Deck 2: The Dynamic Environment of International Trade

Question 1

In general, tariffs decrease inflationary pressures.

Answer 1

False
Explanation: In general, tariffs increase inflationary pressures, special interests' privileges, government control and political considerations in economic matters, and the number of tariffs (they beget other tariffs via reciprocity).

Question 2

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.

Answer 2

True
Explanation: 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-usually one year.

Question 3

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

Answer 3

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 4

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

Question 5

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 6

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

Question 7

To encourage development of domestic industries, governments work on reducing trade barriers.

Question 8

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

Question 9

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

Question 10

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

Question 11

As the U.S. trade deficit has grown, pressures have begun to push the value of the dollar to higher levels.

Question 12

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

Question 13

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

Question 14

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 15

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

Question 16

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 17

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

Question 18

Quotas are more flexible than import licenses.

Question 19

A 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 20

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 21

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 22

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) dissolving the colonial powers.
D) building a stronger defense force.
E) creating a worldwide trade bloc to counter the OPEC countries' clout.

Question 23

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 24

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

A) 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.
B) It became part of the World Trade Organization.
C) It 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 25

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

Question 26

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

Question 27

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

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

Question 28

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) Political intervention in free trade movement and growing influence of consumer rights advocacy in the home market.

Question 29

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

Question 30

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 31

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

Question 32

Since both 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 33

The World Bank 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 34

Obtaining export licenses for products on the export control list is more arduous than for those items that are exempted from the list.

Question 35

The exchange permit can stipulate an unfavorable rate of exchange depending on the desires of the government.

Question 36

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) European countries formed an alliance to counter the OPEC countries' clout.
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 37

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 uneven distribution of economic power.
C) the dissolution of GATT.
D) the spread of Communism.
E) the sharp reduction of the production capacity in the U.S.

Question 38

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) Truman Plan

Question 39

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 Programme.
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 40

Which of the following factors was primarily responsible for the excess production capacity in the U.S. in the first half of the twentieth century?

A) Technological innovation revolutionized production during this time.
B) Many firms from other nations shifted their production facilities to the U.S.
C) Domestic demand was at a historic low and resulted in excess capacity.
D) Swelling labor supply of returning military after World War II.
E) Influx of migrant laborers from Europe and Japan.

Question 41

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

A) The sum of squares recording system.
B) The ledger entry model.
C) The double-entry bookkeeping system.
D) The archival records system.
E) The multifactor recording system.

Question 42

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 worldwide.
B) The uneven distribution of economic power.
C) The restructuring of U.S industries.
D) The decadence of Communism.
E) The dissolution of colonial powers.

Question 43

Which of the following strategies was employed by the US 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) Providing financial assistance to the under-developed countries.
D) Raising average U.S. tariffs on more than 20,000 imported goods.
E) Outsourcing its production activities to other countries.

Question 44

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 45

In the late 1990s, most of the countries of the world saw a slow down in the unprecedented and precipitous growth of their economies. However, _____ remained unaffected by this trend.

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

Question 46

By the year 1971, the United States was witnessing: By the year 1971, the United States was witnessing:

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

Question 47

Which of the following sections 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 48

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) Reserves account

Question 49

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

A) The balance-of-payments accounts do not consider income brought in by non-resident citizens of a country.
B) The fact that assets and liabilities balance does not essentially mean that a nation is in a particularly good financial condition.
C) A balance of payments is not a record of condition.
D) A balance of payments is a determinant of condition.
E) A balance of payments records all the financial transactions of a country since 1980.

Question 50

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 were excluded from this economic growth leading to stark imbalances in wealth.
B) The European Union became the center of world trade, taking the position away from the U.S.
C) The U.S. attained a positive balance of trade scenario in the 1950s and maintained it continuously till the Great Recession.
D) Economic power and potential became more evenly distributed among the countries of the world.
E) SDRs and gold lost their utility as the basic medium of financial exchange and most monetary statistics started relating to the U.S dollar.

Question 51

Randall Smithe-Jones believes that protectionism is the only way to save the United Kingdom from outside competitors. He has seen small businesses go bankrupt because cheaper foreign goods have been more popular. The cell-phone manufacturing industry has just started in U.K and Smithe-Jones' company is one of the first to try its hand at cell-phone manufacturing. Which of the following would probably be the argument that Smithe-Jones would use to persuade his government representatives that protectionism is still needed in the U.K.?

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 52

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) Rhodesia

Question 53

The _____ account 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
B) capital
C) credit
D) receivables
E) reserves

Question 54

In general, tariffs weaken:

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

Question 55

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

A) It is a record of the transactions between the government of a country and the private companies.
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 localfirm's financial statement, where the credits and debits must offset each other.

Question 56

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 57

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) Protection of an infant industry.
D) Conservation of natural resources.
E) Maintenance of employment and reduction of unemployment.

Question 58

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 59

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 60

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 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 levies

Question 62

The fundamental difference between quotas and import licenses is that:

A) import licenses have greater flexibility than 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 63

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 64

_____ is the practice whereby a foreign producer intentionally sells their 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) Offensive pricing
C) Defensive pricing
D) Counterpoint pricing
E) Predatory pricing

Question 65

Which of the following is a defining characteristic of VERs?

A) International regulatory bodies set export/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 66

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 67

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

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

Question 68

Which of the following 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 69

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) Import quota
B) Government approval
C) Tariff
D) VERs
E) Embargo

Question 70

When the United States refuses to sell goods to Iran because of the perception that the country harbors radicals and terrorists, the refusal is most accurately referred to as a(n):

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

Question 71

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.

Question 72

The exchange permit can stipulate:

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

Question 73

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 74

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

A) Compound duties
B) Revenue tariffs
C) Administrative fees
D) Specific duties
E) Duties

Question 75

_____ is a new nontariff barrier that was designed to prevent foreign producers from using predatory pricing.

A) Quota
B) Embargo
C) Import license
D) Antidumping law
E) License

Question 76

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

A) gain greater exposure in the home country.
B) reduce market competitiveness.
C) avoid the chances of stiffer quotas and tariffs.
D) take over local industries.
E) avoid criminal prosecution.

Question 77

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 78

Blockage is ideally accomplished:

A) when a country refuses to allow an importer to exchange its national currency for the seller's currency.
B) when two countries enter into a voluntary agreement to restrict volume of exports.
C) when a country applies specific unit or dollar limit to a particular type of good.
D) when countries limit the export of certain goods on a case-by-case basis.
E) when the government imposes a mandatory tax on goods entering at its borders.

Question 79

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) OMAs
B) quotas
C) tarrifs
D) VERs
E) boycotts

Question 80

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

A) None of these.
B) tariff.
C) voluntary export restraint.
D) special interests' privilege.
E) balance-of-payment.