international trade MCQ 3

Questions and Answers

All economic transactions within a country

All financial transactions with other countries

All imports of a country

All economic and financial transactions between the residents of a country and the rest of the world (correct)

National debt increase and decrease in incomes

Rise in incomes and decrease in unemployment

Unemployment and leakage from the circular flow of income

Economic growth, high dependency on exports, and demand pull inflation (correct)

The country has used protectionist measures to discourage imports

The national debt will increase

The country has a high dependency on exports

The country has a rise in incomes and unemployment (correct)

Exports minus imports in monetary value Signup and view all the answers

Rise in incomes in domestic economy and national debt increase Signup and view all the answers

To make imports more expensive than domestically produced goods Signup and view all the answers

Selling goods abroad at a lower price than in the domestic market Signup and view all the answers

It makes exports more attractive in foreign markets Signup and view all the answers

To ban all trade from a specific country Signup and view all the answers

It protects domestic firms from foreign competition Signup and view all the answers

Study Notes

A record of all economic and financial transactions between a country's residents and the rest of the world
Can be simplified as exports (in monetary value) minus imports (in monetary value)

Often accompanied by:
- Economic growth
- High dependency on exports
- Demand pull inflation
May indicate the country has used protectionist measures to discourage imports

Results in:
- Rise in incomes in the domestic economy
- Leakage from the circular flow of income
- National debt could fall
- Unemployment if there's more demand for imports

Protectionism can create thousands of jobs by reducing competition from foreign firms, allowing domestic industries to grow.
Infant industries can be protected, giving them time to develop and become competitive.
A country can become more self-sufficient by protecting its industries, reducing dependence on foreign goods.

Dumping occurs when a firm sells goods abroad at a lower price than in its home country.
This can be done to sell excess output without affecting the home market price.

Tariffs: a tax on imports, making them more expensive than domestic goods.
Quotas: a physical or monetary limit on imports, restricting the amount of goods allowed into the country.
Embargo: a complete ban on trade with a specific country.
Subsidies: government assistance to exporters, allowing them to lower prices in foreign markets.
Administrative Barriers: tedious paperwork or delays that hinder trade.
Currency Devaluation: a country can increase the attractiveness of its exports by devaluing its currency, making it cheaper for foreigners to buy.