Question 1

A restriction on the amount of a particular foreign currency that can be purchased or sold is a

Accepted Answer

A restriction on the amount of a particular foreign currency that can be purchased or sold is referred to as foreign-exchange control. This control may be imposed by a government to manage its currency exchange rates or to conserve foreign exchange reserves. The other options are not accurate descriptions of this type of control.

Question 2

A currency devaluation increases the cost of foreign goods and ____ the cost of domestic goods to foreign firms.

Accepted Answer

A currency devaluation means that the value of the currency has decreased relative to other currencies. This makes foreign goods more expensive for domestic consumers because they need to exchange more of their own currency to obtain the same amount of foreign currency to purchase the goods. However, it also makes domestic goods cheaper for foreign consumers because they need to exchange less of their currency to obtain the same amount of domestic currency to purchase the goods, which decreases the cost of domestic goods to foreign firms.

Question 3

Arguments for the government imposing restrictions on foreign trade include

Accepted Answer

The government may impose restrictions on foreign trade in order to protect the health of its citizens. This could include imposing import bans on goods that fail to meet safety and health standards or placing restrictions on products that are deemed to pose a risk to public health. Examples of this would include bans on certain types of food additives, restrictions on imports of pharmaceuticals that have not been approved by regulatory authorities, or the imposition of tariffs on goods that are responsible for environmental pollution.

Question 4

When a country's currency is devalued,this ____ the cost of foreign goods and ____ the cost of domestic goods to foreign firms.

Accepted Answer

When a country's currency is devalued, it becomes cheaper in terms of foreign currencies. This makes foreign goods more expensive for residents of the devaluing country (since they have to spend more of their now less valuable currency to buy the same amount of foreign currency), and domestic goods become cheaper for foreign firms (since they can now buy more with their stronger currency).

Question 5

When an Indian importing firm wants to import U.S.-made products,it must first secure permission and dollars from the Reserve Bank of India.This type of restriction is known as a

Accepted Answer

The described restriction is a foreign-exchange control, which involves a government regulating the amount and availability of its currency in relation to foreign currency exchanges. This is commonly done to manage a country's balance of trade and currency value.

Question 6

Pablo complained that it took some time to locate a distributor of an imported light bulb that he had to replace.He was further annoyed that he had to pay an artificially high price.When asked for his opinion,Pablo would probably argue

Accepted Answer

Pablo's experience suggests that trade restrictions may have limited the availability of the light bulb he needed, leading to higher prices. Therefore, he would likely argue against such restrictions in favor of free trade.

Question 7

All of the following are reasons against having trade restrictions except

Accepted Answer

The protection of the health of citizens is a valid reason for having trade restrictions, as some products may pose a health risk and should not be traded. The other options listed are reasons against having trade restrictions.

Question 8

Arguments for imposing trade restrictions include

Accepted Answer

Trade restrictions can be used to equalize a nation's balance of payments by limiting imports and encouraging domestic production, which can help reduce trade deficits.

Question 9

Franky believes that there should be no trade restrictions for any reason.What effect would Franky say that trade restrictions have on prices?

Accepted Answer

Franky believes that trade restrictions reduce competition, which leads to an increase in prices. Without the competition from other countries, domestic producers can charge higher prices, which hurts consumers. Therefore, Franky would advocate for the removal of trade restrictions to make markets more competitive and keep prices low.

Question 10

Despite trade restrictions,international business is

Accepted Answer

International business is actually growing despite trade restrictions. This can be seen in the increasing number of multinational corporations and global trade volume. While trade restrictions may hinder certain aspects of international business, overall it is still expanding.

Question 11

The United States wants to limit the amount of dollars that another country can obtain.The best way to accomplish this is to

Accepted Answer

The best way to limit the amount of dollars another country can obtain is to establish foreign-exchange controls. This can be done by imposing restrictions on the amount of foreign currency a country can purchase or by setting limits on the amount of dollars that can be exchanged for other currencies. Foreign-exchange controls make it more difficult for other countries to obtain dollars, which can help to reduce the trade deficit and protect the value of the dollar.

Question 12

Who are the top two export partners of the United States?

Accepted Answer

According to the latest data from the U.S. Census Bureau, in 2020, the top two export partners of the United States were Mexico and Canada, accounting for 14.8% and 12.6% of U.S. exports, respectively. Therefore, option C is the correct answer.

Question 13

A newly formed country in the Caribbean has no high tariffs,yet other countries find it difficult to trade with the new country because of its requirements for labeling,product testing,and certifications.These restrictions can best be classified as

Accepted Answer

The restrictions on labeling, product testing, and certifications seem to be bureaucratic in nature, which can be classified as bureaucratic red tape. These requirements add extra steps and costs to the trading process, making it difficult for other countries to trade with the new country.

Question 14

Because it has not been around long enough to establish itself,the Russian automobile industry could be classified as a(n)

Accepted Answer

The term "infant industry" is used to describe a newly established industry that has not had enough time to fully develop and establish itself. The Russian automobile industry fits this description, as it has not been around long enough to become a well-established industry.

Question 15

In addition to political considerations,all of the following are reasons for trade restrictions except

Accepted Answer

All of the answer choices are reasons for trade restrictions, so there is no singular answer that is correct.

Question 16

Suppose a set of English bone china costing £1,000 costs $3,000 in the United States.After devaluation,the set of china costs $1,000.This change

Accepted Answer

After devaluation, the set of English bone china now costs $1,000 in the United States, which is significantly less expensive than before. This makes the china more attractive to foreign purchasers, as they can now purchase it for a lower price in their own currency.

Question 17

A reduction of the value of a nation's currency relative to the currencies of other countries is called

Accepted Answer

A reduction of the value of a nation's currency relative to the currencies of other countries is called a currency devaluation.

Question 18

During a stormy meeting of computer software firms,several company presidents said that without tariff cushions,many of them would go broke.They represent a new industry that needs protection until their firms grow to a size that will allow them to be competitive.Their comments are based on the

Accepted Answer

The comments made by the company presidents suggest that they believe in the infant-industry argument, which states that new industries need protection in the form of tariffs until they become large and competitive enough to operate without government help.

Question 19

The United States does not sell fighter jets,such as F-16s,to Libya.The rationale for this restriction is most likely to

Accepted Answer

The restriction on selling fighter jets to Libya is most likely to protect national security. Libya has a history of political instability and has been subject to UN sanctions in the past. Selling fighter jets to a country with such instability and potential ties to terrorism could pose a threat to US national security.

Question 20

If the Korean government charged tariffs on Japanese automobiles and in turn the Japanese government put tariffs on Korean automobiles,Japan's major rationale for imposing these tariffs would be to

Accepted Answer

The Japanese government's rationale for imposing tariffs on Korean automobiles would be to retaliate for Korea's tariffs on Japanese automobiles. This is a common response in trade wars, where one country imposes tariffs on another's goods and the other country responds with tariffs of their own. Protection of domestic jobs or national security could also be potential rationales for imposing tariffs, but in this specific scenario, it is likely a retaliation tactic. Protection of an infant industry or lowering prices for consumers would not be viable justifications in this case.

Quiz 3: Global Business