Question 1

Those nations that liberalized trade during the past decade

Accepted Answer

Studies have shown that nations that liberalized trade during the past decade grew faster than those that did not.

Question 2

The following region of the world has been the least successful in creating economic development and growth over the last thirty years

Accepted Answer

Africa has consistently lagged behind other regions in economic development and growth over the last thirty years. Many factors contribute to this, including political instability, corruption, weak infrastructure, and limited access to education and healthcare. Despite some progress in recent years, such as increased foreign investment and improved business environments in some countries, overall economic growth in Africa has been slower than in other regions.

Question 3

The following is not an example of an international commodity agreement.

Accepted Answer

Marketing boards refer to governmental or quasi-governmental organizations that regulate the production, marketing, and distribution of a particular commodity within a particular country or region. They do not involve international agreements or cooperation between countries. The other options (buffer stocks, export controls, and purchase contracts) are all examples of international commodity agreements to manage the supply and demand of commodities on a global scale.

Question 4

Which of the following is false with respect to traditional trade theory?

Accepted Answer

Traditional trade theory is largely considered static, focusing on the conditions and outcomes at a specific point in time rather than incorporating changes over time, which would be characteristic of a dynamic theory.

Question 5

Which of the following is not part of the demand for a NIEO?

Accepted Answer

The demand for a NIEO includes the establishment of international commodity agreements to stabilize the prices of primary commodities, removal of trade barriers in developed nations for agricultural products of developing nations, and increasing the flow of foreign aid to developing nations. However, preferential access for the manufactured exports of developed nations is not a part of the demand for a NIEO as it would only benefit the developed nations and not bring about a fair and just economic order.

Question 6

During the 1950's,1960's and 1970's the predominant growth strategy for developing nations was one of

Accepted Answer

During this period, many developing nations focused on import substitution as a growth strategy, which involved protecting domestic industries from foreign competition through tariffs and subsidies, and promoting the production of goods locally rather than importing them. This was seen as a way to reduce reliance on foreign goods and to stimulate domestic economic growth. Export orientation and communism were also present as growth strategies in some countries, but import substitution was the predominant approach.

Question 7

The policy of import substitution was most vigorously followed by:

Accepted Answer

Import substitution was most vigorously followed by large developing nations during the 1960's. These nations believed that by limiting imports and producing goods domestically, they could become more self-sufficient and increase their economic independence. This policy was popular among countries in Latin America, Africa, and Asia during this time period.

Question 8

The nation's commodity terms of trade times the productivity index in its export sector gives the nation's

Accepted Answer

The answer of The nation's commodity terms of trade times...

Question 9

Which are is not an advantage of export-oriented industrialization?

Accepted Answer

The statement "domestic industries grow accustomed to protection and have an incentive to become more efficient" is actually a disadvantage of export-oriented industrialization, as it promotes protectionism and hinders competition, which can lead to inefficiencies in the long run.

Question 10

The terms of trade for most developing nations over the last thirty years have generally been

Accepted Answer

The answer of The terms of trade for most developing...

Question 11

When a nation's commodity terms of trade deteriorate and its single factor terms of trade improve,the nation's welfare:

Accepted Answer

When a nation's commodity terms of trade deteriorate, it means the country's export prices fall relative to its import prices. This leads to a decrease in welfare. However, if the nation's single factor terms of trade improve, it means that the price of the nation's most important factor of production (such as labor) has increased relative to its export price. This leads to an increase in welfare.

Therefore, in this scenario, the positive effect of the improvement in single factor terms of trade outweighs the negative effect of the deterioration in commodity terms of trade, leading to a net increase in welfare. Hence, the correct answer is B- rises.

Question 12

Supporting the price of a commodity by buying it when its price is low is:

Accepted Answer

Supporting the price of a commodity by buying it when its price is low is known as a buffer stock.

Question 13

If the prices of a nation's exports and imports both rise,the nation's commodity terms of trade may:

Accepted Answer

The commodity terms of trade depend on the relative change in export and import prices. If both rise, the terms of trade could improve, deteriorate, or remain unchanged depending on the magnitude of the changes.

Question 14

Trade cannot be an engine of growth for today's developing nations because:

Accepted Answer

Developing nations often rely on exporting primary products or low-value added goods, which tend to have a low income elasticity of demand. This means that as incomes rise in other countries, demand for their exports may not increase proportionally. Therefore, trade may not necessarily result in significant economic growth for these nations.

Question 15

What is the advantage of a policy of import substitution?

Accepted Answer

All the options listed are advantages of a policy of import substitution. A) highlights the reduced risk due to existing market demand, B) points out the relative ease of protecting domestic markets compared to penetrating foreign ones, and C) notes the potential for attracting foreign firms to manufacture locally to bypass tariffs.

Question 16

The primary exports of developing nations tend to face demand that is _______ and supply that is _______.

Accepted Answer

The primary exports of developing nations, often raw materials or agricultural products, tend to have inelastic demand because they are necessities with few substitutes. Similarly, their supply is inelastic due to factors like limited production capacity and dependence on natural conditions.

Question 17

Developing nations often experience wildly fluctuating export prices for their primary products because of:

Accepted Answer

Developing nations often face wildly fluctuating export prices primarily due to inelastic and unstable demand and supply. This means that the demand and supply for their primary products do not significantly change with price changes, but external factors can cause their supply to be unpredictable, leading to price volatility.

Question 18

According to Nurkse,international trade was an engine of growth for:

Accepted Answer

Nurkse argued that international trade was an engine of growth for regions of recent settlements during the 19th century, as it enabled these areas to export primary products and import manufactured goods, thus facilitating their economic development. For developed nations during the 20th century, however, Nurkse believed that international trade would not necessarily lead to economic growth, as these countries already had established industrial sectors and could face competition from developing countries that could produce the same goods at a lower cost.

Question 19

MacBean found that the export instability faced by developing nations was:

Accepted Answer

The answer of MacBean found that the export instability faced...

Question 20

According to traditional trade theory,a developing nation should export the commodity:

Accepted Answer

The answer of According to traditional trade theory,a developing nation...

Quiz 11: International Trade and Economic Development