Question 1

The large increase in trade integration comes from Global North countries.

Accepted Answer

The large increase in trade integration has been driven by the Global South, particularly emerging economies like China and India, which have become significant players in global trade.

Question 2

Intra-firm trade is cross-national trade of international goods and services within the same firm.

Accepted Answer

Intra-firm trade refers to the exchange of goods and services between different divisions or subsidiaries of the same firm that are located in different countries.

Question 3

The primary goal of the GATT was to open or liberalize world trade using the principles of reciprocity, nondiscrimination, and transparency.

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) was established in 1947 with the primary goal of promoting international trade by reducing trade barriers through negotiations among member countries. The principles of reciprocity, nondiscrimination, and transparency were key in achieving this goal.

Question 4

There is a direct correlation between economic freedom and prosperity; the more economically free a country, the more prosperous it tends to be and vice versa.

Accepted Answer

Numerous studies have shown that countries with higher levels of economic freedom, as measured by factors such as low taxes, minimal regulation, and strong property rights, tend to have higher levels of prosperity, as measured by indicators such as GDP per capita, job creation, and poverty reduction. Conversely, countries with less economic freedom tend to have lower levels of prosperity.

Question 5

Hegemons are initially intolerant of nations called free riders, because they immediately take advantage of free trade before they eventually begin to repay the hegemon.

Accepted Answer

Hegemons may tolerate free riders initially because they benefit from the stability and order provided by the hegemon, even if they do not contribute equally. The expectation of eventual repayment is not guaranteed.

Question 6

A country whose economic policies encourage specialization in manufacturing over other types of industry is practicing a policy of mercantilism.

Accepted Answer

Mercantilism is an economic policy that emphasizes the promotion of exports and the accumulation of wealth through manufacturing and trade, often through protectionist measures such as tariffs and subsidies. By encouraging specialization in manufacturing over other types of industry, a country is promoting its exports and aiming to increase its wealth through trade.

Question 7

It is often the case that states who engage in trade with one another are less likely to enter into military conflicts, as the opportunity costs of doing so are too high.

Accepted Answer

This concept is known as the "trade-off hypothesis" and has been supported by various studies and empirical evidence. When states have economic interdependence and rely on each other for trade, going to war would disrupt this relationship and potentially harm their own economic stability. Therefore, it is often in their best interest to maintain peaceful relations and avoid conflict.

Question 8

The trade theory of liberalism holds that open trade borders and minimal government intervention will maximize global welfare.

Accepted Answer

The trade theory of liberalism, also known as classical trade theory or the theory of comparative advantage, asserts that free trade, open borders, and minimal government intervention lead to economic efficiency, improved productivity, and increased global welfare.

Question 9

The production of goods is usually dispersed throughout several different countries.

Accepted Answer

This is known as global supply chains or trade networks, where different tasks of production, such as design, manufacturing, assembly, and distribution, are performed in different countries based on comparative advantages in labor, resources, or expertise.

Question 10

An open international economy is a collective good.

Accepted Answer

An open international economy benefits not just one individual or country, but rather the global community as a whole by allowing for increased trade, investment, and economic growth. Therefore, it can be considered a collective good.

Question 11

In The Wealth of Nations, Adam Smith argues for the idea of a nation specializing in goods in which it has a comparative advantage.

Accepted Answer

Adam Smith's "The Wealth of Nations" discusses the concept of absolute advantage, not comparative advantage, which was later developed by David Ricardo.

Question 12

The United States ended its steel tariffs in response to a WTO ruling because it feared retaliatory tariffs from the EU.

Accepted Answer

The United States ended its steel tariffs in response to a WTO ruling because it feared retaliatory tariffs from the EU.

Question 13

Modern scholars believe trade to be a bilateral interaction between countries.

Accepted Answer

Modern scholars believe trade to be a multilateral interaction between countries rather than just a bilateral one. Globalization has led to complex and interconnected trade networks between multiple countries.

Question 14

Economic sanctions have the greatest impact on autocratic regimes.

Accepted Answer

Economic sanctions can impact both autocratic and democratic regimes, but their effectiveness depends on various factors such as the regime's economic resilience, political structure, and international support. Autocratic regimes may sometimes withstand sanctions better due to centralized control and fewer political constraints.

Question 15

Liberal trade theorists advocate the use of quotas, tariffs, and other barriers to protect local industry from import competition and "bring the jobs back home."

Accepted Answer

Liberal trade theorists generally support free trade and oppose the use of trade barriers such as quotas and tariffs. They argue that free trade promotes efficiency and economic growth, and that protectionism can lead to reduced competition, higher prices, and lower quality products for consumers. They do not advocate for protection of local industry or bringing jobs back home through trade barriers.

Question 16

When Brazil sued the United States for cotton subsidies that violated international trade law standards, the United States began sending annual payments of $150 million to Brazil in exchange for their dropping the case.

Accepted Answer

This is correct. The case was brought before the World Trade Organization (WTO) and the United States agreed to pay Brazil $147.3 million annually to avoid potential trade retaliation.

Question 17

GATT stands for General Agreement on Tariffs and Trade.

Accepted Answer

GATT stands for General Agreement on Tariffs and Trade.

Question 18

Voluntary export restrictions (VERs) are agreements in which exporting countries agree to restrict shipments of a particular product to a country to deter it from imposing an even more onerous import quota.

Accepted Answer

This statement accurately describes voluntary export restrictions.

Question 19

As trade integration grows, so does globalization because states' interdependence increases when exports account for an increasing percentage of their gross domestic product.

Accepted Answer

Trade integration refers to the increase in the flow of goods, services, and investments between countries. As countries become more integrated through trade, their economies become more interdependent, leading to increased globalization. This is because globalization refers to the interconnectedness of economies, societies, and cultures around the world, which is facilitated by trade and other forms of international cooperation. Therefore, as trade integration grows, so does globalization.

Question 20

Liberals emphasize the mutual gains (absolute gains) of global trade whereas mercantilists are more concerned with relative gains.

Accepted Answer

This statement accurately reflects the key difference between the liberal and mercantilist perspectives on global trade. Liberals argue that engaging in trade can lead to mutual gains for all parties involved, while mercantilists prioritize the relative gains their country can achieve over others through trade.

Quiz 11: International Trade in the Global Marketplace

The large increase in trade integration comes from Global North countries.

Intra-firm trade is cross-national trade of international goods and services within the same firm.

The primary goal of the GATT was to open or liberalize world trade using the principles of reciprocity, nondiscrimination, and transparency.

There is a direct correlation between economic freedom and prosperity; the more economically free a country, the more prosperous it tends to be and vice versa.

Hegemons are initially intolerant of nations called free riders, because they immediately take advantage of free trade before they eventually begin to repay the hegemon.

A country whose economic policies encourage specialization in manufacturing over other types of industry is practicing a policy of mercantilism.

It is often the case that states who engage in trade with one another are less likely to enter into military conflicts, as the opportunity costs of doing so are too high.

The trade theory of liberalism holds that open trade borders and minimal government intervention will maximize global welfare.

The production of goods is usually dispersed throughout several different countries.

An open international economy is a collective good.

In The Wealth of Nations, Adam Smith argues for the idea of a nation specializing in goods in which it has a comparative advantage.

The United States ended its steel tariffs in response to a WTO ruling because it feared retaliatory tariffs from the EU.

Modern scholars believe trade to be a bilateral interaction between countries.

Economic sanctions have the greatest impact on autocratic regimes.

Liberal trade theorists advocate the use of quotas, tariffs, and other barriers to protect local industry from import competition and "bring the jobs back home."

When Brazil sued the United States for cotton subsidies that violated international trade law standards, the United States began sending annual payments of $150 million to Brazil in exchange for their dropping the case.

GATT stands for General Agreement on Tariffs and Trade.

Voluntary export restrictions (VERs) are agreements in which exporting countries agree to restrict shipments of a particular product to a country to deter it from imposing an even more onerous import quota.

As trade integration grows, so does globalization because states' interdependence increases when exports account for an increasing percentage of their gross domestic product.

Liberals emphasize the mutual gains (absolute gains) of global trade whereas mercantilists are more concerned with relative gains.