Chapter 2

Question 1

What has led to countries becoming more economically interdependent than ever before in modern history?

Answer 1

World trade

Question 2

What has world trade resulted in? (Two things)

Answer 2

• Countries often attempt to control trade

* Protectionism more likely as competition intensifies

Question 3

True/False: World trade has always been very prevalent.

Answer 3

False

Question 4

World trade was disrupted in the 1st half of the 20th century by what?

Answer 4

• Depression era (1930s)
• Two world wars
• Smoot-Hawley act raised U.S. tariffs; 60 countries retaliated

Question 5

World trade was disrupted in the 2nd half of the 20th century by what?

Answer 5

Social Marxism vs. Capitalism

Question 6

The U.S. stimulated world trade in what two ways?

Answer 6

• Spread capitalism after WWII

* World Trade Agreements

Question 7

How did the U.S. spread capitalism after WWII?

Answer 7

• With the Marshall plan: aided Japan and undeveloped countries
• by making other countries’ economies stronger enabling them to buy more from the U.S.

Question 8

What two world trade agreements stimulated world trade?

Answer 8

• GATT (General Agreement on Tariffs and Trade)

* WTO (World Trade Organization)

Question 9

When did U.S. companies begin to export and make significant investments overseas?

Answer 9

1950s

Question 10

What two fronts did U.S. multinational corporations face major challenges on and when did this occur?

Answer 10

• Resistance to investments
• Increasing competition in export markets

*1960s

Question 11

In what countries was there increasing competition in export markets during the 1960s?

Answer 11

Japan, Germany, Newly industrialized countries (NIC) and developing countries

Question 12

The U.S. role as an economic powerhouse was challenged on what two fronts?

Answer 12

• U.S. position in world trade

* U.S. trade deficit (importing more than exporting)

Question 13

In 1950 the U.S. position was ___% of the world GDP.

In 2012 it was ____% of the world GDP.

Answer 13

39%

Less than 25%

Question 14

When did the U.S. trade deficit begin and what was it in 2011?

Answer 14

• 1971

* over 700 billion

Question 15

In the 1980s and 90s, three free trade zones were created. What are they?

Answer 15

1) NAFTA
2) AFTA
3) APEC

Question 16

What are the OECD predictions of annual economic growth for the next 25 years: (there’s two)

These growths will result in economic power and influence moving from ______________ to _______________.

Answer 16

Developed countries - 3% per year
Developing countries - 6% per year

Industrialized nations to developing nations

Question 17

What is: the system of accounts that records a nations international finance transactions?

Answer 17

Balance of payments

Question 18

Which of the following are true for balance of payments:

1) Transactions recorded annually
2) Must always be in balance
3) A record of condition, not determinant of condition

Answer 18

All of them are true

Question 19

List the three accounts of balance of payments and some examples of each.

Answer 19

1) Current account: exports, imports, services, funds
2) Capital account: investments and short-term capital
3) Reserves account: gold, foreign exchange, and liabilities

Question 20

What is it called when a country sells more goods/services than it buys?

What are two results of this?

Answer 20

Trade surplus

1) Greater demand for the currency
2) Currency will appreciate in value (more valuable)

Question 21

What is it called when a country buys more goods/services than it sells?

What are two results of this?

Answer 21

Trade deficit

1) Less demand for the currency
2) Currency will depreciate in value (less valuable)

Question 22

What are attempts by a country to inhibit the entry of products and services from foreign companies by imposing trade barriers called?

List the three arguments for this act.

Answer 22

Protectionism

1) Protection of infant industry
2) National defense
3) Industrialization of a low wage nation

Question 23

True/false: Protectionism is bad for consumers but good for business/industries.

Answer 23

True

Question 24

Lists the 12 trade barriers

Answer 24

1) Tariffs
2) Quota
3) Import license
4) Voluntary export restraints (VER)
5) Boycott
6) Embargo
7) Blocked currency
8) Government Approval
9) Standards
10) Antidumping penalties
11) Dumping
12) Domestic subsidies and economic stimuli

Question 25

What trade barrier is this: taxes imposed by a government on goods entering its borders

Answer 25

Tariffs

Question 26

What trade barrier is this: a specific unit or dollar limit applied to a particular type of good (increases price of good)

Answer 26

Quota

Question 27

What trade barrier is this: limits quantities on a case case-by-case basis

Answer 27

Import license

Question 28

What trade barrier is this: similar to a quota except that exporting country sets the limit

Answer 28

Voluntary Export Restraints (VER)

Question 29

What trade barrier is: absolute restriction against the purchase and importation of certain goods and/or services from other countries

Answer 29

Boycott

Question 30

What trade barrier is this: refusal to sell to a specific country

Answer 30

Embargo

Question 31

What trade barrier is this: refusing to allow an importer to exchange its national currency for the exporter’s currency; cuts off importing

Answer 31

Blocked Currency

Question 32

What trade barrier is this: exchange permit needed to exchange currencies; permit may stipulate rate of exchange and time of exchange

Answer 32

Government Approval

Question 33

What trade barrier is this: used to protect health, safety, and product quality; may be used in a discriminating way; number of standards is complicated

Answer 33

Standards

Question 34

What trade barrier is this: taxes/duties applied to foreign products that are “dumped” in one’s country

Answer 34

Antidumping Penalties

Question 35

What trade barrier is this: exporting products to another country at a price lower than it cost to produce in that country

Answer 35

Dumping

Question 36

What trade barrier is this: often used in agriculture; gives companies who received them an unfair advantage

Answer 36

Domestic Subsidies and Economic Stimuli

Question 37

What act helped ease trade restrictions, assisted businesses to become more competitive in a global market, and corrected perceived injustices in trade practices

Answer 37

Omnibus Trade and Competitiveness Act of 1988

Question 38

This agreement eased trade restrictions, was the 1st worldwide tariff agreement, and was established after WWII by 23 countries

Answer 38

General Agreement on Tariffs and Trade (GATT)

Question 39

What are the four important outcomes of the Uruguay Round of 1994?

Answer 39

1) Eliminated barriers in services trade
2) Eliminated foreign investment restrictions
3) Protection of intellectual property rights
4) Creation of World Trade Organization

Question 40

What year did the Uruguay Round of 1994 begin?

How many countries agreed to this act?

Answer 40

1988

80

Question 41

What was created to assist nations in becoming and remaining economically viable?

What are its three objectives?

Answer 41

International Monetary Fund (IMF)

1) Surveillance
2) Technical Assistance and Training
3) Lending

Question 42

What is the goal of the World Bank Group?

The WBG works primarily with _________________

Answer 42

Reduction of poverty and improvement of living standards

Developing countries

Question 43

List the unintended consequences of globalizing:

Answer 43

1) Environmental concerns
2) Worker exploitation and domestic job losses
3) Cultural extinction: idea that one day we will all share the same culture
4) Higher oil prices
5) Diminished sovereignty of nations

Question 44

Anti-globalization protest featured what type of protest?

Answer 44

Anti-sweatshop