Chapter 2`

A specific unit or dollar limit applied to a particular type of good is called a(n): A. trade license. B. quota. C. asterisk bill. D. predatory price. E. exchange rate.

B. quota

In order to effectively secure foreign exchange, which of the following is most likely to be used by countries experiencing severe shortages of foreign exchange? A. Import quota B. Government approval C. Tariff D. VERs E. Embargo

B. government approval

Which of the following is the most popular way to circumvent WTO guidelines and impose new duties? A. Antidumping duties B. Boycotts C. Orderly market agreements D. Voluntary export restraints E. Embargoes

A. Antidumping duties

Which of the following falls on the plus side of the U.S. balance of payments? A. Payments to the United States for insurance. B. The costs of goods imported. C. Spending by American tourists overseas. D. New overseas investments. E. The cost of foreign military.

A. Payments to the United States for insurance.

Randall Smithe-Jones believes that protectionism is the only way to save the United Kingdom from outside competitors. He has seen small businesses go bankrupt because cheaper foreign goods have been more popular. The cell-phone manufacturing industry has just started in U.K and Smithe-Jones' company is one of the first to try its hand at cell-phone manufacturing. Which of the following would probably be the argument that Smithe-Jones would use to persuade his government representatives that protectionism is still needed in the U.K.? A. Protection of an infant industry. B. The need to keep money at home. C. Conservation of natural resources. D. National defense. E. Maintenance of standard of living.

A. Protection of an infant industry.

Which of the following is the major reason behind the failure of American MNCs to completely dominate the European markets as predicted by Servan-Schreiber? A. The resurgence of competition worldwide. B. The uneven distribution of economic power. C. The restructuring of U.S industries. D. The decadence of Communism. E. The dissolution of colonial powers.

A. The resurgence of competition worldwide.

The _____ of the balance-of-payments statement is most likely to record all merchandise exports, imports, and services plus unilateral transfers of funds. A. current account B. capital account C. credit account D. receivables account E. reserves account

A. current account

The fundamental difference between quotas and import licenses is that: A. import licenses have greater flexibility than quotas. B. quotas impose specific limitations on trade and import licenses take care of standards. C. quotas are imposed on export goods and import licenses are imposed on import goods. D. for quotas the exporting country sets the limits but licenses are issued by the importing country. E. unlike licenses, quotas limit quantities on a case-by-case basis.

A. import licenses have greater flexibility than quotas.

Which of the following is an area that is considered critical in improving U.S. trade in the context of the Omnibus Trade and Competitiveness Act? A. Market access B. Market availability C. Exchange stability D. Export restriction E. Sustainability in trade

A. market access

Several nations are frustrated with the slow progress of the most recent round of WTO trade negotiations. To vent their frustration, several countries are: A. negotiating bilateral trade agreements. B. forming a rival organization. C. refusing to honor rules and regulations imposed by the WTO. D. using legal means to sue the WTO. E. opting out of membership in the WTO.

A. negotiating bilateral trade agreements.

The rapid growth of war-torn economies and previously underdeveloped countries, coupled with large-scale economic cooperation and assistance that followed World War II led to: A. the rise of new global marketing opportunities. B. the uneven distribution of economic power. C. the dissolution of GATT. D. the spread of Communism. E. the sharp reduction of the production capacity in the U.S.

A. the rise of new global marketing opportunities.

Blockage is ideally accomplished: A. when a country refuses to allow an importer to exchange its national currency for the seller's currency. B. when two countries enter into a voluntary agreement to restrict volume of exports. C. when a country applies specific unit or dollar limit to a particular type of good. D. when countries limit the export of certain goods on a case-by-case basis. E. when the government imposes a mandatory tax on goods entering at its borders.

A. when a country refuses to allow an importer to exchange its national currency for the seller's currency.

Which of the following sections of the balance-of-payments statement is a record of the direct investment, portfolio investment, and short-term movement of cash and technology to and from countries? A. Current account B. Capital account C. Credit account D. Receivables account E. Reserves account

B. Capital account

Which of the following acronyms refers to the international forum that was created for member countries to engage in the negotiation of tariffs and other barriers to trade? A. UNHCR B. GATT C. WMO D. NPT E. UNDP

B. GATT

What was the outcome for the GATT after the ratification of the Uruguay Round agreements? A. With the ratification of the Uruguay Round agreements, the GATT became part of the World Trade Organization (WTO) in 1995, and its 117 original members moved into a new era of free trade. B. It became part of the World Trade Organization. C. It led to the uneven distribution of economic power and potential. D. The European Union decided to stay away from the treaty. E. The original purpose was sidelined in favor of political and military intervention between member states.

B. It became part of the World Trade Organization.

Which of the following is a defining characteristic of a balance-of-payments statement? A. It is a record of the transactions between the government of a country and the private companies. B. It records all financial transactions between the residents of a country and those of the rest of the world. C. It records the trade policies of the member nations of the WTO. D. It is an annual record of the profitable foreign transactions made by a particular country. E. It is a localfirm's financial statement, where the credits and debits must offset each other.

B. It records all financial transactions between the residents of a country and those of the rest of the world.

After World War II, the United States set out to infuse the ideal of capitalism throughout as much of the world as possible. The _____, aimed at assisting in rebuilding Europe, is the plan most closely associated with this endeavor. A. Eisenhower Plan B. Marshall Plan C. Bradley Plan D. Roosevelt Plan E. Truman Plan

B. Marshall Plan

Which of the following strategies was employed by the US to regain its lost market share for capital goods by the late 1990s? A. Funding the Communist nations. B. Restructuring its industries to be more lean and mean. C. Providing financial assistance to the under-developed countries. D. Raising average U.S. tariffs on more than 20,000 imported goods. E. Outsourcing its production activities to other countries.

B. Restructuring its industries to be more lean and mean.

Which of the following was designed to primarily deal with trade deficits, protectionism, and the overall fairness of the U.S. trading partners? A. The Neutrality Pact of 1941. B. The Omnibus Trade and Competitiveness Act of 1988. C. The League of Nations Act of 1920. D. The Hawley-Smoot Tariff Act of 1930. E. The International Monetary Fund Act.

B. The Omnibus Trade and Competitiveness Act of 1988.

Which of the following is true regarding the balance-of-payments records? A. The balance-of-payments accounts do not consider income brought in by non-resident citizens of a country. B. The fact that assets and liabilities balance does not essentially mean that a nation is in a particularly good financial condition. C. A balance of payments is not a record of condition. D. A balance of payments is a determinant of condition. E. A balance of payments records all the financial transactions of a country since 1980.

B. The fact that assets and liabilities balance does not essentially mean that a nation is in a particularly good financial condition.

Which of the following agreements makes it possible for firms to challenge the restrictions in Indonesia that prohibit foreign firms from opening their own wholesale or retail distribution? A. Trade-Related Aspects of Intellectual Property Rights (TRIPs) B. Trade-Related Investment Measures (TRIMs) C. General Agreement on Trade in Services (GATS) D. Marrakesh Agreement E. Stockholm Agreement

B. Trade-Related Investment Measures (TRIMs)

n the context of nontariff barriers, antidumping practices fall under the category of: A. specific limitations on trade. B. customs and administrative entry procedures. C. standards. D. governmental participation in trade. E. charges on imports.

B. customs and administrative entry procedures.

After World War II, the United States led efforts like the Marshall Plan to assist in rebuilding Europe, financial and industrial development assistance to rebuild Japan, and funds channeled to foster economic growth in the underdeveloped world. These efforts were primarily aimed at: A. halting the growth of Nazi Germany. B. dampening the spread of communism. C. dissolving the colonial powers. D. building a stronger defense force. E. creating a worldwide trade bloc to counter the OPEC countries' clout.

B. dampening the spread of communism.

When the United States refuses to sell goods to Iran because of the perception that the country harbors radicals and terrorists, the refusal is most accurately referred to as a(n): A. antidumping penalty. B. embargo. C. tariff. D. orderly market agreement. E. voluntary export restraint.

B. embargo

Which of the following types of nontariff barriers strictly falls under the category of specific limitations on trade? A. Import credit discriminations B. Export subsidies C. Voluntary export restraints D. Embargoes E. Packaging, labeling, or marking standards

B. embargoes

he Foreign Corrupt Practices Act (FCPA) is specifically addressed in the _____ section of the Omnibus Trade and Competitiveness act. A. market access B. export expansion C. import relief D. foreign exchange regulation E. trade deficit

B. export expansion

Developed by the IMF to cope with universally floating exchange rates, _____ represent(s) an average base of value derived from the value of a group of major currencies. A. exchange permits B. special drawing rights C. floating currencies D. the gold rate E. dollar parities

B. special drawing rights

In the late 1990s, most of the countries of the world saw a slow down in the unprecedented and precipitous growth of their economies. However, _____ remained unaffected by this trend. A. the United States B. Germany C. China D. Japan E. France

C. China

As an outcome of the Uruguay Round of intergovernmental tariff negotiations on the GATT platform, the first multilateral, legally enforceable agreement covering trade and investment in the services sector was formulated, termed the _____. A. Trade-Related Aspects of Intellectual Property Rights (TRIPs) B. Trade-Related Investment Measures (TRIMs) C. General Agreement on Trade in Services (GATS) D. Comprehensive Economic Cooperation Agreement (CECA) E. Trade in Services and Investment Obligations Act

C. General Agreement on Trade in Services (GATS)

Which of the following is one of the four ongoing forces supporting the growth of international trade? A. Warsaw Pact B. Kyoto Protocol C. International Monetary Fund D. World summit on sustainable development E. Treaty of Waitangi

C. International Monetary Fund

Which of the following arguments regarding the need for protectionism is recognized by economists as valid? A. Need to keep money at home. B. Encouragement of capital accumulation. C. Protection of an infant industry. D. Conservation of natural resources. E. Maintenance of employment and reduction of unemployment.

C. Protection of an infant industry

Which were the two major challenges faced by U.S. multinational corporations at the close of the 1960s? A. The creation of the Soviet Union and the higher tariffs on imports. B. Growing jingoistic nationalism and a negative population growth rate in major international markets. C. Resistance to direct investment and increasing competition in export markets. D. Increasing Chinese domination in the manufacturing sector and the falling dollar in global markets. E. Political intervention in free trade movement and growing influence of consumer rights advocacy in the home market.

C. Resistance to direct investment and increasing competition in export markets.

Which of the following statements is true with regard to the status of protests against global financial institutions? A. Organized protests against global financial institutions began with the establishment of the IMF in 1945. B. The sole focus of the anticapitalist protestors has been the environmental impact of globalization and the need for stability. C. The "antisweatshop" campaigns by students in America have translated into changes in policy. D. The entire gamut of anticapitalist protests have been weak and ineffectual in the face of the tremendous power of the global financial institutions. E. The protests against the global financial institutions have been organized yet non violent as a rule.

C. The "antisweatshop" campaigns by students in America have translated into changes in policy.

_____ and the World Bank Group are two global institutions created primarily to assist nations in becoming and remaining economically viable. A. The United Nations B. The World Court C. The International Monetary Fund D. The International Red Cross E. The League of Nations

C. The International Monetary Fund

Which of the following is a defining characteristic of VERs? A. International regulatory bodies set export/import limits. B. The importing country can levy heavier import tariffs to override the VERs. C. The exporting country sets the limits on the quantity it will export. D. It is a mandatory tax imposed by a government on goods entering at its borders. E. It is an absolute restriction against the importation of certain goods.

C. The exporting country sets the limits on the quantity it will export.

Which section of the Omnibus Trade and Competitiveness Act recognizes that foreign penetration of U.S. markets can cause serious competitive pressure, loss of market share, and, occasionally, severe financial harm? A. The market access section. B. The export expansion section. C. The import relief section. D. The foreign exchange regulation section. E. The trade deficit section.

C. The import relief section.

Which of the following is true of tariffs? A. They strengthen balance-of-payments positions. B. They strengthen supply-and-demand patterns. C. They increase special interests' privileges. D. They strengthen international relations. E. They promote competition.

C. They increase special interests' privileges.

Which of the following is an example of a nontariff trade barrier? A. Compound duties B. Revenue tariffs C. Administrative fees D. Specific duties E. Duties

C. administrative fees

Exporting countries primarily agree to voluntary export restraints (VERs) to: A. gain greater exposure in the home country. B. reduce market competitiveness. C. avoid the chances of stiffer quotas and tariffs. D. take over local industries. E. avoid criminal prosecution.

C. avoid the chances of stiffer quotas and tariffs.

In general, tariffs weaken: A. inflationary pressures. B. special interests' privileges. C. balance-of-payments positions. D. government control in economic matters. E. reciprocal tariffs by other countries.

C. balance-of-payments positions.

Which of the following ensures that balance-of-payments records are always in balance? A. The sum of squares recording system. B. The ledger entry model. C. The double-entry bookkeeping system. D. The archival records system. E. The multifactor recording system.

C. double entry bookkeeping system

A tax imposed by a government on goods entering at its borders is most accurately termed as a(n) _____. A. boycott B. asterisk bill C. tariff D. quota E. writ

C. tariff

An agreement signed willingly between the importing country and the exporting country for a restriction on the volume of exports is called a: A. None of these. B. tariff. C. voluntary export restraint. D. special interests' privilege. E. balance-of-payment.

C. voluntary export restraint

By the year 1971, the United States was witnessing: By the year 1971, the United States was witnessing: A. an increase in protectionist federal policies. B. a positive balance of trade. C. a sharp rise in domestic and international demand. D. a huge trade deficit. E. an economic situation of the magnitude of the Great Depression.

D. A huge trade deficit

Which of the following presents the correct picture of the outcome of increased world trade after the 1950s, contrary to Servan-Schreiber's prediction? A. Third World countries were excluded from this economic growth leading to stark imbalances in wealth. B. The European Union became the center of world trade, taking the position away from the U.S. C. The U.S. attained a positive balance of trade scenario in the 1950s and maintained it continuously till the Great Recession. D. Economic power and potential became more evenly distributed among the countries of the world. E. SDRs and gold lost their utility as the basic medium of financial exchange and most monetary statistics started relating to the U.S dollar.

D. Economic power and potential became more evenly distributed among the countries of the world.

The World Bank estimates that five countries whose share of world trade is barely one-third that of the European Union will, by 2020, have a 50 percent higher share than that of the European Union. _____ is one of the countries included in this list. A. Canada B. Nigeria C. Netherlands D. Indonesia E. Rhodesia

D. Indonesia

To overcome the problems of inadequate monetary reserves and unstable currencies that plagued international trading before World War II, the _____ was formed. A. European Union B. World Trade Organization C. Federation of International Trade Associations D. International Monetary Fund E. United Nations Development Programme

D. International Monetary Fund

What was the most apparent reciprocal impact of the foreign economic assistance given by the United States? A. European countries formed an alliance to counter the OPEC countries' clout. B. European countries formed an alliance to counter the OPEC countries' clout. C. All recipient countries appointed Americans to manage their central banks. D. Purchases of U.S. agricultural products, manufactured goods, and services by the recipient countries increased. E. Distribution of economic power and potential became more uneven.

D. Purchases of U.S. agricultural products, manufactured goods, and services by the recipient countries increased.

Which of the following factors was primarily responsible for the excess production capacity in the U.S. in the first half of the twentieth century? A. Technological innovation revolutionized production during this time. B. Many firms from other nations shifted their production facilities to the U.S. C. Domestic demand was at a historic low and resulted in excess capacity. D. Swelling labor supply of returning military after World War II. E. Influx of migrant laborers from Europe and Japan.

D. Swelling labor supply of returning military after World War II.

Which of the following is a criticism associated with the global financial institutions? A. They failed to focus on the aim of reducing inequalities between the rich and the poor countries. B. They failed to help the Asian countries substantially when they underwent a major financial crisis in the 1990s. C. They failed to respect the autonomy of member nations by deeming any bilateral agreements between members as illegal if made without their approval. D. They failed to foresee and counter the unintended effects of globalizations like pollution, exploitation, and cultural exploitation. E. They failed to suppress the terrorists who were responsible for the attack in London that coincided with the G8 summit.

D. They failed to foresee and counter the unintended effects of globalizations like pollution, exploitation, and cultural exploitation.

Which of the following is an adverse consequence of globalization? A. Nationalization of private sector holdings. B. Lower and more competitive oil prices. C. Reduced variety and quality of goods and services. D. Worker exploitation and domestic job losses. E. Provision of loans from the World Bank.

D. Worker exploitation and domestic job losses.

Which of the following emerged as a successor to the GATT following the Uruguay Round of GATT negotiations? A. International Monetary Fund B. World Bank C. European Services Forum D. World Trade Organization E. Association of Southeast Asian Nations

D. World Trade Organization

_____ is a new nontariff barrier that was designed to prevent foreign producers from using predatory pricing. A. Quota B. Embargo C. Import license D. Antidumping law E. License

D. antidumping law

The system of accounts that records a nation's international financial transactions is most accurately called its: A. supply chain management system. B. gross domestic product system. C. net domestic product payments. D. balance of payments. E. net national product systems.

D. balance of payments

Which of the following trade policy tools makes it mandatory for its importers who want to buy a foreign good to apply for an exchange permit? A. Tariff B. Import quota C. Blocked currency D. Government approval E. Export levies

D. government approval

Another term for IMF special drawing rights (SDRs) is: A. black gold. B. exchange permits. C. floating currencies. D. paper gold. E. virtual dollars.

D. paper gold

The United States and other countries require some products (automobiles in particular) to contain a percentage of "local content" to gain admission to their markets. This is an example of the stringent usage of _____ to restrict trade. A. exchange permits B. embargoes C. blocked currencies D. standards E. antidumping penalties

D. standards

One of the basic elements of the General Agreement on Tariffs and Trade (GATT) is that: A. member nations are exempt from import tariffs to other member nations. B. all tariffs shall be abolished among member nations at the time of membership. C. the World Court shall review all claims and make final judgments. D. trade shall be conducted on a nondiscriminatory basis. E. trade in services and investments will be excluded from the purview of the GATT.

D. trade shall be conducted on a nondiscriminatory basis.

Which of the following trading partners of the U.S. became its topmost "trade problem" at the beginning of the 21st century? A. United Kingdom B. Japan C. Germany D. Canada E. China

E. China

Which of the following is true of the GATT? A. The U.S, U.K, and Germany were the original signatories of the GATT. B. The original agreement provided a process to increase the required tariffs. C. Member nations seek to resolve their trade disputes unilaterally. D. The GATT panels have enforcement powers apart from advisory powers. E. It created an agency to serve as watchdog over world trade.

E. It created an agency to serve as watchdog over world trade.

Which of the following was the most significant move of the 1980s that contributed toward international cooperation among trading nations? A. Formation of the United Nations Development Programme. B. Creation of the United Nations. C. Establishment of the World Trade Organization. D. Signing of the Montreal Protocol. E. Negotiation of the General Agreement on Tariffs and Trade.

E. Negotiation of the General Agreement on Tariffs and Trade.

_____ is the practice whereby a foreign producer intentionally sells their products in the United States for less than the cost of production to undermine the competition and take control of the market. A. Basing point pricing B. Offensive pricing C. Defensive pricing D. Counterpoint pricing E. Predatory pricing

E. Predatory pricing

Which of the following falls on the minus side of the U.S. balance of payments? A. Payments to the United States for insurance. B. Payments of dividends and interest on investments abroad. C. Return on capital invested abroad. D. New foreign investments in the United States. E. Spending by American tourists overseas.

E. Spending by American tourists overseas.

Tall Pine Plywood Company has just received a notice that a shipment of plywood (2 metric tons) has been rejected by Japanese customs because the knotholes commonly found on a plywood sheet are too large. Which of the following categories of nontariff barriers primarily checks such quality issues? A. Quotas B. Licenses C. Embargoes D. Boycotts E. Standards

E. Standards

The marketing manager for Grand Products wants to export the company's range of beer products to a Gulf country. However, he discovers that there is a complete restriction on the import of any form of liquor into that country. This is an accurate example of _____. A. OMAs B. quotas C. tarrifs D. VERs E. boycotts

E. boycotts

In general, tariffs restrict: A. inflationary pressures. B. special interests' privileges. C. government control in economic matters. D. the number of reciprocal tariffs. E. manufacturers' supply sources.

E. manufacturers' supply sources.

Post World War II, it was noticed that there was worldwide economic growth and countries once classified as less developed were reclassified as _____. A. capitalist countries B. free trade economies C. tier-II countries D. developed countries E. newly industrialized countries

E. newly industrialized countries

The _____ account of the balance-of-payments statement is most likely to record all exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks. A. current B. capital C. credit D. receivables E. reserves

E. reserves

A balance-of-payments statement includes three accounts. Two of those accounts are the current account and the capital account. What is the third account found on the balance-of-payments statement? A. Investment account B. Receivables account C. Services account D. Credit account E. Reserves account

E. reserves account

The exchange permit can stipulate: A. the quantity of goods that can be exchanged for a particular sum of foreign currency. B. the number of parties that can be involved in an exchange transaction. C. the amount to be exchanged to be deposited in a local bank for a set period. D. the parties involved to declare collaterals to avail of exchange permits. E. the number of times one party can avail of exchange permits.

E. the number of times one party can avail of exchange permits.