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INTERNATIONAL TRADE

Circle the letter next to the correct answer.

1. International trade may best be defined as:

a) Bartering of goods and services


b) A local company buying from a foreign company
c) Selling of goods and services to other countries
d) Buying and selling of good and services across national boundaries

2. Which of the following is not a benefit of international trade?

a) Gives greater access to goods and services


b) Contributes to the spread of technology
c) Encourage competition which leads to lower prices and good quality
d) Allows countries to impose tariffs to protect their home industries

3. The meaning of the trade gap is that there is:

a) A deficit on the current account of the balance of payments


b) A surplus on the current account of the balance of payments
c) A deficit on the balance of trade
d) A surplus on the balance of trade

4. Which of the following describe the purpose of tariffs?

I. To control the volume of exports


II. To raise revenue
III. To raise the price of goods leaving the country
IV. To raise the price of good entering the country

a) I only
b) I and III only
c) II only
d) II and IV only

5. Possible gains from international trade are:

a) The advantages of specialization that can be obtained


b) Increased competition
c) More scope for the economies of large-scale production
d) All of the above

6. Free Trade means that:

a) Manufacturers are given tax free concessions by governments


b) No restrictions are imposed on international trade
c) Persuasive and competitive advertising are prohibited by government
d) Purchasers are free to buy any amount of goods at market price

7. The imposition of import controls helps a country to:

a) Increase imports and decrease exports


b) Produce more goods of a marketable quality
c) Protect its infant industries
d) Become more freely industrialized

8. Imports from abroad CANNOT be restricted by the imposition of:

a) Excise duties
b) Import quotas
c) Tariffs
d) Restriction of foreign exchange to importers
9. Restrictions are usually placed on goods imported into a country in order to:

I. Protect home industries


II. Encourage competition for home-produced goods
III. Ensure the flow of adequate supplies of foreign goods into a country
IV. Prohibit goods considered harmful to health and morals

a) I and IV only
b) II and III only
c) I, II and III only
d) I, II and IV only

10. Member nations of GATT meet at regular intervals to:

a) Determine the size of loans to be given to Third World countries


b) Set the price of petroleum products
c) Discuss feasibility studies carried out in under-developed countries wanting to
finance new industries
d) Negotiate agreement to reduce quotas, tariffs and other restrictions

11. A government would use subsidies to:

a) Build cheap factories


b) Increase the cost of imported goods
c) Redistribute incomes
d) Reduce the cost of home produced goods

12. A quota is:

a) A government ban on foreign imports


b) A quantity limit on imports
c) A tax on imports
d) A grant paid to importers

13. A trade gap would exist in the B.V.I. if it:

a) Sold more goods to foreign countries that it bought


b) Could not balance its trade with the other Caribbean countries
c) Had a fall in its international currency reserves
d) Bought more goods from foreign counties than it sold

14. If two countries, A and B, divide their factors of production equally between
producing bauxite and sugar, their output is:

Country Bauxite Sugar


A 200 2,000
B 1200 2,400

This schedule suggests a strong possibility that both countries will be better
off if:

a) A specializes in producing bauxite and B sugar


b) A specializes in producing sugar and B bauxite
c) Each country produces both bauxite and sugar
d) A specializes in producing sugar but B produces both sugar and bauxite

Questions 15-19 are based on the table set out below:

Output per man hour


Commodity Trinidad Guyana
Flour (bags) 10 8
Oil (barrels) 20 12

15. Which country (if any) has comparative advantages in producing flour as
against oil?

a) Guyana
b) Trinidad
c) Both countries
d) Neither country

16. Which country (if any) has absolute advantage in producing both commodities?
a) Guyana
b) Trinidad
c) Both Countries
d) Neither country

17. Which product should Trinidad specialize in producing and exporting?

a) Flour only
b) Oil only
c) Both Flour and oil
d) Neither of the commodities

18. How many bags of flour would a Trinidadian trader, wishing to exchange oil for
flour within Trinidad, get for 20 barrels of oil?

a) 20
b) 12
c) 10
d) 8

19. If the Trinidadian trader takes his 20 barrels of oil to Guyana, how many bags of
flour should he get for them?

a) 30
b) 20
c) 13 1/3
d) 8

The table below refers to questions 20 and 21.

Steel Food

Country A 10 4
Country B 8 6

20. Which of the following is a true statement?

a) Country A has an absolute advantage in both goods


b) Country B has an absolute advantage in both goods
c) Country C has an absolute advantage in steel
d) Country B has an absolute advantage in steel

21. The table shows that:

a) Country A has a comparative advantage in both goods


b) Country B has a comparative advantage in both goods
c) Country A has a comparative advantage in food
d) Country B has a comparative advantage in food

22. Which item in the following list is not an invisible import?

a) Fees paid to foreign ship owners for freight


b) Government spending on embassies abroad
c) Payment to foreign airlines for freight
d) Profit received from investment abroad by home firms

23. An order by a Caribbean importer for two hundred European cars represents

a) an invisible import
b) an invisible export
c) a visible import
d) a visible export

24. In a certain year there is an unfavorable balance of trade of $1,354m and a


surplus on the invisible account of $1,582m. The current account balance is:

a) +$1,582m
b) -$1,354m
c) +$228m
d) -$228m

25. The following figures relate to a countrys balance of payments

Imports Exports Invisible account balance


$7,882m $7,885m +$638m

The balance of payments on current account is:

a) -$631m
b) +625m
c) +$631m
d) -$624m

Questions 26 28 are based upon the figures shown below.

Year 1 ($M) Year 2 ($M)

Visible export 3,500 4,000


Visible imports 4,000 5,000
Invisible exports 3,000 4,000
Invisible imports 2,400 3,700
Capital flow (net) 500 (-) 500 (+)

26. The percentage change between the two years in the balance of trade is

a) an increase of 50 per cent


b) an increase of 100 per cent
c) a decrease of 50 per cent
d) a decrease of 100 per cent

27. The current account balance in Year 2 is:

a) +$100m
b) -$100m
c) +$700m
d) -$700m

28. The current account balance in year 2 is:

a) +$100m
b) -$100m
c) +$700m
d) -$700m

29. In a certain year goods worth $7,902m are imported and goods worth $7,893
are exported. The balance of trade is:

a) +$7,893m
b) -$9m
a) -$7,902m
b) -$9m

Questions 30 -32 are based on the figures shown below.

$M
Visible imports 9,000
Visible exports 8,600
Invisible imports 2,500
Invisible exports 2,700
Investments in foreign countries 450
Foreign investment in home country 400

30. The balance of trade is:

a) a surplus of $400m
b) a deficit of $400m
c) a surplus of $200m
d) a deficit of $600m
31. The current balance is:

a) a deficit of $200m
b) a surplus of $200m
c) a deficit of $150m
d) a surplus of $150m

32. The total currency flow is:

a) a deficit of $200m
b) a surplus of $200m
c) a deficit of $150m
d) a surplus of $150 m

33. The immediate effect of devaluation by a country is:

a) imported goods become cheaper


b) exported goods become dearer
c) imported goods become dearer
d) prices remain unaltered

34. A deficit on the balance of payments on the current account means:

e) invisible exports exceed visible imports


a) visible exports exceed invisible imports
b) invisible imports exceed invisible exports
c) visible and invisible imports exceed visible and invisible exports

35. Goods sold to overseas buyers represent:

a) Invisible imports
b) Visible exports
c) Invisible exports
d) Visible imports

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