Deck 20: International Economic Relations

Question 1

What are the arguments in favor of free trade? What global efforts have been made to remove trade restrictions? How do free trade areas impact free trade?

Answer 1

Supporters of free trade argue that if trade could flow freely there would be a great expansion of its total volume and that in the long run all nations would be more prosperous. There would be less need for foreign aid because every country would have access to the markets and raw materials of the world, and the price of goods would be lower everywhere. Steps to remove restrictions include the Reciprocal Trade Agreements Act of 1934, the 1947 General Agreement on Trade and Tariffs, and the foundation of the World Trade Organization, an international organization designed to foster trade among countries. Free trade areas, like the European Union and those created under the North American Free Trade Agreement, are beneficial for the countries involved but make it harder to achieve a worldwide reduction in trade barriers.

Question 2

The reason international trade is controlled has to do with how economics relates to:

A) politics.
B) biology.
C) chance factors.
D) invention.

Answer 2

A

Question 3

A limit on the quantity or the value of a commodity that can be brought into a country is called a
(n):

A) tax barrier.
B) tariff.
C) quality control.
D) import quota.

Answer 3

D

Question 4

Invisible items of trade include:

A) wheat, barley, corn, and rye.
B) machinery.
C) U.S. tourist payments in foreign countries.
D) rice.

Question 5

What is the meaning of foreign exchange? What is the difference between a fixed and a flexible exchange rate system? How does the current exchange rate system of the United States work?

Question 6

Why do countries place restrictions on international trade? What are tariffs and import quotas? What are the arguments for and against protective tariffs?

Question 7

If countries decide to stop accepting U.S. dollars and promissory notes and instead want goods and services, the value of the dollar will likely:

A) fall substantially.
B) rise modestly.
C) decrease slightly.
D) be maintained.

Question 8

A tax or duty on an imported commodity is called a
(n):

A) tariff.
B) bill.
C) arbitrary cost.
D) revenue limit.

Question 9

Most economists oppose the levying of:

A) all taxes.
B) protective tariffs.
C) any kind of minimal tariff.
D) any kind of revenue-generating tax by a government.

Question 10

Which of the following is not an argument against protective tariffs?

A) Restricting international trade robs us of part of its benefits.
B) Free admission of imports is one of the most effective ways of expanding the foreign markets of home industries.
C) When one country institutes tariffs, it is likely that other countries will follow.
D) A tariff that keeps out foreign goods increases the market for U.S. goods.

Question 11

In most cases, nations would derive the greatest economic advantage from international trade if they:

A) tightly controlled imports.
B) allowed free trade.
C) controlled all types of trade.
D) eliminated all exports.

Question 12

Which of the following is not an advantage of international trade?

A) Better product can be obtained.
B) Prices for products are lower.
C) Local producers may be hurt.
D) Products that cannot be produced at home can be obtained.

Question 13

What are the advantages and disadvantages of international trade? Why and how are the advantages linked to the disadvantages?

Question 14

When one country institutes tariffs, it is likely that other countries will follow, resulting in:

A) a contracting spiral of trade.
B) an expanding trade network.
C) benefits from increased trade worldwide.
D) a free trade zone.

Question 15

Note some ways to protect American jobs from being lost to foreign nations. Why do most economists oppose such measures? What do they cite as being the impact on pricing of goods in the American market?

Question 16

In 1947, most Western nations agreed to a mutual effort to reduce trade barriers through the:

A) North Atlantic Treaty Organization.
B) Organization of Petroleum Exporting Countries.
C) Security Council of the United Nations.
D) General Agreement on Trade and Tariffs.

Question 17

In 2007, the U.S. balance of payments was:

A) running a surplus.
B) balanced by increased trade advantage.
C) running a deficit.
D) exactly equal to the balance of trade surplus.

Question 18

The home-market argument in favor of protective tariffs results in:

A) decreases in home product industry employment.
B) decreases in protected home product industry profits.
C) short-term failure of home industry.
D) long-term benefits for some producers at the expense of losing foreign markets for other producers.

Question 19

Recently, the balance of trade deficits has become so large that the U.S. is now:

A) the largest debtor nation in the world.
B) a net creditor nation.
C) a surplus nation.
D) the first nation not to import anything.

Question 20

In the 1960s, 1970s, and 1980s, international trade expanded in the developing countries, mainly in the area of:

A) farming.
B) textiles.
C) technology.
D) manufacturing.

Question 21

International trade has only advantages.

Question 22

In the mid-1990s, GATT was replaced by the:

A) Reciprocal Trade Group
(RTG).
B) International Commerce Circle
(ICC).
C) World Trade Organization
(WTO).
D) Global Corporation Group
(GCG).

Question 23

Although the value of the dollar has recently been on a roller-coaster ride, fluctuating, the general trend of the dollar has been:

A) up substantially.
B) unfluctuating.
C) positive.
D) down.

Question 24

Between 2000 and 2005, the Bureau of Economic Analysis reported that the U.S. trade balance:

A) improved.
B) worsened significantly.
C) had no appreciable change.
D) there is no way to factor the amount of trade between countries.

Question 25

Trade imbalances can be offset by foreign capital investment.

Question 26

Economists who favor free trade view free trade areas created by associations of countries with:

A) much favor.
B) much fear.
C) both favor and fear.
D) great joy.

Question 27

Trade is the lifeblood of a modern economy.

Question 28

For many years before World War I, the principal trading countries maintained monetary systems based on:

A) flexible exchange rates.
B) adjustable exchange rates.
C) variable exchange rates.
D) fixed exchange rates.

Question 29

When countries meet under GATT in order to reduce trade barriers, these meetings are called:

A) circles.
B) trade rounds.
C) confrontations.
D) squares.

Question 30

The 1970s marked a new dimension in the expansion of international trade.

Question 31

U.S. producers as a group are injured by foreign purchases.

Question 32

One commodity that is desirable in the United States that we cannot produce ourselves is coffee.

Question 33

Most economists would argue that free trade should be pursued insofar as jobs can be protected from outsourcing.

Question 34

Interest Americans receive from foreign investments are unimportant in the U.S. economy.

Question 35

The U.S. exchange rate system is called a
(n):

A) dirty float.
B) sinking boat.
C) dollar value-added.
D) ad valorem.

Question 36

International trade now accounts for well over 50 percent of our total GDP.

Question 37

International trade raises standards of living by increasing consumer purchasing power.

Question 38

The crisis and shortages in the U.S. economy as a result of the Arab oil embargo in the 1970s demonstrated the importance of international trade.

Question 39

Invisible items of trade consist of services of all sorts for which people of one country pay those of another.

Question 40

The relation of our total exports to our total imports is called the balance of:

A) income.
B) payments.
C) trade.
D) money.

Question 41

Recently the American dollar has been very stable.

Question 42

The IMF has helped stabilize foreign exchange rates.

Question 43

In the 1930s, the United States followed an isolationist policy toward trade.

Question 44

Global corporations can avoid import quotas.

Question 45

When tariffs are levied as a percentage of a value of a commodity, they are said to be ad hominem.

Question 46

When two or more countries are on the gold standard, only very large fluctuations can take place in the exchange rate between their currencies.

Question 47

World trade expanded during 1929-1933.

Question 48

Controls on international trade include subsidies on exports, tariffs, quotas, exchange controls, and bilateral barter agreements.

Question 49

The Trump administration has been a strong supporter of globalization.

Question 50

The United States is the largest debtor nation in the world.

Question 51

Since the 1930s, the importance of international trade for the United States has:

A) declined.
B) remained unchanged.
C) increased until 1950 and then sharply declined.
D) grown significantly.

Question 52

Critics of globalization argue that to prevent job loss we should protect domestic jobs by establishing tariffs on imports.

Question 53

After World War II, the Western world went on a modified gold standard.

Question 54

Erratic fluctuations in exchange rates help trade and reduce risk in transactions.

Question 55

Trade is best seen as taking place between two countries without the other countries in the picture.