Chapter 2 Quiz

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. -They violate national sovereignty by imposing unwanted domestic policies. -They ignore potentially large adjustment costs for developing nations of implementing their policies. -They fail to understand the effects of their policies on the vulnerable.

-Their decision-making is biased in favor of underdeveloped nations.

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

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

With a partial trade agreement, -two or more countries allow the free mobility of inputs such as labor and capital. -goods and services are allowed to cross boundaries without tariffs. -two or more countries set common tariffs toward non-members. -two or more countries agree to liberalize trade in a selected group of categories

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

Until the Uruguay Round of trade negotiations, which of the following sectors were NOT included in the rules for international trade? Financial sector Agriculture and apparel Automobiles and agriculture Steel and agriculture Steel and textiles

Agriculture and apparel

The implementation of a Customs Union involves all of the following EXCEPT... a. Restrictions on resource factor movements b. A common tax system and common currency c. A common tariff levied on imports from nonmembers d. Elimination of trade restrictions among member countries

B

Which of the following is NOT a criticism of international institutions such as the IMF, the World Bank, or the WTO? a. they ignore potentially large adjustment costs for developing nations of implementing their policies. b. Their decision-making is biased in favor of underdeveloped nations. c. they violate national sovereignty by imposing unwanted domestic policies. d. They fail to understand the effects of their policies on the vulnerable.

B

When the United States gives MFN status to China, it means that

China is treated the same as other U.S. trading partners.

Which of the following is an example of an institution whose primary concern is global stability? NAFTA (North American Free Trade Agreement) European Union Asian Development Bank OPEC (Oil Producing and Exporting Countries) IMF (International Monetary Fund)

IMF (International Monetary Fund)

free trade area

a grouping of countries within which tariffs and non-tariff trade barriers between the members are generally abolished but with no common trade policy toward non-members.

Which of the following criticisms is NOT directed at the IMF? a. It creates a free-riding problem. b. t serves the interests of wealthier countries. c. It violates national sovereignty. d. It lacks openness in its decision-making process.

a. It creates a free-riding problem.

The United States is an example of: a. an economic union. b. a customs union c. a free trade area d. a common market

a. an economic union. def: participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production (capital and labour) and a common external trade policy

IMF conditionality refers to the

changes a country must make in order to receive IMF financial assistance.

Which economic integration scheme is SOLELY intended to abolish trade restrictions among member countries, while setting up common tariffs against RTA nonmembers? Economic Union Customs Union Free Trade Area Common Market

customs union

beautiful scenic view, national defense, clean air, street lights, and public safety, most intellectual property

examples of nonrival goods

One of the most important and most visible roles of the IMF is to

intercede by invitation when countries cannot pay their international debts.

non-excludability

means that the good is available to all citizens.

Non-rivalrous

means that the goods do not dwindle in supply as more people consume them

If a good or service does not get used up as it is consumed, then it is said to be nondiscrimination. nonexcludable. nonconsumable. nonrival.

nonrival

An important function of international institutions during times of crisis is to stabilize exchange rates. prevent nondiscrimination. make goods nonrival. make goods nonexcludable. prevent free riding.

prevent free riding

The primary mission of the World Bank today is to

provide capital to underdeveloped countries.

Most favored nation (MFN) status means that a country treats another country

the same as its other trading partners.

Which of the following is FALSE? -Because of international recognition of national sovereignty, individual nations are unaffected by global trade and capital flows. -Because trade policies are laws of individual nations, it is difficult for other nations and international organizations to force changes on unwilling nation states. -Foreign investors may not have a legal right to impose policies on a nation state, but the nation state may still experience consequences of poor policies. -National sovereignty limits outsiders' ability to change the trade laws and practices of individual nation states.

-Because of international recognition of national sovereignty, individual nations are unaffected by global trade and capital flows.

Which of the following statements is TRUE? -The World Bank formed the World Trade Organization when it became clear that to alleviate poverty in developing nations, agricultural trade barriers were going to have to be reduced. -WTO talks in the late 1990s led to openings in both financial services and telecommunications. -MFN status means that a trading partner is getting the best trade deal possible given current national trade policies. -A nation's votes at the IMF are proportional to its population.

-WTO talks in the late 1990s led to openings in both financial services and telecommunications.

Suppose that the United States, Canada, and Mexico abolish all tariffs on each other's goods and eliminate all restrictions on movements of resources between each other. They also adopt a common protectionist policy toward other countries. The three countries further maintain their own respective monetary and fiscal policies. This is an example of a (an)... Economic Union Customs Union Quasi Customs Union Common Market Free Trade Area

Common Market

examples of free trade area

North American Free Trade Area (NAFTA) and the European Free Trade Association (EFTA)

Which of the following is NOT a feature of a common market? -Substantial coordination of macroeconomic policies among the members -Free trade in goods and services between the members -Common external barriers to trade -Factor mobility

Substantial coordination of macroeconomic policies among the members

Suppose that Japan and South Korea form a free-trade area. The Japanese then decrease auto manufacturing and increase imports of autos from South Korea, while the South Korean's decrease computer production and import more computers from Japan. This is an example of... Trade diversion only Trade creation and diversion Trade creation only Trade exhaustion Trade destruction only

Trade creation only

The two main criteria that distinguish a public good:

nonexcludable and nonrival

If a good or service does not get used up as it is consumed, then it is said to be

nonrival