IBT 401 - International Business and Trade Reviewer

By: Joan Bongato BSA-3

Chapter 1: An Introduction to International Economics

1. The following are major concerns of international economic except:

a. International trade in goods and services
b. International ownership of assets
c. Currency exchange
d. International Peace
2. The increased import demand by the United States generates economic growth in other
countries. This situation is a result of _________________.
a. Interdependence
b. Cross-border trade
c. Investments
d. Increase in supply
3. Which of the following is not a source of potential gain?
a. Access to items not available domestically
b. Access to expensive goods
c. Access to lower cost products
d. Access to greater product variety
4. Which statements is/are correct?
I. The International Economy generates interdependence due to this, there is always a
gain.
II. Import competing sectors may experience production and job losses.
III. This loss is at least partially (and potentially, completely) offset by gains in the exporting
sectors.
IV. Increased import demand by the United States generates economic growth in other
countries.
a. I,II and IV b. II and IV c. II, III, and IV d. I only

5. What theory analyses the basis of and the gains from international trade and focuses on the
microeconomic aspects of the international economy?
a. International economy theory
b. International trade theory
c. Interdependence theory
d. Exporting theory
6. What policy analyzes the implications for International Trade Theory of such restrictions and
examines the reasons for and the effects of restrictions on international trade?
a. International Business Policy
b. International Trading Policy
 c. Global Trade Policy
d. International Trade Policy
7. What do we call summary statement of all the international transactions of the residents of a
nation with the rest of the world during a particular period of time, usually a year.
a. Financial Report
b. Balance of Payments
c. Statement of Transactions
d. Balance Sheet
8. What is the institutional framework for the exchange of one national currency into another?
a. Foreign Exchange Markets
b. Financial Markets
c. Money Markets
d. Stock Markets
9. Which of the following is/are the major concern/s of the Adjustments in the Balance of
Payments?
I. Focuses on the relationship between internal and external aspects of the economy
II. Examines how disequilibria lead to macroeconomic adjustment under difference
international monetary systems
III. Examines the reasons for and the effects of restrictions on international trade
IV. Analyzes the implications for International Trade Theory of such restrictions
a. I,II and IV b. II and IV c. II, III, and IV d. I and II only
10. The following are current international economic problems except:
a. High Structural Unemployment and Slow Growth in Europe and Stagnation in Japan
b. United States supported the economic development of its allies through aid.
c. Job Insecurity from Restructuring and Downsizing in the United States.
d. Restructuring Problems of Transition Economies
11. Which of the following do not refer to globalization?
a. Increasing international economic connections
b. Increasing role of International Organizations in constraining domestic policies
c. Increasing cultural homogeneity
d. Increasing in country’s liabilities

Chapter 2: International Trade & Globalization

Identification
________________1. Sending goods or services to another country for sale.

________________2. Bringing goods or services into a country for sale.

________________3.The expansion of economic, political, and cultural processes to the point that they become
global in scale and impact.

________________4. The price of a nation’s currency in terms of another nation’s currency.

________________5. The difference in value between a country’s imports and exports.

________________6. A consequence of specialization or the division of labor.

________________7. A numerical limit on imports or exports.

________________8. Tax on imported goods or services.

________________9. International trade left to its natural course without tariffs, quotas, or other restrictions.

________________10.A trade penalty imposed by one nation onto one or more other nations.

________________11.The partial or complete prohibition of commerce and trade with a particular country or a
group of countries.

________________12.Ability of a nation to produce a good more efficiently than any other nation.

________________13. Inability of a nation to produce a good more efficiently than other nations, but an ability to
produce that good more efficiently than it does any other good

Chapter 3. International Trade Theory

1. Which of the following is not a concept of Mercantilism?

a. A nation’s wealth depends on accumulated treasure
b. Gold and silver are the currency of trade.
c. Theory says you should have a trade surplus.
d. Maximize imports through subsidies. And minimize exports through tariffs and quotas.
2. Who developed the Theory of Absolute Advantage?
a. David Hume
b. Adam Smith
c. David Ricardo
d. Leontief Paradox,
3. Who developed the Theory of Comparative Advantage?
a. David Hume
b. Adam Smith
c. David Ricardo
d. Leontief Paradox,
4. Which of the following is not a concept of the Hecksher-Olin Theory?
a. Export goods that intensively use factor endowments which are locally abundant.
b. Patterns of trade are determined by differences in factor endowments - not productivity.
c. Remember, focus on relative advantage, not absolute advantage.
d. Factor endowments can be impacted by government policy - minimum wage.
5. Which of the following is not true about the Product Life-Cycle Theory?
a. As products mature, both location of sales and optimal production changes.
b. Affects the direction and flow of imports and exports.
c. Globalization and integration of the economy makes this theory less valid.
d. Specialization increases output, ability to enhance economies of scale increase.
6. What theory deals with the returns on specialization where substantial economies of scale are present?
 a. Hecksher-Olin Theory
b. Product Life-Cycle Theory
c. New Trade Theory
d. Theory of Comparative Advantage
7. What theory believes in the Role of the government in the economy?
a. New Trade Theory
b. Theory of Comparative Advantage
c. First-Mover Advantage Theory
d. Theory of Absolute Advantage
8. What refers to the nation’s position in factors of production such as skilled labor or infrastructure
necessary to compete in a given industry?
a. Factor endowments#
b. Firm strategy, structure and rivalry
c. Demand conditions
d. Related and supporting industries
9. What refers to the conditions in the nation governing how companies are created, organized, and
managed and the nature of domestic rivalry?
a. Factor endowments#
b. Firm strategy, structure and rivalry
c. Demand conditions
d. Related and supporting industries
10. What do we call the nature of home demand for the industry’s product or service?
a. Factor endowments#
b. Firm strategy, structure and rivalry
c. Demand conditions
d. Related and supporting industries
11. What do we call the presence or absence in a nation of supplier industries or related industries that are
nationally competitive?
a. Factor endowments
b. Firm strategy, structure and rivalry
c. Demand conditions
d. Related and supporting industries
12. According to Heckscher-Olin, which of the following is not a basic factor of endowments?
a. natural resources,
b. climate,
c. location.
d. Technology
13. According to Heckscher-Olin, which of the following is not an advance factor of endowments?
a. Location
b. communications,
c. skilled labor,
d. technology.

Chaper 4: The Global Marketplace

________________1 Involves the exchange of goods and services between nations.

________________2. Occurs when a country has special natural resources or talents that allow it to produce an
item at the lowest cost possible.

________________3. The value that a nation gains by selling the goods that it produces most efficiently.

________________4. Is a global coalition of 135 governments that makes the rules governing international trade.

________________5. Is an international trade agreement among the United States, Canada, and Mexico. It went
into effect on January 1, 1994.

________________6. It was established by the Maastricht Treaty, which called not only for free trade among
member nations, but also for a single European currency and a central European bank.
Answer Key:

Chapter 1

1. D
2. A
3. B
4. C
5. B
6. D
7. B
8. A
9. D
10. B
11. D

Chapter 2

1. Exports
2. Imports
3. Globalization
4. Exchange reates
5. Balance of trade
6. Economic interdependence
7. Quota
8. Tariff
9. Free trade
10. Sanction
11. Embargo

Chapter 3

1. D
2. B
3. C
4. D
5. D
6. C
7. C
8. A
9. B
10. C
11. D

Chapter 4

1. International trade
2. Absolute advantage
3. Competitive advantage
4. World Trade Organization (WTO)
5. North American Free Trade Agreement (NAFTA)
6. European Union (EU)