Political pressures by unions that are threatened from more efficient foreign producers have more political clout than consumers who will pay the…
23. Political pressures by unions that are threatened from more efficient foreign producers have more political clout than consumers who will pay the costs.
a. True.
b. False.
24. Retaliation means if one country takes specific trade action against another, then the one that is hurt may retaliate and impose new trade barriers.
a. True.
b. False.
25. A free trade is a trading arrangement in which a nation grants partial trade preferences to one or more trading partners.
a. True.
b. False.
26. A nation’s share of global trade is calculated as the sum of exports and imports in a given time period divided by total global trade.
a. True.
b. False.
27. Trade agreements normally result in both trade creation and trade diversion.
a. True.
b. False.
28. The WTO was established by the Uruguay Round of GATT in 1993.
a. True.
b. False.
29. Trade diversion is the movement of goods or components of goods from a country outside a trading arrangement to one within such an arrangement so that the seller can benefit from trading preferences within the arrangement.
a. True.
b. False.
30. David Ricardo theory of comparative advantage advocates trade as a zero sum game.
a. True.
b. False.
31. Heckscher-Ohlin theory states that countries will export goods that use their abundant factor endowment intensively.
a. True.
b. False.
32. A country’s Balance of Payment account keeps track of the payments to and receipts from other countries for a given time.
a. True.
b. False.
33. If capital inflow into a country exceeds its capital outflow, then there is financial account deficit.
a. True.
b. False.
****If the world consists of only three countries 1, 2 and 3. The trade pattern between this world is as follows:
Country of Origin Exports ($million) Exported to
Country 1 45 Country 2
Country 1 55 Country 3
Country 2 35 Country 1
Country 2 25 Country 3
Country 3 45 Country 1
Country 3 15 Country 2
34. According to the information in the above table, Country 1 has a _________________and country 2 has a ______________________.
a. Trade surplus; trade deficit.
b. Trade surplus; zero net trade balance.
c. Trade surplus; trade surplus.
d. Trade deficit, Zero net trade balance.
35. Country’s 1 share of global trade is.
a. 40.9%
b. 22.7%
c. 18.2%
d. 45.4%
36. If country D has an absolute advantage over country E in the production of all goods and services, then country D may gain from international trade with country E, but country E can not gain.
a. True.
b. False.
***The following table shows the production of food and equipment by two countries, country A and country B. Answer Questions 37-40 accordingly
Country A output Country B output
Food 500 tons 600 tons
Equipment 200 units 120 units
37. From the above information, which country has an absolute advantage in the production of equipment.
38. Which country has an absolute advantage in the production of food.
