Deck 2: The Dynamic Environment of International Trade

Question 1

The GATT became part of the World Trade Organization in 1995 with the ratification of the Uruguay Round agreements.

Answer 1

True
Explanation: With the ratification of the Uruguay Round agreements, the GATT became part of the World Trade Organization (WTO) in 1995, and its 117 original members moved into a new era of free trade.

Question 2

Quotas strictly permit importing on a case-by-case basis.

Answer 2

False
Explanation: Quotas permit importing until the quota is filled; licensing limits quantities on a case-by-case basis.

Question 3

After World War II, the United States provided assistance to other countries to develop their markets and improve global trade though it gained no returns on these initiatives.

Answer 3

False
Explanation: For every dollar the United States invested in the economic development and rebuilding of other countries after World War II, hundreds of dollars more returned in the form of purchases of U.S. agricultural products, manufactured goods, and services.

Question 4

As part of the worldwide economic growth and rebuilding after World War II, countries once classified as less developed were reclassified as underdeveloped countries.

Question 5

Tariffs are often used as reprisals against protectionist moves of trading partners.

Question 6

The reserves account is a record of direct investment, portfolio investment, and short-term capital movements to and from countries.

Question 7

A nation's balance-of-payments statement records all financial transactions between its residents and those of the rest of the world during a given period of time.

Question 8

The Organization for Economic Cooperation and Development (OECD) estimates that the economies of the developed world will expand at much faster rates when compared to the developing economies.

Question 9

A government boycott is a partial restriction against the purchase and importation of certain goods and/or services from other countries.

Question 10

Quotas are more flexible than import licenses.

Question 11

When foreign currencies can be traded for more dollars, U.S. products and companies are more expensive for the foreign customer and exports decrease.

Question 12

Quotas, boycotts, monetary barriers, and market barriers are examples of tariff barriers.

Question 13

It is mandatory for importers who want to buy a foreign good from a foreign country to apply for a business permit in that country.

Question 14

In the context of blocked currency, blockage is accomplished by refusing to allow an importer to exchange its national currency for the currency of the seller.

Question 15

A case might be made for the temporary protection of markets with excess productive capacity or excess labor when such protection could facilitate an orderly transition.

Question 16

In general, tariffs decrease inflationary pressures.

Question 17

A voluntary export restraint (VER) is generally imposed under the threat of stiffer quotas and tariffs being set by the importing country if a VER is not established.

Question 18

In a balance-of-payments record, if the credit and debit offset each other, it means that a nation is in particularly good financial condition.

Question 19

Protection of an infant industry is recognized by economists as a valid argument in favor of protectionism.

Question 20

By the year 1971, the United States was selling more to other countries than it bought from them; that is, the United States had a favorable balance of trade.

Question 21

Antidumping laws were specifically designed to prevent foreign producers from investing in the U.S. markets.

Question 22

Which of the following acronyms refers to the international forum that was created for member countries to engage in the negotiation of tariffs and other barriers to trade?

A) UNHCR
B) GATT
C) WMO
D) NPT
E) UNDP

Question 23

The rapid growth of war-torn economies and previously underdeveloped countries, coupled with large-scale economic cooperation and assistance that followed World War II, led to:

A) the rise of new global marketing opportunities.
B) the decrease in demand for American goods worldwide.
C) the dissolution of the GATT.
D) the spread of communism by the United States.
E) the sharp reduction in the production capacity of the United States.

Question 24

After World War II, the United States led efforts like the Marshall Plan to assist in rebuilding Europe, financial and industrial development assistance to rebuild Japan, and funds channeled to foster economic growth in the underdeveloped world. These efforts were primarily aimed at:

A) halting the growth of Nazi Germany.
B) dampening the spread of communism.
C) dampening the spread of capitalism.
D) building a stronger defense force.
E) creating a worldwide trade bloc to counter the OPEC countries' clout.

Question 25

What was the outcome for the GATT after the ratification of the Uruguay Round agreements?

A) The GATT allowed the United States to increase its import tax.
B) The GATT became part of the World Trade Organization.
C) The GATT directly led to the uneven distribution of economic power and potential.
D) The European Union decided to stay away from the treaty.
E) The original purpose was sidelined in favor of political and military intervention between member states.

Question 26

The GATT panels were formed to resolve bilateral trade disputes and have both advisory and enforcement powers.

Question 27

As both special drawing rights (SDRs) and the U.S. dollar have lost their utility as the basic medium of financial exchange, most monetary statistics relate to gold rather than dollars.

Question 28

The decisions taken by the World Trade Organization in solving trade disputes among members are binding ones.

Question 29

What was the most apparent reciprocal impact of the foreign economic assistance given by the United States?

A) European countries formed an alliance to counter the OPEC countries' clout.
B) Outflow of labor to the recipient countries increased dramatically.
C) All recipient countries appointed Americans to manage their central banks.
D) Purchases of U.S. agricultural products, manufactured goods, and services by the recipient countries increased.
E) Distribution of economic power and potential became more uneven.

Question 30

The United States and other countries require some products to contain a percentage of "local content" to gain admission to their markets.

Question 31

Which of the following was the most significant move of the 1980s that contributed toward international cooperation among trading nations?

A) Formation of the United Nations Development Program
B) Creation of the United Nations
C) Establishment of the World Trade Organization
D) Signing of the Montreal Protocol
E) Negotiation of the General Agreement on Tariffs and Trade

Question 32

Which of the following factors was primarily responsible for the excess in production capacity in the United States after World War II?

A) The United States government raised the tariffs on most imports by 60%.
B) Many firms from other nations shifted their production facilities to the United States.
C) Domestic demand was at a historic low and resulted in excess capacity.
D) The returning military after World War II increased the labor supply in the United States.
E) The implementation of the Marshall Plan dampened the overseas demand.

Question 33

Post-World War II, it was noticed that there was worldwide economic growth and countries once classified as less developed were reclassified as _____.

A) communist countries
B) free trade economies
C) tier-II countries
D) developed countries
E) newly industrialized countries

Question 34

The Omnibus Trade and Competitiveness Act of 1988 focuses on assisting businesses to be more competitive in world markets as well as on correcting perceived injustice in trade practices.

Question 35

After World War II, the United States set out to infuse the ideal of capitalism throughout as much of the world as possible. The _____, aimed at assisting in rebuilding Europe, is the plan most closely associated with this endeavor.

A) Eisenhower Plan
B) Marshall Plan
C) Bradley Plan
D) Roosevelt Plan
E) Kennedy Plan

Question 36

Which were the two major challenges faced by U.S. multinational corporations at the close of the 1960s?

A) The creation of the Soviet Union and the higher tariffs on imports
B) Growing jingoistic nationalism and a negative population growth rate in major international markets
C) Resistance to direct investment and increasing competition in export markets
D) Increasing Chinese domination in the manufacturing sector and the falling dollar in global markets
E) The decreased demand for U.S. goods in the global market and the growing influence of consumer rights advocacy in the home market

Question 37

The Omnibus Trade and Competitiveness Act gives the U.S. president authority to restrict sales of a country's products in the U.S. market if that country imposes unfair restrictions on U.S. products.

Question 38

It is harder to obtain export licenses for products on the export control list than for the products that are excluded from the export control list.

Question 39

An exchange permit issued by a government can stipulate an unfavorable rate of exchange depending on the desires of the government.

Question 40

The World Intellectual Property Organization was formed with the primary objective of overcoming inadequate monetary reserves and dealing with unstable currencies which were particularly vexing problems in global trade.

Question 41

Which of the following is a defining characteristic of a balance-of-payments statement?

A) It is a record of the domestic transactions between the government of a country and the private companies in that country.
B) It records all financial transactions between the residents of a country and those of the rest of the world.
C) It records the trade policies of the member nations of the WTO.
D) It is an annual record of the profitable foreign transactions made by a particular country.
E) It is a financial statement in which the credits must exceed the debits.

Question 42

Which of the following falls on the plus side of the U.S. balance of payments?

A) Payments to the United States for insurance
B) The costs of goods imported
C) Spending by American tourists overseas
D) New overseas investments
E) The cost of foreign military

Question 43

A tax imposed by a government on goods entering at its borders is most accurately termed as a(n) _____.

A) boycott
B) asterisk bill
C) tariff
D) quota
E) writ

Question 44

Which of the following strategies was employed by the United States to regain its lost market share for capital goods by the late 1990s?

A) Funding the communist nations
B) Restructuring its industries to be more lean and mean
C) Decreasing its exports and increasing its imports
D) Raising average U.S. tariffs on more than 20,000 imported goods by 60%
E) Provoking increased protectionism from other countries

Question 45

In general, tariffs weaken:

A) inflationary pressures.
B) special interests' privileges.
C) balance-of-payments positions.
D) government control in economic matters.
E) the number of reciprocal tariffs by other countries.

Question 46

Which of the following arguments regarding the need for protectionism is recognized by economists as valid?

A) Need to keep money at home
B) Encouragement of capital accumulation
C) Industrialization of underdeveloped countries
D) Conservation of natural resources
E) Maintenance of employment and reduction of unemployment

Question 47

Which of the following presents the correct picture of the outcome of increased world trade after the 1950s, contrary to Servan-Schreiber's prediction?

A) Third World countries have been excluded from this economic growth leading to stark imbalances in wealth.
B) The European Union has become the center of world trade, taking the position away from the United States.
C) The United States has continuously maintained the positive balance of trade it attained during the 1950s.
D) Economic power and potential has become more evenly distributed among the countries of the world.
E) SDRs and gold have lost their utility as the basic medium of financial exchange and most monetary statistics have started relating to the U.S. dollar.

Question 48

In the last few years, most of the countries of the world saw a dramatic slowdown in the growth of their economies with the exception of _____.

A) the United States
B) Spain
C) China
D) Greece
E) France

Question 49

The World Bank estimates that five countries whose share of world trade is barely one-third that of the European Union will, by 2020, have a 50 percent higher share than that of the European Union. _____ is one of the countries included in this list.

A) Canada
B) Nigeria
C) Netherlands
D) Indonesia
E) Zimbabwe

Question 50

The system of accounts that records a nation's international financial transactions is most accurately called its:

A) supply chain management system.
B) gross domestic product system.
C) net domestic product payments.
D) balance of payments.
E) net national product systems.

Question 51

Which of the following statements is true of the balance-of-payments records?

A) The balance-of-payments accounts do not consider income brought in by nonresident citizens of a country.
B) The fact that assets and liabilities balanced in a balance-of-payments statement does not mean that a nation is in a particularly good financial condition.
C) A balance of payments is not a record of the financial condition of a nation.
D) A balance of payments is a good determinant of the financial condition of a nation.
E) A balance-of-payments record is maintained on a single-entry bookkeeping system.

Question 52

By the year 1971, the United States was witnessing a(n):

A) increase in protectionist federal policies.
B) positive balance of trade.
C) sharp rise in domestic and international demand for all its goods.
D) huge trade deficit.
E) economic situation of the magnitude of the Great Depression.

Question 53

Which of the following ensures that balance-of-payments records are always in balance?

A) Sum of squares recording system
B) Bank reconciliation system
C) Double-entry bookkeeping system
D) Archival records system
E) Multifactor recording system

Question 54

Which of the following falls on the minus side of the U.S. balance of payments?

A) Payments to the United States for insurance
B) Payments of dividends and interest on investments abroad
C) Return on capital invested abroad
D) New foreign investments in the United States
E) Spending by American tourists overseas

Question 55

The _____ of the balance-of-payments statement is most likely to record all merchandise exports, imports, and services plus unilateral transfers of funds.

A) current account
B) capital account
C) credit account
D) receivables account
E) reserves account

Question 56

A balance-of-payments statement includes three accounts. Two of those accounts are the current account and the capital account. What is the third account found on the balance-of-payments statement?

A) Investment account
B) Receivables account
C) Services account
D) Credit account
E) Official reserves account

Question 57

The _____ of the balance-of-payments statement is most likely to record all exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks.

A) current account
B) capital account
C) credit account
D) receivables account
E) reserves account

Question 58

Randall, a protectionist, has seen several small businesses go bankrupt because they were unable to compete with the cheaper prices of goods provided by foreign companies. The cell-phone manufacturing industry has just started in the United Kingdom, and Randall's company is one of the first to try its hand at cell-phone manufacturing. Which of the following arguments is most likely to be used by Randall to persuade his government to restrict the import of foreign cell phones from foreign companies?

A) Protection of an infant industry
B) The need to keep money at home
C) Conservation of natural resources
D) National defense
E) Maintenance of standard of living

Question 59

Which of the following is the major reason behind the failure of American MNCs to completely dominate the European markets as predicted by Servan-Schreiber?

A) The resurgence of competition for U.S. businesses from all over the world
B) The elimination of import taxes in the European countries
C) The restructuring of U.S industries
D) The decadence of communism
E) The dissolution of colonial powers

Question 60

Which of the following accounts of the balance-of-payments statement is a record of the direct investment, portfolio investment, and short-term movement of cash and technology to and from countries?

A) Current account
B) Capital account
C) Credit account
D) Receivables account
E) Reserves account

Question 61

Which of the following trade policy tools makes it mandatory for its importers who want to buy a foreign good to apply for an exchange permit?

A) Tariff
B) Import quota
C) Blocked currency
D) Government approval
E) Export levy

Question 62

In order to effectively secure foreign exchange, which of the following is most likely to be used by countries experiencing severe shortages of foreign exchange?

A) Privatization
B) Government approval
C) Spot pricing
D) Voluntary export restriction
E) Monopoly

Question 63

In the context of monetary barriers, blockage is ideally accomplished when:

A) a country refuses to allow an importer to exchange its national currency for the country's currency.
B) two countries enter into a voluntary agreement to determine the value of their currencies.
C) a country applies a specific unit or dollar limit to a particular type of good.
D) money dealers limit the rate at which foreign currencies are exchanged.
E) the government of a country imposes a mandatory tax on goods entering at its borders.

Question 64

An agreement signed willingly between the importing country and the exporting country for a restriction on the volume of exports is called a:

A) monetary barrier.
B) tariff restraint.
C) voluntary export restraint.
D) special interests' privilege.
E) balance-of-payments statement.

Question 65

Which of the following statements is true of tariffs?

A) They strengthen balance-of-payments positions.
B) They strengthen supply-and-demand patterns.
C) They increase special interests' privileges.
D) They strengthen international relations.
E) They promote competition.

Question 66

Which of the following types of nontariff barriers strictly falls under the category of specific limitations on trade?

A) Import credit discriminations
B) Export subsidies
C) Voluntary export restraints
D) Embargoes
E) Packaging, labeling, or marking standards

Question 67

The United States and other countries require some products (automobiles in particular) to contain a percentage of "local content" to gain admission to their markets. This is an example of the stringent usage of _____ to restrict trade.

A) exchange permits
B) embargoes
C) blocked currencies
D) standards
E) antidumping penalties

Question 68

An exchange permit can stipulate the:

A) quantity of goods that can be exchanged for a particular sum of foreign currency.
B) number of parties that can be involved in an exchange transaction.
C) amount to be exchanged that must be deposited in a local bank for a set period.
D) quality standards of the goods involved in an exchange.
E) number of times one party can avail exchange permits.

Question 69

One country refuses to sell goods to its neighboring country based on the belief that the neighboring country harbors radicals and terrorists. In this case, the refusal is most accurately referred to as a(n):

A) antidumping penalty.
B) embargo.
C) monetary barrier.
D) orderly market agreement.
E) voluntary export restraint.

Question 70

In the context of nontariff barriers, antidumping practices fall under the category of:

A) specific limitations on trade.
B) customs and administrative entry procedures.
C) standards.
D) governmental participation in trade.
E) charges on imports.

Question 71

_____ is a nontariff barrier that was specifically designed to prevent foreign producers from using predatory pricing to take control of U.S. markets.

A) Quota
B) Embargo
C) Blocked currency
D) Antidumping law
E) Exchange permit

Question 72

Tall Pine Plywood Company has just received a notice that a shipment of plywood (2 metric tons) has been rejected by the customs administration of the recipient country because the knotholes commonly found on a plywood sheet are too large. Which of the following categories of nontariff barriers primarily uses such quality issues as a trade barrier?

A) Quotas
B) Licenses
C) Embargoes
D) Boycotts
E) Standards

Question 73

Exporting countries primarily agree to voluntary export restraints (VERs) to:

A) minimize exposure in the importing country.
B) reduce market competitiveness.
C) avoid stiffer quotas being set by the importing country.
D) take over local industries of the importing country.
E) avoid criminal prosecution.

Question 74

The fundamental difference between quotas and import licenses as a means of controlling imports is that:

A) import licenses have greater flexibility over quotas.
B) quotas impose specific limitations on trade, and import licenses take care of standards.
C) quotas are imposed on export goods, and import licenses are imposed on import goods.
D) for quotas, the exporting country sets the limits, but licenses are issued by the importing country.
E) unlike licenses, quotas limit quantities on a case-by-case basis.

Question 75

Which of the following is a defining characteristic of a voluntary export restraint (VER)?

A) International regulatory bodies set export or import limits.
B) The importing country can levy heavier import tariffs to override the VERs.
C) The exporting country sets the limits on the quantity it will export.
D) It is a mandatory tax imposed by a government on goods entering at its borders.
E) It is an absolute restriction against the importation of certain goods.

Question 76

In general, tariffs restrict:

A) inflationary pressures.
B) special interests' privileges.
C) government control in economic matters.
D) the number of reciprocal tariffs.
E) manufacturers' supply sources.

Question 77

The marketing manager for Grand Products wants to export the company's range of beer products to a Gulf country. However, he discovers that there is a complete restriction on the import of any form of liquor into that country. This is an accurate example of a(n) _____.

A) orderly market agreement
B) quota
C) monetary barrier
D) voluntary export restraint
E) boycott

Question 78

Which of the following is an example of a nontariff trade barrier?

A) Compound duties
B) Revenue tariffs
C) Fees for administrative and custom entry procedures
D) Specific duties
E) Taxes imposed by governments on goods entering at its borders

Question 79

_____ is the practice whereby a foreign producer intentionally sells its products in the United States for less than the cost of production to undermine the competition and take control of the market.

A) Basing point pricing
B) Spot pricing
C) Defensive pricing
D) Counterpoint pricing
E) Predatory pricing

Question 80

A specific unit or dollar limit applied to a particular type of good is called a(n):

A) trade license.
B) quota.
C) asterisk bill.
D) predatory price.
E) exchange rate.