Deck 2: The Dynamic Environment of International Trade

Question 1

An embargo sets a limit on the quantity of goods one country can sell to another.

Answer 1

False

Question 2

In the context of blocked currency, blockage is accomplished by refusing to allow an importer to exchange its national currency for the currency of the seller.

Answer 2

True

Question 3

By the year 1971, the United States was selling less to other countries than it bought from them; that is, the United States had a trade deficit.

Answer 3

True

Question 4

The United States has placed a limit on the tons of sugar that can be imported into the country. This is an example of a tariff.

Question 5

In general, economists do not recognize "protection of the home market" as a valid argument for protectionist measures.

Question 6

Establishing a tariff on fabrics imported from Uruguay so that U.S. manufacturers sell more fabrics is an example of a protectionist measure.

Question 7

An import license limits the quantities that can be imported on a case-by-case basis.

Question 8

The Organization for Economic Cooperation and Development (OECD) estimates that the economies of the developed world will expand at much faster rates when compared to the developing economies.

Question 9

Tariffs are often used as reprisals against protectionist moves of trading partners.

Question 10

The Marshall Plan was developed by the United States as a method to assist Europe in rebuilding after World War II.

Question 11

The GATT became part of the World Trade Organization in 1995 with the ratification of the Uruguay Round agreements.

Question 12

Quotas, boycotts, monetary barriers, and market barriers are examples of tariff barriers.

Question 13

The United States faced decreasing competition in export markets beginning in 1970 with the ending of the Vietnam War.

Question 14

It is mandatory for importers who want to buy a foreign good from a foreign country to apply for a business permit in that country.

Question 15

A nation's balance-of-payments statement records all financial transactions between its residents and those of the rest of the world during a given period of time.

Question 16

In general, a tariff will decrease inflationary pressures.

Question 17

Voluntary export restraints are common in the agricultural industry when an agreement is made between the importing and exporting countries for a restriction on the volume of exports.

Question 18

When reviewing a balance-of-payments statement, you would check the reserves account to view exports and imports of gold.

Question 19

In a balance-of-payments record, the current account is a record of direct investment, portfolio investment, and short-term capital movements to and from countries.

Question 20

When foreign currencies can be traded for more dollars, U.S. products and companies are more expensive for the foreign customer and exports decrease.

Question 21

The GATT panels were formed to resolve bilateral trade disputes and have both advisory and enforcement powers.

Question 22

What was the outcome for GATT after the ratification of the Uruguay Round agreements?

A) GATT allowed the United States to increase its import tax.
B) GATT became part of the World Trade Organization.
C) GATT directly led to the uneven distribution of economic power and potential.
D) The European Union decided to stay away from the treaty.
E) The original purpose was sidelined in favor of political and military intervention between member states.

Question 23

The Omnibus Trade and Competitiveness Act of 1988 focuses on assisting businesses to be more competitive in world markets, but does not get involved in trade practices.

Question 24

As both special drawing rights (SDRs) and the U.S. dollar have lost their utility as the basic medium of financial exchange, most monetary statistics relate to gold and silver rather than dollars.

Question 25

The decisions taken by the World Trade Organization in solving trade disputes among members are binding ones.

Question 26

The rapid growth of war-torn economies and previously underdeveloped countries, coupled with large-scale economic cooperation and assistance that followed World War II, led to

A) the rise of new global marketing opportunities.
B) the decrease in demand for American goods worldwide.
C) the dissolution of GATT.
D) the spread of communism by the United States.
E) the sharp reduction in the production capacity of the United States.

Question 27

After World War II, the United States led efforts to provide financial and industrial development assistance to rebuild Japan and channeled funds to foster economic growth in the underdeveloped world. These efforts were primarily aimed at

A) halting the growth of Nazi Germany.
B) dampening the spread of communism.
C) dampening the spread of capitalism.
D) building a stronger defense force.
E) creating a worldwide trade bloc to counter the OPEC countries' clout.

Question 28

The United States and other countries require some products to contain a percentage of "local content" to gain admission to their markets.

Question 29

Antidumping laws encourage foreign producers to sell their products at a higher cost than the cost of production and create more opportunities for free trade.

Question 30

What was the most apparent reciprocal impact of the foreign economic assistance given by the United States following World War II?

A) European countries formed an alliance to counter the OPEC countries' clout.
B) Outflow of labor to the recipient countries increased dramatically.
C) All recipient countries appointed Americans to manage their central banks.
D) Purchases of U.S. agricultural products, manufactured goods, and services by the recipient countries increased.
E) Distribution of economic power and potential became more uneven.

Question 31

Under the Omnibus Trade and Competitiveness Act, the U.S. president has the authority to restrict sales of a country's products in the U.S. market if that country imposes unfair restrictions on U.S. products.

Question 32

One advantage of the Omnibus Trade and Competitiveness Act is a more flexible process to obtain export licenses.

Question 33

The International Monetary Fund was created before World War II to help individual states regain economic profitability.

Question 34

What factor was primarily responsible for the excess in production capacity in the United States after World War II?

A) The United States government raised the tariffs on most imports by 60%.
B) Many firms from other nations shifted their production facilities to the United States.
C) Domestic demand was at a historic low and resulted in excess capacity.
D) The returning military after World War II increased the labor supply in the United States.
E) The implementation of the Marshall Plan dampened the overseas demand.

Question 35

An exchange permit issued by a government can stipulate an unfavorable rate of exchange depending on the desires of the government.

Question 36

Post-World War II, worldwide economic growth was in strong evidence and countries that were once classified as less developed were reclassified as

A) communist countries.
B) free trade economies.
C) tier-II countries.
D) developed countries.
E) newly industrialized countries.

Question 37

After World War II, the United States set out to infuse the ideal of capitalism throughout as much of the world as possible. As a result, most of the noncommunist economies in the world

A) stagnated.
B) grew significantly.
C) failed.
D) quickly matched the U.S. economy.
E) faced high inflation rates.

Question 38

Which were the two major challenges faced by U.S. multinational corporations at the close of the 1960s?

A) the creation of the Soviet Union and the higher tariffs on imports
B) growing jingoistic nationalism and a negative population growth rate in major international markets
C) resistance to direct investment and increasing competition in export markets
D) increasing Chinese domination in the manufacturing sector and the falling dollar in global markets
E) the decreased demand for U.S. goods in the global market and the growing influence of consumer rights advocacy in the home market

Question 39

How did GATT prevent the repeat of the economic disaster that occurred after World War I?

A) It provided short-term loans to struggling nations.
B) It promoted dumping policies to allow stronger ties between member nations.
C) It fostered isolationism for nations that were market leaders.
D) It provided for a third party, the United Nations, to negotiate peace treaties.
E) It provided a forum for member countries to negotiate a reduction of tariffs and other barriers to trade.

Question 40

Why did the Smoot-Hawley Act play a role in sending the world's economies into the Great Depression?

A) It encouraged the majority of world economies to lower tariffs to imported goods.
B) It raised U.S. tariffs on thousands of imported goods by more than 60 percent.
C) It created an embargo on all agricultural products.
D) It divided the United States into factions based on race.
E) It forced independent countries to band together to stay economically viable.

Question 41

The system of accounts that records a nation's international financial transactions is most accurately called its

A) supply chain management system.
B) gross domestic product system.
C) net domestic product payments.
D) balance of payments.
E) net national product systems.

Question 42

The World Bank estimates that five countries whose share of world trade is barely one-third that of the European Union will, by 2020, have a 50 percent higher share than that of the European Union. Which of these countries is included on this list?

A) Canada
B) Nigeria
C) Netherlands
D) Indonesia
E) Zimbabwe

Question 43

What strategy was employed by the United States to regain its lost market share for capital goods by the late 1990s?

A) funding the competitive developing nations
B) restructuring its industries to be more "lean and mean"
C) decreasing its exports and increasing its imports
D) raising average U.S. tariffs on more than 20,000 imported goods by 60 percent
E) provoking increased protectionism from other countries

Question 44

Which of the following falls on the minus side of the U.S. balance of payments?

A) payments to the United States for insurance
B) payments of dividends and interest on investments abroad
C) return on capital invested abroad
D) new foreign investments in the United States
E) spending by American tourists overseas

Question 45

In the last few years, most of the countries of the world saw a dramatic slowdown in the growth of their economies with the exception of

A) the United States.
B) Spain.
C) China.
D) Greece.
E) France.

Question 46

What is a defining characteristic of a balance-of-payments statement?

A) It is a record of the domestic transactions between the government of a country and the private companies in that country.
B) It records all financial transactions between the residents of a country and those of the rest of the world.
C) It records the trade policies of the member nations of the WTO.
D) It is an annual record of the profitable foreign transactions made by a particular country.
E) It is a financial statement in which the credits must exceed the debits.

Question 47

What is used to ensure that balance-of-payments records are always in balance?

A) sum of squares recording system
B) bank reconciliation system
C) double-entry bookkeeping system
D) archival records system
E) multifactor recording system

Question 48

The ________ of the balance-of-payments statement is used to record increases or decreases in foreign exchange and increases or decreases in liabilities to foreign central banks.

A) current account
B) capital account
C) credit account
D) receivables account
E) reserves account

Question 49

What is the major reason behind the failure of American MNCs to completely dominate the European markets as predicted by Servan-Schreiber?

A) The resurgence of competition for U.S. businesses from all over the world
B) The elimination of import taxes in the European countries
C) The restructuring of U.S industries
D) The decadence of communism
E) The dissolution of colonial powers

Question 50

A balance-of-payments statement for a country reveals

A) how rich or poor a country is financially.
B) a record of the country's financial condition.
C) a comparison of one country's finances to another country's debt.
D) a balanced budget for the country.
E) the spending power available to the country for specific goods.

Question 51

Which account in the balance-of-payments statement is a record of direct investment, portfolio investment, and short-term movement of cash and technology to and from countries?

A) current account
B) capital account
C) credit account
D) receivables account
E) reserves account

Question 52

In general, tariffs weaken

A) inflationary pressures.
B) special interests' privileges.
C) balance-of-payments positions.
D) government control in economic matters.
E) the number of reciprocal tariffs by other countries.

Question 53

Which statement presents the correct picture of the outcome of increased world trade after the 1950s, contrary to Servan-Schreiber's prediction?

A) Third World countries have been excluded from this economic growth leading to stark imbalances in wealth.
B) The European Union has become the center of world trade, taking the position away from the United States.
C) The United States has continuously maintained the positive balance of trade it attained during the 1950s.
D) Economic power and potential has become more evenly distributed among the countries of the world.
E) SDRs and gold have lost their utility as the basic medium of financial exchange and most monetary statistics have started relating to the U.S. dollar.

Question 54

What occurs in the balance of payments account when international payments are greater than receipts?

A) a tariff
B) inflation
C) recession
D) a credit
E) a deficit

Question 55

What is a tariff?

A) It is a tax levied by a government on goods being exported out of the country.
B) It is a tax paid by individual states to the federal government for goods transferred across state lines.
C) It is a tax imposed by a government on goods that are imported into the country.
D) It is a limit on the amount of goods that can be imported into the country.
E) It is a limit on the amount of goods that can be exported out of the country.

Question 56

What argument regarding the need for protectionism is recognized by economists as valid?

A) need to keep money at home
B) encouragement of capital accumulation
C) industrialization of a low-wage nation
D) conservation of natural resources
E) maintenance of employment and reduction of unemployment

Question 57

Which of the following falls on the plus side of the U.S. balance of payments?

A) payments to the United States for insurance
B) the costs of goods imported
C) spending by American tourists overseas
D) new overseas investments
E) the cost of foreign military

Question 58

The ________ account of the balance-of-payments statement is used to record all merchandise exports, imports, and services plus unilateral transfers of funds.

A) current
B) capital
C) credit
D) receivables
E) reserves

Question 59

Rishi, a protectionist, has seen several small businesses go bankrupt because they were unable to compete with the cheaper prices of goods provided by foreign companies. The cell-phone manufacturing industry has just started in the United Kingdom, and Rishi's company is one of the first to try its hand at cell-phone manufacturing. What argument is most likely to be used by Rishi to persuade his government to restrict the import of foreign cell phones from foreign companies?

A) protection of an infant industry
B) the need to keep money at home
C) conservation of natural resources
D) national defense
E) maintenance of standard of living

Question 60

Following World War II, it is noted that the West created the trade patterns. This was especially true in which one of the following?

A) North America
B) Europe
C) South America
D) Asia
E) Central America

Question 61

In the context of monetary barriers, blockage is ideally accomplished when

A) a country refuses to allow an importer to exchange its national currency for the country's currency.
B) two countries enter into a voluntary agreement to determine the value of their currencies.
C) a country applies a specific unit or dollar limit to a particular type of good.
D) money dealers limit the rate at which foreign currencies are exchanged.
E) the government of a country imposes a mandatory tax on goods entering at its borders.

Question 62

One country refuses to sell goods to its neighboring country based on the belief that the neighboring country harbors radicals and terrorists. In this case, the refusal is referred to as a(n)

A) antidumping penalty.
B) embargo.
C) monetary barrier.
D) orderly market agreement.
E) voluntary export restraint.

Question 63

What trade policy tool makes it mandatory for its importers who want to buy a foreign good to apply for an exchange permit?

A) tariff
B) import quota
C) blocked currency
D) government approval
E) export levy

Question 64

________ pricing is the practice whereby a foreign producer intentionally sells its products in the United States for less than the cost of production to undermine the competition and take control of the market.

A) Basing point
B) Spot
C) Defensive
D) Counterpoint
E) Predatory

Question 65

The United States and other countries require some products (automobiles in particular) to contain a percentage of "local content" to gain admission to their markets. This is an example of the stringent usage of ________ to restrict trade.

A) exchange permits
B) embargoes
C) blocked currencies
D) standards
E) antidumping penalties

Question 66

The marketing manager for Glorious Products wants to export the company's line of fashion boots to an EU country. However, she discovers that there is a complete restriction on the import of any form of leather into that country. This is an example of

A) an orderly market agreement.
B) a quota.
C) a monetary barrier.
D) a voluntary export restraint.
E) a boycott.

Question 67

A boycott on importing produce from Mexico would be an example of a

A) compound duty.
B) revenue tariff.
C) nontariff barrier.
D) specific duty.
E) quota embargo.

Question 68

If a country decided to refuse to allow an importer to exchange its national currency for the sellers' currency, it would be an example of a(n) ________ currency.

A) blocked
B) spot
C) embargo
D) taxed
E) quota

Question 69

The tariff on certain goods is based on the percentage of the determined value of the item being imported. What type of tariff is this?

A) compound duty
B) quota duty
C) specific duty
D) reciprocal duty
E) ad valorem duty

Question 70

A specific unit or dollar limit applied to a particular type of good is called a(n)

A) trade license.
B) quota.
C) ad valorem duty.
D) predatory price.
E) exchange rate.

Question 71

________ is/are a nontariff barrier that was specifically designed to prevent foreign producers from using predatory pricing to take control of U.S. markets.

A) Quotas
B) Embargoes
C) Blocked currency
D) Antidumping laws
E) Exchange permits

Question 72

Exporting countries primarily agree to voluntary export restraints (VERs) to

A) minimize exposure in the importing country.
B) reduce market competitiveness.
C) avoid stiffer quotas being set by the importing country.
D) take over local industries of the importing country.
E) avoid criminal prosecution.

Question 73

Voluntary export restraints are commonly used in what industry?

A) finance
B) furniture
C) agriculture
D) media
E) education

Question 74

Which statement is true of tariffs?

A) They strengthen balance-of-payments positions.
B) They strengthen supply-and-demand patterns.
C) They increase special interests' privileges.
D) They strengthen international relations.
E) They promote competition.

Question 75

Which trading partner of the United States became its number one "trade problem" at the beginning of the 21st century?

A) United Kingdom
B) Japan
C) Germany
D) Canada
E) China

Question 76

If a country refuses to sell some products to another country, it is utilizing which barrier to trade?

A) import credit discriminations
B) export subsidies
C) voluntary export restraints
D) embargoes
E) packaging, labeling, or marking standards

Question 77

Active Bicycle Company has just received notice that a shipment of 300 bicycles has been rejected by the customs administration of the recipient country because the bikes did not include a metal plate surrounding the chain. What category of nontariff barriers primarily uses such quality issues as a trade barrier?

A) quotas
B) licenses
C) embargoes
D) boycotts
E) standards

Question 78

An exchange permit can stipulate the

A) quantity of goods that can be exchanged for a particular sum of foreign currency.
B) number of parties that can be involved in an exchange transaction.
C) amount to be exchanged that must be deposited in a local bank for a set period.
D) quality standards of the goods involved in an exchange.
E) number of times one party can avail exchange permits.

Question 79

In order to effectively secure foreign exchange, what is most likely to be used by countries experiencing severe shortages of foreign exchange?

A) privatization
B) government approval
C) spot pricing
D) voluntary export restriction
E) monopoly

Question 80

A voluntary export restraint is an agreement signed willingly between the importing country and the exporting country for a restriction on the

A) overall tax.
B) number of businesses eligible for imports.
C) volume of exports.
D) government's portion of the paid tariff.
E) balance-of-payments statements.