Question 1

If the price of a nation's exports and imports both rise,the nation's commodity terms of trade:&#10;A)improve&#10;B)deteriorate&#10;C)remain unchanged&#10;D)any of the above

Accepted Answer

If the price of a nation's exports and imports both rise, it is difficult to determine the effect on the commodity terms of trade, as it can either improve, deteriorate or remain unchanged depending on the magnitude of changes in prices. Hence, the correct answer is D) any of the above.

Question 2

Those nations that liberalized trade during the past decade&#10;A)grew faster than those that did not&#10;B)grew more slowly than those that did not&#10;C)grew at about the same rate as those that did not&#10;D)any of the above

Accepted Answer

Studies have shown that countries that liberalized trade during the past decade grew at a faster rate than those that did not. This is because liberalization of trade policies leads to increased foreign investment, greater competition, reduction in prices, and access to a wider range of goods and services, which all contribute to economic growth.

Question 3

Which of the following is not part of the demand for a NIEO?&#10;A)the establishment of international commodity agreements&#10;B)preferential access for the manufactured exports of developed nations&#10;C)removal of the agricultural trade barriers in developed nations&#10;D)increasing the yearly flow of foreign aid to developing nations

Accepted Answer

The demand for a New International Economic Order (NIEO) includes the establishment of international commodity agreements, removal of agricultural trade barriers, and increasing foreign aid to developing nations. However, preferential access for the manufactured exports of developed nations is not part of the demand for NIEO as it contradicts the principle of equal opportunities in international trade.

Question 4

The policy of import substitution was most vigorously followed by:&#10;A)large developing nations during the 1970's&#10;B)large developing nations during the 1960's&#10;C)small developing nations during the 1970's&#10;D)small developing nations during the 1960's

Accepted Answer

The policy of import substitution was most vigorously followed by large developing nations during the 1960's. This was a time when many developing nations sought to reduce their dependence on foreign goods and promote domestic production by enacting protectionist policies such as tariffs, subsidies, and government ownership of industries. These policies were meant to create a self-sufficient economy and reduce the outflow of foreign exchange. Import substitution was also seen as a way to promote industrialization and modernization, but the policies ultimately had mixed results and became less popular in the 1980s and 1990s.

Question 5

MacBean found that the export instability faced by developing nations was:&#10;A)not very large and did not seriously interfere with development&#10;B)very large and seriously interfered with development&#10;C)very large but did not seriously interfere with development&#10;D)not very large but seriously interfered with development

Accepted Answer

The answer of MacBean found that the export instability faced...

Question 6

Developing nations often experience wildly fluctuating export prices for their primary products because of:&#10;A)inelastic and stable demand and supply&#10;B)elastic and unstable demand and supply&#10;C)inelastic and unstable demand and supply&#10;D)elastic and stable demand and supply

Accepted Answer

Developing nations often face wildly fluctuating export prices primarily due to inelastic and unstable demand and supply. This means that the demand and supply for their primary products do not significantly change with price changes, but external factors can cause their supply to be unpredictable, leading to price volatility.

Question 7

According to traditional trade theory,a developing nation should export the commodity:&#10;A)of its comparative advantage&#10;B)that it can produce relatively more efficiently&#10;C)intensive in the nation's relatively abundant factor&#10;D)all of the above

Accepted Answer

According to traditional trade theory, a developing nation should export the commodity that it has a comparative advantage in, meaning the commodity that it can produce relatively more efficiently than other countries. This is because by specializing in the production of this commodity and exporting it, the country can earn higher profits and increase its economic development. Additionally, the country should also focus on exporting commodities that are intensive in its relatively abundant factor, as this will increase the efficiency of production and further boost economic growth. Therefore, all of the above choices (A, B, and C) are correct.

Question 8

According to Nurkse,international trade was an engine of growth for:&#10;A)the regions of recent settlements during the 19th century&#10;B)regions of recent settlements during the 20th century&#10;C)developed nations during the 19th century&#10;D)developed nations during the 20th century

Accepted Answer

Nurkse argued that international trade was an engine of growth for regions of recent settlements during the 19th century, as it enabled these areas to export primary products and import manufactured goods, thus facilitating their economic development. For developed nations during the 20th century, however, Nurkse believed that international trade would not necessarily lead to economic growth, as these countries already had established industrial sectors and could face competition from developing countries that could produce the same goods at a lower cost.

Question 9

Supporting the price of a commodity by buying it when its price is low is:&#10;A)a buffer stock&#10;B)a purchase contract&#10;C)an export control&#10;D)a marketing board

Accepted Answer

Supporting the price of a commodity by buying it when its price is low is known as a buffer stock. This helps to stabilize the market and ensure that producers receive a fair price for their goods. A buffer stock is a common tool used by governments or international organizations to support agricultural commodities such as grains, coffee, and sugar.

Question 10

What is the advantage of a policy of import substitution?&#10;A)setting up an industry to replace imports minimizes risk of failure because the market for the product already exists in the nation as evidenced by the nation's imports of the commodity&#10;B)It is easier for developing nations to protect their domestic market against foreign competition than to force developed nations to lower their trade barriers against their manufactured exports&#10;C)foreign firms are induced to establish tariff factories to overcome the tariff wall of developing nations&#10;D)all of the above.

Accepted Answer

All the options listed are advantages of a policy of import substitution. A) highlights the reduced risk due to existing market demand, B) points out the relative ease of protecting domestic markets compared to penetrating foreign ones, and C) notes the potential for attracting foreign firms to manufacture locally to bypass tariffs.

Question 11

The nation's commodity terms of trade times the productivity index in its export sector gives the nation's&#10;A)income terms of trade&#10;B)double factoral terms of trade&#10;C)single factoral terms of trade&#10;D)barter terms of trade

Accepted Answer

The answer of The nation's commodity terms of trade times...

Question 12

When a nation's commodity terms of trade deteriorate and its single factoral terms of trade improve,the nation's welfare:&#10;A)falls&#10;B)rises&#10;C)remains unchanged&#10;D)any of the above

Accepted Answer

The answer of When a nation's commodity terms of trade...

Question 13

Which of the following is false with respect to traditional trade theory?&#10;A)it can incorporate changes in factor endowments and technology&#10;B)it leads to the best allocation of resources at any point in time&#10;C)it is a dynamic theory&#10;D)it is based on comparative advantage

Accepted Answer

The answer of Which of the following is false with...

Question 14

Trade cannot be an engine of growth for today's developing nations because:&#10;A)the income elasticity for many of their exports is less than 1&#10;B)the development of synthetic substitutes&#10;C)technical advances reduced the raw-material content of many products&#10;D)all of the above

Accepted Answer

The answer of Trade cannot be an engine of growth...

Question 15

Which are is not an advantage of export-oriented industrialization?&#10;A)It overcomes the smallness of the domestic market and allows developing nations to take advantage of economies of scale&#10;B)domestic industries grow accustomed to protection and have an incentive to become more efficient&#10;C)production of manufactured goods for export requires and stimulates efficiency throughout the economy&#10;D)the expansion of manufactured exports is not limited by the size of the domestic market

Accepted Answer

The answer of Which are is not an advantage of...

Deck 11: International Trade and Economic Development