Question 1

The terms of trade for most developing nations over the last thirty years have generally been

Accepted Answer

D

Question 2

The primary exports of developing nations tend to face demand that is _______ and supply that is _______.

Accepted Answer

B

Question 3

What is the advantage of a policy of import substitution?

Accepted Answer

All the options listed are advantages of a policy of import substitution. A) highlights the reduced risk due to existing market demand, B) points out the relative ease of protecting domestic markets compared to penetrating foreign ones, and C) notes the potential for attracting foreign firms to manufacture locally to bypass tariffs.

Question 4

When a nation's commodity terms of trade deteriorate and its single factor terms of trade improve,the nation's welfare:

Accepted Answer

When a nation's commodity terms of trade deteriorate, it means that the prices of the commodities it exports have fallen in relation to the prices of the commodities it imports. This leads to a decrease in the nation's income from exports and an increase in the cost of imports, which can make the nation worse off. However, if its single factor terms of trade improve, it means that the price of the factor it exports (e.g. labor or capital) has increased relative to the price of the factor it imports. This can lead to an increase in the nation's income from exports and a decrease in the cost of imports, which can make the nation better off. Overall, if the improvement in single factor terms of trade outweighs the deterioration in commodity terms of trade, the nation's welfare will rise.

Question 5

Supporting the price of a commodity by buying it when its price is low is:

Accepted Answer

Supporting the price of a commodity by buying it when its price is low is known as creating a buffer stock. A buffer stock is a reserve stock created by a government to regulate the market price of a particular commodity. When the price of the commodity falls below a certain level, the government buys the excess supply and stores it in a buffer stock. This helps in stabilizing the price of the commodity in the market. Therefore, option A is the correct answer. Purchase contracts are agreements between the buyer and the seller to purchase goods at a certain price and time, while export controls are imposed by governments to restrict the export of certain products. Marketing boards are organizations that regulate the marketing and pricing of various agricultural products. However, none of these options accurately reflects the concept described in the question.

Question 6

Trade cannot be an engine of growth for today's developing nations because:

Accepted Answer

Developing nations often rely on exporting primary products or low-value added goods, which tend to have a low income elasticity of demand. This means that as incomes rise in other countries, demand for their exports may not increase proportionally. Therefore, trade may not necessarily result in significant economic growth for these nations.

Question 7

Which of the following is false with respect to traditional trade theory?

Accepted Answer

Traditional trade theory is largely considered static, focusing on the conditions and outcomes at a specific point in time rather than incorporating changes over time, which would be characteristic of a dynamic theory.

Question 8

According to Nurkse,international trade was an engine of growth for:

Accepted Answer

Nurkse argued that international trade was an engine of growth for regions of recent settlements during the 19th century, as it enabled these areas to export primary products and import manufactured goods, thus facilitating their economic development. For developed nations during the 20th century, however, Nurkse believed that international trade would not necessarily lead to economic growth, as these countries already had established industrial sectors and could face competition from developing countries that could produce the same goods at a lower cost.

Question 9

During the 1950's,1960's and 1970's the predominant growth strategy for developing nations was one of

Accepted Answer

During the 1950's, 1960's and 1970's, many developing nations adopted the strategy of import substitution. This strategy focused on developing domestic industries to replace foreign imports and create self-sufficiency. Countries would impose high tariffs on imports and provide incentives for local production. This strategy was implemented to reduce dependency on foreign countries, and promote industrialization and economic growth.

Question 10

Which of the following is not part of the demand for a NIEO?

Accepted Answer

The demand for a New International Economic Order (NIEO) includes the establishment of international commodity agreements, removal of agricultural trade barriers in developed nations, and increasing the yearly flow of foreign aid to developing nations. However, preferential access for the manufactured exports of developed nations is not part of the demand for a NIEO. Instead, a NIEO would aim to promote the development of industries in developing nations to reduce their dependence on manufactured imports from developed nations.

Question 11

The following region of the world has been the least successful in creating economic development and growth over the last thirty years

Accepted Answer

Africa has faced tremendous challenges in creating economic development and growth over the last thirty years due to factors such as political instability, lack of infrastructure, low levels of education, and poverty. Despite efforts to attract foreign investment and promote economic reforms, many African countries continue to struggle with high levels of debt, corruption, and conflict.

Question 12

Those nations that liberalized trade during the past decade

Accepted Answer

Multiple economic studies have shown that nations that liberalized trade during the past decade grew faster than those that did not. This is because liberalizing trade leads to increased competition, lower prices, and increased access to foreign markets, all of which can help stimulate economic growth.

Question 13

MacBean found that the export instability faced by developing nations was:

Accepted Answer

The answer of MacBean found that the export instability faced...

Question 14

According to traditional trade theory,a developing nation should export the commodity:

Accepted Answer

According to traditional trade theory, a developing nation should export the commodity of its comparative advantage. This means that the nation should focus on producing and exporting the goods that it can produce more efficiently and at a lower opportunity cost compared to other nations. This will allow the country to specialize in producing certain goods and services, leading to increased efficiency, productivity, and competitiveness in the international marketplace. By exporting goods that are its comparative advantage, the developing nation can generate foreign exchange earnings and promote economic growth and development.

Question 15

The nation's commodity terms of trade times the productivity index in its export sector gives the nation's

Accepted Answer

The answer of The nation's commodity terms of trade times...

Question 16

The following is not an example of an international commodity agreement.

Accepted Answer

Marketing boards refer to governmental or quasi-governmental organizations that regulate the production, marketing, and distribution of a particular commodity within a particular country or region. They do not involve international agreements or cooperation between countries. The other options (buffer stocks, export controls, and purchase contracts) are all examples of international commodity agreements to manage the supply and demand of commodities on a global scale.

Question 17

If the prices of a nation's exports and imports both rise,the nation's commodity terms of trade may:

Accepted Answer

The answer of If the prices of a nation's exports...

Question 18

Developing nations often experience wildly fluctuating export prices for their primary products because of:

Accepted Answer

Developing nations often face wildly fluctuating export prices primarily due to inelastic and unstable demand and supply. This means that the demand and supply for their primary products do not significantly change with price changes, but external factors can cause their supply to be unpredictable, leading to price volatility.

Question 19

The policy of import substitution was most vigorously followed by:

Accepted Answer

The policy of import substitution was most vigorously followed by large developing nations during the 1960's. This policy involved countries attempting to reduce their dependence on imported goods by developing industries that could produce those goods domestically. This was seen as a way to promote economic growth and reduce vulnerability to external shocks. This policy was most commonly pursued by countries in Latin America, Asia, and Africa during the 1960's.

Question 20

Which are is not an advantage of export-oriented industrialization?

Accepted Answer

Domestic industries becoming accustomed to protection and having an incentive to become more efficient is not an advantage of export-oriented industrialization. This can lead to complacency and a lack of competitiveness in the global market.

Quiz 11: International Trade and Economic Development