Chapter 19

Question 1

What is international trade?

Answer 1

Trade across national borders

Question 2

What are the basic principles of trade?

Answer 2

1. Trade makes people better off when preferences differ
2. Trade increases productivity through specialization and the division of knowledge
3. Trade increases productivity through comparative advantage

Question 3

The difference between domestic demand and domestic supply is made up by..

Answer 3

imports

Question 4

What is protectionism?

Answer 4

the economic policy of restraining trade

through quotas, tariffs, or other regulations that burden foreign producers but not domestic production.

Question 5

What is a tariff?

Answer 5

a tax on imports

Question 6

What is a quota?

Answer 6

restrictions on the quantity of goods that can be imported.

Question 7

What are 4 effects of a tariff?

Answer 7

1. Domestic suppliers respond to the higher price by increasing production
2. Domestic consumers respond to the higher price by buying less
3. Imports decrease
4. Gov’t revenue=tariff amount times the quantity of imports

Question 8

5 arguments against international trade

Answer 8

1. Trade reduces the number of jobs in the U.S.
2. It’s wrong to trade with countries that use child
   labor.
3. We need to keep certain jobs at home for
   national security.
4. We need to keep certain “key” industries at
   home because of beneficial spillovers onto other
   sectors of the economy.
5. We can increase U.S. well-being with strategic
   trade protectionism.

Question 9

When US tariffs are reduced, the industry contracts and jobs are..

Answer 9

lost

Question 10

Foreign producers use the US currency to purchase US goods. This increases..

Answer 10

exports

Question 11

What is the real cause of child labor?

Answer 11

Poverty