Question 1

The imperfect capital market justification for infant industry promotion

Accepted Answer

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

Question 2

Export-led growth tends to

Accepted Answer

A)  discourage competition in the global economy.
B)  exploit domestic comparative advantages.
C)  lead to unemployment among domestic workers.
D)  help firms benefit from diseconomies of large-scale production.
E)  lower the overall volume of imports. B

Question 3

The "East Asian Miracle" is

Accepted Answer

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

Question 4

The United States,as it began its long and successful growth in the early 19th century,consciously promoted domestic production through such activities as tariffs,Clay's American System,and many direct subsidies to railroads,canal companies,farmers (free land)etc.Today we view this blatant example of large scale and extensive import-substitution industrialization as having been very successful.Comment on this.

Accepted Answer

The answer of The United States,as it began its long...

Question 5

The consensus today is that import-substitution protectionist industrial policy has not served the developing countries' growth ambitions well.This fact proves that policies relying on export-driven growth are the "winning ticket" for these countries.

Accepted Answer

The answer of The consensus today is that import-substitution protectionist...

Question 6

The infant industry argument calls for active government involvement

Accepted Answer

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

Question 7

To help developing countries expand their industrial base,some industrial countries have reduced tariffs on designated manufactured imports from developing countries below the levels applied to imports from industrial countries.This policy is called

Accepted Answer

A)  export-led growth.
B)  generalized system of preferences.
C)  Most Favored Nation.
D)  reciprocal trade agreement.
E)  outsourcing.

Question 8

Sophisticated theoretical arguments supporting import-substitution policies include

Accepted Answer

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

Question 9

It is argued that import substitution is a misguided trade policy if the intent is to promote long-term economic growth.Explain the reasons underlying this argument.

Accepted Answer

The answer of It is argued that import substitution is...

Question 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

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

Question 12

The experience of sub-Saharan Africa,as compared to that of "Other Asia" (not including the HPAEs)supports the argument that

Accepted Answer

A)  high rates of protection tend to harm economic growth.
B)  the poorer is the country the easier it is for it to "catch up" economically.
C)  low rates of protection tend to promote economic growth.
D)  free trade always best stimulates a developing country's economy.
E)  neither trade liberalization nor import substitution is a foolproof strategy for economic development.

Question 13

Statistical evidence suggests that

Accepted Answer

A)  free trade policies promote economic growth more effectively than do import substitution policies.
B)  import substituting policies tend to promote effective exploitation of scale economies.
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 14

All the following nations except ________ have recently utilized export-led growth policies.

Accepted Answer

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

Question 15

The "East Asian Miracle" of the "Four Tigers" in the 1960s was replicated by

Accepted Answer

A)  developing countries around the world.
B)  other East Asian countries.
C)  Sub Sahara African countries.
D)  Industrialized countries.
E)  Eastern European countries.

Question 16

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

Accepted Answer

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

Question 17

-Refer to above figure.If the economy were in the initial position (where OmL1 workers were in manufacturing,what trade policy might gain ABC of economic welfare?

Accepted Answer

The answer of 
-Refer to above figure.If the economy were...

Question 18

A reason why it is difficult for developing countries to maintain a cartel is that

Accepted Answer

A)  the elasticity of demand for a cartel's output decreases over time.
B)  producers in the cartel have an economic incentive to cheat.
C)  economic profits discourage other producers from entering the industry.
D)  producers in the cartel have the motivation to lower prices but not to raise prices.
E)  tariffs allow producers in the cartel to produce items that make no profit.

Question 19

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

Accepted Answer

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

Question 20

The experience of Chile's foreign sector in the last two decades of the 20th century supports the proposition that economic growth is supported by

Accepted Answer

A)  import substitution.
B)  industrialization policies.
C)  trade liberalization policies.
D)  intra-industry trading.
E)  trade embargoes.

Exam 11: Trade Policy in Developing Countries