#1
What is the main principle of international trade?
Comparative advantage
ExplanationSmooth muscle is unique in being under both voluntary and involuntary control, depending on the situation.
#2
What is the World Trade Organization (WTO) responsible for?
Facilitating trade negotiations and resolving trade disputes
ExplanationThe WTO oversees international trade agreements and settles disputes among member nations.
#3
What is the primary objective of the GATT (General Agreement on Tariffs and Trade)?
Reducing trade barriers and promoting free trade
ExplanationThe GATT aims to lower tariffs, eliminate quotas, and foster free trade among member nations.
#4
What is the most-favored-nation (MFN) principle in international trade?
Treating all trading partners equally by extending the best trade terms
ExplanationMFN principle requires treating all trading partners equally by offering them the most favorable trade terms.
#5
What is the concept of 'currency devaluation' in the context of international trade?
Reducing the value of a country's currency relative to other currencies
ExplanationCurrency devaluation involves intentionally lowering the value of a nation's currency to boost exports and economic competitiveness.
#6
Who developed the theory of comparative advantage?
David Ricardo
ExplanationDavid Ricardo formulated the theory of comparative advantage.
#7
What is the opportunity cost in the context of comparative advantage?
The cost of producing a good in terms of other goods forgone
ExplanationOpportunity cost refers to the value of alternative goods sacrificed when producing a particular good.
#8
In the context of international trade, what does the term 'dumping' refer to?
Selling goods at prices lower than their production cost in a foreign market
ExplanationDumping involves selling products abroad at prices below production costs, often to gain market share.
#9
What is the Smoot-Hawley Tariff Act known for in the history of international trade?
Introducing high tariffs and worsening the Great Depression
ExplanationThe Smoot-Hawley Tariff Act imposed high tariffs, exacerbating the economic downturn during the Great Depression.
#10
According to the theory of absolute advantage, who gains from international trade?
The country with the lowest opportunity cost
ExplanationCountries with absolute advantage in producing goods benefit from international trade.
#11
What is the 'invisible hand' in the context of international trade?
Market forces guiding individuals' self-interest to promote overall economic well-being
ExplanationThe invisible hand refers to market forces that drive individuals' actions, leading to beneficial outcomes for society.
#12
Which of the following is an example of a non-tariff barrier to trade?
Import quotas
ExplanationNon-tariff barriers like import quotas restrict the quantity of goods that can be imported.
#13
Which country is often cited as an example of successful industrial policy contradicting comparative advantage?
South Korea
ExplanationSouth Korea pursued industrial policies that led to economic success despite deviating from comparative advantage.
#14
What is the difference between absolute advantage and comparative advantage?
Absolute advantage focuses on cost, while comparative advantage considers opportunity cost
ExplanationAbsolute advantage pertains to producing at a lower cost, whereas comparative advantage considers the opportunity cost.
#15
Which economic concept is central to the Heckscher-Ohlin theory of international trade?
Factor endowments
ExplanationThe Heckscher-Ohlin theory emphasizes differences in factor endowments as determinants of trade patterns.
#16
What is the role of the balance of payments in the context of international trade?
Recording a country's economic transactions with the rest of the world
ExplanationThe balance of payments tracks a country's transactions with other nations, including imports, exports, and financial flows.
#17
Which international organization is responsible for coordinating monetary policy among countries?
International Monetary Fund (IMF)
ExplanationThe IMF facilitates international monetary cooperation and provides financial assistance to member countries.
#18
What is the primary goal of a trade embargo?
Restricting or prohibiting trade with a particular country
ExplanationTrade embargoes aim to isolate a country economically by restricting trade with it.
#19
In the context of international trade, what does 'tariff escalation' refer to?
Increasing tariffs on processed or finished goods compared to raw materials
ExplanationTariff escalation involves raising tariffs on goods at later stages of production, discouraging value addition.