Trade Strategies For Economic Growth & Development
Read pages 367 to 377 in the textbook (IB Economics- A Course Companion) and answer the questions which follow.
- 1.When a country produces just a few major products, it may suffer from the problem of:
- A.
Interdependence
- B.
Independence
- C.
Over-specialization
- D.
Trade diversion
- 2.If a country is dependent on a narrow range of exports, then they face great:
- A.
Vulnerability
- B.
Uncertainty
- C.
Fluctuations in economic growth
- D.
All of the above.
- 3.Countries that were dependent on the export of a small range of low-skill manufactured goods such as textiles were damaged when China joined the _____________ and sharply increased the supply of textiles on world markets
- A.
OECD
- B.
WTO
- C.
IMF
- D.
World Bank
- 4.The price elasticity of demand for commodities and the price elasticity of supply for commodities (on the world market) tend to be:
- A.
Relatively elastic
- B.
Very inelastic
- C.
Very elastic
- D.
Relatively inelastic
- 5.Any economic policy that is aimed at supporting domestic producers at the expense of foreign producers is called:
- A.
Trade diversion
- B.
Trade creation
- C.
Protectionism
- D.
Nationalistic behavior.
- 6.If protectionist measures prevent developing countries from utilizing their (i) ________________ advantage (through exporting to developed countries), then developing countries will be limited in their ability to earn (ii)____________ exchange.
- A.
(i) absolute (ii) foreign
- B.
(i) comparative (ii) foreign
- C.
(i) trade (ii) hard currency
- D.
(i) comparative (ii) real.
- 7.America's cotton, dairy, and rice farmers receive billions of dollar every year in the form of:
- A.
Grants
- B.
Subsidies
- C.
Quotas
- D.
All of the above
- 8.Subsidies in the US and European Union, encourage farmers to produce more, forcing down the world
- A.
Tariff
- B.
Benchmark
- C.
Quota
- D.
Price
- 9.Due to subsidies in developed countries, small scale farmers in developing countries are effectively deprived of the ability to:
- A.
Export to developed countries
- B.
Earn a living
- C.
Provide for their families
- D.
All of the above.
- 10.What is tariff escalation?
- A.
The rate of tariffs on goods rises the more the goods are bought by consumers
- B.
The rate of tariffs on goods rises the more the goods are processed
- C.
The rate of tariffs on goods rises when dumping can be proved by the WTO
- D.
The rate of tariffs on goods rises in accordance with the supply / demand for the good.
- 11.Due to tariff escalation, there is little incentive for developing countries to _____________ away from producing raw materials to producing more processed goods.
- A.
Trade
- B.
Manufacturer
- C.
Diversify
- D.
Stay
- 12.Tariff escalation is widely observed in:
- A.
Textile markets
- B.
Agriculture markets
- C.
Mineral-resource markets
- D.
Foreign exchange markets
- 13.Another factor that prevents developing countries from gaining access to international markets is that some have _______________ currencies.
- A.
Soft
- B.
Free floating
- C.
Low value
- D.
Non-convertible
- 14.Economic growth is not economic ________________ but it can generate extra income for governments, firms and people that may led to ______________
- A.
Progress
- B.
Development
- C.
Trade
- D.
Opportunity
- 15.Import substitution is more formally known as import substitution _______________
- A.
Trade
- B.
Industrialization (ISI)
- C.
Development (ISD)
- D.
Programs (ISP)
- 16.When a developing country adopts a policy of ISI it will:
- A.
Produce goods domestically rather than import them.
- B.
Import more essential goods to satisfy domestic demand but export goods where the country has a comparative advantage.
- C.
Produce goods domestically and export all these goods to the world.
- D.
Import about the same volume of exports.
- 17.ISI is the opposite of:
- A.
Comparative advantage
- B.
Absolute advantage
- C.
Export led growth
- D.
All of the above.
- 18.Economists that believe in free trade would:
- A.
Support a policy of ISI, but only in the short term.
- B.
Oppose a policy of ISI
- C.
Argue for a policy of export led growth
- D.
Two of the above answers are correct.
- 19.Traditionally countries which adopted a policy of ISI focused on industries that were:
- A.
Labour-intensive
- B.
Low-skilled manufacturing
- C.
Not dependent on large investments in capital equipment.
- D.
All of the above
- 20.With a policy of ISI a government will:
- A.
Provide subsidies to domestic industries and implement tariffs against imports.
- B.
Remove barriers to free trade, but maintain subsidies to local industries
- C.
Provide subsidies to domestic industries, but export more to the developed world.
- D.
None of the above.
- 21.The advantages of ISI include:
- A.
It protects local jobs
- B.
It protects local cultures and social habits
- C.
It protects an economy from MNCS
- D.
All of the above
- 22.ISI means that a country does not enjoy the benefits to be gained from _______________________ and specialization and therefore it could be producing products relatively inefficiently.
- A.
Absolute advantage
- B.
Comparative advantage
- C.
Nationalization
- D.
WTO membership
- 23.When countries implement a policy of ISI other countries may:
- A.
Welcome the decision and attempt to increase trade with this country
- B.
Implement similar policies, while trying to encourage more trade.
- C.
Take retaliatory measures, involving more protectionist policies.
- D.
Adopt the counter-argument and implement less protectionist measures.
- 24.Countries which have adopted ISI policies include:
- A.
Argentina
- B.
Brazil
- C.
Mexico
- D.
All of the above.
- 25.Export promotion or export led growth is an ________________ oriented growth strategy.
- A.
Inward
- B.
Outward
- C.
International
- D.
None of the above.
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