Deck 11: International Trade in the Global Marketplace

Question 1

The large increase in trade integration comes from Global North countries.

Answer 1

False

Question 2

Intra-firm trade is cross-national trade of international goods and services within the same firm.

Answer 2

True

Question 3

The primary goal of the GATT was to open or liberalize world trade using the principles of reciprocity, nondiscrimination, and transparency.

Answer 3

True

Question 4

There is a direct correlation between economic freedom and prosperity; the more economically free a country, the more prosperous it tends to be and vice versa.

Question 5

Hegemons are initially intolerant of nations called free riders, because they immediately take advantage of free trade before they eventually begin to repay the hegemon.

Question 6

A country whose economic policies encourage specialization in manufacturing over other types of industry is practicing a policy of mercantilism.

Question 7

It is often the case that states who engage in trade with one another are less likely to enter into military conflicts, as the opportunity costs of doing so are too high.

Question 8

The trade theory of liberalism holds that open trade borders and minimal government intervention will maximize global welfare.

Question 9

The production of goods is usually dispersed throughout several different countries.

Question 10

An open international economy is a collective good.

Question 11

In The Wealth of Nations, Adam Smith argues for the idea of a nation specializing in goods in which it has a comparative advantage.

Question 12

The United States ended its steel tariffs in response to a WTO ruling because it feared retaliatory tariffs from the EU.

Question 13

Modern scholars believe trade to be a bilateral interaction between countries.

Question 14

Economic sanctions have the greatest impact on autocratic regimes.

Question 15

Liberal trade theorists advocate the use of quotas, tariffs, and other barriers to protect local industry from import competition and "bring the jobs back home."

Question 16

When Brazil sued the United States for cotton subsidies that violated international trade law standards, the United States began sending annual payments of $150 million to Brazil in exchange for their dropping the case.

Question 17

GATT stands for General Agreement on Tariffs and Trade.

Question 18

Voluntary export restrictions (VERs) are agreements in which exporting countries agree to restrict shipments of a particular product to a country to deter it from imposing an even more onerous import quota.

Question 19

As trade integration grows, so does globalization because states' interdependence increases when exports account for an increasing percentage of their gross domestic product.

Question 20

Liberals emphasize the mutual gains (absolute gains) of global trade whereas mercantilists are more concerned with relative gains.

Question 21

The globalization and outsourcing of labor is most problematic for which sector of laborers?

A) Professionals
B) Highly skilled
C) Low skilled
D) Supervisory

Question 22

How is the degree of trade integration measured?

A) The difference between growth rates in trade and gross domestic product (GDP)
B) The average export volume divided by the average gross domestic product (GDP)
C) Gross domestic product (GDP) minus gross national product (GNP)
D) The difference between total export volume and gross domestic product (GDP)

Question 23

The GATT principle of nondiscrimination that called for all foreign goods to be treated equally with domestic goods, and that countries are not able to enact policies, such as taxes, to give their products an advantage over foreign products is called _____.

A) national treatment
B) most-favored nation status
C) transparency
D) liberalization

Question 24

A good that everyone benefits from and from which no one can be excluded is a(n) _____.

A) exported good
B) free rider
C) collective, or public good
D) commercial good

Question 25

According to the most-favored-nation (MFN) principle,

A) states cannot rely on comparative advantage in their trade policies.
B) goods produced at home are treated the same for import and export agreements.
C) tariff preferences granted to one state must be granted to all others exporting the same product.
D) import quotas can be used to regulate trade, but export quotas cannot be used.

Question 26

How might the growth of FDI produce a level of social homogeneity?

A) Countries adopt similar institutions to facilitate economic activity.
B) FDI conveys technologies and corporate practices across borders.
C) FDI leads countries to adopt one another's norms.
D) All of these are true.

Question 27

When taxes are placed on another exporting state's alleged selling of a product at a price below the cost to produce it, this is called _____.

A) strategic trade policy
B) voluntary export restrictions
C) orderly market arrangements
D) antidumping duties

Question 28

Even if outsourcing decreases the wage levels of some states, liberal economic theory and empirical evidence show that

A) the decreasing wage level is offset by an increase in purchasing power.
B) low wage levels tend to result in high levels of unemployment.
C) inflation tends to occur in globalized states.
D) in the long run, there is no incentive for companies to hire domestic labor.

Question 29

What was the name of the meeting that changed the GATT to WTO?

A) The Brazil Round
B) The Uruguay Round
C) Paris Talks
D) The Vienna Conference

Question 30

Economic sanctions have been used with increasing frequency since World War II. Research has shown sanctions

A) are seldom effective in impairing the military potential of its targets.
B) actually slow down the threat of military actions between two countries.
C) are successful against autocratic leaders, such as Fidel Castro of Cuba.
D) are useless in achieving any kind of policy goal.

Question 31

Mercantilists differ from liberalists in all of the following ways except,

A) mercantilists do not see wealth and economic growth as ends in themselves.
B) liberalists treat all specializations as equal in value; mercantilists do not.
C) mercantilists view the state as having an active and vital role in their economies; liberalists do not.
D) mercantalists would advocate for free trade over protectionism.

Question 32

The economist credited with the idea of comparative advantage is _____.

A) Adam Smith
B) David Ricardo
C) John Maynard Keynes
D) Milton Friedman

Question 33

Which best defines a quota?

A) Taxes assessed on goods coming into a country
B) The selling of a product as a price below the cost in the home market
C) A restriction on the quantity of goods that can be imported to or exported from a country
D) All of these are true.

Question 34

The transnationalization of the productive process in which finished goods rely on inputs from multiple countries outside their final market is known as _____ .

A) intra-firm trade
B) globalization of production
C) trade integration
D) globalization of finance

Question 35

How might the Prisoner's Dilemma from Chapter 9 apply to free trade and protectionism?

A) All states have an incentive to cooperate in free trade policies, and those who do not cooperate are excluded from the global system.
B) Even though it is in everyone's best interest for all states to have free trade, individual states have an incentive to enact protectionist policies.
C) Free trade is the most desirable outcome in the global economy; therefore, all states will comply with the global norms of cooperation.
D) Trade is bad for people who are incarcerated.

Question 36

Which of the following statements is NOT true regarding the globalization of labor?

A) The use of child or slave labor can be used to gain an unfair advantage over companies that pay a fair wage.
B) Mobility of businesses and labor is an integral component of the international economy.
C) Corporations will always benefit by moving to a country where labor is less expensive.
D) Studies show that multinational corporations need for skilled labor can encourage countries to increase spending on education and health care.

Question 37

The GATT principle that called for mutual lowering of trade barriers between trading partners was known as _____ .

A) reciprocity
B) convertibility
C) nondiscrimination
D) outsourcing

Question 38

Which of the following best describes comparative advantage?

A) If a state can produce the highest volume of wool in the world, that state should produce wool regardless of opportunity cost.
B) If a state can produce equal amounts of wine and wool, that state should produce whichever good is more expensive and desirable in the global economy.
C) If a state can produce wine at a lower opportunity cost than wool, that state should produce wine even if it could produce more wool than any other state in the world.
D) States should avoid producing wine, as wool is a more valuable resource to the economy.

Question 39

A hegemon must do all of the following to maintain the international political economy?

A) Remain open and liberal
B) Tolerate free riders
C) Provide a stable international currency
D) A hegemon must do all of the above.

Question 40

The mercantilist school of thought posits that states can maximize their wealth and welfare by

A) playing an active role in the economy and accumulating resources.
B) letting the "invisible hand" control economic decisions.
C) opening trade borders and removing barriers to trade.
D) focusing on industries in which they have a comparative advantage.

Question 41

We're always encouraged to "buy domestic."  It is politically popular to support policies that limit import competition and reduce the number of jobs that are outsourced to other countries.  According to liberal economic trade theory, however, these policies and the accompanying encouragement to buy domestic-made goods are actually harming our overall welfare in the long-run.  Explain why liberal theory knows this to be true.  Do you agree with the conclusions of liberal theory?  If not,  why?

Question 42

World trade fell by 9 percent in 2008 precipitated by which of the following?

A) An increase in consumer demand
B) Global supply chains, which meant that trade reductions were felt in multiple countries
C) Collapse in credit markets that dried up available financing
D) Only b and c are true.

Question 43

Treaties that integrate the economies of members through the reduction of trade barriers are known as _____.

A) World Trade Organizations (WTOs)
B) plurilateral agreements
C) regional trade agreements (RTAs)
D) tariff exchanges

Question 44

An infant industry is one that

A) is not yet strong enough to compete effectively in the global marketplace.
B) is new to the practice of voluntary export restraints.
C) is accused of "dumping" products below the cost of production.
D) recently began selling exports.

Question 45

Globalization of labor is a very controversial issue. Why do so many people fear it? What do the studies indicate? Are MNCs an integral component of this issue? What are the pros and cons of MNCs? Explanation should include issues such as child labor, immigration, slave labor, and unions.

Question 46

Since its inception the World Trade Organization has often been descended upon by activists during its Ministerial Meetings.  Select one such event and discuss why the protestors were there?  What were their complaints? Were they justified? Write an essay in which you decide whether the World Trade Organization is a friend or foe.

Question 47

Describe the theories of liberalism and mercantilism, including the strengths and weaknesses of each as a policy guiding tool.  Which do you believe states should follow? Why?

Question 48

Rules governing international commerce often evolve according to the wishes of the powerful.
(a) How useful is hegemonic stability theory in accounting for the creation and stability of the postwar international economic regime?
(b) Describe the problems that arise when the hegemon is no longer able to effectively carry out its role.

Question 49

Which of the following is NOT an example of a non-tariff barrier?

A) A subsidy
B) Health and safety regulations
C) Antidumping duties
D) Taxes

Question 50

As the WTO has been largely successful in reducing tariffs, it has begun to confront all but which of the following issues?

A) Agriculture policy
B) Intellectual property rights
C) Security issues
D) Environmental protection measures