International Trade: Master the Fundamentals for Economic Success

Question 1

Which of the following is a potential consequence of quotas?

Accepted Answer

Higher domestic prices

Answer

Increased imports

Answer

Improved trade balance

Answer

Enhanced consumer welfare

Question 2

An appreciation of a currency generally leads to:

Accepted Answer

Higher prices for imported goods

Answer

Increased exports

Answer

Increased imports

Answer

Lower prices for domestic goods

Question 3

In the Heckscher-Ohlin (H-O) model, which factor plays a crucial role in determining the pattern of international trade?

Accepted Answer

Relative factor endowments (e.g., natural resources, skilled labor)

Answer

Government trade policies (e.g., tariffs, subsidies)

Answer

Exchange rate fluctuations

Question 4

The exchange rate between two currencies determines:

Accepted Answer

The relative price of goods and services between the two countries

Answer

The interest rate differential between the two countries

Answer

The inflation rate differential between the two countries

Answer

The GDP growth rate differential between the two countries

Question 5

Which of the following is a preferential trade agreement?

Accepted Answer

NAFTA

Answer

WTO

Answer

GATT

Question 6

A tariff is a tax imposed on the:

Accepted Answer

Value of imported goods

Answer

Volume of imported goods

Answer

Value of exported goods

Answer

Production of domestic goods

Question 7

A quota sets a limit on the:

Accepted Answer

Quantity of a good or service that can be imported

Answer

Quantity of a good or service that can be exported

Answer

Quantity of a good or service that can be produced domestically

Answer

Price of a good or service that can be traded

Question 8

The J-curve effect suggests that a currency depreciation may initially lead to a:

Accepted Answer

Trade deficit

Answer

Trade surplus

Answer

Balanced trade

Answer

Decline in net exports

Question 9

The concept of trade creation refers to the:

Accepted Answer

Expansion of trade within a trading bloc due to the removal of trade barriers

Answer

Contraction of trade within a trading bloc due to the imposition of trade barriers

Answer

Increase in trade volume between members and non-members of a trading bloc

Answer

Decrease in overall trade volume

Question 10

Which of the following institutions is primarily responsible for promoting international trade and economic cooperation?

Accepted Answer

World Trade Organization

Answer

European Central Bank

Answer

International Monetary Fund

Answer

United Nations Security Council

Question 11

A tariff is a tax levied on:

Accepted Answer

Imports

Answer

Exports

Answer

Domestic production

Answer

Foreign investment

Question 12

An import quota restricts the:

Accepted Answer

Quantity of goods that can be imported

Answer

Price of imported goods

Answer

Quality of imported goods

Answer

Origin of imported goods

Question 13

Which of the following is NOT a goal of international trade policy?

Accepted Answer

Ensuring environmental sustainability

Answer

Promoting economic growth

Answer

Protecting domestic industries

Answer

Raising revenue

Question 14

Which determinant is NOT considered in the calculation of comparative advantage?

Accepted Answer

Government subsidies

Answer

Labor productivity

Answer

Capital intensity

Answer

Natural resource endowment

Question 15

What is the expected impact of an appreciation of the exchange rate on a country's trade flows?

Accepted Answer

Decreased exports and increased imports

Answer

Increased exports and decreased imports

Answer

No impact on trade flows

Answer

Increased both exports and imports

Question 16

According to the Heckscher-Ohlin model, countries typically export goods that:

Accepted Answer

Utilize their abundant factors of production

Answer

Have a high demand for

Answer

Are technologically advanced in producing

Answer

Have a comparative advantage in

Question 17

Technical regulations that set quality or safety standards for imported goods are an example of a:

Accepted Answer

Non-tariff barrier to trade

Answer

Tariff

Answer

Quota

Answer

Embargo

Question 18

The concept of 'infant industry' protection advocates for:

Accepted Answer

Shielding domestic industries from foreign competition until they become competitive

Answer

Unrestricted free trade regardless of the impact on domestic industries

Answer

Protecting only high-technology industries

Answer

Providing no protection to domestic industries

Question 19

What is a potential negative consequence of international trade?

Accepted Answer

Job losses in specific industries

Answer

Increased consumer choice

Answer

Economic growth

Question 20

According to David Ricardo's theory of comparative advantage, international trade patterns are determined by:

Accepted Answer

Relative advantage in production

Answer

Absolute advantage in production

Answer

Similar factor endowments between countries

Answer

Government policies aimed at promoting exports

Question 21

Which of the following trade policy instruments limits the quantity of imported goods?

Accepted Answer

Quota

Answer

Tariff

Answer

Embargo

Answer

Subsidy

Question 22

The graphical representation of the relationship between the exchange rate and the quantity of a country's exports is known as the:

Accepted Answer

J-curve

Answer

Demand curve

Answer

Supply curve

Answer

Marshall-Lerner condition

Question 23

Which of the following is a potential benefit of free trade?

Accepted Answer

Increased consumer choice and lower prices

Answer

Higher prices for domestic producers

Answer

Reduced government revenue

Answer

Job losses in certain industries

Question 24

When a country's exchange rate is overvalued, leading to a deficit in the current account, the situation is referred to as:

Accepted Answer

Dutch disease

Answer

Currency crisis

Answer

Trade surplus

Answer

Structural imbalance

Question 25

The primary purpose of the World Trade Organization (WTO) is to:

Accepted Answer

Promote free trade, reduce trade barriers, and facilitate the settlement of trade disputes

Answer

Regulate international financial markets

Answer

Provide humanitarian aid to developing countries

Answer

Enforce environmental protection measures

Question 26

Which of the following is a potential argument against protectionism?

Accepted Answer

Higher consumer prices and reduced consumer choice

Answer

Increased efficiency of domestic industries

Answer

Improved international relations

Answer

Increased government revenue

Question 27

International trade has several advantages. Which of the following is NOT a benefit of international trade?

Accepted Answer

Depletion of natural resources

Answer

Reduced consumer prices

Answer

Increased economic growth

Answer

Improved job opportunities

Question 28

According to the theory of comparative advantage, countries should:

Accepted Answer

Produce only goods in which they have a comparative advantage

Answer

Produce only goods in which they have an absolute advantage

Answer

Protect their domestic industries from foreign competition

Answer

Impose quotas on imports of goods they produce

Question 29

What is the primary purpose of an exchange rate?

Accepted Answer

To determine the value of one currency relative to another

Answer

To regulate the flow of goods and services between countries

Answer

To protect domestic industries from foreign competition

Answer

To provide a stable monetary system

Question 30

According to the theory of comparative advantage, what is a key determinant of the pattern of international trade?

Accepted Answer

Differences in resource availability

Answer

Differences in exchange rates

Answer

Differences in government policies

Answer

Differences in consumer preferences

Question 31

A quota is a:

Accepted Answer

Restriction on the quantity of goods that can be traded

Answer

Tax levied on imported goods

Answer

Government subsidy for exporters

Answer

Regulation on the quality of exported goods

Question 32

A floating exchange rate is one that:

Accepted Answer

Is determined by market forces

Answer

Is set and maintained by government intervention

Answer

Is fixed against a single currency

Answer

Is pegged to a basket of currencies

Question 33

The elasticity of demand for imports measures the:

Accepted Answer

Responsiveness of import quantity to changes in import prices

Answer

Responsiveness of import quantity to changes in income

Answer

Responsiveness of import prices to changes in demand

Answer

Responsiveness of domestic demand to changes in import prices