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International Trade and Economic Policy

Description: This quiz aims to evaluate your understanding of key concepts and theories related to international trade and economic policy.
Number of Questions: 15
Created by:
Tags: international trade economic policy trade policy economic integration
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Which of the following is NOT a determinant of a country's comparative advantage?

  1. Factor endowments

  2. Technology

  3. Government policies

  4. Consumer preferences


Correct Option: D
Explanation:

Consumer preferences are not a determinant of a country's comparative advantage, as they do not affect the relative costs of production between countries.

According to the Heckscher-Ohlin model, countries tend to export goods that are intensive in their _____ factors of production.

  1. abundant

  2. scarce

  3. fixed

  4. variable


Correct Option: A
Explanation:

The Heckscher-Ohlin model predicts that countries will export goods that are intensive in their abundant factors of production and import goods that are intensive in their scarce factors of production.

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

  1. Increased consumer choice

  2. Lower prices for consumers

  3. Increased job opportunities

  4. Reduced economic growth


Correct Option: D
Explanation:

Free trade is generally associated with increased economic growth, as it allows countries to specialize in the production of goods and services in which they have a comparative advantage.

The theory of _____ argues that countries can gain from trade even if they do not have a comparative advantage in any good.

  1. Absolute advantage

  2. Comparative advantage

  3. Mercantilism

  4. New trade theory


Correct Option: D
Explanation:

The new trade theory argues that countries can gain from trade even if they do not have a comparative advantage in any good, due to factors such as economies of scale, product differentiation, and increasing returns to scale.

Which of the following is a common argument in favor of protectionist trade policies?

  1. To protect infant industries

  2. To promote national security

  3. To reduce the trade deficit

  4. To increase consumer choice


Correct Option: A
Explanation:

One common argument in favor of protectionist trade policies is the need to protect infant industries, which are new and developing industries that may need temporary protection from foreign competition in order to become established.

The _____ is a multilateral trade agreement that aims to reduce trade barriers between its member countries.

  1. World Trade Organization (WTO)

  2. International Monetary Fund (IMF)

  3. World Bank

  4. United Nations (UN)


Correct Option: A
Explanation:

The World Trade Organization (WTO) is a multilateral trade agreement that aims to reduce trade barriers between its member countries and promote free trade.

Which of the following is NOT a type of trade barrier?

  1. Tariffs

  2. Quotas

  3. Embargoes

  4. Subsidies


Correct Option: D
Explanation:

Subsidies are not a type of trade barrier, as they are government payments to domestic producers that can help them compete with foreign producers.

The _____ is a measure of the overall restrictiveness of a country's trade policies.

  1. Trade restrictiveness index (TRI)

  2. Trade openness index (TOI)

  3. Effective rate of protection (ERP)

  4. Nominal rate of protection (NRP)


Correct Option: A
Explanation:

The trade restrictiveness index (TRI) is a measure of the overall restrictiveness of a country's trade policies, taking into account all types of trade barriers.

Which of the following is NOT a type of economic integration?

  1. Free trade area

  2. Customs union

  3. Common market

  4. Economic union


Correct Option: D
Explanation:

Economic union is not a type of economic integration, as it is the highest level of economic integration and involves the full integration of economic policies, including a common currency.

The _____ is a regional trade agreement between the United States, Mexico, and Canada.

  1. North American Free Trade Agreement (NAFTA)

  2. Central American Free Trade Agreement (CAFTA)

  3. European Union (EU)

  4. Association of Southeast Asian Nations (ASEAN)


Correct Option: A
Explanation:

The North American Free Trade Agreement (NAFTA) is a regional trade agreement between the United States, Mexico, and Canada.

Which of the following is NOT a potential cost of economic integration?

  1. Loss of sovereignty

  2. Increased competition

  3. Increased economic growth

  4. Reduced consumer choice


Correct Option: C
Explanation:

Increased economic growth is not a potential cost of economic integration, as it is one of the main benefits of economic integration.

The _____ is a measure of the extent to which a country's trade policy is biased towards or against certain sectors of the economy.

  1. Trade bias index (TBI)

  2. Effective rate of protection (ERP)

  3. Nominal rate of protection (NRP)

  4. Trade restrictiveness index (TRI)


Correct Option: A
Explanation:

The trade bias index (TBI) is a measure of the extent to which a country's trade policy is biased towards or against certain sectors of the economy.

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

  1. Increased consumer choice

  2. Lower prices for consumers

  3. Increased job opportunities

  4. Reduced economic growth


Correct Option: D
Explanation:

Reduced economic growth is not a potential benefit of trade liberalization, as trade liberalization is generally associated with increased economic growth.

The _____ is a measure of the extent to which a country's trade policy is biased towards or against imports.

  1. Import bias index (IBI)

  2. Export bias index (EBI)

  3. Trade bias index (TBI)

  4. Effective rate of protection (ERP)


Correct Option: A
Explanation:

The import bias index (IBI) is a measure of the extent to which a country's trade policy is biased towards or against imports.

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

  1. Reduced consumer choice

  2. Higher prices for consumers

  3. Increased job opportunities

  4. Reduced economic growth


Correct Option: C
Explanation:

Increased job opportunities is not a potential cost of trade protectionism, as one of the main arguments in favor of trade protectionism is that it can protect jobs in certain industries.

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