MKT 310 exam 3

PPP theory predicts that changes in relative prices will result in

a change in exchange rates.

The European Commission, to maintain the level of competition in the EU, is increasingly willing to impose conditions on businesses before allowing

a merger or acquisition.

Which three trade barriers constrain a firm's ability to disperse its productive activities?

tariff, subsidies, quotas

Approximately how many regional trade agreements are currently in force?

280

A(n)______ tariff is a tax that is levied on a good on the basis of its value, not on the basis of its weight or quantity.

Ad valorem

Which of the following best explains why some think the European Union would be better off without Britain?

Britain has been seen as taking a "me first" approach rather than a "what's best for the whole" approach.

Tyson is a trader and borrows money in Japanese yen (where the interest rate is 1%). He then invests the money in a Canadian bank, where the rate is 5%. This is an example of a(n) ______.

Carry Trade

China has been accused of prohibiting U.S. companies that offer cloud computing from offering their services in China. Which argument best explains this?

China wants to protect its firms from their more competitive U.S. rivals.

What are three reasons that caused the global trading system erected under GATT to be strained during the 1980s and early 1990s?

Countries found ways to get around GATT regulations The persistent trade deficit in the United States The economic success of Japan

As the most enduring free trade area in the world, ______ concentrates on the free trade of industrial goods, but not agricultural products.

EFTA

Which level of regional economic integration best describes the new free trade agreement in North America currently referred to as USMCA?

Free trade area

What is the purpose of the European Stability Mechanism that was established by the EU?

It is a permanent bailout fund.

If China provides cash assistance to its companies in the steel industry, China is using which type of trade instrument?

Subsidy

The new trade deal in North America called USMCA by Donald Trump is a revision of the North American Free Trade Agreement (NAFTA). What was the initial impetus for NAFTA?

NAFTA was designed to eliminate barriers to trade among member countries thereby creating a larger and more efficient productive base for the entire region.

By threatening ______ trade sanctions, one country can convince another country to open its markets.

punitive

The nationwide company, Nightingale Health Systems, received a tax break from the government when it was faltering and ready to declare bankruptcy. This subsidy helped the company with production costs and allowed it to have a stronger presence in the competitive health industry. This tax break is a type of _____.

Subsidy

Why is the announcement of the new trade agreement, referred to as USMCA by Donald Trump, so important for companies like Renault?

The new agreement reduces uncertainty about trade in the region allowing firms to make strategic decisions.

What fundamental element of a political union is the European Union missing by Britain's decision to opt out of provisions such as the EU Charter of Fundamental Rights, the Schengen Agreement, and the Eurozone?

The willingness of countries to give up sovereignty for the benefit of all

Company ABC in Scotland exports a pound of cheese to the US for $100. The US places a 9% tax on the cheese as a proportion of its value. What type of tariff is this?

ad valorem

Under the "Chicken Tariffs", the United States assesses _______ tariffs on SUVs entering the country.

ad valorem

A customs union differs from a free trade area because it allows for

adoption of a common external trade policy.

One purpose of the Smoot-Hawley Act, passed by the US Congress in 1930, was to

avoid rising unemployment

Which type of control of exposure is MOST effective at protecting resources efficiently and ensuring that each subunit adopts the correct mix of tactics and strategies?

centralized

The members of Mercosur agreed on a _____ in 2010 in an attempt to avoid paying tariffs more than once.

common customs code

Who are the losers as a result of the tariffs on SUVs imported to the United States?

domestic consumers

Who benefits from the tariffs assessed on SUVs imported to the United States?

domestic producer

When a country restricts the export of a product, it is implementing a(n)

export ban

f a country places a 20% tax on dairy products exported to other nations in order to limit exports and have sufficient supplies of dairy products for the home country, it is using a(n) ______.

export tariff

A consequence of subsidies paid to companies during difficult economic times -- for example, the Japanese farm subsidies -- is

giving recipients an unfair competitive advantage.

According to Alexander Yeats, the countries that produce the fastest-growing products in intra-Mercosur trade do so _____ and at the _____ price.

inefficiently; highest

Economic arguments for intervention

infant industry argument, promote investment inflows, essential industry argument, import substiution

When the euro-zone economies are NOT growing at the same rate, a common monetary policy linked to common currency may mean that ______ rates may not reflect any one individual country's needs.

interest

Regional trade blocs can possibly occur in markets that are protected from outside competition because ______ barriers are in place, and the WTO does not cover some of these types of barriers.

nontariff

African countries have attempted to form a continental trade agreement, but have been stymied by significant ______ turmoil.

political

Political arguments for intervention

protecting jobs, national security, protecting consumer, protecting the environment

short range predictors of exchange rate movement

psychological effects, investor expectations, bandwagon effects

With regard to strategic trade policy, which two actions can governments take in response to pressure from business firms?

push for more open markets and freer trade, increase protectionism

When NAFTA was created, it allowed for special protection from foreign direct investment on which two Mexican industries?

railway, energy

Long range predictors of exchange rate movement

relative monetary growth, relative inflation rates, nominal interest rate differentials

Currency ______ involves buying, selling, and holding currencies in order to make a profit from favorable fluctuations in exchange rates.

speculation