Question 1

The purpose of the General Agreement on Tariffs and Trade is to reduce trade barriers.

Accepted Answer

The main purpose of the General Agreement on Tariffs and Trade (GATT) is to reduce trade barriers among member nations and promote international trade. This includes the reduction of tariffs (taxes on imports and exports), quotas (limits on the amount of goods that can be imported or exported), and other barriers such as regulations and standards that can hinder the flow of goods and services across borders.

Question 2

Local content laws guarantee that products sold in a country are at least partly made there.

Accepted Answer

Local content laws require that a certain percentage of a product's materials or production must come from within the country where it is sold. This is done to support domestic industries and create jobs.

Question 3

When a country's imports exceed its exports,that country experiences a trade surplus.

Accepted Answer

This statement is incorrect. When a country's imports exceed its exports, that country experiences a trade deficit or negative trade balance, not a trade surplus. A trade surplus occurs when a country's exports exceed its imports.

Question 4

A tariff is a tax on imported products.

Accepted Answer

A tariff is a tax imposed by a government on goods and services imported from other countries.

Question 5

A trade deficit occurs when a nation imports more than it exports.

Accepted Answer

A trade deficit occurs when the value of a country's imports exceeds the value of its exports. This means that the country is buying more goods and services from other countries than it is selling. The opposite of a trade deficit is a trade surplus, which occurs when a country's exports exceed its imports.

Question 6

Low-income countries are often called developing countries.

Accepted Answer

Low-income countries are often referred to as developing countries because they are in the process of developing their economies and infrastructure to improve the living standards of their citizens.

Question 7

An import is a product made or grown abroad but sold domestically.

Accepted Answer

An import is a product or a service produced in one country (the exporting country) that is purchased by buyers in another country (the importing country). It is generally sold domestically in the importing country.

Question 8

The North American Free Trade Agreement regulates trade between the United States,Canada,and Japan.

Accepted Answer

The North American Free Trade Agreement (NAFTA) only regulates trade between the United States, Canada, and Mexico. Japan is not included in NAFTA.

Question 9

NAFTA created fewer jobs than proponents had predicted.

Accepted Answer

Studies have shown that NAFTA created fewer jobs than proponents had predicted. While some industries saw job growth, others saw a decline in employment due to outsourcing and competition from cheaper imports.

Question 10

Dumping refers to the practice of selling a product abroad for less than the cost of production.

Accepted Answer

Dumping involves selling a product at a price that is lower than the cost of production in the exporting country. This can be done to gain market share or to undercut competition in the importing country. It is considered an unfair trade practice and is subject to anti-dumping laws and regulations.

Question 11

The World Trade Organization (WTO)was created to encourage international trade.

Accepted Answer

The WTO was created to promote free trade and reduce tariffs and other barriers to international trade.

Question 12

Globalization refers to the process by which countries around the world are becoming more self-sufficient.

Accepted Answer

This statement is false. Globalization refers to the process by which economies, societies, and cultures become more interconnected through international trade, investment, and information exchange, increasing interdependence and reducing self-sufficiency.

Question 13

In a licensing arrangement,firms choose foreign organizations to manufacture their products in another country in return for a fee plus royalties.

Accepted Answer

This is a basic definition of a licensing arrangement, where a firm allows a foreign organization to produce its product in another country in exchange for a fee and ongoing royalties.

Question 14

A subsidy is a tax designed to help companies who import products.

Accepted Answer

A subsidy is actually financial assistance given by the government to certain industries or companies to encourage production or to help them compete with foreign imports. It is not a tax.

Question 15

Strategic alliances are also called joint ventures.

Accepted Answer

Strategic alliances can also be referred to as joint ventures, as they involve two or more parties working together towards a common goal or objective. However, it is important to note that not all strategic alliances are joint ventures, as some may involve less formal agreements or partnerships.

Question 16

Free market economies often establish some system of quotas and/or tariffs.

Accepted Answer

Quotas and tariffs are often used by governments in free market economies to regulate and protect certain industries, and can be seen as a form of intervention in an otherwise free market system.

Question 17

The General Agreements on Tariffs and Trade opened foreign markets to most financial services.

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) primarily focused on reducing tariffs and other trade barriers for goods, not specifically on financial services. Financial services were more directly addressed in the General Agreement on Trade in Services (GATS) under the World Trade Organization (WTO).

Question 18

Products made domestically but shipped and sold abroad are known as imports.

Accepted Answer

Products made domestically and shipped and sold abroad are known as exports. Imports are products made elsewhere and brought into the domestic market.

Question 19

An exchange rate is the rate at which the currency of one nation can be exchanged for the currency of another nation.

Accepted Answer

This is the correct definition of an exchange rate. It represents the value of one currency in terms of another currency. For example, the exchange rate between the US dollar (USD) and the euro (EUR) represents how many euros can be exchanged for a US dollar or vice versa. The exchange rate fluctuates based on various factors such as economic performance, political events, and supply and demand.

Question 20

A subsidy is a government payment to help a domestic business compete.

Accepted Answer

A subsidy is a financial assistance provided by a government to selected domestic industries to help them compete against foreign imports and achieve specific policy objectives.

Quiz 4: The Global Context of Business