BUS 313 ch.2 + quiz and handout

Describe the main functions of each of the following: · The IMF · The World Bank · The GATT · The WTO

(1) The IMF's role is to act as a lender of last resort in the case of a debt crisis or foreign exchange crisis. It provides technical expertise and advice and assists national governments with necessary but difficult reorganizations of their national economies. (2) The World Bank's mission, in general terms, is to assist the economic development of nations through the provision of loans, technical expertise, and advice. (3) GATT is a series of multilateral trade negotiations and resulting treaties which binds the tariffs and trade policies of nations and limits their ability to arbitrarily change them. Its mission is to keep markets for goods open and to ensure that nations follow a set of rules governing fair trade. (4) The WTO is an umbrella organization created by the Uruguay round of GATT. Its role is similar to GATT's, but it has expanded its function to include agreements on services, agriculture, and textiles and apparel, all of which were omitted from the previous rounds of GATT. In addition, it provides rules for the resolution of trade disputes between nations and acts as a forum for the discussion and implementation of further reductions in trade barriers.

What are public goods and how do they differ from private ones? Give examples of each.

- Public goods are non-diminishable and non-excludable. Public goods include national defense, public airways, civil and commercial codes, and so forth. - Private goods generally share neither of these characteristics. Private goods include most things that are bought and sold in private markets (restaurant meals, clothing, houses, cars, etc.) while public goods are often provided collectively.

Which of the following is FALSE?

A common market is more deeply integrated than an economic union.

Which of the following is true? A) A country experiencing a debt or currency crisis would contact the World Trade Organization. B) The World Trade Organization was formed at the Bretton Woods conference. C) The General Agreement on Tariffs and Trade created the World Trade Organization in the negotiations and treaty known as the Uruguay Round. D) The World Trade Organization has no power to resolve trade disputes and to enforce their resolution.

C) The General Agreement on Tariffs and Trade created the World Trade Organization in the negotiations and treaty known as the Uruguay Round.

From the late 1940s until the creation of the​ WTO, the organization that was primarily responsible for conducting rounds of trade negotiations was the

GATT

Which of the following is an example of an institution whose primary concern is global​ stability?

IMF​ (International Monetary​ Fund)

How is the IMF funded? Which round of GATT led to the formation of the WTO?

It collects fees called quotas from its members. The Uruguay Round

Which of the following is NOT an example of an international public good?

Regional trade agreements

Critics of the global institutions have a variety of complaints about the WTO, the IMF, and the World Bank. Explain the main categories of complaints.

The text describes the problems with institutions in terms of issues of sovereignty (may force adoption of domestic policies against nation's will or interests), transparency (decision making at institutions may be dominated by others pursuing their own interests), ideology (advice may be bad or biased), and implementation and adjustment costs (asymmetries in negotiation power and in ability to absorb costs imposed). They especially question the dominance of the United States and industrialized nations in determining the policies institutions set for client countries, since those policies may be wrong or biased or impose particular harm to some groups in the client nations' populations. Overall, critics question whether institutions generate economic inequality and compound risks to vulnerable groups.

Which of the following is NOT a criticism of international institutions such as the​ IMF, the World​ Bank, or the​ WTO?

Their decision−making is biased in favor of underdeveloped nations

A free trade agreement plus a common set of tariffs toward non−members is called

a customs union

The United States is an example of

a free trade area.

One reason markets may fail to provide the optimal quantity of public goods is the problem of

free riders

One of the strongest motivations for holding the Bretton Woods Conference was to design new international institutions that would

help countries avoid the mistakes of the 1920s and 1930s.

The primary mission of the World Bank today is to

provide capital to underdeveloped countries

The original mission of the World Bank was to

provide financial assistance for the reconstruction of war-damaged nations.

The international organization that serves as a forum for trade discussions and the development of trade rules is called

the WTO

With a partial trade agreement

two or more countries agree to liberalize trade in a selected group of categories.