Question 1

Protectionism:

Accepted Answer

Protectionism involves the use of trade barriers like tariffs, embargoes, and quotas to protect domestic industries from foreign competition. These barriers are artificial means to restrict imports to boost local businesses.

Question 2

In 2006, the nation of Zimbabwe reduced the value of its currency by 60 percent to bring its value more in line with the relative value of most other world currencies.This reduction of value is called:

Accepted Answer

Devaluation is the correct term for the deliberate reduction in the value of a country's currency relative to other currencies.

Question 3

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 the principle of:

Accepted Answer

This scenario describes the principle of comparative advantage, which suggests that countries benefit from specializing in the production of goods for which they have a lower opportunity cost and trading for goods that other countries produce at a lower opportunity cost.

Question 4

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 a(n):

Accepted Answer

Venezuela can grow and sell cut flowers for floral bouquets more easily and more cheaply than most other countries can produce the same flowers. This means that Venezuela has a comparative advantage in producing cut flowers.

Question 5

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 all of the following EXCEPT:

Accepted Answer

Corporate tax rates do not directly affect the balance of payments. The balance of payments is concerned with transactions between a country and the rest of the world, including trade in goods and services, cross-border investment flows, and financial transfers, but not domestic tax policies.

Question 6

In 2018, if the country of Serbia had imports of $10.58 billion and had an unfavorable balance of trade.This means that Serbia had:

Accepted Answer

An unfavorable balance of trade means that a country's imports exceed its exports. Therefore, if Serbia had imports of $10.58 billion and an unfavorable balance of trade, it means Serbia had less than $10.58 billion in exports.

Question 7

The _____ is the total amount of money that flows in and out of a country.

Accepted Answer

The balance of payments is the correct term for the total amount of money that flows in and out of a country, as it records all financial transactions made between consumers, businesses, and the government in one country with others.

Question 8

Free trade:

Accepted Answer

Free trade permits people to buy and sell goods and services across borders with minimal or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

Question 9

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

Accepted Answer

Free trade is the policy that allows people and businesses in a country to buy and sell goods and services with minimal or no restrictions, promoting international trade.

Question 10

In 2018, Country A exported $1.237 billion and imported products valued at $5.552 billion. The difference between the dollar value of its exports and imports represents a:

Accepted Answer

The difference between exports and imports, when imports exceed exports, represents a trade deficit. In this case, Country A imported more than it exported, leading to a trade deficit.

Question 11

The _____ is the value of one currency in terms of another.

Accepted Answer

The exchange rate is the value of one currency in terms of another, determining how much of one currency can be exchanged for another.

Question 12

All of the following terms are associated with international trade EXCEPT:

Accepted Answer

The discount rate is primarily associated with monetary policy rather than international trade. It is the interest rate charged by central banks on loans to commercial banks, influencing domestic economic conditions rather than trade between nations. Absolute advantage, balance of payments, balance of trade, and comparative advantage are all directly related to international trade. Absolute and comparative advantage refer to the efficiency of producing goods between countries, while balance of payments and balance of trade involve the calculation of transactions between countries.

Question 13

The difference between a country's total payments to other countries and its total receipts from other countries is called its:

Accepted Answer

The balance of payments is a comprehensive record of a country's financial transactions with the rest of the world, including its imports and exports of goods and services, financial transfers, and investments. It encompasses all transactions between a country's residents and non-residents.

Question 14

When Ted Giovanni was preparing for his trip to Brazil, he found that he could go to his bank and trade his 10 U.S.dollars for 37.11 Brazilian real (the nation's currency).In this instance, the _____ was one U.S.dollar to 3.711 Brazilian real.

Accepted Answer

The exchange rate specifies how much one currency is worth in terms of another, in this case, how many Brazilian real one U.S. dollar can buy.

Question 15

In 2018, the country of Brazil, had imports of $78.02 billion and had a favorable balance of trade.This means that Brazil had:

Accepted Answer

A favorable balance of trade means that a country's exports exceed its imports. Therefore, if Brazil had imports of $78.02 billion and a favorable balance of trade, it means Brazil had more than $78.02 billion in exports.

Question 16

Canada is currently the second largest producer of nickel in the world.The reopening of the world famous Voisey's Bay mine, which has total resources estimated at 124 million tons of nickel-bearing ore, should give Canada a clear:

Accepted Answer

A comparative advantage refers to a country's ability to produce a particular good at a lower opportunity cost than others. The reopening of Voisey's Bay mine enhances Canada's ability to produce nickel more efficiently compared to other countries, thus giving it a comparative advantage.

Question 17

_____ is the reduction of a currency's value relative to another currency.

Accepted Answer

Devaluation is the deliberate downward adjustment of a country's currency value relative to another currency, gold, or a standard.

Question 18

Since the balance of payments is the summary of a country's financial transactions with another country, a discussion of a nation's balance of payments will need to include a discussion of:

Accepted Answer

The balance of payments includes all financial transactions a country has with the rest of the world, which encompasses imports and exports (trade balance), long-term overseas investments, government loans, and gifts and foreign aid.

Question 19

The karakul is a breed of Central Asian sheep that produces curly, glossy wool.This wool is popular in some countries for the manufacturing of warm hats and coats.Since the breed can only be grown in Central Asia, this region can be said to have a(n):

Accepted Answer

The karakul sheep's unique ability to be grown only in Central Asia, leading to the exclusive production of its curly, glossy wool, grants the region an absolute advantage in its manufacturing. This is because no other region can produce this specific type of wool, making Central Asia the sole source for it.

Question 20

Currency markets operate under a system called _____.This means that prices of currencies vary based upon demand and supply of that currency.

Accepted Answer

The correct term is "floating exchange rate," which refers to a currency system where the price of a currency is determined by the foreign exchange market based on supply and demand relative to other currencies.

Quiz 3: Competing in the Global Marketplace