Question 1

If a country specializes in goods that it can produce most readily and cheaply and trades those goods for the goods that another country can produce most readily and cheaply,then both countries are exercising which of the following principles?

Accepted Answer

This scenario describes the principle of comparative advantage, which states that a country should specialize in producing goods and services with the lowest opportunity cost and trade with other countries to attain goods and services that it cannot produce efficiently.

Question 2

Which of the following best describes protectionism?

Accepted Answer

Protectionism is the economic policy of using artificial barriers, such as tariffs, embargoes, and import quotas, to protect domestic industries from foreign competition. This is done to promote the growth of domestic industries and to prevent job losses. Option B is incorrect because protectionism is not based on the concept of absolute advantage. Option C is incorrect because protectionism restricts buying and selling to some extent, while option D is incorrect because protectionism involves the use of tariffs, embargoes, and import quotas.

Question 3

Which of the following best describes the term "preferential tariff"?

Accepted Answer

Preferential tariffs provide tariff advantages to one country over others, typically to encourage trade and economic cooperation between countries. They may be applied to specific products or across a range of goods.

Question 4

When South Korea reduces the tariff that Japan (but only Japan)has to pay when it imports cameras into South Korea,which of the following best describes the action?

Accepted Answer

The action described is a preferential tariff, which is a reduced tariff given to certain countries as a form of trade preference. In this case, South Korea is granting Japan a lower tariff rate for cameras than other countries importing cameras would have to pay.

Question 5

Venezuela can grow and sell cut flowers for floral bouquets more easily and more cheaply than most other countries can produce the same flowers.When it comes to flowers,Venezuela has which of the following?

Accepted Answer

Venezuela has a comparative advantage in growing and selling cut flowers because they can produce them more easily and cheaply compared to most other countries. This means they can specialize in floral bouquet production and trade with other nations, resulting in mutual benefits.

Question 6

When Steve went to Mexico,he found that he could go to his bank and trade his 100 Canadian dollars for 750 Mexican pesos (the nation's currency).This is an example of 7.5 Mexican pesos representing which of the following?

Accepted Answer

The exchange rate is the value of one country's currency in terms of another country's currency. In this case, Steve is exchanging Canadian dollars for Mexican pesos, so the rate at which he can make the exchange is the exchange rate.

Question 7

Why do many people fear trade and globalization?

Accepted Answer

Many people fear that opening up trade and globalization will lead to a loss of jobs as companies seek lower-wage workers in other countries or move production overseas. This fear can be particularly acute for workers in industries that are vulnerable to international competition.

Question 8

Which of the following represents the world's largest free-trade zone?

Accepted Answer

The answer of Which of the following represents the world's...

Question 9

Which of the following terms best describes the reduction of value,if,during the past decade,the Canadian dollar's value has been reduced relative to most other world currencies?

Accepted Answer

The term that best describes the reduction of value of the Canadian dollar relative to other world currencies is devaluation. Devaluation refers to the deliberate lowering of the value of a currency in relation to another currency or a standard value, often done by a government.

Question 10

Which of the following represents the total amount of money that flows into and out of a country?

Accepted Answer

The balance of payments represents the total amount of money that flows into and out of a country, including all financial transactions (such as exports and imports of goods and services, investment income, and foreign aid). The balance of trade only includes the value of goods and services traded between countries, whereas the federal deficit relates to government spending and taxation. The balance of exchange is not a commonly used term in economics.

Question 11

What are the benefits associated with free trade and globalization?

Accepted Answer

Free trade and globalization provide an open economy that spurs innovation by allowing the exchange of ideas, technologies, and innovations across international borders, promoting competition, and expanding markets. This, in turn, leads to increased economic growth and prosperity. The other options listed are not benefits of free trade and globalization.

Question 12

Imagine you are trying to gather the information needed to calculate the balance of payments for an Eastern European country.To do your calculations,you would need to have information on which of the following?

Accepted Answer

To calculate the balance of payments, one needs to consider all transactions between residents and non-residents of a country, including foreign aid received. Military expenditures, inflation rate, and corporate tax rates may have an impact on the overall economy, but they are not directly relevant to the balance of payments.

Question 13

Which of the following best describes an effect of free trade?

Accepted Answer

Free trade typically involves the removal of restrictions and tariffs on trade between countries, allowing individuals and businesses to buy and sell goods and services across borders without hindrance. This promotes greater global economic integration and competition, which generally leads to increased efficiency, lower costs for consumers, and greater access to a wider range of goods and services. Artificial barriers to trade, licenses, and protectionism are all typically counterproductive to this process.

Question 14

A policy of permitting the people of a country to buy and sell where they please,without restrictions,is called which of the following?

Accepted Answer

Free trade is a policy that allows people of a country to buy and sell goods and services without restrictions, tariffs or quotas. Choice A (protectionism) is the opposite of free trade, as it involves limiting imports and promoting domestic production. Choices C and D (premium exchange and comparative advantage) are not related to the policy of permitting free trade.

Question 15

The karakul is a breed of Central Asian sheep that produces curly,glossy wool for the manufacturing of warm hats and coats.Since the breed can be grown only in Central Asia,this region can be said to have which of the following?

Accepted Answer

Central Asia has an absolute advantage because it is the only region where the Karakul sheep can be grown, giving it the exclusive ability to produce this specific type of wool.

Question 16

Which of the following is a benefit associated with free trade and globalization?

Accepted Answer

The answer of Which of the following is a benefit...

Question 17

Which of the following is the reduction of a currency's value relative to another currency?

Accepted Answer

Devaluation is the reduction of a currency's value relative to another currency. Deregulation is the reduction of government regulations, and currency levelling and exchange depreciation are not commonly used terms in economics.

Question 18

Which of the following terms means that prices of currencies vary based upon demand and supply of that currency?

Accepted Answer

The term "floating exchange rate" means that the value of a currency is determined by the supply and demand in the foreign exchange market. This means that the exchange rate can fluctuate on a daily basis depending on economic and political factors that affect the demand for a currency.

Question 19

Which of the following represents the value of one currency in terms of another?

Accepted Answer

The exchange rate represents the value of one currency in terms of another. The balance of payments, investment exchange, and balance of trade all relate to a country's economic transactions and do not directly represent the value of one currency in terms of another.

Question 20

Nations sometimes form free-trade associations and establish areas where there are few,if any,export and import duties or other regulations that would act as barriers to trade among partners.Which of the following best describes the result of this behaviour?

Accepted Answer

Free trade zones are areas where trade barriers, such as tariffs and import quotas, are eliminated or reduced between participating nations. These zones encourage increased trade and economic cooperation among participating countries.

Quiz 5: International The Global Marketplace