Question 1

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

Accepted Answer

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 2

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

Accepted Answer

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

Question 3

Among the many proposals brought forward for lowering the trade deficit, most deal with fairness of trade with some of our trading partners instead of reducing imports or adjusting other trade policies.

Accepted Answer

Lowering the trade deficit has been a priority of the U.S. government for a number of years. Among the many proposals brought forward for lowering the trade deficit, most deal with fairness of trade with some of the country's trading partners instead of reducing imports or adjusting other trade policies.

Question 4

Antidumping laws were designed to prevent foreign producers from "predatory pricing."

Accepted Answer

Antidumping laws were designed to prevent foreign producers from "predatory pricing," a practice whereby a foreign producer intentionally sells its products in the United States for less than the cost of production to undermine the competition and take control of the market.

Question 5

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

Accepted Answer

Economists in general recognize as valid only the arguments regarding infant industry, national defense, and industrialization of underdeveloped countries.

Question 6

In general, tariffs decrease inflationary pressures.

Accepted Answer

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 7

Blocked currency is used by refusing to allow an exporter to exchange its national currency for the buyers' currency.

Accepted Answer

Blockage is accomplished by refusing to allow an importer to exchange its national currency for the sellers' currency.

Question 8

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.

Accepted Answer

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 9

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.

Accepted Answer

A VER is called voluntary because the exporting country sets the limits; however, it is generally imposed under the threat of stiffer quotas and tariffs being set by the importing country if a VER is not established.

Question 10

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

Accepted Answer

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. Unfortunately such protection often becomes long term and contributes to industrial inefficiency while detracting from a nation's realistic adjustment to its world situation.

Question 11

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

Accepted Answer

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

Question 12

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

Accepted Answer

The exchange permit may stipulate the rate of exchange, which can be an unfavorable rate depending on the desires of the government.

Question 13

As a result of the increasing global trade, the United States was able to increase its share of the world gross national product (GNP) from less than 25 percent in 1950 to over 39 percent in 2010.

Accepted Answer

Contrary to Servan-Schreiber's prediction about American domination of Europe, economic power and potential became more evenly distributed among countries. Instead the U.S. position in world trade is now shared with other countries. For example, in 1950, the United States represented 39 percent of world gross national product (GNP), but by 2010, it represented less than 25 percent.

Question 14

The United States and other countries require some products to contain a percentage of "local content" to gain admission to their markets. This is an example of how countries use antidumping rules to protect their own industries.

Accepted Answer

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 how countries use standards to protect domestic industry.

Question 15

Importers who want to buy a foreign good must apply for a business permit, that is, permission to exchange an amount of local currency for foreign currency.

Accepted Answer

Importers who want to buy a foreign good must apply for an exchange permit, that is, permission to exchange an amount of local currency for foreign currency.

Question 16

The fact that the credit and debit side in a balance-of-payments record balance means that a nation is in particularly good financial condition.

Accepted Answer

Like a company's statement, the fact that the credit and debit balance does not mean a nation is in particularly good or poor financial condition.

Question 17

Quotas are more flexible than import licenses.

Accepted Answer

The fundamental difference between quotas and import licenses as a means of controlling imports is the greater flexibility of import licenses over quotas.

Question 18

Barriers to trade are encouraged by local industry.

Accepted Answer

While the inspiration for trade barriers may be economic or political, they are encouraged by local industry.

Question 19

The reciprocal impact of U.S. assistance to other countries to develop their markets and improve global trade was that the recipient countries provided funds for American domestic infrastructure development efforts.

Accepted Answer

For every dollar the United States invested in the economic development and rebuilding of other countries after World War II, hundreds of dollars more returned in the form of purchases of U.S. agricultural products, manufactured goods, and services.

Question 20

As part of the worldwide economic growth and rebuilding after World War II, countries once classified as less developed were reclassified as underdeveloped countries.

Accepted Answer

As part of the worldwide economic growth and rebuilding after World War II, countries once classified as less developed were reclassified as newly industrialized countries (NICs).

Quiz 2: The Dynamic Environment of International Trade

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

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

Among the many proposals brought forward for lowering the trade deficit, most deal with fairness of trade with some of our trading partners instead of reducing imports or adjusting other trade policies.

Antidumping laws were designed to prevent foreign producers from "predatory pricing."

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

In general, tariffs decrease inflationary pressures.

Blocked currency is used by refusing to allow an exporter to exchange its national currency for the buyers' currency.

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.

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.

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

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

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

As a result of the increasing global trade, the United States was able to increase its share of the world gross national product (GNP) from less than 25 percent in 1950 to over 39 percent in 2010.

The United States and other countries require some products to contain a percentage of "local content" to gain admission to their markets. This is an example of how countries use antidumping rules to protect their own industries.

Importers who want to buy a foreign good must apply for a business permit, that is, permission to exchange an amount of local currency for foreign currency.

The fact that the credit and debit side in a balance-of-payments record balance means that a nation is in particularly good financial condition.

Quotas are more flexible than import licenses.

Barriers to trade are encouraged by local industry.

The reciprocal impact of U.S. assistance to other countries to develop their markets and improve global trade was that the recipient countries provided funds for American domestic infrastructure development efforts.

As part of the worldwide economic growth and rebuilding after World War II, countries once classified as less developed were reclassified as underdeveloped countries.