Module 2

Question 1

What were the necessities that were usually exchanged in early international trade?

Answer 1

Food
Materials
Tools

Question 2

This is a volcanic glass that was traded as a material to create tools and weapons.

Answer 2

Obsidian

Question 3

Where was the obsidian usually traded in?

Answer 3

North Africa
Mediterranean
Near East

Question 4

The obsidian trade was critical to what revolution?

Answer 4

Neolithic revolution

Question 5

This was used to preserve food and used as currency.

Answer 5

Salt

Question 6

This was used to transport salt across long distances.

Answer 6

Caravans

Question 7

What were the mediums of exchange used in early trade?

Answer 7

Barter
Commodities as currency

Question 8

This is an early trade route that facilitated the exchange of goods and ideas between different cultures and regions.

Answer 8

Silk Road

Question 9

To which did traders rely on due to the absence of a standard system of currency?

Answer 9

Trust and reputation of traders

Question 10

What is considered the foundation of economic growth and development?

Answer 10

Exchange of goods and services

Question 11

This is an exchange involving a good or service conducted between at least 2 countries.

Answer 11

International trade

Question 12

What are the 2 forms of international trade?

Answer 12

Import
Export

Question 13

This happens when a good or service is sold to a foreign country.

Answer 13

Export

Question 14

This happens when a good or service is brought into the domestic country.

Answer 14

Import

Question 15

International trade is a form of economic linkage. What are the 3 other forms?

Answer 15

Foreign financial investment
MNCs
Foreign employees

Question 16

What is the impetus of international trade?

Answer 16

To exploit the principle of comparative advantage

Question 17

This is a country’s ability can produce a good or service more efficiently than another.

Answer 17

Comparative advantage

Question 18

What forms the foundation of international trade?

Answer 18

Comparative Advantage

Question 19

This is the earliest and simplest form of international business.

Answer 19

Trade

Question 20

This brings funds and business culture from abroad, creates new jobs, and introduces innovative technologies.

Answer 20

FDI

Question 21

This is a theory of international trade that supports the premise that a nation could only gain from trade if it had trade surplus.

Answer 21

Mercantilism

Question 22

This is the oldest trade theory.

Answer 22

Mercantilism

Question 23

This theory believed that for a nation to become wealthy, it had to export as much as possible, exceeding those of imports.

Answer 23

Mercantilism

Question 24

This theory believed that metals, such as gold and silver, were deemed indispensable to a nation’s wealth. So, if a nation has no mines, it should import these precious metals.

Answer 24

Mercantilism

Question 25

For a trade balance to be favorable, what must it be?

Answer 25

An excess of exports over imports

Question 26

Mercantilism is common in which continent and in what centuries?

Answer 26

Europe in the 16th to 18th century

Question 27

He is a Scottish social scientist who devised the absolute advantage theory.

Answer 27

Adam Smith

Question 28

This exists when one country can produce a good more efficiently than another.

Answer 28

Absolute advantage

Question 29

This theory says that countries should focus on producing the products that they can produce efficiently at a lower cost as compared to other countries.

Answer 29

Theory of Absolute Advantage

Question 30

This is the ability of a country to produce goods or deliver services at a lower opportunity cost than other countries.

Answer 30

Comparative advantage

Question 31

Comparative advantage must be about what kind of efficiency rather than overall efficiency?

Answer 31

Relative efficiency

Question 32

This is proposed by David Ricardo in 1817 and is a refinement of Adam Smith's theory. It claims that a country should produce the commodity in which it has the greatest advantage.

Answer 32

Theory of Comparative Advantage

Question 33

These two people showed that nations primarily export goods and service that intensely use their abundant factors of production and import goods that intensively use its scarce factors.

Answer 33

Eli Heckscher Bertil Ohlin

Question 34

This theory attributes the comparative advantage of a nation to its factor endowments.

Answer 34

Heckscher-Ohlin Theory

Question 35

What are the key assumptions for the H-O theory to work?

Answer 35

Perfect competition Perfect immobility of factors of production

Question 36

This theory states that when factors are allowed to move freely among trading nations, efficiency increases, and leads to superior allocation of production of goods and services among countries.

Answer 36

Factor Price Equalization theory

Question 37

He is an American economist famous for his Five Forces Model.

Answer 37

Michael Porter

Question 38

This is the title of Porter's book where he introduced the national competitive advantage theory.

Answer 38

The Competitive Advantage of Nations

Question 39

This theory provides a model in terms of a diamond that consists of four groups of company-specific and country-specific characteristics.

Answer 39

Porter's Model of National Competitive Advantage

Question 40

This theory identified the characteristics that made firms and industries in countries "winners" or "losers" in international trade.

Answer 40

Porter's Model of National Competitive Advantage

Question 41

What are the four groups in Porter's diamond model?

Answer 41

Factor Conditions Demand Conditions Related and supporting industries Firm structure, strategy, and rivalry

Question 42

What are the 2 other critical variables in Porter's diamond model?

Answer 42

Chance Government

Question 43

He is an American economist who began working on analyzing the patterns of international trade by observing the effects of economies of scale.

Answer 43

Paul Krugman

Question 44

This theory emphasizes the role of economies of scale, increasing returns to scale and imperfect competition in explaining international trade patterns.

Answer 44

New Trade Theory

Question 45

He introduced the Gravity Model of Trade.

Answer 45

Walter Isard in 1955

Question 46

This theory argues that trade between two countries is proportional to the distance between them. It essentially predicts bilateral trade flows based on economic sizes and distance.

Answer 46

Gravity Model of Trade

Question 47

This theory essentially argues that large and wealthy countries tend to trade more with each other and geographical proximity tends to increase trade.

Answer 47

Gravity Model of Trade

Question 48

What are the 3 types of policies?

Answer 48

Monetary policy Fiscal policy Trade policy

Question 49

This refers to all government actions that seek to alter the free flow of merchandise or services between countries.

Answer 49

Trade policy

Question 50

These are taxes on imports.

Answer 50

Tariffs

Question 51

What are the 2 forms of tariffs?

Answer 51

Ad valorem Specific

Question 52

This tariff assigns a fixed dollar amount per physical unit.

Answer 52

Specific tariff

Question 53

This tariff is a constant percentage of the monetary value of one unit of the imported good.

Answer 53

Ad valorem tariff

Question 54

This refer to low tariff rates applied to specific imports coming from certain countries. Under this, the same good imported from a country outside of a preferred group will be subject to higher tariff

Answer 54

Preferential duties

Question 55

In this system, a large number of developed countries have agreed to permit duty-free imports of a selected list of products that originate from specific developing countries.

Answer 55

Generalized System of Preferences

Question 56

These are measures to encourage domestic businesses to expand into international markets such as tax breaks or government grants.

Answer 56

Export incentives

Question 57

These are bilateral or multilateral treaties that reduce barriers to trade and increase economic cooperation.

Answer 57

Trade agreements

Question 58

How many tariff rates were lowered by GATT?

Answer 58

45,000

Question 59

This body sets rules of trade among nations on a near-global basis.

Answer 59

WTO

Question 60

Under this principle, any tariff concession granted by one member to any other country will automatically be extended to all other WTO member countries.

Answer 60

Most favored nation principle

Question 61

These limit the amount of products that can be imported into a country.

Answer 61

Import quotas or quantitative restrictions

Question 62

This occurs when an efficient exporting nation agrees to temporarily limit exports of a product to another country to allow competitors in the importing country to become more efficient within a set period of time.

Answer 62

Voluntary export restraint (VER)

Question 63

These are another form of non-tariff barrier. Countries may require that a certain percentage of the value of an import be domestically sourced

Answer 63

Domestic content provisions

Question 64

These are financial assistance given to domestic industries.

Answer 64

Subsidies

Question 65

This refers to agreements between countries that aim to achieve certain trade outcomes for the countries involved.

Answer 65

Managed trade

Question 66

What are the 2 rationales of managed trade?

Answer 66

Socioeconomic rationale Geopolitical rationale

Question 67

In this rationale, it explores the relative negative impact of free trade upon society's welfare.

Answer 67

Socioeconomic rationale

Question 68

Here, an exporter of goods or services commits to import goods or services of corresponding value.

Answer 68

Countertrade

Question 69

The terms of export and import exchange are predetermined through what?

Answer 69

Negotiations

Question 70

These are formed to control prices and export revenues. It is caused by fluctuations in export volume and prices.

Answer 70

Export cartels

Question 71

This implies that economies of scale and the comparative advantage of an industry can only be exploited by providing temporary protection.

Answer 71

Infant industry argument

Question 72

This rationale has the objective of sacrificing some economic efficiency for the greater good of the country in terms of national security, protection of critical industries, and international commerce.

Answer 72

Geopolitical rationale

Question 73

These are meant to punish a country for perceived unacceptable international behavior. These are restrictions or bans on traded with specific countries, often for political reasons.

Answer 73

Embargoes or sanctions