Master International Trade: Benefits, Costs, and Policies

Question 1

Which of the following is NOT a benefit of international trade?

Accepted Answer

Reduced government spending

Answer

Lower consumer prices

Answer

Increased economic growth

Answer

Job creation

Question 2

What is the primary factor that determines the direction of trade between countries?

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Government intervention

Answer

Transportation costs

Question 3

How does a depreciation in a country's currency affect its exports?

Accepted Answer

Makes exports cheaper

Answer

Makes exports more expensive

Answer

Has no effect on exports

Answer

Depends on the elasticity of demand

Question 4

Which of the following is a primary benefit of international trade?

Accepted Answer

Increased economic growth

Answer

Higher consumer prices

Answer

Reduced job opportunities

Answer

Increased government regulation

Question 5

Which of the following is a potential cost of international trade?

Accepted Answer

Job losses in certain industries

Answer

Increased national debt

Answer

Reduced national sovereignty

Answer

Higher import costs

Question 6

What is the impact of trade liberalization on economic growth?

Accepted Answer

It tends to increase economic growth in the long run

Answer

It tends to decrease economic growth in the long run

Answer

It has no impact on economic growth

Answer

The impact is uncertain

Question 7

How does the World Trade Organization (WTO) promote international trade?

Accepted Answer

Establishes binding trade rules for member countries

Answer

Provides financial aid to developing nations

Answer

Negotiates bilateral trade deals between countries

Answer

Imposes tariffs on imported goods

Question 8

Which of the following is NOT a potential cost associated with international trade?

Accepted Answer

Economic growth resulting from expanded markets and increased competition

Answer

Job losses in certain industries due to competition from imports

Answer

Environmental harm caused by production methods in other countries that may not meet domestic environmental standards

Answer

Cultural homogenization due to the spread of Western culture and values

Question 9

What is the primary consequence of a trade deficit?

Accepted Answer

Reduced foreign exchange reserves

Answer

Increased domestic production

Answer

Higher interest rates

Answer

Inflation

Question 10

What is the concept of "dynamic gains from trade"?

Accepted Answer

Increased productivity and innovation driven by international competition

Answer

Lower prices for imported goods

Answer

Increased exports

Answer

Improved access to new technologies

Question 11

What is the key difference between a customs union and a free trade area?

Accepted Answer

A customs union eliminates all trade barriers and sets common tariffs for trade with non-member countries.

Answer

A customs union allows for free trade only within member countries, while a free trade area includes countries outside the union.

Answer

A customs union eliminates tariffs and other trade barriers among member countries, while a free trade area only eliminates tariffs.

Answer

There is no difference between a customs union and a free trade area.

Question 12

What is the purpose of "infant industry protection"?

Accepted Answer

To provide temporary support to new or emerging industries

Answer

To protect domestic industries from foreign competition

Answer

To promote free trade and open markets

Answer

To reduce government spending and trade barriers

Question 13

Which of the following is NOT a recognized benefit of international trade?

Accepted Answer

Job losses in certain industries

Answer

Lower consumer prices

Answer

Increased competition in domestic markets

Answer

Increased availability of goods and services for consumers

Question 14

Which of the following factors is generally NOT considered a major influence on the volume of international trade?

Accepted Answer

Natural disasters

Answer

Government trade policies

Answer

Exchange rates between currencies

Answer

Consumer preferences and demand

Question 15

What is a primary objective of imposing tariffs on imported goods?

Accepted Answer

Protecting domestic industries from foreign competition

Answer

Raising revenue for the government

Answer

Promoting economic growth through increased exports

Answer

Stabilizing exchange rates

Question 16

What is the term used to describe a country's ability to produce more of a particular good or service than it consumes domestically?

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Trade surplus

Answer

Export surplus

Question 17

What is the primary responsibility of the World Trade Organization (WTO)?

Accepted Answer

Establishing and enforcing rules for international trade

Answer

Promoting free trade and reducing barriers

Answer

Negotiating and implementing trade agreements

Answer

Providing technical assistance to developing countries

Question 18

What is the term used to describe the total monetary value of all goods and services produced within a country's borders in a given year?

Accepted Answer

Gross domestic product (GDP)

Answer

Net national product (NNP)

Answer

Gross national income (GNI)

Answer

Balance of trade

Question 19

Explain the different types of trade policies and how they can affect international trade flows.

Accepted Answer

Tariffs and quotas can lead to decreased trade flows.

Accepted Answer

Subsidies can encourage exports and discourage imports.

Accepted Answer

Exchange rate adjustments can influence the relative cost of exports and imports.

Answer

Trade agreements always result in increased global trade.

Question 20

Which of the following is NOT a recognized benefit of international trade?

Accepted Answer

Narrowed income inequality

Answer

Enhanced economic growth

Answer

Lowered consumer prices

Answer

Improved technological innovation

Question 21

The economic theory that suggests that governments should shield domestic industries from foreign competition is known as:

Accepted Answer

Mercantilist theory

Answer

Theory of absolute advantage

Answer

Theory of comparative advantage

Answer

Free trade theory

Question 22

The primary document that establishes the rules and regulations governing the World Trade Organization is known as the:

Accepted Answer

General Agreement on Tariffs and Trade (GATT)

Answer

North American Free Trade Agreement (NAFTA)

Answer

Treaty on the European Union (TEU)

Answer

United Nations Convention on Contracts for the International Sale of Goods (CISG)

Question 23

The term 'balance of trade' specifically refers to:

Accepted Answer

The difference between a country's exports and its imports

Answer

The total value of a country's exports

Answer

The total value of a country's imports

Answer

The percentage of a country's exports relative to its imports

Question 24

In the United States, which government agency is responsible for overseeing international trade?

Accepted Answer

Department of Commerce

Answer

Federal Reserve

Answer

Securities and Exchange Commission (SEC)

Answer

Environmental Protection Agency (EPA)

Question 25

What is the primary motivation for countries to engage in international trade?

Accepted Answer

To obtain goods and services not readily available domestically

Answer

To increase their military strength

Answer

To reduce environmental pollution

Answer

To foster cultural exchange

Question 26

What is the key distinction between a tariff and a quota?

Accepted Answer

A tariff imposes a tax on imported goods, while a quota restricts the quantity of imported goods.

Answer

A quota imposes a tax on imported goods, while a tariff restricts the quantity of imported goods.

Answer

Tariffs and quotas are identical in their impact on international trade.

Answer

Tariffs promote imports, while quotas restrict imports.

Question 27

How do exchange rates affect international trade?

Accepted Answer

Exchange rates influence the relative prices of goods and services, thereby impacting trade flows

Answer

Exchange rates do not have a significant impact on international trade.

Answer

International trade primarily determines exchange rates.

Answer

Exchange rates are solely determined by central banks.

Question 28

What is the main objective of a preferential trade agreement?

Accepted Answer

To reduce trade barriers among participating countries

Answer

To promote trade only between countries with similar economic systems

Answer

To foster trade between geographically distant countries

Answer

To shield domestic industries from foreign competition

Question 29

What is the main difference between a customs union and a free trade area?

Accepted Answer

In a customs union, member countries have a common external tariff, while in a free trade area, each country sets its own external tariff.

Answer

In a free trade area, member countries have a common external tariff, while in a customs union, each country sets its own external tariff.

Answer

Customs unions and free trade areas have no significant differences.

Answer

Customs unions are more restrictive than free trade areas.

Question 30

What is the term for government policies that restrict international trade?

Accepted Answer

Protectionism

Answer

Laissez-faire

Answer

Mercantilism

Answer

Free trade

Question 31

What is the primary goal of the World Trade Organization (WTO)?

Accepted Answer

To promote free and fair trade among member countries

Answer

To regulate the global financial system

Answer

To provide humanitarian assistance to developing nations

Answer

To enforce environmental standards

Question 32

What is the relationship between international trade and economic growth?

Accepted Answer

Trade can foster economic growth by enhancing competition and innovation

Answer

Trade can lead to increased inequality and reduced economic growth

Answer

There is no significant relationship between trade and economic growth

Answer

Trade only benefits developed countries, not developing countries

Question 33

What is the difference between a tariff and a quota?

Accepted Answer

A tariff is a tax on imported goods, while a quota limits the quantity of imported goods

Answer

A quota is a tax on imported goods, while a tariff limits the quantity of imported goods

Answer

A tariff and a quota both limit the quantity of imported goods, but a tariff is more effective

Answer

There is no difference between a tariff and a quota

Question 34

Which of the following is a potential drawback of international trade?

Accepted Answer

Reduced job opportunities in specific industries

Answer

Increased economic growth

Answer

Lower consumer prices

Answer

Increased innovation

Question 35

Which theory of international trade suggests that countries should specialize in producing and exporting goods where they have the most efficient production process?

Accepted Answer

Comparative advantage theory

Answer

Mercantilism

Answer

Absolute advantage theory

Answer

Free trade theory

Question 36

What is a primary purpose of a tariff?

Accepted Answer

To protect domestic industries from foreign competition

Answer

To raise revenue for the government

Answer

To promote exports

Answer

To stabilize the exchange rate

Question 37

What is a primary objective of the World Trade Organization (WTO)?

Accepted Answer

To facilitate the free flow of goods and services between countries

Answer

To regulate the financial markets

Answer

To promote economic development in developing countries

Answer

To negotiate trade agreements between countries

Question 38

How do quotas differ from tariffs as trade policies?

Accepted Answer

Quotas restrict the quantity of imports or exports, while tariffs restrict the price

Answer

Tariffs restrict the quantity of imports or exports, while quotas restrict the price

Answer

Quotas and tariffs both restrict the quantity and price of imports or exports

Answer

Quotas and tariffs have no meaningful difference

Question 39

What is a key function of exchange rates in international trade?

Accepted Answer

To determine the relative prices of goods and services between countries

Answer

To facilitate the flow of funds between countries

Answer

To stabilize the economies of countries

Answer

To promote free trade

Question 40

According to the concept of comparative advantage, countries should:

Accepted Answer

Specialize in producing goods where they have the lowest relative opportunity cost

Answer

Aim to produce all goods they consume

Answer

Impose tariffs on foreign goods

Answer

Limit exports to increase domestic supply

Question 41

The primary objective of protectionist trade policies is to:

Accepted Answer

Promote domestic industries against foreign competition

Answer

Increase export revenue

Answer

Enhance consumer welfare

Answer

Reduce government intervention in trade

Question 42

The World Trade Organization (WTO) aims to:

Accepted Answer

Promote free trade while regulating and reducing trade barriers

Answer

Set global economic and political policies

Answer

Provide foreign aid to developing countries

Answer

Negotiate peace treaties between nations

Question 43

The elasticity of demand for a product measures its:

Accepted Answer

Responsiveness to changes in price

Answer

Total quantity supplied at a given price

Answer

Price sensitivity of consumers

Answer

Cross-price elasticity with other products

Question 44

A trade surplus occurs when:

Accepted Answer

The value of a country's exports exceeds the value of its imports

Answer

The value of a country's imports exceeds the value of its exports

Answer

Imports and exports are equal in value

Answer

Government spending equals tax revenue

Question 45

What is 'free trade' and how can it potentially benefit global economic growth?

Accepted Answer

Free trade is the absence of government intervention in international trade, leading to increased consumer choice, lower prices, and fewer barriers for new businesses.

Answer

Free trade reduces government involvement in the economy.

Answer

Free trade increases environmental pollution.

Question 46

During the initial stages of economic integration, which of these is a potential challenge?

Accepted Answer

Increased competition in domestic markets

Answer

Enhanced cooperation between member nations

Answer

Reduced trade barriers within the integrated region

Question 47

According to the theory of comparative advantage, countries should prioritize the production and export of goods where they have:

Accepted Answer

A comparatively lower opportunity cost

Answer

A considerably larger domestic market

Answer

A comparatively higher fixed cost

Answer

A far stronger comparative disadvantage

Question 48

Which of the following is NOT considered a potential benefit of international trade?

Accepted Answer

An increase in consumer prices

Answer

Fostering of competition

Answer

Stimulation of economic growth

Answer

Expansion of consumer choice

Question 49

The presence of trade barriers, such as tariffs and quotas, can result in:

Accepted Answer

A reduction in overall economic efficiency

Answer

An exacerbation of global income inequality

Answer

Stimulation of domestic production

Answer

An increase in consumer welfare

Question 50

Which of the following factors is likely to contribute to an appreciation in a country's currency?

Accepted Answer

Strong demand for its exported goods

Answer

Increased government expenditure

Answer

Low interest rates

Answer

Weak domestic economic growth

Question 51

The World Trade Organization (WTO) plays a crucial role in:

Accepted Answer

Facilitating international trade and promoting the principles of free trade

Answer

Setting global interest rates

Answer

Providing financial assistance to developing nations

Question 52

Which of the following types of trade agreements aims to establish a free trade area?

Accepted Answer

North American Free Trade Agreement (NAFTA)

Answer

General Agreement on Tariffs and Trade (GATT)

Answer

World Trade Organization (WTO)

Answer

International Monetary Fund (IMF)

Question 53

The balance of trade refers to:

Accepted Answer

The difference in value between a country's exports and imports

Answer

The rate at which currencies are exchanged

Answer

The total volume of goods and services traded by a country

Question 54

Which of the following countries is a prominent exporter of oil?

Accepted Answer

Saudi Arabia

Answer

Germany

Answer

United States

Answer

China

Question 55

The process of globalization has led to:

Accepted Answer

Increased interdependence and interconnectedness among nations

Answer

A decline in global economic growth

Answer

A universal reduction in trade barriers

Answer

Heightened cultural homogeneity worldwide

Question 56

Which of the following challenges do developing countries commonly face in the context of international trade?

Accepted Answer

Limited access to advanced technologies and financial resources

Answer

An abundance of natural resources

Answer

Robust domestic demand

Answer

Excessive labor costs