WEEK 7-8 Flashcards by Frances Joanne Arado

In the context of free trade, what does the term “comparative advantage” refer to?

a. The balance of trade between two countries
b. The practice of imposing tariffs on all imports
c. The ability of a country to produce all goods domestically without imports
d. The situation where a country specializes in producing goods it can produce most efficiently

d. The situation where a country specializes in producing goods it can produce most efficiently

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What does the term “infant industry” refer to in the context of protectionism?

a. Industries that are monopolies in the domestic market
b. Well-established and highly profitable industries
c. Industries that have reached maturity and no longer require government support
d. Emerging and vulnerable industries that need protection from foreign competition

d. Emerging and vulnerable industries that need protection from foreign competition

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What is the primary function of the WTO’s Dispute Settlement Body (DSB)?

a. To arbitrate disputes between member countries
b. To provide technical assistance to developing nations
c. To review the WTO’s budget and financial matters
d. To impose trade sanctions on non-compliant members

a. To arbitrate disputes between member countries

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What is the primary purpose of a trade embargo?

a. To limit the export of specific goods to certain countries.
b. To encourage trade and economic cooperation with specific nations.
c. To prohibit all trade with a specific country for political or economic reasons.
d. To impose trade restrictions on all countries.

c. To prohibit all trade with a specific country for political or economic reasons.

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Which statement is incorrect

a. GATT had a less formal and effective dispute settlement mechanism compared to the WTO. It relied heavily on voluntary negotiations and lacked the binding nature of the WTO’s dispute settlement system.

b. GATT relied on voluntary compliance, and enforcement of its rules and agreements was weaker

c. WTO has the authority to enforce its decisions and agreements. It can authorize the imposition of trade sanctions against member countries that fail to comply with its rulings.

d. The WTO is a non- formal international organization with its own legal framework and a Secretariat to administer its functions.

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Which GATT principle prohibits discrimination between trading partners and requires that countries treat all members equally?

a. Most-Favored-Nation (MFN) principle
b. Transparency principle
c. Reciprocity principle
d. National Treatment principle

a. Most-Favored-Nation (MFN) principle

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What is the primary objective of the WTO?

a. Promoting global economic development
b. Ensuring fair and open international trade
c. Regulating commodity prices
d. Facilitating bilateral trade agreements

b. Ensuring fair and open international trade

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General Agreement on Tariffs and Trade (GATT) went into effect?

a. 1945
b. 1948
c. 1946
d. 1947

b. 1948

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GATT was initially signed by how many countries, including the USA?

a. 22
b. 20
c. 23
d. 25

c. 23

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Name the Agreement which was signed by the United States, Canada and Mexico towards removing trade barriers?

a. SEATO
b. CENTO
c. NAFTA
d. None of them

c. NAFTA

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When was GATT replaced with WTO?

a. 1994
b. 1992
c. 1995
d. 1993

c. 1995

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Does WTO come as the third economic pillar of world-wide dimensions along with the World Bank and

a. International Monetary Funds (IMF)
b. International Economic Association (IEA)
c. International Funding Organization (IFO)
d. International Development Bank (IDB)

a. International Monetary Funds (IMF)

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Which of the following is the main objective behind the establishment of WTO?

a. To settle disputes between nations
b. To widen the principle of free Trade to sectors such as services and agriculture
c. To cover more areas than GATT
d. All of them

d. All of them

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Which of the following is the headquarters of the World Trade Organization (WTO)?

a. Paris
b. New York
c. Geneva
d. Madrid

c. Geneva

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How many countries are the current members of WTO?

a. 181
b. 191
c. 161
d. 123

c. 161

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China became a member of world trade Organization in

a. 1945
b. 1660
c. 1990
d. 2001

d. 2001

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When did World Trade Organization come into effect?

a. February 5, 1994,
b. January 1, 1995
c. March 8, 1996
d. April 8, 1994

b. January 1, 1995

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Which of the following is classed as a tariff barrier?

a Red Tape
b. Subsidies
c. Taxes on Imports
d. Embargo

c. Taxes on Imports

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The U.S. band beef imports from Canada after a Mad Cow Disease outbreak there. This is an example of which type of barrier to trade?

a. Standards
b. Subsidy
c. Quota
d. Tariff

a. Standards

Government payments to a local supplier to reduce the supplier cost. This helps local businesses survive because it is getting direct aid from the federal government. What is this called?

a. Balance of trade
b. Exchange rate
c. Protectionism
d. Subsidy

d. Subsidy

Limit of the amount (quantity) of a good that can be imported is called a(n).

a. Subsidy
b. Exports
c. Quota
d. Appreciation

c. Quota

A protective tariff is intended to protect the;

a. Consumer from higher prices on foreign goods
b. Manufacturer from higher prices on materials produced within the country
c. Consumer from higher price goods produced within the country.
d. Manufacturer or farmer from lower priced goods imported into the country.

d. Manufacturer or farmer from lower priced goods imported into the country.

All of these restrict international Trade EXCEPT

a. Quotas
b. Embargoes
c. Subsidies
d. Trade deficits

d. Trade deficits

What are tariffs?

a. Political boundaries between nations
b. Disputes between state government over boundaries
c. Military blockades of specific countries
d. Taxes on the import or export of goods from a country

d. Taxes on the import or export of goods from a country

**When one country refuses to trade with another country because of political or infringements of human rights it is called:** a. Standard of Care b. Embargo c. Subsidy d. Revenue tariff

b. Embargo

**In 2019, China placed a tax on imported American poultry of u to 105.4%. This is an example of a?** a. Tariff b. Embargo c. Market d. Quotas

a. Tariff

**Japanese auto firms agree to limits set in Washington D.C., on the number of Japanese cars that may be sold in the U.S.** a. Embargo b. Tariff c. Quotas d. Subsidy

c. Quotas

**Which of the following would be an example of foreign direct investment from the United States to Taiwan?** I. U.S. bank buys bonds issued by a Taiwan computer manufacturer. II. A U.S. car manufacturer enters into a contract with a Taiwan firm for the latter to make and sell it spark plugs. III. The state of California rents space in Taipei for one of its employees to use promoting tourism in California. IV. Warren Buffet (a U.S. citizen) buys a controlling share in a Taiwanese electronics firm.

IV. Warren Buffet (a U.S. citizen) buys a controlling share in a Taiwanese electronics firm.

**What is the relationship between foreign direct investment (FDI) and multinational enterprises (MNEs)?** a. An MNE never involves FDI. b. FDI is never done by an MNE. c. All MNEs involve FDI. d. All FDI is done by MNEs

c. All MNEs involve FDI.

**If a German manufacturer of household appliances wants to take advantage of the cheaper labor available in the Czech Republic, which of the following actions will not serve that purpose?** a. Build a manufacturing subsidiary there and employ Czech workers. b. Build a plant in the Czech Republic and send all German workers to operate it c. License a Czech firm to produce its products under its own label. d. A contract for a Czech firm to do some of the processing for it.

b. Build a plant in the Czech Republic and send all German workers to operate it

**The Foreign Direct Investment includes** a .Tangible Goods b. Intangible Goods c. Intellectual Property d. Human Resources

a .Tangible Goods

**For spreading information, the foreign policy decision-makers rely on;** a. Media b. Politicians c. Bureaucrats d. Public

a. Media

**More expansion of foreign direct investment can boost** a. Employment c. Money circulation b. Unemployment d. Demand

a. Employment

**When capital and labor are moved internationally to will develop the:** a. Gains more from trade b. Gains more from income c. Economic growth d. None of the Above

b. Gains more from income

**Which of the following is an example of horizontal FDI?** a. Ford Motor Company acquires the British Jaguar b. Lenovo, a Chinese company, acquires IBM's personal computing business c. The Venezuelan government acquires the Venezuelan operations of B.P. Petroleum, a British Firm d. General Motors Corporation builds a plan in Chins to supply Buicks to the Chinese market

a. Ford Motor Company acquires the British Jaguar

**Which of the following statement refer to a vertical FDI?** a. Ford Motors company establishes a plant in Canada b. GM opens a plant in India c. BMW opens a plant in Bilbao, Spain d. None of the Above

b. GM opens a plant in India

*Suppose that Mexico has previously had restrictions on inflows of foreign direct investment from all sources, including the United States. Then suppose that they remove those restrictions on flows from the United States in a particular industry, say hammocks. As a result, several hammock producers in the U.S. move production to Mexico via FDI. Indicate for each of the groups below whether you expect them to gain or to lose from this flow of investment.* **Workers previously employed in hammock production in the U.S.** a. Gain b. Lose

b. Lose

a. Gain

*Suppose that Mexico has previously had restrictions on inflows of foreign direct investment from all sources, including the United States. Then suppose that they remove those restrictions on flows from the United States in a particular industry, say hammocks. As a result, several hammock producers in the U.S. move production to Mexico via FDI. Indicate for each of the groups below whether you expect them to gain or to lose from this flow of investment.* **Owners of firms that move production to Mexico.** a. Gain b. Lose

b. Lose

*Suppose that Mexico has previously had restrictions on inflows of foreign direct investment from all sources, including the United States. Then suppose that they remove those restrictions on flows from the United States in a particular industry, say hammocks. As a result, several hammock producers in the U.S. move production to Mexico via FDI. Indicate for each of the groups below whether you expect them to gain or to lose from this flow of investment.* **Owners of U.S. hammock firms that do not move production to Mexico.** a. Gain b. Lose

b. Lose

*Suppose that Mexico has previously had restrictions on inflows of foreign direct investment from all sources, including the United States. Then suppose that they remove those restrictions on flows from the United States in a particular industry, say hammocks. As a result, several hammock producers in the U.S. move production to Mexico via FDI. Indicate for each of the groups below whether you expect them to gain or to lose from this flow of investment.* **Owners of firms in Mexico that previously produced hammocks.** a. Gain b. Lose

b. Lose

*Suppose that Mexico has previously had restrictions on inflows of foreign direct investment from all sources, including the United States. Then suppose that they remove those restrictions on flows from the United States in a particular industry, say hammocks. As a result, several hammock producers in the U.S. move production to Mexico via FDI. Indicate for each of the groups below whether you expect them to gain or to lose from this flow of investment.* **Consumers of hammocks (assume that there already was free Trade in hammocks).** a. Gain b. Lose

a. Gain

Malipayong Buyog, a Filipino Corp. opening restaurants in Singapore is an example of _______________. a. Vertical FDI b. Linearforeign direct investment c. Horizontal FDI d. Aligned FDI

c. Horizontal FDI

**Which of the following is NOT a common feature of FDI?** a. Establishment of a lasting interest in a foreign enterprise b. Temporary investment for speculative purposes c. Long-term commitment d. Transfer of technology and skills

b. Temporary investment for speculative purposes

**Which statement that refers to retaliatory tariff** a. Can make domestic producers more lethargic and inefficient and unable to face foreign competition in the long run. b. Imposed to protect the home industries from the cut-throat competition from the foreign-produced goods. c. Imposed primarily for generating more revenues for the government d. Imposed tariffs upon the exports from the home country and the latter imposes tariffs against the products of the former.

d. Imposed tariffs upon the exports from the home country and the latter imposes tariffs against the products of the former.

**What is a countervailing duty (CVD) designed to address?** a. Currency exchange rate fluctuations b. Unfair trade practices by domestic producers c. Excessive profits earned by multinational corporations d. Subsidies given to foreign producers that harm domestic industries

d. Subsidies given to foreign producers that harm domestic industries

**What is the primary characteristic of Foreign Direct Investment (FDI)?** a. Portfolio investment in stocks and bonds b. Ownership and control in a foreign company c. Short-term capital inflow d. Government grants for international projects

b. Ownership and control in a foreign company