Deck 11: Trade Policy in Developing Countries

Question 1

Which of the following could explain why the terms of trade of developing countries might deteriorate over time?

A)Developing country exports are too diverse.
B)Commodity export prices are solely determined by developing countries.
C)Developing country exports consist mainly of manufactured goods.
D)Commodity export prices are determined in highly competitive markets.
E)Developing country exports consist mainly of primary products.

Answer 1

D

Question 2

The infant industry argument was an important theoretical basis for

A)import- substituting industrialization.
B)neo- colonialist theory of international exploitation.
C)the East- Asian miracle.
D)the reduction of tariffs on Western Europe.
E)historiography of the industrial revolution in Western Europe.

Answer 2

A

Question 3

The infant industry argument calls for active government involvement

A)only if the industry is not one already dominated by industrial countries.
B)only if the industry has a high value added.
C)only if some market failure can be identified.
D)only if the government forecasts are accurate.
E)only if the industry is independently able to earn high returns.

Answer 3

C

Question 4

The "East Asian Miracle" is

A)the fact that so many Influenza varieties originate from this region.
B)the fact that poor dualistic economies managed to escape the vicious circle of poverty.
C)the advent of completely free labor mobility between east Asian countries.
D)the ability to maintain large positive trade balances with the U.S.
E)the ability of so many people to live in such small areas.

Question 5

Which trade strategy have developing countries used to restrict imports of manufactured goods so that the domestic market is preserved for home producers?

A)export subsidies
B)export promotion
C)multilateral contract
D)international commodity agreement
E)import substitution

Question 6

The infant industry argument is that

A)comparative advantage is irrelevant to economic growth.
B)developing countries have a comparative advantage in manufacturing.
C)developing countries have a comparative advantage in agricultural goods.
D)developing countries have a potential comparative advantage in manufacturing.
E)developing countries have no chance to compete with industrialized countries.

Question 7

The growth successes of the high performance Asian economies

A)enforces United States' hesitation to trade with developing countries.
B)rejects the belief that economic development requires import substitution policies.
C)suggests that free trade policies are required for successful economic development.
D)supports the belief that economic development requires import substitution policies.
E)rejects the belief that export- oriented industrialization is likely to promote economic development.

Question 8

Sophisticated theoretical arguments supporting import- substitution policies include

A)learning curve considerations.
B)scale economy arguments.
C)terms of trade effects.
D)the problem of appropriability.
E)domestic market failure arguments.

Question 9

Historically those few developing countries which have succeeded in significantly raising their per- capita income levels

A)tended to provide heavy protection to domestic industrial sectors.
B)did so to the detriment of their nearest neighbors.
C)favored industrial to agricultural or service sectors.
D)did not accomplish this with import- substituting industrialization.
E)did accomplish this with import- substituting industrialization.

Question 10

Import substitution policies make use of

A)production subsidies granted to industries with comparative advantage.
B)quotas applied to goods that are shipped abroad.
C)production facilities provided by industrialized countries.
D)tariffs that discourage goods from entering a country.
E)tax breaks granted to industries with comparative advantage.

Question 11

All of the following nations EXCEPT _ have recently utilized export- led growth policies.

A)Hong Kong
B)Argentina
C)Singapore
D)South Korea
E)Taiwan

Question 12

The disappointment with import- substitution policies is in part because

A)of the rapid and continuous growth record of South American countries.
B)many countries pursuing this strategy experienced stagnation in their growth.
C)this policy tended to create world- class industrial competitors.
D)this policy is inconsistent with sophisticated economic growth models.
E)of the financial investment lost by the U.S.

Question 13

China's recent experience supports the proposition that

A)"economic miracles" are solely to be expected in small countries.
B)a lessening of income disparities is a prerequisite for economic growth.
C)growth in a large country cannot be affected by its foreign sector.
D)central planning and socialism can promote sustained economic growth.
E)policy changes can dramatically prompt export oriented growth.

Question 14

The imperfect capital market justification for infant industry promotion

A)assumes that infant industries will be in products of comparative advantage.
B)assumes that banks can allocate resources efficiently.
C)assumes that developing country will reward the donor country.
D)assumes that infant industries will soon mature.
E)assumes that new industries will tend to have low profits.

Question 15

Which industrialization policy used by developing countries places emphasis on the comparative advantage principle as a guide to resource allocation?

A)international commodity agreements
B)Infant Industry promotion
C)import substitution
D)intra- industry trade practice
E)export promotion

Question 16

The development of countries like South Korea has been supported by all of the following EXCEPT

A)high domestic saving rates.
B)high levels of labor productivity.
C)large endowments of human capital.
D)high domestic interest rates.
E)reduced government regulation.

Question 17

General equilibrium considerations lead to the realization that import- substituting policies have the effect of

A)generating large tariff revenues for the government.
B)creating competitive manufacturing sectors.
C)encouraging exports.
D)discouraging exports.
E)encouraging an efficient use of a country's resources.

Question 18

Statistical evidence suggests that

A)import substituting policies tend to promote effective exploitation of scale economies.
B)free trade policies promote economic growth more effectively than do import substitution policies.
C)import substitution tends to lead to relatively low effective rates of protection.
D)import substitution is to this day the preferred growth strategy promoted by the World Bank.
E)import substitution proved to be the most effective aid for developing countries before 1970.

Question 19

Growth rates in Brazil and other Latin American countries have actually been slower since the trade liberalization of the late 1980s than they were during import- substituting industrialization

A)proves that export promoting trade policy leads to relatively rapid economic growth.
B)proves that trade policy is the most important policy area for promotion of economic development.
C)proves that exports help growth,whereas imports impede growth.
D)proves that a free- trade orientation of trade policy results in rapid economic growth.
E)does not prove that trade liberalization always leads to rapid economic growth.

Question 20

Taiwan and South Korea are examples of developing nations that have recently pursued these industrialization policies:

A)trade embargoes.
B)multilateral contract.
C)import substitution.
D)export promotion.
E)commercial dumping.

Question 21

The HPAE "economic miracle" illustrates a clear case in which

A)import substitution enhanced economic development.
B)economic growth was determined by successful export promotion.
C)trade policy dominated other considerations in promoting economic growth.
D)exports and growth were positively related.
E)exports were promoted by successful economic growth.

Question 22

The HPAE (High Performance Asian Economies)countries

A)have all outperformed the U.S.
B)have all consistently maintained non- biased efficient free capital markets.
C)have all consistently supported free trade policies.
D)have all consistently maintained import- substitution policies.
E)have all maintained openness to international trade.

Question 23

The remarkable success of the HPAEs proves that

A)dual economies must suffer economic stagnation.
B)high educational standards is the key to successful economic growth.
C)trade policy is irrelevant to successful economic growth.
D)trade policy is the key to successful economic growth.
E)trade policy can lead to a higher standard of living for developing countries.