Deck 3: Understanding Terms of Trade and Trade Gains Theory

Question 1

The difference in price ratios of two commodities in the two trading countries is

A)Potential gains
B)Partial gains
C)Actual gains
D)None of the above

Answer 1

Actual gains

Question 2

The ratio between the quantities of a country's imports to its exports is known as

A)Commodity or net barter terms of trade
B)Single factoral terms of trade
C)Gross barter terms of trade
D)Double factoral terms trade

Answer 2

Gross barter terms of trade

Question 3

J.S.Mill introduced the theory of reciprocal demand to explain

A)Determination of factor endowments
B)Determination of equilibrium terms of trade
C)Determination of availability of resources
D)Determination of equilibrium in balance of payments

Answer 3

Determination of equilibrium terms of trade

Question 4

Mill's theory of reciprocal demand indicates a

A)Country's demand for one commodity in terms of the quantities of the other country it is prepared to give up in exchange
B)Country's supply of a commodity in terms of the quantities of the other country it is prepared to give up in exchange
C)Country's balance of payments
D)Country's labour cost

Question 5

The gains from trade refers to

A)A duty levied on goods when they enter and leave a country's national boundary
B)A tariff that maximizes a country's welfare
C)Net benefits or increases in goods that a country gets by trading with other countries
D)The demand and supply curve of a country

Question 6

The ratio between the price of a country's export goods to its import goods is called

A)Income terms of trade
B)Gross barter terms of trade
C)Real cost terms of trade
D)Commodity or net barter terms of trade

Question 7

An increase in the index of income terms of trade implies that

A)A country cannot import more goods in exchange for its exports
B)A country can import more goods in exchange for its exports
C)A country cannot export more goods in exchange for its imports
D)None of the above

Question 8

The terms of trade refers to the rate

A)At which the goods of one country is exchanged for the goods of another country
B)At which the price of a country's import is calculated
C)At which the price of a country's export is calculated
D)All of the above

Question 9

The types of terms of trade does not include

A)Utility terms of trade
B)Real cost terms of trade
C)Productive capacity terms of trade
D)Double factoral terms of trade

Question 10

In the modern trade theory, the gains from international trade are clearly differentiated between

A)The gains from exchange and the gains from specialization
B)The gains from exchange and income
C)The gains from exchange and price
D)All of the above

Question 11

Under the gains from international trade, the gains from exchange is also known as the

A)Partial gains
B)Consumption gains
C)Domestic gains
D)Price gains

Question 12

In modern trade theory, the gains from specialization is also known as the

A)Constant gains
B)Consumption gains
C)Production gains
D)Internal gains

Question 13

The terms of trade of a country improves when

A)The import price of a country relatively rises to its export prices
B)The import price of a country is the same with its export prices
C)The export price of a country does not rise in relation to its import prices
D)The export price of a country relatively rises to its import prices

Question 14

When a country's import price relatively rises to its export prices,

A)The terms of trade of a country remains the same
B)The terms of trade of a country becomes worsened
C)The terms of trade of a country improves
D)None of the above

Question 15

The various methods of measuring gains from trade does not include

A)Haberler's approach
B)Ricardo's-Malthus approach
C)Modern approach
D)Mill's approach

Question 16

According to Jacob Viner, the classical economists measured the gains from trade in terms of

A)Increase in national income
B)Difference in comparative costs
C)Terms of trade
D)All of the above

Question 17

The classical theorists believed that the gains from trade resulted from

A)Stabilisation of price level
B)Increased production and specialization
C)Exchange and specialization
D)Perfect competition

Question 18

The modern economists considered the gains from trade resulted from

A)Increased production and specialization
B)Increased competition
C)Exchange and specialization
D)All of the above

Question 19

The concept of single factoral terms of trade was developed by

A)Jacob Viner
B)G.S. Dorrance
C)G.Haberler
D)F.W. Taussig

Question 20

Mill's theory of reciprocal demand is based on one of the assumptions that

A)There is less than full employment
B)There is imperfect competition
C)The commodities are produced under the law of constant returns
D)There are transport costs involved

Question 21

When the export prices of a country relatively rises to its import prices, its terms of trade are said to have

A)Deteriorated
B)Improved
C)Remain constant
D)None of the above

Question 22

The concept of gross barter terms of trade was introduced by

A)Jacob Viner
B)Adam Smith
C)Lionel Robbins
D)F.W. Taussig

Question 23

A single factoral terms of trade shows that a country's factoral terms of trade improve as productivity

A)Remains constant in its export industries
B)Improves in its export industries
C)Deteriorates in its export industries
D)Increases in its import industries

Question 24

The concept of commodity or net barter terms of trade has been used by economists to measure

A)The gains from domestic trade
B)The gains from internal trade
C)The gains from international trade
D)The gains from prices

Question 25

The term 'terms of trade' between two countries refers to

A)The barter terms of trade
B)The quantity of exports
C)Both (a) and (b)
D)The price