Unit 4

Question 1

Restrictions against trade (9):

Answer 1

TARIFF: tax on imports
SUBSIDY: Directed on a particular industry
QUOTAS: limits on number
EMBARGO: limits a country’s ability to import/export
PROTECTION: shield or advance certain industries
DUMPING: selling abroad at lower price than it takes to produce (overproduction)
INTELLECTUAL PROPERTY INFRINGEMENT: duplicating things with copyright protection
CERTIFICATION AND TESTING REQUIREMENTS: discouraging imports by having too much “red tape” it isn’t worth the hassle
BOYCOTTS

Question 2

Absolute advantage in trade:

Answer 2

If a region/nation can produce a product using resources more efficiently than another it is said to have an absolute advantage in producing the product; specialization.

Question 3

Comparative advantage in trade:

Answer 3

The disadvantaged country can benefit from specializing in and exporting the product(s) with the largest opportunity cost for the other country

Question 4

Merchandise Trade:

Answer 4

• Visible trade

- Tangible physical goods that are exported or imported

Question 5

Non-merchandise trade:

Answer 5

• Invisible trade
• The exchange of services, tourism, investment incomes, and other transfers of funds.
• Often consists of money flowing without tangible products appearing in return

Question 6

Trade Surplus:

Answer 6

nation has greater value of exports than imports

Question 7

Trade Deficit:

Answer 7

nation has a greater value of imports than exports

Question 8

Balance of payments:

Answer 8

• A comprehensive statement of a country’s economic transactions with the rest of the world for a given period of time; either a quarter of a year of a full year.
• Composed of total receipts and payments for goods, services, and investments

Question 9

Exchange rates:

Answer 9

• The value of the Canadian dollar against the currencies of other countries.
• Helps determine how much Canadians pay for imported goods and services and how much Canadians receive for what they export

Question 10

When the Canadian dollar value falls…

Answer 10

• Imported goods are more expensive
• May trigger a rise in inflation.
• Other countries will pay less for some Canadian products and that will tend to boost export sales.

Question 11

When the Canadian dollar value rises…

Answer 11

• Imported goods are less expensive
• Other countries pay more for Canadian exports.
• The volume of Canadian exports may decline.
• May trigger layoffs in export-sensitive industries and thus increase Canadian unemployment.

Question 12

Multinational Corporations:

Answer 12

• a company that does production or delivers services in at least two countries.
• Account for the majority of the world’s industrial output.

Question 13

Advantages of globalization…

Answer 13

• Multinational corporations have global reach and increasing power
• Travel and shipping are cheap and safe
• Governments have decreased tariffs and regulations on international trade
• Increased worldwide economic output
• Greater number of people being offered the opportunity to live better than they previously have
• Remittances; working abroad in developed countries and sending home money to family
• Diverse cultural diversity as people migrate and blend cultures

Question 14

Disadvantages of Globalization…

Answer 14

• Companies don’t have to follow the regulations in underdeveloped countries than they do in developed countries
• Lack of sustainability