International Trade Exam Materials
Course Introduction
International Trade explores the fundamental theories, policies, and practices that govern the exchange of goods and services across national borders. The course examines the economic reasons for trade, the gains from trade, and the impact of international trade on economic growth and development. Students will analyze topics including comparative advantage, trade barriers, tariffs, quotas, trade agreements, and the roles of international organizations such as the World Trade Organization (WTO).
Real-world case studies and current global issues will be incorporated to illustrate the complexities and dynamics of today's global trading system.
Recommended Textbook
International Economics 6th Edition by James Gerber
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17 Chapters
830 Verified Questions
830 Flashcards
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Page 2
Chapter 1: The United States in a Global Economy
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Sample Questions
Q1) An important factor that increased international capital flows in the latter part of the 1800s was
A)the creation of the International Monetary Fund.
B)the creation of numerous regional trade agreements.
C)the rapid rate of East Asian economic growth.
D)technological innovations.
E)the creation of the World Bank.
Answer: D
Q2) Which of the following kinds of agreements between two or more countries would be an example of a deep integration measure?
A)An agreement to reduce tariffs and quotas
B)An agreement to unify customs forms in order to speed up cross-border traffic
C)An agreement to impose the same limits on cartels and monopolies
D)An agreement to reduce exports
E)An agreement to limit imports
Answer: C
Q3) Most of what we buy and sell never makes it out of domestic markets.
A)True
B)False
Answer: True
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Chapter 2: International Economic Institutions Since World War
Ii
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Sample Questions
Q1) Which of the following is TRUE?
A)A common market is more deeply integrated than a customs union.
B)The European Union is a shallower and broader form of integration than NAFTA.
C)NAFTA is an example of a customs union.
D)Customs unions require the creation of a common currency.
Answer: A
Q2) If a good or service does not get used up as it is consumed,then it is said to be
A)nonexcludable.
B)nonrival.
C)nondiscrimination.
D)nonconsumable.
E)None of the above.
Answer: B
Q3) Many of the important international governmental institutions that deal with the global economy have their roots in the Bretton Woods conference at the end of World War II.
A)True
B)False
Answer: True
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Chapter 3: Comparative Advantage and the Gains From Trade
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Sample Questions
Q1) Suppose Mexico can produce 5 autos or 10 corn.Suppose the United States can produce 4 autos or 20 corn.If opportunity costs are constant for both countries,which of the following would NOT be a potential terms of trade?
A)1 auto for 3 corn
B)1 auto for 4 corn
C)1 corn for 1/3 of an auto
D)1 corn for 1 auto
Answer: D
Q2) Adam Smith created the theory of comparative advantage.
A)True
B)False Answer: False
Q3) In the simple trade model,what is assumed about labor?
Answer: It is perfectly mobile between the two industries within a nation.
Q4) What is productivity?
Answer: The amount of output from a unit of an input
Q5) What results has the Republic of Korea experienced from its change in policies?
Answer: It has successfully industrialized.Its index of openness is many times greater and incomes have grown almost 6 percent per year over the period.
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Chapter 4: Comparative Advantage and Factor
Endowments
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Q1) The opportunity cost of producing in low-income,developing countries rises over the product cycle,according to theory.
A)True
B)False
Q2) Offshoring by domestic firms causes job losses not job expansion in the home market.
A)True
B)False
Q3) Which types of workers are most likely to favor lowering trade barriers in the United States?
Q4) The United States has the largest percentage of foreigners in its overall population of any nation.
A)True
B)False
Q5) The O in OLI theory stands for ownership,and the asset owned can be tangible or intangible.
A)True
B)False
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Q6) In the Heckscher-Ohlin model,what assumption is made about opportunity costs?
Chapter 5: Beyond Comparative Advantage
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Sample Questions
Q1) Which industry was first covered by a free trade agreement between Canada and the United States?
Q2) If the United States and Mexico trade Budweiser for Modelo beer,what type of trade does this represent?
Q3) Comparative advantage cannot account for a significant portion of world trade.
A)True
B)False
Q4) Describe the two sources of economies of scale and how these economies of scale lead to intraindustry trade.
Q5) Interindustry trade refers to
A)international trade of products made within the same industry.
B)domestic trade of products made within the same industry.
C)international trade of products made across different industries.
D)the exchange of similar items that are differentiated.
E)None of the above.
Q6) If countries have similar factor endowments and productivities,their trade is likely to be interindustry.
A)True
B)False
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Chapter 6: The Theory of Tariffs and Quotas
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Sample Questions
Q1) Nontariff barriers to trade are less transparent than tariffs.
A)True
B)False
Q2) Describe intellectual property rights.What agreements have been reached regarding their protection? What are the benefits and the costs of protecting intellectual property rights?
Q3) The production side efficiency loss of a tariff is caused by
A)confusion about prices when a tariff is imposed.
B)higher profits gained by foreign producers.
C)the expansion of relative inefficient domestic production.
D)the contraction of domestic consumption.
E)the increase in government revenue.
Q4) What are the three major types of quotas?
Q5) Based on Figure 6.1,given a tariff of $0.25 per bushel on soybean imports,how much will domestic production increase?
A)Domestic firms will increase output by 10 million bushels.
B)Domestic firms will increase output by 20 million bushels.
C)Domestic firms will increase output by 70 million bushels.
D)Domestic firms' production will not be changed by the tariff.
Q6) What are some of the long-run costs of tariffs?
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Chapter 7: Commercial Policy
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Sample
Questions
Q1) Agriculture,clothing,and textiles are singled out for treatment in the chapter because
A)they tend to be the most highly protected sectors of industrial economies.
B)they tend to be the least-protected sectors internationally.
C)the policies of high-income nations in these sectors may have harmful effects in low-income countries.
D)A and C are both correct.
E)B and C are both correct.
Q2) If a large percentage of economic activity in developing countries is unrecorded,then the countries are likely to rely on which of the following taxes to provide government revenue?
A)Sales taxes
B)Property taxes
C)Income taxes
D)Tariffs
Q3) In the global recession of 2007-2009,world trade declined because nations closed their markets to trading partners.
A)True
B)False
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9
Chapter 8: International Trade and Labor and Environmental Standards
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Sample Questions
Q1) Discriminatory trade practices are allowed among sister WTO member countries,especially when it comes to
A)the use of child labor in agricultural and textile/apparel products.
B)national security and special benefits given to other members of a free trade area.
C)the protection of agriculture and textile/apparel from open trade.
D)Both A and B are correct.
E)Both B and C are correct.
Q2) The race-to-the-bottom concept described in the text refers to
A)the situation in which countries with high standards are forced to lower their standards or face the loss of jobs and industry.
B)the situation in which human rights are not respected by trading countries.
C)adopting the standards of a few selected middle-income and high-income countries.
D)the use of low per-capita income as a means of comparing the well-being of individuals.
E)None of the above.
Q3) What are two main obstacles to increased international integration?
Q4) Which region has the most children (total number)working?
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Chapter 9: Trade and the Balance of Payments
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Q1) Looking at the financial account data,it is possible to determine the total amount of official reserves available to a nation.
A)True
B)False
Q2) Based on Table 9.1,if the information in the table is typical of current and financial account values over a long period,then it would be reasonable to infer that
A)the net international investment position is negative.
B)the net international investment position is positive.
C)national savings are less than domestic investment.
D)government accounts are in deficit.
E)the current account balance is greater than domestic investment.
Q3) What is the difference between the U.S.current account deficits of the 1980s and the 1990s?
Q4) For countries such as the United States and the United Kingdom,it is important to have trade surpluses in order to service their external debts.
A)True
B)False
Q5) How do recent current account deficits compare to GNP and to past ratios?
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Chapter 10: Exchange Rates and Exchange Rate Systems
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Sample Questions
Q1) An American firm that buys foreign exchange because its managers expect the dollar to depreciate is
A)increasing the supply of foreign exchange.
B)increasing the demand for foreign exchange.
C)speculating.
D)Both A and B.
E)Both B and C.
Q2) An increase in the U.S.demand for the Mexican peso
A)causes an increase in the U.S.dollar price of a Mexican peso.
B)causes the Mexican peso to appreciate.
C)causes the U.S.dollar to depreciate.
D)causes Mexican goods to be relatively more expensive.
E)All of the above.
Q3) A country that experiences higher real interest rates than other countries would expect its currency to depreciate.
A)True
B)False
Q4) Currently the NAFTA nations do not meet the conditions for an optimal currency area.What are the two main reasons why?
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Chapter 11: An Introduction to Open Economy
Macroeconomics
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Sample Questions
Q1) Which of the following is TRUE?
A)Points along the aggregate supply curve show the equilibrium levels of output and prices that are consistent on the demand side of the economy.
B)Points along the aggregate demand curve show the equilibrium levels of output and prices that are consistent on the supply side of the economy.
C)Aggregate demand shows the levels of GDP and prices where expenditure decisions and production decisions match.
D)Aggregate supply shows the levels of GDP and prices where expenditure decisions and production decisions match.
Q2) Government spending and taxes
A)do not change aggregate demand.
B)are an important component of aggregate supply.
C)do not play a big role in determining GDP.
D)are a major determinant of aggregate demand.
E)cannot affect the price level.
Q3) Describe the difficult choices in macroeconomic policy that Argentina faced in the late 1990s.
Q4) What typically happens to imports as income and spending rise?
Page 13
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Chapter 12: International Financial Crises
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Sample Questions
Q1) When expansionary fiscal and monetary policies are joined with a ________ exchange rate system,the various components of economic policy often interact in ways that lead to a crisis followed by a steep recession.
A)fixed
B)floating
C)crawling peg
D)flexible
Q2) Exchange rate crises are only associated with fixed exchange rate systems.
A)True
B)False
Q3) Which of the following was NOT one of the causes of the Asian financial crises of 1997 and 1998?
A)A current account deficit and financial account surpluses
B)The use of exports as an engine of economic growth by the countries involved
C)China's 1994 devaluation of its fixed exchange rate
D)The appreciation of the U.S.dollar and depreciation of the Japanese yen
E)Crony capitalism
Q4) Describe the background factors that contributed to the Asian financial crisis.
Q5) What are the benefits of capital mobility?
Q6) What are the costs of capital mobility?
Page 14
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Chapter 13: The United States in the World Economy
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Sample Questions
Q1) Why is the U.S.putting less emphasis on multilateral and more emphasis on bilateral trade agreements?
Q2) The main area of economic activity that Canada chose not to open to free trade is A)agriculture.
B)oil and gas.
C)lumber.
D)the cultural industries.
E)financial services.
Q3) Twenty-four years before CUSTA,another agreement between the same countries covered trade in A)textiles.
B)steel.
C)autos. D)agriculture.
E)telecommunications.
Q4) What two trends was Canada trying to address in negotiating CUSTA?
Q5) In negotiating NAFTA,what two side agreements were reached?
Q6) What is the main problem with rules of origin?
Q7) When did NAFTA go into effect?
Page 15
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Chapter 14: The European Union: Many Markets Into One
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Sample Questions
Q1) A major reason for creating the European Monetary System was to
A)create a single currency.
B)unify banking laws and permit cross-border investment.
C)avoid competitive devaluations.
D)reduce the costs of changing currencies.
E)eliminate the need for central banks.
Q2) The Maastricht Treaty eliminated passport controls at borders with the European Union.
A)True
B)False
Q3) The roots of the European Union are in agreements within the coal and steel industries.
A)True
B)False
Q4) Which of the following is the treaty that took the participating countries from a free trade area to a common market?
A)The Treaty of Rome
B)The Maastricht Treaty
C)Single European Act
D)Treaty on European Union
Page 16
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Chapter 15: Trade and Policy Reform in Latin America
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Sample Questions
Q1) An orthodox model calls for cutting government spending,reforming the tax system to increase compliance and revenues,and limiting the creation of new money.
A)True
B)False
Q2) The accumulation of international debt increased the debt service requirements of the indebted countries.After the debt crisis began,this caused
A)the adoption of expansionary policies to return to growth.
B)large capital inflows to service the debt.
C)the adoption of strongly contractionary policies to reduce consumption and government deficits.
D)an intensification of industrial policies targeted on import substitutes.
E)a reduction in inequality.
Q3) What is the primary reason exchange rates were overvalued under ISI?
Q4) What economic problems persist in Latin America? How has this shaped recent policy in the region and why are changes particularly challenging?
Q5) What is called for with heterodox stabilization policies?
Q6) Briefly describe orthodox stabilization policies.
Q7) What do structural reform policies emphasize?
Page 17
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Chapter 16: Export-Oriented Growth in East Asia
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Q1) Studies of the HPAE confirm the importance of savings and investment in increasing economic growth.
A)True
B)False
Q2) What did the HPAE do to share wealth across all levels of society?
Q3) Name the eight HPAEs.
Q4) Measurements of TFP indicate that the East Asian success story is based on
A)a significantly different economic model from the one followed in the West.
B)unusually large amounts of innovation.
C)rapid increases in the education of the work force.
D)high amounts of savings and investment.
E)large current account surpluses.
Q5) Macroeconomic stability has been a high priority for the economic policies of the HPAE.
A)True
B)False
Q6) Describe several components of the institutional environment in the HPAEs that are critical to their success.
Q7) Identify at least three key factors in the HPAE's economic success?
Page 18
Q8) Which factors account for most of the growth in the HPAEs?
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Chapter 17: The Bric Countries in the World Economy
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Sample Questions
Q1) Recently,there has been little political stability in Brazil.
A)True
B)False
Q2) What is the best explanation for why China and India have received so much international interest and foreign investment?
A)Their large populations
B)Their geographic location
C)Their control over natural resources
D)Government incentives provided to foreign firms
Q3) What is the pattern of exports and imports in China and India?
A)Exports are heavily subsidized through government policy.
B)Many barriers to imports exist.
C)Exports and imports are tied together,with exports depending on imported inputs and technology.
D)Imports are not important to either nation's economy.
Q4) China's economy did not decline at all during its transition from communism to capitalism.
A)True
B)False
Q5) What is the difference between Chinese and Indian trade in services?
Page 19
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