International Trade Test
What is a comparative advantage?
A comparative advantage is when a country evaluates the opportunity cost to produce an item and then chooses to produce items that they can make better than other nations.
Why is it bad for a country to import more goods than it exports?
Because it runs into a trade deficit, meaning it is spending or sending more money out of the country than it is bringing in.
Over the last 50 years, trade between nations has decreased
False
What are the key reasons why international trade has increased rapidly?
Key reasons why international trade has increased rapidly because of technological advancements and trade agreements.
What are three possible negative impacts of international trade?
Possble negative impacts of internatonal trade are displacement of workers, environmental damage, and/or a trade imbalance.
What is international trade?
The exchange of capital (money), goods, and services across international borders or between nations.
What has fostered globalization?
The growing increase with international trade and the development of technology.
What determines the types of goods and services a country will export?
The types of goods and services a country decides to export is determined by what is referred to as their comparative advantage and absolute advantage.
A country is encouraged to produce those goods or services where they have an absolute advantage or comparative advantage.
True
What does a comparative advantage often lead to?
A comparative advantage often leads to a country specializing in the production and exporting certain items.
Is it better for a country to have a positive or a negative trade balance? Why?
A positive trade balance is better because when its imports are higher they are spending money.
What is a positive trade balance or a trade surplus?
A positive trade balance is when the amount of a country's exports is greater than the amount of its imports.
The United States is not a party to any trade agreements worldwide and considers free trade to be dangerous.
False
When a country exports a lot more goods and services than they import, it causes job losses, a lower standard of living, and is bad for their economy.
False
What are four common trade barriers?
Four common trade barriers are tariffs on certain imports, placing quotas by limiting the amount imported, subsidizing the making of domestic goods, or outright prohibition of the importation of a good or service.
What does free trade mean?
Free trade is trade between countries without restrictions or trade barriers.
What is the WTO and what does it do?
The WTO is a global organization that helps negotiate global trade agreements, helps enforce trade agreements, and aids in resolving trade disputes among countries.
What does absolute advantage mean?
The ability of a country to produce a good or service at a lower cost than another country.
What is often formed by countries to promote free trade?
Trade agreements are often formed by countries.
In an effort to encourage free trade, a worldwide organization was created called the World Trade Organization (WTO).
True
International trade tends to encourage companies to be more competitive, thus forcing prices down and increasing quality.
True
Technological innovations in transportation and in communications has made it easier to move goods, information, and money around the world.
True
Though in most cases a free trade agreement doesn't truly mean free trade, such agreements are aimed at reducing or eliminating tariffs, quotas and other trade restrictions.
True
