

b)poor developing

c)Latin American

d)Scandinavian

6.Bono supports increased ______as the best way to eliminate global poverty.

a)foreign investment

b)trade

c)currency flows

d)foreign aid

7.The main change in the international trade regime between 1945 and the present was ______.

a)an increase in average tariff levels

b)a decline in the volume and value of trade

c)the creation of a more ambitious trade regime (the WTO)

d)the return to a gold standard

8. The "Nixon shock" of 1971 ended which of the following elements of the Bretton Woods system?

a)the gold standard

b)the most-favored-nation principle

c)the IMF

d)dollar-gold convertibility

9.One of the costs of the switch from fixed, adjustable exchange rates to floating rates in the early 1970s was greater ______in exchange rates.

a)volatility

b)stability

c)speculation

d)competitive depreciation

10.One of the key impediments to the successful conclusion of the Doha Development Round of multilateral trade negotiations is the lack of agreement over ______.

a)trade in services

b)non-tariff barriers

c)agricultural subsidies

d)intellectual property rights

11. One of the unregulated financial markets that contributed to the financial crisis of 2008 was the market for ______.

a)currency futures

b)stocks

c)private equity

d)credit default swaps

12.Which of the following is a key currency?

a)Euro

b)Dollar

c)Yen

d)Yuan

13.The rise of the fascist dictatorships in Europe and Japan in the period between World War I and World War II that happened in the wake of ______helped to convince the U.S. and British governments to push for a liberal world economy after the end of World War II.

a)unprecedented economic growth

b)the Great Depression

c)tariff reductions

d)globalization

14.The trade deficit of the United States in 2006 was approximately _____ dollars.

a)800 million

b)8 billion

c)80 billion

d)800 billion

15.A "dirty float" exists when there is a floating exchange rate regime with ______.

a)government intervention in currency markets

b)attempts by the key-currency country to export its inflation

c)currency markets controlled by racketeers

d)price volatility

16.The biggest political defender of bi-metallismin the United States was ______.

a)Abraham Lincoln

b)Cordell Hull

c)Wendell Wilkie

d)William Jennings Bryan

17.The International Monetary Fund works with highly indebted countries to formulate a structural adjustment program before the IMF makes any new loans. In so doing, the IMF provides a "stamp of approval" for the ______indebted countries.

a)suspension of loan payments by

b)adoption of import substitution development strategies by

c)inflationary policies of

d)granting of new loans by private lenders to

18.OLI theory examines three things -- ______-- to predict how much foreign direct investment will flow to specific locations.

a)ownership, legality, and information

b)organization, labor, and investment

c)ownership, location and internalization

d)oil, liberalism, and inequality

19.Which of the following countries was the last to be admitted to the Group of 8?

a)Russia

b)Italy

c)Nigeria

d)Canada

20.The documentary film Life and Debt includes interviews with the former Prime Minister of _____, Michael Manley.

a)Britain

b)Jamaica

c)Trinidad

d)Guyana

21.One of the key rules of the GATT/WTO is that members must not discriminate in their trade with other members. That rule is called the ______principle.

a)multilateral trade negotiation (MTN)

b)multinational corporation (MNC)

c)most favored nation (MFN)

d)world tariff floor (WTF)

22.Intellectual property protection is of particular concern to the ______industries.

a)steel, railroad, and automotive

b)mining

c)textile, clothing, and apparel

d)recording, movie, and pharmaceutical

23.After the 1970s, ______experienced large structural deficits in its balance of payments.

a)the United States

b)Germany

c)Japan

d)China

24.Which of the following was not part of the successful energy conservation efforts that came in the wake of the oil price increases of the 1970s?

a)increased sales of SUVs

b)improved insulation of homes and offices

c)adoption of fuel efficiency standards for automobiles

d)invention of new energy-saving technologies for industries

25.An international regime is a set of norms, rules, procedures, and institutions that ______.

a)is backed by military force

b)performs pretty much like a government does

c)includes all the countries in the world

d)constrains the behavior of members of the regime

26.One of the areas of trade that was excluded from the GATT initially was trade in ______.

a)automobiles

b)clothing and textiles

c)steel

d)agriculture

27.The latest and currently ongoing round of multilateral trade negotiations is called the ______Round.

a)Uruguay

b)Doha

c)Seattle

d)Dillon

28.Which of the following OPEC countries generally want moderate price increases?

a)Venezuela

b)Iran

c)Libya

d)Saudi Arabia

29.The most important change in the monetary regime between 1944 and the present was ______.

a)the end of fixed exchange rates

b)the creation of the Euro

c)the floating of the yuan/renminbi

d)the reestablishment of the gold standard

30.What is the word or phrase that stands for the desire of insurance companies and other risk management firms to prevent their customers from engaging in overly risky activities by having them bear some of the costs of doing so?

a)moral turpitude

b)creditworthiness

c)moral hazard

d)the uncertainty principle

Part II. Essay (30 minutes)

Choose one question below and write an essay in your blue book (30 minutes):

1. What are the origins and consequences of the current global financial crisis? How is that crisis similar to and different from previous major financial crises? What measures are likely to be taken by the US government and others to prevent the recurrence of the problems that led to the current crisis?

1. Review at least two theories about the origin of the gap in incomes between the industrialized countries and the rest of the world. Which of those theories do you think does the best job of explaining the gap? What are the policy implications? Use what you learned about Jamaica from viewing the documentary Life and Death to answer these questions.

1. The Obama Administration has put a major emphasis on improving the international competitiveness of the U.S. economy, especially in view of the increased competition from developing countries like China. Do you agree or disagree with this perspective? State your reasons. Be sure to consider some counterarguments to your position in the essay.

1. Like McDonald’s and IBM in the recent past, Wal-Mart has become a symbol U.S.-led, neo-liberal globalization and its potentially evil effects on the planet. Make a case for and against Wal-Mart as an evil force. State your own views.

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