International Trade

Question 1

Strong arguments for protectionism

Answer 1

Infant industry and military self sufficiency

Question 2

GATT

Answer 2

General Agreement on Tariffs and Trade

To encourage nondiscrimanatory treatment for all member nations, to reduce tariffs, and to eliminate import quotas)

Question 3

Balance of payments deficit

Answer 3

When a country imports more than they export

Question 4

Balance of payments surplus

Answer 4

When a country exports more than it imports

Question 5

Official reserves

Answer 5

foreign currencies, reserves held with the international monetary fund, and stocks of gold

Question 6

Current account+capital/financial acount=

Answer 6

ZERO

Question 7

Flexible exchange rates

Answer 7

Demand and supply determine exchange rates with no governmetn intervention

Question 8

Fixed exchange rate

Answer 8

Governments determine exchange rates and make adjustments to maintain those rates

Question 9

Determinants of exchange rate shift

Answer 9

Relative income change
Relative interest change
Relative price level/inflation change
Expected returns change
Speculation

Question 10

If relative income increases

Answer 10

the country’s currency will depreciate

Question 11

If relative interest increases

Answer 11

the country’s currency will appreciate

Question 12

If relative price level (inflation) increases

Answer 12

the country’s currency will depreciate

Question 13

If expected returns increase

Answer 13

the country’s currency will appreciate

Question 14

Current account

Answer 14

Income, goods and services, investment income, transfers

Question 15

Financial/Capital account

Answer 15

Capital: debt forgiveness (asset transactions)
Financial: international purchases and sales of real or financial assets (stocks, bonds, property, treasury bonds (our debt))

Question 16

Balance of payments

Answer 16

Sum of all financial transactions that take place between its residents and the residents of a foreign nation
2 Categories:
1) international trade
2) international asset trade

Question 17

Who are the leading trading nations

Answer 17

US, germany, japan, western europena countries, asian economies, south kore, taiwan and singapore