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Chapter 1
1) Which of the following is FALSE? Please elaborate on your answer.
A) Capital flows today are larger mainly because economies are larger.
B) The last two decades are the first time in history that a nation has borrowed more than 10 percent of its GDP.
C) There are important qualitative differences between capital flows today and in the past.
D) Today most international financial transactions involve buying and selling assets denominated in foreign currencies.
Chapter 2
2) Which of the following is FALSE? Please elaborate your answer.
A) National sovereignty limits outsiders’ ability to change the trade laws and practices of individual nation states.
B) Because of international recognition of national sovereignty, individual nations are unaffected by global trade and capital flows.
C) Foreign investors may not have a legal right to impose policies on a nation state, but the nation state may still experience consequences of poor policies.
D) Because trade policies are laws of individual nations, it is difficult for other nations and international organizations to force changes on unwilling nation states.
Chapter 3
Please elaborate your answer.
3) If one nation is able to produce a good at a lower opportunity cost than another, it has
A) an absolute advantage in that good.
B) a comparative advantage in that good.
C) a productivity advantage in that good.
D) a technological advantage in that good.
Chapter 4
Please elaborate your answer.
4) Suppose that Brazil is capital abundant and Chile is natural resource abundant. If timber is natural resource intensive and computers are capital intensive, then
A) Chile will produce more computers after trade begins with Brazil.
B) Brazil will produce more timber after trade begins with Chile.
C) Chile will produce more timber after trade begins with Brazil.
D) Brazil will completely specialize in computers once trade begins with Chile.
