Deck 6: Trade and Development I: Import Substitution Industrialization

Question 1

Improvement in a country's terms of trade means that

A) the price of its imports is rising relative to the price of its exports.
B) the price of its exports is falling relative to the price of its imports.
C) the price of its exports is rising relative to the costs of its exports.
D) the price of its imports is rising relative to the costs of its imports.
E) the price of its exports is rising relative to the price of its imports.

Answer 1

E

Question 2

According to the Singer-Prebisch theory developing countries trying to industrialize would find it much easier by participating in a GATT-based trade system

A) because they would have better access to critical resources.
B) because they would have better terms of trade.
C) because they would have less access to critical resources.
D) because they could take advantage of infant industry protections.
E) because their consumers would have lower prices through comparative advantage benefits.

Answer 2

C

Question 3

According to structuralists in the post WWII era,markets in developing countries would not naturally reallocate sufficient resources from agriculture to manufacturing because

A) they were still dominated by export-oriented agricultural interests.
B) they were still dominated by export-oriented manufacturing interests in advanced industrial states.
C) they were too poor because of having been prone to monoexportism.
D) they were too inflexible.
E) they did not have a coherent economic development strategy.

Answer 3

D

Question 4

The structuralist critique of the market provided a compelling justification for state-led strategies of industrialization primarily because of

A) the problem of the "big push".
B) start-up manufacturing coordination problems.
C) the problem of pecuniary internal economies.
D) the problem of complementary supply.
E) threats of domestic violence by the urban unemployed.

Question 5

The primary reason why developing countries,like those in Latin America,were so intent on industrialization was because most governments believed that

A) they needed to appease military governments.
B) subsistence agriculture could not employ enough people.
C) the Great Depression in the 1920's & 1930's proved a export-oriented agriculture was no longer profitable.
D) higher standards of living could only be achieved through industrialization.
E) prices of imported manufactured goods were too high.

Question 6

Agriculture in Latin America (as a percent of GDP)has

A) did not change from 1960 to 1995.
B) decreased from 16% in 1960 to 10% in 1995.
C) increased from 5% in 1960 to 26% in 1995.
D) decreased from 26% in 1980 to 5% in 1995.
E) did not change from 1960 to 1980.

Question 7

The income elasticity of demand is the degree to which

A) a change in demand alters the cost for a particular product.
B) rising import prices relative to export prices yields deteriorating terms of trade.
C) a change in income alters the demand for a particular product.
D) rising export prices relative to import prices yields deteriorating terms of trade.
E) rising export prices relative to import prices yields improving terms of trade.

Question 8

The problem of complementary demand means that in subsistence agricultural economy,trying to establish a manufacturing economy meant

A) no manufacturing firm would be willing to invest unless a large number of manufacturing industries were started simultaneously.
B) no manufacturing firm would be willing to invest unless it was given infant industry protection.
C) no manufacturing firm would be willing to invest unless the government agreed to purchase a minimum amount of its product.
D) no manufacturing firm would be willing to invest unless wages were increased enough in agriculture to allow farmers to buy their product.
E) unless there was sufficient interdependencies among the manufacturing firms.

Question 9

In secondary ISI,emphasis shifts from

A) the manufacture of simple consumer goods to consumer durable goods and intermediate inputs.
B) the manufacture of consumer durable goods to intermediate exports.
C) was adopted by most governments of East Asia.
D) the manufacture of consumer durable goods and intermediate inputs to capital goods needed to produce simple consumer goods.
E) the manufacture of simple consumer goods for exports and the import of cheaper consumer durable goods.

Question 10

The claim that developing countries face a continuous decline in their terms of trade

A) has been confirmed by most recent research according to Oatley.
B) has been disputed by most recent research according to Oatley.
C) was not really believed by governments in developing countries according to Oatley.
D) cannot be tested because the hypothesis is too generalized according to Oatley.
E) did not influence trade and development policies of developing countries according to Oatley.

Question 11

Trade and development policies in developing countries after WW I have been strongly shaped by political competition between

A) export and import oriented agricultural interests.
B) export and import oriented manufacturing interests.
C) rural-based agriculture and urban-based manufacturing.
D) former colonial and nationalist agriculture.
E) former colonial agriculture and nationalist manufacturing.

Question 12

Import substitution industrialization (ISI)was based on the strategy of

A) substituting previously imported simple consumer goods with newly domestically produced ones.
B) substituting previously exported simple consumer goods with newly domestically produced ones.
C) substituting previously imported advanced consumer goods with newly domestically produced simple ones.
D) substituting previously exported advanced consumer goods with newly domestically produced advanced agricultural ones.
E) substituting previously imported agricultural goods with newly domestically produced manufacturing ones.

Question 13

Confidence that the state could achieve what markets would not was based in part on evidence of the dramatic industrialization achieved by

A) China between 1980 and 2000.
B) Russia between 1950 and 1970.
C) Russia between 1930 and 1950.
D) Germany between 1920 and 1940.
E) United States between 1930 and 1950.

Question 14

Export substitution strategy is one

A) in which manufactured goods industries developed in secondary ISI began to export rather than continue to produce for the domestic market.
B) which was adopted by most governments outside of East Asia.
C) in which manufactured goods industries developed in easy ISI began to export rather than continue to produce for the domestic market.
D) in which manufactured goods industries developed in easy ISI began to be imported rather than exported for the international market.
E) in which manufactured goods industries developed in easy ISI began to be imported rather than continue to produce for the domestic market.

Question 15

Agriculture in Sub-Saharan Africa (as a percent of GDP)has

A) decreased from 46% in 1960 to 10% in 1995.
B) increased from 10% in 1960 to 46% in 1995.
C) decreased from 36% in 1980 to 20% in 1995.
D) increased from 10% in 1980 to 56% in 1995.
E) decreased from 56% in 1960 to 14% in 1995.

Question 16

From 1850 to WW I,trade politics in most Latin American countries were

A) dominated by military governments on behalf of urban interests.
B) highly protectionist in both agriculture and manufacturing.
C) highly open in agriculture but protectionist in manufacturing.
D) highly open in both agriculture and manufacturing.
E) dominated by colonial structures.

Question 17

A country which is a monoexporter is one in which

A) their exports were almost fully sent to one country.
B) their exports were almost fully accounted for by one product.
C) their exports were almost fully accounted for by agriculture.
D) their exports were almost fully accounted for by mining.
E) their total trade was almost totally with one country.

Question 18

In 1960 agriculture (as a percent of GDP)in advanced industrial economies was

A) 25%.
B) 20%.
C) 15%.
D) 10%.
E) 5%.

Question 19

Agriculture in East Asia & the Pacific (as a percent of GDP)has

A) increased from 2% in 1960 to 18% in 1995.
B) increased from 8% in 1960 to 56% in 1995.
C) decreased from 56% in 1980 to 17% in 1995.
D) increased from 20% in 1980 to 66% in 1995.
E) decreased from 46% in 1960 to 18% in 1995.

Question 20

The Singer-Prebisch theory argues that developing countries' terms of trade deteriorate steadily over time because of

A) greater demand for primary commodities versus industrial goods.
B) higher costs of primary commodities versus industrial goods.
C) less demand for industrial goods versus primary commodities
D) greater government protection for primary commodities versus industrial goods.
E) less demand for primary commodities versus industrial goods.

Question 21

Explain the importance of terms of trade in Singer-Prebisch theory.Has research confirmed these hypotheses?

Question 22

Explain the coordination problems identified by structuralist theory and the suggested remedies for government intervention.

Question 23

Explain how and why structuralism became the dominant theory of development economics.

Question 24

The New International Economic Order (NIEO),according to Oatley,represented a new attempt by developing countries

A) to gain acceptance of a set of radical demands to alter the operation of the international economy.
B) which was largely successful because the establishment and maintenance of a cohesive coalition.
C) which was largely unsuccessful in spite of OPEC governments' willingness to use their oil power to reform the trade system for their greater benefit.
D) which was largely successful because of debt assistance by the IMF and World Bank.
E) which only disappeared from the international agenda when it was replaced in 2000 by the Millennium Development Goals.

Question 25

According to Oatley,the benefits of ISI were transferred from

A) export-oriented commodities producers to urban consumers.
B) rural agriculture to urban manufacturing and nontraded-goods sectors.
C) urban manufacturing to urban consumers.
D) private owned producers to state owned enterprises.
E) foreign manufacturing exporters to domestic manufacturing producers.

Question 26

Backward linkages arise when

A) the production of one good decreases demand in industries that supply components for that good.
B) the production of one good increases the profits in industries that supply components for that good.
C) the production of goods for export increases demand in industries that supply components for that good.
D) the production of goods that were previously imported increases demand in consumers for that good.
E) the production of one good increases demand in industries that supply components for that good.

Question 27

Most developing countries either nationalized or heavily controlled the financial sector in order to direct financial resources to targeted industries.

Question 28

GATT Part IV was successful in creating meaningful changes in the trade policies pursued by the advanced industrial countries.

Question 29

According to structuralists in the post WWII era,markets in developing countries would not naturally reallocate sufficient resources from agriculture to manufacturing because they were still dominated by export-oriented agricultural interests.

Question 30

Explain how landowner dominated politics prior to WW II differed considerably across regions in the developing world.

Question 31

The Group of 77 was a trade alliance of developing country governments that

A) tried to use GATT rather than UNCTAD to pursue international rules that would increase their share of the gains from trade.
B) tried to use UNCTAD rather than GATT to pursue international rules that would increase their share of the gains from trade.
C) pressured advanced industrial countries to decrease trade barriers to protect their commodity export interests from competition.
D) pressured other developed countries to improve the terms of trade with each other.
E) created a finance mechanism, funded largely by the advanced industrialized countries, to purchase their commodities when their prices reached above a ceiling.

Question 32

The structuralists' assertion that coordination problems would prevent investment in manufacturing was not a serious problem for governments intent on industrialization.

Question 33

The push toward decolonialization in Africa in the 1950s was led by a coalition of indigenous professionals who had acquired positions in the administration of colonial economic and political rule.

Question 34

The GSP agreements agreed to by advanced industrial countries in the late 1960s were of limited importance because they used limited quotas of goods that could enter under preferential tariff rates.

Question 35

Explain how the collapse of agriculture during the Great Depression brought to power governments supported by import-competing interests.

Question 36

Trade and development policies in developing countries after WW I have been strongly shaped by political competition between former colonial and nationalist agriculture.

Question 37

The United Nations Conference on Trade and Development (UNCTAD)was established in 1964 as a

A) international institution dedicated to eliminating protectionism in developing countries in the world trade system.
B) international institution dedicated to promoting protectionism in developing countries in the world trade system.
C) international institution dedicated to promoting the interests of developing countries in the world trade system.
D) international institution dedicated to replacing colonialism in the world trade system.
E) international institution dedicated to promoting the interests of advanced industrial countries in the world trade system.

Question 38

Most governments of developing countries after World War II believed that higher standards of living were not possible with most people living on subsistence agriculture.

Question 39

Developing governments' belief that industrialization would not occur in their countries if they participated in the GATT-based system played an important role in shaping their trade and development policies.

Question 40

Pecuniary external economies are a problem of interdependent coordination among market processes.

Question 41

Discuss the successes and failures of the NIEO reforms suggested by the Group of 77 in the 1970s.

Question 42

Explain how and why governments transferred the costs of import substitution industrialization to agriculture in developing countries.

Question 43

Discuss how trade relations between the advanced industrial countries and the developing world revolved around competing conceptions of international trade rules embodied in the GATT and UNCTAD systems.

Question 44

Were developing countries correct in their assessment that their participation in the global economy under liberalized trade rules would always leave them on vastly unequal terms?

Question 45

Explain the costs and benefits of the two-stage strategy of import substitution industrialization.