Understanding International Trade Agreements and Economic Integration, Exams of Economics

Download Understanding International Trade Agreements and Economic Integration and more Exams Economics in PDF only on Docsity! ECON 3100 Exam 1Questions with Answers Latest Update 2024 World Bank - Correct answer A Bretton Woods institution, originally charged with the responsibility of providing financial and technical assistance to the war-torn economies of Europe Bretton Woods conference - Correct answer A small town in New Hampshire that was, in July 1944, the site of talks establishing the international financial and economic order after World War II. The International Monetary Fund and the World Bank emerged from this Common external tariff - Correct answer the policy of customs unions in which the members adopt the same tariffs toward nonmembers Common market - Correct answer a regional trade agreement whose member nations allow the free member nations allow the free movement of inputs as well as outputs, and who share a common external tariff toward nonmembers Customs union - Correct answer an agreement among two or more member countries to engage in free trade with each other and to exchange common external tariff toward nonmembers Doha Development Agenda - Correct answer the name for the trade negotiations that began in 2000 under the auspices of the World Trade Organization Doha Round - Correct answer the current WTO round of trade negotiations Economic union - Correct answer the most complete form of economic integration, these unions are common markets that also harmonize many standards while having the same or substantially similar fiscal monetary policies (may include a common currency) Foreign exchange reserves - Correct answer assets held by the national monetary authority that can be used to settle international payments (examples: dollars, euros, yen, and monetary gold) Free riding - Correct answer occurs when a person lets others pay for a good or service, or lets them do the work when he/she knows that he/she cannot be excluded from consumption of the good or from the benefits of the work free-trade area - Correct answer a preferential trade agreement in which countries permit the free movement of outputs (goods and services) across their borders as long as the outputs originate in one of the member countries General Agreement on Tariffs and Trade (GATT) - Correct answer the main international agreement covering the rules of trade in most, but not all goods IMF conventionality - Correct answer the changes in economic policy that borrowing nations are required to make in order to receive International Monetary Fund loans Institution - Correct answer A set of rules of behavior. This sets limits, or constraints, on social, political, and economic interaction International Monetary Fund (IMF) - Correct answer One of the original Bretton Woods institutions, its responsibilities include helping member countries that suffer from instability or problems with their balance payments. Also provides technical expertise in international financial relations. lender of last resort - Correct answer In international economics, a place where nations can borrow after all sources of commercial lending have dried up (IMF fills this role today) Most favored nation (MFN) status - Correct answer the idea that every member of the WTO is required to treat each of its trading partners as well as it treats its most favored trading partner. This prohibits one country from discriminating against another country. National treatment - Correct answer the idea that foreign firms operating outside a nation should not be treated differently from domestic firms No diminishable - Correct answer a good or service that is not reduced by consumption Nondiscrimination - Correct answer the notion that national laws should not treat foreign firms differently from domestic firms No excludable - Correct answer when people who do not pay for a good or service cannot be excluded from its consumption (example: national defense) Partial trade agreement - Correct answer an agreement that covers only some goods and/or services and is less than a free-trade agreement Public goods - Correct answer goods that share two characteristics: excludability and no rivalry or nondiminishability Quota - Correct answer a numerical limit on the volume of imports Factor scarcity - Correct answer implies that an economy has less of a particular factor in relation to some other factor and by comparison to another economy Foreign affiliate - Correct answer a foreign-based operation that is owned by a firm in the home country Huckster-Ohlin (HO) trade theory - Correct answer a trade theory that predicts the goods and services that countries export and import. The theorem states that countries will export goods that require the intensive use of relatively abundant factors to produce, and import goods that require relatively scarce factors. Intrafirm trade - Correct answer international trade between two or more divisions of the same company that are located in different countries Magnification effect - Correct answer the idea that a rise or decline in goods prices has a larger effect in the same direction on the income of the factor used intensively in it production Off-shoring - Correct answer the movement of some or all of a firm's activities to a foreign country OLI theory - Correct answer a model of the determinants of foreign direct investment that is based on the key variable Ownership-Location-Internalization Outsourcing - Correct answer the shifting of procurement from within a firm to outside a firm. It is often used to refer to services that are purchased abroad, such as the procurement of business in India by a firm based in Europe or the US product cycle - Correct answer the idea that manufactured goods go through a cycle of heavy research and development requiring experimentation in the product and the manufacturing process, followed by stabilization of design and production, and a final stage of complete standardization Resource curse - Correct answer the economic and/or political problems caused by an abundance of one valuable natural resource such as petroleum Social networks - Correct answer members of a migrant's family or village that provide support in the migrant's new location Specific factors model - Correct answer a trade model that allows for mobile and immobile factors of production Stopper-Samuelson theorem - Correct answer a corollary of the HO theory stating that changes in import or export prices lead to a change in the same direction of the income of factors used intensively in production of the imported or exported goods Supply-push factors - Correct answer the factors that "push" migrants out of their home country Value added - Correct answer the price of a good minus the value of intermediate inputs used to produce it (measures the contribution of capital and labor at a given stage of production) Export processing zone (EPZ) - Correct answer a geographical region in which firms are free from tariffs as long as they export the goods that are made from imports. Rules and regulations of this vary by country, but all of them are aimed at encouraging exports, often through encouragement given to investment. External economies of scale - Correct answer Scale economies that are external to a firm, but internal to an industry. Consequently, all the firms in an industry experience declining average costs as the size of the industry increases. Externality - Correct answer a divergence between social and private returns Industrial policy - Correct answer a policy designed to create new industries or to provide support for existing ones Interindustry trade - Correct answer trade that involves exports and imports of goods that are produced in different industries, for example when the US exports cars and imports sugar cane Maquiladora - Correct answer Mexican manufacturing firms. Mostly along the US - Mexican border, that receive special tax breaks Market failure - Correct answer a situation in which markets do not produce the most beneficial economic outcome. This has numerous causes including externalities and monopolistic or oligopolistic market structures. Monopolistic competition - Correct answer Competition between differentiated products, combining elements of perfect competition and monopoly New Trade Theory - Correct answer a new approach to modeling international trade that began in the 1980s. This theory drops the assumption of constant or decreasing returns to scale (increasing costs) and introduces economies of scale that are either internal to the firm or external to the firm but internal to the industry. Oligopoly - Correct answer a market with so few producers that each firm can influence the market price private returns - Correct answer The value of all private benefits minus all private costs, properly adjusted to take into account that some costs and benefits are in the future and must be discounted to show their value in today's dollars. Product differentiation - Correct answer two products that serve similar purposes but that are different in one or more dimensions. Most consumer goods are considered this Rent seeking - Correct answer any activity by firms, individuals, or special interests that is designed to alter the distribution of income to their favor. Political lobbying, legal challenges, and bribery are common forms of this behavior, which use resources (labor and capital) but do not add to national output. For this reason, it is a net loss to the nation. Social returns - Correct answer this includes private returns, but they add costs and benefits to the elements of society that are not taken into consideration in the private returns. Subsidies and Countervailing Measures (SCM) - Correct answer an agreement to limit subsidies that also specified when countervailing measures were allowed that emerged from the Uruguay Round of GATT negotiations. Trade-Related Investment Measures (TRIMs) - Correct answer an agreement that emerged from the Uruguay Round of the GATT that emphasizes national treatment and nondiscrimination in the treatment of foreign investors Trade-Related Aspects of Intellectual Property Rights (TRIPS) - Correct answer an agreement that emerged from the Uruguay Round of the GATT. It requires increased enforcement of intellectual property. Consumer surplus - Correct answer the difference between the value of a good to consumers and the price they have to pay Deadweight loss - Correct answer a pure economic loss with no corresponding gains elsewhere in the economy. effective rate of protection - Correct answer These consider levels of protection on intermediate inputs as well as the nominal tariff levied on the protected good. This is measured as the percentage change in the domestic value added after tariffs on the intermediate and final goods are levied. Efficiency loss - Correct answer a form of deadweight loss that refers to the loss of income or output that occurs when a nation produces a good at a cost higher than the world price. intellectual property rights - Correct answer Intellectual property is divided into copyrights and related rights for literary and artistic work, and industrial property rights for trademarks, patents, industrial designs, geographical indications, and the layout of integrated circuits