Question 1

In the context of the balance of trade,the _____ calculates a country's exports and imports of goods,services,and income.

Accepted Answer

The current account is the part of the balance of payments that records a country's exports and imports of goods, services, and income. It includes transactions related to trade in goods and services, primary income (such as wages and profits), and secondary income (such as aid and remittances). The capital account records a country's inflows and outflows of financial capital, the credit account is not a term used in the balance of payments, and the equity account is a term used in accounting to represent the ownership interest in a company.

Question 2

Which of the following statements is true of the balance of trade?

Accepted Answer

Income disparities can lead to a negative trade balance because if the majority of a country's population has a lower income, they may not be able to afford domestically produced goods and will turn to cheaper imports, creating a trade deficit. A and C are incorrect as mercantilistic policies are not always effective and individual countries do need to maintain trade balances. B is incorrect as countries can have negative trade balances.

Question 3

The government of Gredland,a small country,realizes that Gredland's imports have been disproportionately higher than its exports for the past five years.From the given information,it can be said that Gredland does not have an ideal _____.

Accepted Answer

The fact that Gredland's imports have been higher than its exports for five consecutive years indicates that its balance of trade is not ideal. A balance of trade refers to the difference between a country's exports and imports. If a country's imports exceed its exports, it is said to have a trade deficit, which can have negative implications for its economy. Therefore, it is essential for Gredland to improve its balance of trade. Options A, C, and D are not directly related to the issue of imbalanced trade.

Question 4

To discourage dumping activities and to maintain a trade surplus,the government of Alburnark has imposed high taxes on the import of foreign products in the country.In the given scenario,the government of Alburnark has used _____ to restrict imports.

Accepted Answer

Tariffs are taxes imposed by a government on imported goods. In the given scenario, the government of Alburnark has imposed high taxes on the import of foreign products in the country to discourage dumping activities and maintain a trade surplus. This is an example of using tariffs to restrict imports. Subsidies are financial assistance given by the government to domestic producers to increase production and exports. Block grants are a form of financial aid given by the government to state and local governments for specific purposes. Quotas are restrictions on the quantity of imports of a specific good or service allowed into a country.

Question 5

Darren,a trade analyst,believes that trade is a function of a specific company's strategic initiatives and not country-level factors,production factors,or even industry characteristics.Darren's belief reflects the _____.

Accepted Answer

The answer of Darren,a trade analyst,believes that trade is a...

Question 6

The media and communications sector is an emerging industry in the developing nation of Plaesis.The government of Plaesis is taking all the measures needed to protect this sector from foreign competition.The government believes that emerging business sectors need to be protected and nurtured for a period of time until they become established,or they will not be able to compete against established foreign firms.In the given scenario,the beliefs of the country's government most closely reflect _____.

Accepted Answer

The government's belief that emerging business sectors need to be protected and nurtured until they become established is in line with the infant industry theory. This theory suggests that developing countries need to protect their infant industries until they become competitive enough to withstand foreign competition.

Question 7

In efforts to curb the influx of foreign goods into the country,the government of Losvane has set a limit on the number of goods that can be imported in a given year.In this case,the government of Losvane is most likely imposing a _____.

Accepted Answer

A limit on the number of goods that can be imported is known as a quota. A subsidy is a payment made by the government to support a particular industry or product. A tariff is a tax placed on a particular imported good. Sanctions are penalties or restrictions put on a country as a form of punishment. In this scenario, the best choice is D - quota.

Question 8

The government of Nerland,a European country,wants to find out about the country's exports and imports of goods,services,and income.In this case,the country's Ministry of Finance will have to look into the _____ of Nerland.

Accepted Answer

The current account covers the country's balance of trade of goods and services, as well as income flows between the country and other countries. Therefore, the Ministry of Finance would need to look into the current account to find out about Nerland's exports and imports of goods, services, and income. The capital account covers the flow of capital in and out of a country, the credit account is not a common term used in international trade and finance, and the equity account refers to the account used in financial accounting to record investments made by shareholders.

Question 9

Avancas Inc.is a health food manufacturing company that decides to expand its business.It introduces its products in Crosia,a developing nation,which is a new market altogether.The company's products become an instant hit in the country,and their sales go up.Nutricia,another health food manufacturing company,follows suit and launches its products in Crosia.However,the consumers seem less enthusiastic about Nutricia's products than they were for Avancas' products.In this scenario,Avancas Inc.is a _____.

Accepted Answer

Avancas Inc. is a first mover in this scenario as it entered the market first and established itself as a brand preferred by consumers.

Question 10

Broston Inc. ,a bottling company,has state-of-the-art bottling and capping equipment in its manufacturing unit.The manufacturing unit is capable of producing double the quantity than required for the domestic market.The company plans to venture into the global market in order to maximize the utilization of the bottling plant and generate more revenue.This scenario reflects the concept of the _____.

Accepted Answer

The scenario reflects the concept of the theory of economies of scale, which refers to the cost advantages a company experiences by producing in larger quantities. The company can use its state-of-the-art bottling and capping equipment to produce double the quantity required for the domestic market and venture into the global market to maximize the utilization of the bottling plant and generate more revenue.

Question 11

Which of the following statements is true of the infant industry theory?

Accepted Answer

The infant industry theory argues that certain emerging industries need to be protected for a period of time to give them time to grow and compete against foreign firms. This protection usually takes the form of tariffs or subsidies. Once the industry has matured and become competitive, the protection can be removed and the industry can operate on a level playing field with foreign competitors.

Question 12

Which of the following statements is true of mercantilism?

Accepted Answer

One of the primary objectives of mercantilism was to generate funds to support the military.

Question 13

The government of Kingsbain believes in backing its domestic firms rather than allowing foreign products to be dumped in the domestic markets.As the domestic firms of Kingsbain are inefficient,the government regularly gives them money to keep them in business.This monetary support provided by the government is called a(n)_____.

Accepted Answer

The monetary support provided by the government to domestic firms is called a subsidy. Tariff is a tax imposed on imported goods, embargo is a ban on trade with a particular country, and quota is a limit on the quantity of a product that can be imported or exported.

Question 14

Jonathan is an entrepreneur who believes that companies pursue international trade in an attempt to achieve cost advantages by spreading fixed costs over more units of output.Jonathan believes in the _____.

Accepted Answer

The theory of economies of scale suggests that companies pursue international trade to achieve cost advantages by spreading fixed costs over more units of output, which is exactly what Jonathan believes. The theory of absolute advantage focuses on a country's ability to produce a good or service more efficiently than any other country, while the theory of comparative advantage suggests that countries should specialize in producing goods where they have a lower opportunity cost. The theory of the international product life cycle describes how a product moves through different stages of production and consumption in different countries. None of these theories align with Jonathan's belief as much as the theory of economies of scale.

Question 15

Which of the following scenarios best illustrates a situation that hints at the problem of underconsumption in an economy?

Accepted Answer

Glisbane is a country that has income disparity, which hints at the problem of underconsumption. When there is a significant income gap between the rich and poor, the poor are not able to consume the same quantity of goods and services as the rich. This results in a decrease in overall consumption in the economy, leading to underutilization of resources and reduced economic growth.

Question 16

Which of the following statements is true of the General Agreement on Tariffs and Trade (GATT)treaty?

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) treaty provided a multilateral forum to resolve trade disputes between member countries, making option C the correct statement. GATT was actually created with the motive of reducing import and export tariffs in order to promote international trade, making options A and B incorrect. The treaty did not encourage countries to buy only from preferred partners, making option D incorrect.

Question 17

Quotas and tariffs:

Accepted Answer

Quotas and tariffs are trade barriers that restrict imports and make foreign goods more expensive, making it harder for domestic firms to compete. While they may be implemented with the intention of protecting domestic industries, they ultimately limit free trade and can have negative effects on both domestic and international economies.

Question 18

Cleon,a Korean cosmetics brand,recently launched its range of face oils in an entirely new market where that product has never been introduced by any brand.Exploring the new market turns out to be greatly beneficial for the company as the sales of the face oils shoot up immediately.In the given scenario,Cleon is a _____.

Accepted Answer

Cleon is a first mover as it is the first brand to introduce face oils in the new market.

Question 19

Reylons Inc. ,a private company based in the United States of America,buys 1500 acres of public land in India to set up one of its manufacturing units.In this case,the sum of money received by the Indian government in exchange for the land will be reflected in the country's _____.

Accepted Answer

The sum of money received by the Indian government in exchange for the land sold to Reylons Inc. is a capital transaction as it involves the acquisition or disposal of a non-financial asset (public land). Therefore, it will be reflected in India's capital account, which records all capital transactions between India and the rest of the world. The current account, on the other hand, records all transactions related to the export and import of goods and services, and the demand and equity accounts are not relevant in this context.

Question 20

Darsana and Meraad,two Middle Eastern countries,have signed a global pact that provides a multilateral forum in which to resolve business-related disputes between member countries.In spite of years of good business relations between the two countries,they have a dispute over each other's import and export policies.In this case,to solve the dispute,both the countries will most likely approach the _____.

Accepted Answer

The World Trade Organization (WTO) provides a forum for its member countries to resolve business-related disputes. As Darsana and Meraad have a dispute over each other's import and export policies, they can approach the WTO to resolve their dispute. Option A, International Association of Facilitators is a professional association and does not deal with business-related disputes between countries. Option B, United Nations Trusteeship Council is defunct and has no jurisdiction over business-related disputes. Option D, United Nations Security Council primarily deals with issues related to international peace and security.

Quiz 7: Trade