Chapter 5

Question 0

Mercantilist practices were seen as essential to state power because

Answer 0

The accumulation of precious metals could be converted into military assets when needed

Question 1

The mercantilist approach to trade is similar to what theoretical framework?

Answer 1

Realism

Question 2

Balance of trade

Answer 2

Value of imports relative to exports

Question 3

Comparative advantage

Answer 3

States differ in their abilities to produce different goods due to different resources and technology.

Question 4

Monopoly

Answer 4

One supplier of an item

Question 5

Oligopoly

Answer 5

A monopoly shared by just a few large sellers

Question 6

Autarky

Answer 6

To avoid trading and try to produce all goods by itself. Also called self reliance

Question 7

Protectionism hurts an economy in what way?

Answer 7

Consumers pay higher prices

Question 8

Dumping

Answer 8

The sale of products in foreign markets at prices below the minimum level necessary to make a profit

Question 9

Tariff

Answer 9

Tax imposed on certain types of goods

Question 10

Quota

Answer 10

How many goods of a certain kind can be imported

Imposed to restrict growth of those products

Question 11

Subsidies

Answer 11

Payments to a domestic industry that allow it to lower it’s prices without losing money

Question 12

The world trade organization replaced what in 1995?

Answer 12

GATT

Question 13

Most-favored-nation principle

Answer 13

Concept which says that trade restrictions imposed by a WTO member on its most favored trading partner must be applied equally to all WTO members

Question 14

Largest, most comprehensive, regional free trade area is in

Answer 14

Europe

Question 15

Cartels

Answer 15

An association of producers or consumers, or both, of a certain product formed to manipulate its price on the world market

Question 16

Most prominent cartel in the international economy

Answer 16

OPEC

Question 17

Most profitable goods involved in illicit trade

Answer 17

Drugs and weapons

Question 18

The industrial revolution began in

Answer 18

Great Britain in the 18th century

Question 19

Groups that oppose free trade because of its negative impacts include

Answer 19

Labor unions

Question 20

The global currency that had value in all countries was

Answer 20

The US dollar

Question 21

Fixed exchange rates

Answer 21

Official rates of exchange for currencies set by governments

Question 22

Floating exchange rates

Answer 22

Rates determined by global currency markets in which private investors and governments alike buy and sell currencies

Question 23

How do governments increase the value of currency?

Answer 23

Intervene in currency markets and buy a currency, increasing its value

Question 24

How do governments decrease the value of currency?

Answer 24

Intervene in currency markets and sell a currency, decreasing the value

Question 25

The principle determinant of the long term value of a states currency is

Answer 25

Changes in the long term supply and demand for the currency

Question 26

Central banks in industrialized countries maintain the value of the states currency by

Answer 26

Limiting the amount of money printed and preventing high inflation

Question 27

Bretton woods system

Answer 27

1944 to manage international monetary relations

Question 28

When did the International Monetary Fund begin?

Answer 28

After the gold standard was abandoned

Question 29

When did the World Bank begin?

Answer 29

After WWII

Question 30

Why do states go into debt?

Answer 30

Trade defecits

Question 31

Monetary policy

Answer 31

Decisions about printing and circulating money

Question 32

Fiscal policy

Answer 32

Government decisions on spending and taxation

Question 33

Direct foreign investment

Answer 33

Includes tangible goods such as factories and office buildings