#1
Which of the following is a key principle of international trade?
Comparative advantage
ExplanationFocus on producing goods where opportunity costs are lower.
#2
What is the main purpose of trade barriers such as tariffs and quotas?
To restrict imports and protect domestic industries
ExplanationTo shield domestic producers from foreign competition.
#3
What is the 'Most Favored Nation' status in international trade?
A trade status that grants equal treatment to all trading partners
ExplanationAssuring no preferential treatment to any trading partner.
#4
What is the Smoot-Hawley Tariff Act, enacted in 1930, known for?
Introducing protectionist measures and exacerbating the Great Depression
ExplanationIncreasing tariffs, leading to retaliatory measures.
#5
What is the primary purpose of the North American Free Trade Agreement (NAFTA)?
To create a free trade zone among Canada, Mexico, and the United States
ExplanationPromote economic integration among member nations.
#6
What is the primary purpose of the World Trade Organization (WTO)?
To promote free and fair trade
ExplanationEnsure countries abide by agreed-upon trade rules and reduce barriers.
#7
In the context of international trade, what does the term 'dumping' refer to?
Exporting goods at a price lower than the domestic market
ExplanationSelling products abroad below production costs to gain market share.
#8
Which international organization focuses on providing financial assistance to countries facing balance of payments problems?
International Monetary Fund (IMF)
ExplanationLender of last resort to countries with payment imbalances.
#9
What is the 'current account' in the balance of payments?
A measure of a country's trade in goods and services
ExplanationRecords transactions in goods, services, and income.
#10
What is the primary function of the General Agreement on Tariffs and Trade (GATT)?
To reduce trade barriers and promote free trade
ExplanationNegotiate and implement international trade agreements.
#11
Which economic indicator is used to measure the overall health of a country's economy?
Gross Domestic Product (GDP)
ExplanationSum of all goods and services produced within a nation.
#12
Which term is used to describe a situation where a country exports more goods and services than it imports?
Trade surplus
ExplanationExcess of exports over imports in a nation's trade.
#13
What is the 'balance of trade'?
The difference between a country's exports and imports of goods
ExplanationMeasure of a nation's trade surplus or deficit.
#14
Which economic theory suggests that a nation should focus on industries where it has a comparative advantage?
Heckscher-Ohlin theory
ExplanationCountries should specialize in goods they can produce efficiently.
#15
Which trade theory suggests that similar nations will trade more with each other due to shared cultural, linguistic, and historical ties?
Linder hypothesis
ExplanationCountries with similar attributes exchange goods more.
#16
In the context of international trade, what is 'currency manipulation'?
The intentional devaluation or appreciation of a currency
ExplanationDeliberate altering of exchange rates for economic gain.
#17
What is the 'J-curve effect' in international trade?
A short-term worsening of the trade balance before improvement
ExplanationInitially, a devaluation leads to a worse trade balance.
#18
In the context of trade negotiations, what does the term 'most-favored-nation clause' refer to?
A commitment to treat a particular trading partner equally with others
ExplanationPromise not to discriminate among trading partners.
#19
In the context of international trade, what is 'deindustrialization'?
The decline in the relative importance of the industrial sector in an economy
ExplanationDecrease in industrial sector's share of GDP and employment.