W4P2 (video): International Trade Theory by Bob Stephens

Question 1

What is the primary focus of descriptive trade theories?
A) Explaining how trade policies should be formed
B) Explaining why trade occurs and what kinds of products are traded
C) Explaining how to restrict trade
D) Determining which countries should be restricted from trading

Answer 1

B) Explaining why trade occurs and what kinds of products are traded

Question 2

What is the goal of mercantilism in terms of trade?
A) To promote free trade between countries
B) To limit exports and maximize imports
C) To build up a country’s surplus of gold by exporting more than importing
D) To reduce reliance on gold as a measure of wealth

Answer 2

C) To build up a country’s surplus of gold by exporting more than importing

Question 3

In the context of mercantilism, what is a “favorable balance of trade”?
A) When a country imports more than it exports
B) When exports exceed imports
C) When imports and exports are equal
D) When a country has no trade deficit

Answer 3

B) When exports exceed imports

Question 4

According to Adam Smith, what should define a country’s wealth?
A) Its amount of accumulated gold
B) The number of colonies it controls
C) The total value of goods and services available to its citizens
D) Its military strength

Answer 4

C) The total value of goods and services available to its citizens

Question 5

What did Adam Smith argue about trade and specialization?
A) Trade should be limited to local markets
B) Specialization leads to higher productivity and greater efficiency
C) Countries should produce everything they need internally
D) Trade is only beneficial for wealthy countries

Answer 5

B) Specialization leads to higher productivity and greater efficiency

Question 6

What are natural advantages in trade based on?
A) Skills and technology acquired by a country over time
B) Climate, geography, and availability of resources
C) The amount of government subsidies a country receives
D) The strength of a country’s regulations on trade

Answer 6

B) Climate, geography, and availability of resources

Question 7

**

What is an example of an acquired advantage in trade?
A) A country’s abundant natural resources
B) A country’s watchmaking skills passed down through generations
C) A country’s favourable weather for growing crops
D) A country’s geographical location close to major trade routes

Answer 7

B) A country’s watchmaking skills passed down through generations

Question 8

How does David Ricardo’s theory of comparative advantage differ from Adam Smith’s absolute advantage?
A) Comparative advantage suggests that even without absolute advantages, countries can still benefit from trade
B) Comparative advantage applies only to goods, not services
C) Absolute advantage is concerned with domestic trade, while comparative advantage deals with international trade
D) Comparative advantage suggests restricting trade to certain countries

Answer 8

A) Comparative advantage suggests that even without absolute advantages, countries can still benefit from trade

Question 9

What is a key characteristic of mercantilist policies?
A) Encouraging imports to boost domestic competition
B) Promoting free trade with as many countries as possible
C) Limiting imports to accumulate national wealth in gold
D) Redefining wealth based on the well-being of citizens

Answer 9

C) Limiting imports to accumulate national wealth in gold

Question 10

What did Adam Smith believe would result from unrestricted trade?
A) Countries would amass large gold reserves
B) Citizens would have greater access to goods and services, improving their standard of living
C) Countries would become more isolated from global markets
D) Imports would decrease, and exports would dominate trade

Answer 10

B) Citizens would have greater access to goods and services, improving their standard of living