Deck 1: Trade in the Global Economy

Question 1

Exports are:

A) goods or services purchased from a foreign resident.
B) goods or services sold to foreign residents.
C) goods only sold to foreigners-you cannot sell services to foreigners.
D) services only-exports do not include goods.

Answer 1

B

Question 2

A Chinese student pays tuition at a U.S. university. The Chinese government classifies this transaction as:

A) a goods' import.
B) a service export.
C) a service import.
D) a goods' export.

Answer 2

C

Question 3

If country X has a GDP of $1 trillion, exports $200 billion to country Y, and imports $300 billion from country Y, then its bilateral trade balance with country Y is:

A) -$100 billion.
B) $100 billion.
C) $500 billion.
D) 50%.

Answer 3

A

Question 4

Currently, which of the following countries is the world's largest exporter of goods and services (in dollar volume)?

A) China
B) the United States
C) Japan
D) Germany

Question 5

What is the term for a capital flow that is used to purchase or build a tangible asset like a factory?

A) migration
B) service exports
C) service imports
D) foreign direct investment

Question 6

What is the name given to a tax on imported goods?

A) income tax
B) tariff
C) sales tax
D) excise tax

Question 7

If the value of a nation's imports is more than the value of its exports, then the nation is experiencing:

A) a trade deficit.
B) a trade surplus.
C) balanced trade.
D) a trade balance.

Question 8

An American tourist buys a ticket to an opera in Paris. The U.S. government classifies this transaction as:

A) a goods' import of a French Opera.
B) a service export.
C) a service import.
D) a goods' export.

Question 9

When a foreign resident purchases a good or service from someone in the United States, the transaction is:

A) a U.S. export.
B) a U.S. import.
C) bilateral exchange.
D) a compensating differential.

Question 10

What country was the world's largest exporter of goods in 2014?

A) China
B) Germany
C) the United States
D) Japan

Question 11

Which of the following is classified as a United States service export?

A) Renee LaFrancois, a French citizen, has her hair dyed in a New York salon.
B) Miguel Ramirez, a Mexican citizen, gets paid for working in a Kansas vegetable-canning factory.
C) Harvey Guelph, a U.S. citizen, gets his haircut in a British barber shop.
D) Marie Thompson, a U.S. citizen, purchases a bottle of champagne in a French grocery store.

Question 12

The difference between the total value of a country's exports and the total value of its imports is defined as the country's:

A) trade status.
B) trade balance.
C) trade deficit.
D) bilateral trade balance.

Question 13

The difference in value between a nation's exports and imports is called:

A) its trade deficit.
B) its bilateral trade balance.
C) balanced trade.
D) its trade balance.

Question 14

Imports are:

A) goods or services purchased from a foreign resident.
B) goods or services sold to foreign residents.
C) goods only purchased from foreigners-you cannot purchase services from foreigners.
D) services only-imports do not include goods.

Question 15

A country's service exports include:

A) a restaurant meal purchased by its resident in another country.
B) equipment or automobiles with a warranty and a service contract sold to a foreign resident.
C) a ticket on a country's airline sold to a foreign resident.
D) a country's resident who migrates to work in another country.

Question 16

Which of the following transactions is NOT a trade flow?

A) domestic residents' purchases of foreign-made goods
B) domestic residents' purchases of foreign-provided services
C) domestic residents' purchases of foreign stocks and bonds
D) domestic residents' purchases of foreign-produced software

Question 17

Which of the following is an example of trade of goods, otherwise known as trade flow?

A) Robert Feenstra purchases $100 million of British treasury bonds.
B) Robert Feenstra purchases a yogurt factory in France.
C) Robert Feenstra purchases a British-made Range Rover.
D) Robert Feenstra purchases 100 shares of Novartis AG, a Swiss pharmaceutical company.

Question 18

Which of the following entries is considered a service export?

A) Japan buys soybeans from the United States.
B) China sells iPhones to the United States.
C) Mexican tourists visit the Grand Canyon.
D) France sells wine to the United States.

Question 19

Which of the following is an example of a service export?

A) Universal Pictures licenses the right to show the movie Jurassic Park to a Chinese theater chain.
B) Joan Brown migrates from the United States to Canada.
C) Tom Jones purchases 100 shares of Eaton Corporation, an Irish company.
D) Monique le Flambeau, a French citizen, purchases a Ford F150 while visiting the United States.

Question 20

Currently, which of the following countries is the world's largest exporter of goods (in dollar volume)?

A) China
B) the United States
C) Japan
D) Germany

Question 21

(Table: Costs Associated with Phone Supply Chain) Jane Smith, a U.S. citizen, purchases a phone from AT&T for $300. By how much did Jane's purchase change the U.S. trade balance with China?

A) $300
B) $150
C) $120
D) $30

Question 22

Which of the following statements about the United States-China bilateral trade balance is correct?

A) It is a good indicator of the inequality of imports and exports between the United States and China.
B) It vastly understates the gap in imports and exports between the United States and China.
C) It may overstate the gap in imports and exports between the United States and China because some material inputs used to produce Chinese exports do not originate in China.
D) It shows that there is balanced trade between the United States and China.

Question 23

Recent bilateral trade data alarm politicians who worry about China's growing trade imbalance with the United States. What do the authors of your textbook say?

A) The real data are even more shocking.
B) It is not as bad as the numbers appear because China imports a large percentage of the value of its exports to the United States from its other trading partners.
C) It depends on how you count imports and exports and on which currency is used.
D) Irresponsible governments, corruption, and greedy corporations are responsible for the widening gap.

Question 24

Whenever the value of a nation's exports equals the value of its imports, the nation is experiencing:

A) a trade deficit.
B) a trade surplus.
C) balanced trade.
D) a trade balance.

Question 25

(Table: Costs Associated with Phone Supply Chain) Jane Smith, a U.S. citizen, purchases a phone from AT&T for $300. By how much did Jane's transaction affect the U.S.-Japanese trade balance?

A) It did not affect it at all.
B) The U.S.-Japanese trade balance fell by $750.
C) The U.S.-Japanese trade balance rose by $130.
D) The U.S.-Japanese trade balance fell by 25%.

Question 26

Which of the following countries was a member of the European Union prior to 2004?

A) Poland
B) Romania
C) Hungary
D) Italy

Question 27

The United States-China bilateral trade balance may overstate the trade gap if:

A) some of the inputs used to produce Chinese exports are imported.
B) none of the inputs used to produce Chinese exports are imported.
C) Chinese exports are valued in the United States versus Chinese currency.
D) the United States imposes trade restrictions on Chinese imports.

Question 28

Why should the recorded U.S.-Chinese bilateral trade deficit in goods be interpreted with some caution?

A) U.S. imports of Chinese products may be produced by U.S. subsidiaries that generate profits for the U.S. parent firms (recorded as U.S. service export income).
B) U.S. imports of Chinese products may utilize material inputs that China imports from the United States.
C) U.S. imports of Chinese products may be produced with capital goods (e.g., machinery) that China imports from the United States.
D) China does not record all of its imports from the United States in its trade statistics.

Question 29

What entries are used to calculate a country's bilateral trade balance?

A) its unemployment and inflation rates
B) its exports to and imports from another country
C) its per capita income and imports
D) its exports and per capita income

Question 30

How does one determine the "value-added" of a product produced and sold domestically?

A) Subtract the total value of imported raw and semi-finished materials used in production from the product's total value.
B) Add the cost of its transportation to its market to the product's total value.
C) Subtract the total value of all raw and semi-finished materials used in its production from the product's total value.
D) Subtract the total value of a country's imports from the total value of its exports.

Question 31

What nations have the world's highest volume of international trade with one another?

A) Canada, Mexico, and Japan
B) Japan, China, South Korea, and Thailand
C) member nations of the European Union
D) Middle Eastern countries

Question 32

Merchandise trade among European countries accounted for approximately what share of total world merchandise (goods) trade in 2014?

A) 3%
B) 23%
C) 50%
D) 75%

Question 33

Whenever the value of a nation's exports is more than the value of its imports, the nation has:

A) a trade deficit.
B) a trade surplus.
C) balanced trade.
D) a trade balance.

Question 34

Whenever the value of a nation's exports is less than the value of its imports, the nation has:

A) a trade deficit.
B) a trade surplus.
C) balanced trade.
D) a trade balance.

Question 35

How has China explained its growing bilateral imbalance with the United States?

A) Current accounting practices make it very difficult to determine the value-added and true national origin of goods.
B) If the United States would only improve its efficiency, there would be no gap.
C) Most Chinese imports are cheap consumer goods, and no firm in the United States wants to make those things anyway.
D) China continues to struggle with corrupt officials at the customs bureau.

Question 36

Intel, an American company, has manufacturing plants in China that assemble U.S.-made components. Suppose one of these plants produces and sells a computer chip to a Chinese computer manufacturer. How is this sale recorded in U.S. international trade statistics?

A) It is considered to be neither a U.S. import nor a U.S. export.
B) It is considered to be a U.S. export to China
C) It is considered to be a U.S. import from China
D) The value of U.S.-made chip components is considered to be a U.S. export.

Question 37

Jane Ferlengeti, a U.S. citizen, purchases a phone for $300 that Apple imported from China. Apple paid its Chinese subsidiary $150 for the phone. How did these transactions change the U.S.-Chinese bilateral trade balance?

A) It improved (i.e., increased) by $300.
B) It worsened (i.e., fell) by $300.
C) It worsened by $150.
D) It did not change the U.S.--Chinese trade balance, since Apple's $150 margin ($300-$150) offset the $150 cost of importing the phone from China.

Question 38

A bilateral trade balance is:

A) half the trade deficit.
B) the measure of imports only-not exports.
C) the difference between the value of imports and exports between two trading nations.
D) the sum of the value of imports and exports traded between two nations.

Question 39

An example of "value-added" as an important concept for international trade was the case of imports of iPhones from China. The value-added by China was equal to:

A) the total value of imported raw and semi-finished materials into China plus the value of the export to the United States.
B) the total value of the export to the United States minus the total value of imported raw and semi-finished materials into China.
C) the total value of the export plus shipping costs.
D) the difference between the total values of exports to the United States minus the total value of imports from the United States.

Question 40

"Value-added" in the context of international trade refers to:

A) the difference between the value of exports and the value of imported inputs used in producing exports.
B) the additional value a worker provides to a firm when she is hired.
C) the value-added by being able to purchase goods in a competitive market.
D) the value-added by import brokers when they mark up the price of the products.

Question 41

Which of the following statements explains why Asian countries such as China and Vietnam export goods to industrialized countries?

A) Workers in China and Vietnam receive low wages.
B) Workers are more productive in China and Vietnam than in industrialized countries.
C) China and Vietnam have an abundant supply of raw materials.
D) Chinese and Vietnamese factories are more technologically advanced than those in industrialized countries.

Question 42

One way to gauge the impact of trade on a nation is to measure:

A) wage distortions and job loss.
B) the ratio of total imports and exports expressed as a percent of a nation's GDP.
C) shipping costs.
D) rises in national income due to trade.

Question 43

If the trade-to-GDP ratio is 25% and the overall value of trade (imports plus exports) is $175 billion, then the GDP is:

A) $250 billion.
B) $700 billion.
C) $1 trillion.
D) $0.5 trillion.

Question 44

Which of the following countries is NOT a member of the European Union?

A) Turkey
B) Slovakia
C) Hungary
D) Poland

Question 45

Which of the following economic groupings has the largest volume of trade among its member nations?

A) NAFTA
B) the European Union
C) the Trans-Pacific Partnership
D) the European Free-Trade Area

Question 46

What does a country's gross domestic product (GDP) measure?

A) the value of all intermediate goods produced in a year
B) the value of all exports produced in a year
C) the value of all final goods produced in a year
D) the value of all production in a year

Question 47

Which of the following statements about trade is true?

A) In 2014, Canada was the largest exporter to the United States.
B) Trade volume among China, Japan, Thailand, and Taiwan is the world's largest.
C) Trade volume among Chile, Brazil, Argentina, and Mexico is the world's largest.
D) The combined trade volume of the United States and the European Union is the world's largest.

Question 48

Which of the following ratios is used to measure a country's openness to international trade?

A) the ratio of its exports to its GDP
B) the ratio of its imports to its GDP
C) the ratio of its trade balance (exports minus imports) to its GDP
D) the ratio of its exports plus imports to its GDP

Question 49

What is the average tariff on intra-European Union trade?

A) 0%
B) 10%
C) 25%
D) 100%

Question 50

NAFTA is:

A) a free-trade area among Mexico, Canada, and the United States.
B) a trade agreement to limit environmentally dangerous imports and exports.
C) a law preventing illegal immigration.
D) another name for the European Union.

Question 51

How many countries are members of the European Union as of May 2016?

A) 5
B) 12
C) 22
D) 28

Question 52

What was Africa's share of world exports in 2014?

A) 2%
B) 12%
C) 1.5%
D) 58%

Question 53

Which of the following is NOT included in the calculation of a country's gross domestic product (GDP)?

A) the value of all its intermediate goods produced in a year
B) the value of all its exports produced in a year
C) the value of all its final consumption goods produced in a year
D) All of these are included in the calculation of a country's gross domestic product.

Question 54

If a country's GDP is $10 trillion and its overall trade flows are $2 trillion (exports plus imports), then:

A) its trade-to-GDP ratio is 20%.
B) it is not a successful country.
C) its GDP needs to increase.
D) its trade-to-GDP ratio is too high.

Question 55

Which of the following statements best explains the low level (about $35 billion) of trade between the United States and Russia?

A) Russia doesn't produce goods that Americans want to buy.
B) The Russian market is smaller than the markets of most other countries.
C) Political tensions between Russia and the United States reduce the level of trade between the two countries.
D) The United States has banned food imports from Russia.

Question 56

U.S. and European merchandise trade accounted for approximately what share of total world merchandise (goods) trade in 2014?

A) slightly more than one fourth
B) slightly more than one third
C) about one half
D) slightly more than two thirds

Question 57

If a country's trade-to-GDP ratio is 38% and the GDP is $500 billion, then what is the overall value of its trade (imports plus exports)?

A) $390 billion
B) $190 billion
C) $100 billion
D) Not enough information is provided to answer the question.

Question 58

Europe and the United States accounted for ______ of world exports in 2014.

A) 20%
B) 15%
C) 80%
D) 50%

Question 59

Which of the following countries is NOT a member of the European Union?

A) Denmark
B) Finland
C) Norway
D) Sweden

Question 60

If a country's GDP is $10 trillion, its exports are $1 trillion, and its imports are $1.5 trillion, then:

A) its trade-to-GDP ratio is 10%.
B) its trade-to-GDP ratio is 15%.
C) its trade-to-GDP ratio is 25%.
D) its trade-to-GDP ratio is 400%.

Question 61

Which decade of the twentieth century had the highest average tariffs worldwide?

A) 1900-09
B) 1930-39
C) 1950-59
D) 1970-79

Question 62

Suppose that a country has a low ratio of trade to GDP. Which of the following may be a possible explanation for this?

A) The country has low tariffs on imports.
B) The country is geographically distant from the rest of the world.
C) The country is very large.
D) The country produces only agricultural products.

Question 63

What is the best measure of a country's openness to international trade?

A) the ratio of its exports to its GDP
B) the ratio of its imports to its GDP
C) the ratio of its trade balance (exports minus imports) to its GDP
D) the ratio of its exports plus imports to its GDP

Question 64

A tariff is:

A) a tax on an import.
B) a physical limitation on the quantity of imports of a certain good.
C) a health or safety requirement on imports.
D) a regulation affecting imports.

Question 65

What do economists call factors that reduce the total dollar volume of goods and services sold across international borders?

A) trade factor issues
B) trade barriers
C) trade conditions
D) the ratio of total trade to GDP

Question 66

The Smoot-Hawley Tariff Act:

A) was passed in response to World War II.
B) was passed as a reaction to the Great Depression in the United States.
C) was enacted by Germany.
D) greatly reduced the barriers to trade.

Question 67

Why do larger countries tend to have lower ratios of international trade to GDP than smaller countries?

A) Larger countries tend to have more trade between states or provinces within their borders than smaller countries.
B) Larger countries tend to have higher tariffs than smaller countries.
C) Larger countries tend to trade with other larger countries.
D) Larger countries tend to have larger trade deficits than smaller countries.

Question 68

The "first golden age" of trade was:

A) the period from 1864 to 1887.
B) the period from 1890 to 1913.
C) the period between 1919 and 1935.
D) the inter-war period.

Question 69

Which of the following countries had the highest ratio of international trade to GDP in 2014?

A) the United States
B) Japan
C) China
D) Malaysia

Question 70

The U.S. trade-to-GDP ratio is:

A) the highest in the industrialized world.
B) greater than China's and Japan's.
C) smaller than that of Germany.
D) too high.

Question 71

Which of the following nations had the lowest ratio of international trade to GDP in 2014?

A) Hong Kong (China)
B) Japan
C) Germany
D) the United States

Question 72

What ushered in the "second golden age" of trade?

A) the increase in trade among countries in the period after World War II
B) the introduction of the gold standard
C) the increase in trade restrictions as a reaction to the Smoot-Hawley tariff act
D) the decline in volume of trade among industrialized countries

Question 73

What is an import quota?

A) a limit on the quantity of a certain import
B) a tax on the value of an import
C) a health or safety precaution affecting goods that may cause long-term harm to humans or animals
D) a bureaucratic rule that can be overridden by the Secretary for International Trade

Question 74

What was the short-lived import tariff enacted in 1930 that raised rates to an average of 60% on many imports?

A) the Reaganomics principle
B) the Smoot-Hawley tariff
C) the Blair-Bush tariff
D) the International Equity tariff

Question 75

What is an import tariff?

A) a limit on the imported quantity of a certain good
B) a tax on the value of an import
C) a health or safety precaution that affects goods that may cause long-term harm to humans or animals
D) a bureaucratic rule that can be overridden by the Secretary for International Trade

Question 76

Other nations responded to the Smoot-Hawley tariff by:

A) complaining to the United Nations.
B) raising tariffs on imports in retaliation.
C) lowering prices on exports in order to increase sales.
D) attacking military bases in nations that refused to lower tariffs.

Question 77

One factor mentioned in the text as a reason for the "first golden age" of trade was:

A) the invention of the cotton gin.
B) the invention of the wheel.
C) improved methods of transporting goods.
D) the invention of the computer.

Question 78

What is the immediate effect of increasing tariffs in a country on its economy?

A) It increases the volume of trade.
B) It reduces the volume of imports.
C) It increases the volume of exports.
D) It promotes better trade relations with other countries.

Question 79

If we measure the ratio of total trade to GDP, which of the following nations had the highest ratio in 2014?

A) Hong Kong (China)
B) Japan
C) Germany
D) the United States

Question 80

By 2012, the average worldwide tariff had fallen to about:

A) 35%.
B) 25%.
C) 15%.
D) 7%.