Trade and Inequality

Description: This quiz will test your understanding of the relationship between trade and inequality.
Number of Questions: 15
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Tags: trade inequality economics
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Which theory argues that trade leads to greater income inequality within countries?

  1. The Heckscher-Ohlin model

  2. The Stolper-Samuelson theorem

  3. The Ricardo-Viner model

  4. The Solow-Swan model


Correct Option: B
Explanation:

The Stolper-Samuelson theorem states that trade will lead to a rise in the relative wages of skilled workers and a fall in the relative wages of unskilled workers.

What is the main mechanism through which trade affects income inequality?

  1. Changes in the relative prices of goods

  2. Changes in the demand for labor

  3. Changes in the supply of labor

  4. Changes in technology


Correct Option: A
Explanation:

Trade can lead to changes in the relative prices of goods, which can in turn affect the relative wages of workers in different industries.

Which of the following is NOT a potential consequence of trade-induced income inequality?

  1. Increased social unrest

  2. Increased political instability

  3. Increased economic growth

  4. Increased poverty


Correct Option: C
Explanation:

While trade-induced income inequality can have negative consequences, it is not necessarily associated with decreased economic growth.

Which of the following policies is NOT typically used to address trade-induced income inequality?

  1. Progressive taxation

  2. Trade adjustment assistance

  3. Minimum wage laws

  4. Import tariffs


Correct Option: D
Explanation:

Import tariffs are typically used to protect domestic industries from foreign competition, not to address trade-induced income inequality.

Which of the following countries has the highest level of income inequality?

  1. United States

  2. China

  3. India

  4. Brazil


Correct Option: A
Explanation:

The United States has the highest level of income inequality among the countries listed.

Which of the following countries has the lowest level of income inequality?

  1. Sweden

  2. Denmark

  3. Norway

  4. Finland


Correct Option: A
Explanation:

Sweden has the lowest level of income inequality among the countries listed.

What is the Gini coefficient?

  1. A measure of income inequality

  2. A measure of economic growth

  3. A measure of unemployment

  4. A measure of inflation


Correct Option: A
Explanation:

The Gini coefficient is a measure of income inequality that ranges from 0 to 1, with 0 representing perfect equality and 1 representing perfect inequality.

What is the Lorenz curve?

  1. A graphical representation of income inequality

  2. A graphical representation of economic growth

  3. A graphical representation of unemployment

  4. A graphical representation of inflation


Correct Option: A
Explanation:

The Lorenz curve is a graphical representation of income inequality that shows the cumulative distribution of income in a country.

Which of the following is NOT a potential benefit of trade?

  1. Increased economic growth

  2. Increased consumer choice

  3. Increased job opportunities

  4. Increased income inequality


Correct Option: D
Explanation:

Trade can lead to increased income inequality, but it is not necessarily a benefit of trade.

Which of the following is NOT a potential cost of trade?

  1. Job losses

  2. Environmental degradation

  3. Increased economic growth

  4. Increased consumer choice


Correct Option: C
Explanation:

Trade can lead to increased economic growth, but it is not necessarily a cost of trade.

What is the relationship between trade and economic growth?

  1. Trade leads to economic growth

  2. Economic growth leads to trade

  3. Trade and economic growth are independent of each other

  4. Trade and economic growth are negatively correlated


Correct Option:
Explanation:

There is a positive correlation between trade and economic growth, meaning that countries that trade more tend to grow faster.

What is the relationship between trade and job losses?

  1. Trade leads to job losses

  2. Job losses lead to trade

  3. Trade and job losses are independent of each other

  4. Trade and job losses are negatively correlated


Correct Option:
Explanation:

The relationship between trade and job losses is complex. Trade can lead to job losses in some sectors, but it also creates jobs in other sectors. The overall impact of trade on employment is therefore uncertain.

What is the relationship between trade and environmental degradation?

  1. Trade leads to environmental degradation

  2. Environmental degradation leads to trade

  3. Trade and environmental degradation are independent of each other

  4. Trade and environmental degradation are negatively correlated


Correct Option:
Explanation:

The relationship between trade and environmental degradation is complex. Trade can lead to environmental degradation, such as pollution and deforestation, but it can also lead to environmental improvements, such as the adoption of cleaner technologies.

What is the role of government in addressing the negative consequences of trade?

  1. Government should intervene to protect domestic industries from foreign competition

  2. Government should provide trade adjustment assistance to workers who lose their jobs due to trade

  3. Government should invest in education and training to help workers adapt to the changing demands of the global economy

  4. All of the above


Correct Option: D
Explanation:

Government can play a role in addressing the negative consequences of trade by intervening to protect domestic industries from foreign competition, providing trade adjustment assistance to workers who lose their jobs due to trade, and investing in education and training to help workers adapt to the changing demands of the global economy.

What is the future of trade?

  1. Trade will continue to grow and become more globalized

  2. Trade will decline as countries become more protectionist

  3. Trade will become more regionalized as countries form trading blocs

  4. It is impossible to predict the future of trade


Correct Option: D
Explanation:

The future of trade is uncertain. It is possible that trade will continue to grow and become more globalized, but it is also possible that trade will decline as countries become more protectionist or that trade will become more regionalized as countries form trading blocs. It is impossible to predict which of these scenarios will occur.

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