Deck 5: International Trade

Question 1

Trade in services tends to be relatively more important for the world's richest countries as compared to other nations.

Answer 1

True

Question 2

Today, world merchandise exports are around $12 trillion.

Answer 2

True

Question 3

China dominates the rest of the world in the export of both merchandise and commercial services.

Answer 3

False

Question 4

The level of world output in any given year influences the level of trade in that year.

Question 5

Over time, trade has consistently grown more slowly than world output.

Question 6

When a country's currency is weak relative to other nations, imports are more expensive relative to domestic products.

Question 7

The value of trade passing through some nations' borders actually exceeds the amount of goods and services that they produce.

Question 8

An estimated 12 million U.S. jobs depend on exports, and these jobs pay more than jobs not related to international trade.

Question 9

Most of world merchandise trade consists of trade in manufactured goods.

Question 10

Exploring the volume of international trade and world output provides useful insights into who trades with whom.

Question 11

The purchase, sale or exchange of goods and services across national borders is called domestic trade.

Question 12

Since trade-related jobs are service industry jobs, they tend to pay less than jobs not related to international trade.

Question 13

One way to measure the importance of trade to a nation is to examine the volume of trade in an economy relative to its total output.

Question 14

International trade occurs between different states, regions, or cities within a country.

Question 15

Customs data reflects rather well the general trade patterns among nations.

Question 16

Slower world economic output slows the volume of international trade, and higher output encourages trade.

Question 17

Given that international trade is not a manufacturing activity, it has no impact on the job creation potential of an economy.

Question 18

The U.S. Department of Commerce estimates that for every $1 billion increase in exports, around 23,000 jobs are created in the United States.

Question 19

Given the decline of manufacturing activities worldwide, service exports now make up around 80 percent of total world trade.

Question 20

Canada is the world's largest exporter of merchandise.

Question 21

Today, trade between most nations is characterized by a certain degree of interdependency.

Question 22

Trade dependency, once a blessing for Mexico, is now causing economic disruption as some companies shift jobs out of the country to places such as China.

Question 23

The trade theory that nations should accumulate financial wealth, usually in the form of gold, by encouraging imports and discouraging exports is called mercantilism.

Question 24

According to mercantilism, accumulation of wealth depended on expanding a nation's total volume of trade, not necessarily on creating a trade surplus.

Question 25

Germany is central Europe's largest trading partner.

Question 26

Two-way trade between high-income countries and low- and middle-income nations accounts for less than 1 percent of total world trade.

Question 27

It is not necessary to have bilingual business cards when doing business in the Pacific Rim because most Asians speak English.

Question 28

Around half of all exports in Asia are intra-regional.

Question 29

Trade among the world's high-income economies accounts for around 60 percent of total world merchandise trade.

Question 30

One avenue that countries used to implement mercantilism was to acquire less-developed territories (colonies) around the world.

Question 31

Nearly 74 percent of Europe's exports are destined for other European nations.

Question 32

The value of North American exports to Asia is less than one-half the value of Asian exports to North America.

Question 33

The highly competitive nature of Asian business means that the use of cold calling to make direct contact with other companies is a common and successful business practice.

Question 34

In mercantilism, a trade surplus meant that a country was taking in more gold on the sale of its exports than it was paying out for its imports.

Question 35

A trade deficit is the condition that results when the value of a nation's exports is greater than the value of its imports.

Question 36

The United States is central Europe's mightiest trading partner.

Question 37

In mercantilism, trade deficits were highly encouraged.

Question 38

In the context of international trade, isolationism is generally considered undesirable.

Question 39

Mercantilism states that measures of a nation's well being, such as living standards or human development, are irrelevant and that nations should only concern themselves with accumulating financial wealth.

Question 40

Merchandise trade between low- and middle-income nations accounts for only about 6 percent of total world trade.

Question 41

According to comparative advantage theory, trade is still beneficial even if one country is less efficient in the production of two goods, as long as it is less inefficient in the production of one of the goods.

Question 42

Factor proportions theory says that a country will produce and export goods that require resources (factors) that are abundant and import goods that require resources in short supply.

Question 43

Because there are gains to be had by both countries party to an exchange, the theory of absolute advantage states that international trade is a zero-sum game.

Question 44

National competitive advantage theory states that a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade.

Question 45

Adam Smith developed the theory of comparative advantage in 1776.

Question 46

The theories of comparative and absolute advantage assume that specialization in the production of one particular good results in efficiency gains.

Question 47

According to new trade theory, as a company increases the extent to which it specializes in the production of a particular good, output rises because of gains in efficiency.

Question 48

The theory of absolute advantage destroys the mercantilist idea that international trade is a zero-sum game.

Question 49

In the new product stage, demand in the innovating country is supplied with imports from production in developing nations.

Question 50

The ability of a nation to produce a good more efficiently than any other nation is called a comparative advantage.

Question 51

The paradox between the predictions of the comparative advantage theory and actual trade flows is called the Leontief paradox.

Question 52

According to Adam Smith, international trade should be restricted by tariffs and quotas to give a country an absolute advantage.

Question 53

The theory of absolute advantage destroys the mercantilist notion that international trade is a positive-sum game.

Question 54

Wassily Leontief developed factor proportions theory.

Question 55

Factor proportions theory states that factors in great supply relative to demand will be more costly than factors in short supply relative to demand.

Question 56

The theories of comparative and absolute advantage assume that countries are driven only by the maximization of production and consumption.

Question 57

Mercantilism is inherently flawed because it views competition for the world's wealth as a zero-sum game.

Question 58

The international product life cycle theory states that in the maturing product stage, production facilities are introduced in countries with the highest demand.

Question 59

Whereas comparative advantage theory focuses on the productivity of the production process for a particular good, factor proportions theory argues that a country specializes in producing and exporting goods using the factors of production that are most abundant.

Question 60

When countries try to maintain a trade surplus and expand their national treasuries at the expense of other nations, they are accused of practicing neo-mercantilism.

Question 61

Which of the following refers to the purchase, sale, or exchange of goods and services across national borders?

A) Domestic trade
B) Foreign direct investment
C) International trade
D) Mercantilism

Question 62

Service exports account for around ________ percent of total world trade.

A) 12
B) 2
C) 48
D) 20
E) 80

Question 63

Intra-regional exports in Europe are ________ they are in Asia.

A) greater than
B) the same as
C) less than
D) none of the above

Question 64

Trade among the world's high-income economies accounts for roughly ________ percent of total world merchandise trade.

A) 20
B) 40
C) 60
D) 80

Question 65

One way to measure the importance of trade to a nation is to examine ________.

A) its human development index relative to its CPI
B) the availability of natural resources that provides absolute advantage
C) its comparative advantage relative to those of its neighbors
D) the volume of an economy's trade relative to its total output

Question 66

World merchandise exports are worth around ________.

A) $5 billion
B) $13 trillion
C) $12 trillion
D) $60 billion

Question 67

The Porter diamond consists of the following four elements: factor conditions, demand conditions, supply conditions, and company conditions.

Question 68

When a country has a weak currency relative to other nations, imports are ________ relative to domestic products.

A) more expensive
B) equal in price
C) more attractive
D) less expensive

Question 69

National competitive advantage theory argues that companies that can benefit from the product or process technologies of an internationally competitive industry begin to form clusters of related economic activities in the same geographic region.

Question 70

Which of the following statements is NOT true?

A) International trade is opening new doors to entrepreneurial opportunity across Africa.
B) International trade provides a country's people with a greater choice of goods and services.
C) International trade has little effect on job creation in most countries.
D) The value and volume of international trade continues to increase.

Question 71

The U.S. Department of Commerce estimates that for every $1 billion increase in exports, ________ jobs are created in the United States.

A) 22,800
B) 1,480
C) 2 million
D) 380,000

Question 72

The value of North American exports to Asia is ________.

A) more than half the value of Asian exports to North America
B) roughly equal to China's exports to the U.S.
C) less than half the value of Asian exports to North America
D) is in balance with Asia's exports to the U.S.

Question 73

Most of the world merchandise trade is comprised of trade in ________.

A) natural resources
B) services
C) manufactured goods
D) knowledge-based goods

Question 74

Merchandise trade between low- and middle-income nations accounts for about ________ percent of total world trade.

A) 6
B) 23
C) 42
D) 61

Question 75

Nearly ________ percent of Western Europe's exports are destined for other nations in Western Europe.

A) 20
B) 50
C) 74
D) 85

Question 76

The smallest portion of total world trade takes place between ________.

A) high-income countries and low- and middle-income nations
B) high-income economies
C) low- and middle-income nations
D) emerging markets

Question 77

Which of the following statements is NOT true?

A) Trade in services makes up about 20 percent of total world trade.
B) Trade in services tends to be more important for emerging markets.
C) The United States is a top exporter of services in the world.
D) Trade in services is growing for many nations.

Question 78

________ occurs between different states, regions, or cities within a country.

A) Domestic trade
B) Foreign direct investment
C) International trade
D) Mercantilism

Question 79

National competitive advantage theory considers a nation's resources (such as a large labor force, natural resources, and climate) to be advanced factors in a nation's competitive advantage.

Question 80

The majority of total world merchandise trade occurs among ________.

A) high-income countries and low- and middle-income nations
B) high-income economies
C) low- and middle-income nations
D) emerging markets