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Questions and Answers
What is indicated by a favourable Terms of Trade (TOT)?
Which of the following scenarios describes a negative balance of trade?
What is the primary aim of international trade?
What characterizes free trade?
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Which of the following is NOT a form of trade barrier?
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What is a possible effect of imposing subsidies for local industries?
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In which situation would a country's Terms of Trade (TOT) be equal to 100?
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Why do governments impose trade barriers?
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What is the primary goal of the World Trade Organization (WTO) regarding developing countries?
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What defines international trade?
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What usually characterizes the commodities traded by Less Economically Developed Countries (LEDCs)?
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How do the traded commodities of More Economically Developed Countries (MEDCs) generally differ from those of LEDCs?
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What role does the market play in international trade?
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Which of the following types of trade involves exchanges between two countries?
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What is a significant challenge faced by LEDCs in global trade?
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What is the role of WTO technical assistance regarding developing countries?
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What is one key principle of Fair Trade?
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How does Fair Trade ensure fair wages for producers?
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Which of the following is NOT an impact of globalization?
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What role do multinational corporations play in globalization?
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Which of the following is a benefit of fair trade for women?
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Which statement best describes 'open borders' in the context of globalization?
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What is one consequence of improved communication due to globalization?
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Which of the following is a primary focus of global governance related to globalization?
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What is one of the main benefits of multinational corporations (MNCs) in host countries?
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How does globalization enhance access to information?
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What negative impact does outsourcing have in developed countries?
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What is one reason for the economic interdependence caused by globalization?
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Which factor can limit the advantages of globalization for some nations?
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What role do global associations like the United Nations and World Bank play?
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What is a characteristic of export-led development?
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Which of the following is an disadvantage associated with MNCs?
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Study Notes
International Trade and World Markets
- Trade involves the transfer of goods and services between individuals or entities.
- International trade involves cross-border movement of goods and services.
- Bilateral trade involves two countries, while multinational trade involves more than two countries.
- International trade provides countries access to goods and services from other countries.
- Markets facilitate international trade by connecting buyers and sellers.
- Commodities are traded items, which can be either raw materials or finished products.
- Less Economically Developed Countries (LEDCs) primarily trade raw materials, while More Economically Developed Countries (MEDCs) trade processed and finished products.
- This difference in trade commodities results in LEDCs having a smaller share of global trade due to lower value raw material exports compared to high-value processed products traded by MEDCs.
Terms of Trade (TOT)
- TOT describes the relationship between export prices and import prices for a country.
- A favorable TOT occurs when export prices are higher than import prices.
- TOT can be calculated as (Exports value + Imports value) x 100.
- A TOT of 100 indicates balanced imports and exports.
- A favorable TOT will be greater than 100, while an unfavorable TOT will be less than 100.
Balance of Trade
- Balance of trade refers to the difference between a country's exports and imports.
- A negative balance of trade means imports exceed exports.
- A positive balance of trade means exports exceed imports.
Trade Relationships
- International trade aims to boost economic growth and improve living standards in countries.
- Trade relationships are categorized into free trade, trade barriers, and fair trade.
Free Trade
- Free trade involves unrestricted trade between countries.
- Open borders facilitate the free flow of goods and services (commodities) between countries.
- Free trade minimizes tariffs, customs duties, and other trade barriers, aiming to benefit all trading partners.
- Countries with similar economic systems often establish free trade agreements.
Trade Barriers
- Trade barriers aim to protect domestic manufacturers from international competition.
- Governments implement measures to increase the prices of imported goods. These include:
- Import tariffs and taxes
- Subsidies for local industries
- Quotas on imported goods
- Trade barriers are used to protect jobs, safeguard domestic products, and encourage local industries.
Fair Trade
- Fair trade supports farmers in LEDCs by paying them fair prices directly.
- The relationship in fair trade is direct between producers and consumers, bypassing national trade channels.
- Fair trade ensures better working conditions and prevents exploitation of workers.
- Core principles of fair trade include:
- Creating opportunities for direct connection between farmers and MEDC markets.
- Ensuring fair and stable prices for producers and fair wages for workers.
- Promoting social development through long-term partnerships.
- Achieving gender equality by ensuring fair pay for women's work.
Globalisation
- Globalisation signifies the interconnectedness of societies.
- It involves the increasing flow of goods, services, capital, technology, ideas, information, and people across national borders, contributing to a global economy and society.
- Globalisation has led to the worldwide expansion of certain brands and the spread of global communication and governance.
Impacts of Globalisation on Development
- Globalisation has seven primary impacts on development:
- Facilitation of trade and exchange of goods
- Improved communication and knowledge sharing
- Emergence of global governance for regulating economic activities
- Increased open borders for free movement of people, goods, and ideas
- Rise of multinational corporations with global operations
- Stimulation of economic growth
- Increased migration both within and across national borders
Advantages of Globalisation
- Multinational corporations (MNCs) create employment opportunities, offer higher wages and working conditions in host countries, and contribute to the spread of knowledge and innovation.
- Globalisation improves disaster response and relief efforts, promotes cultural tolerance and appreciation, and facilitates remittances from migrant workers to their home countries.
- Global associations like the United Nations, World Bank, International Monetary Fund, and World Trade Organisation regulate international disputes and support development programs.
- Outsourcing creates employment opportunities in developing countries through call centers and manufacturing industries.
- Global awareness, responsibility, and accountability contribute to environmental protection.
Disadvantages of Globalisation
- Increased trade and travel contribute to the spread of diseases.
- Economic interdependence leads to global financial crises.
- Demand for new materials and unsustainable use of resources strain the environment.
- Lack of infrastructure hinders some nations from participating in global advancement.
- MNCs exert economic and political influence in host countries.
- Income inequalities rise as MNCs create an upper-middle class.
- Outsourcing leads to unemployment in developed countries and may result in sweatshops in LEDCs.
- Global regulations impact policies and choices of nation-states.
Export-Led Development
- Export-led development is an economic strategy employed by developing nations to catch up to developed nations.
- It aims to boost wealth by increasing exports through:
- Investing in industries, manufacturing, and education to develop specialised export products.
- Reinvesting export earnings back into social and physical infrastructure.
- Countries like Hong Kong, Singapore, Taiwan, and South Korea have used this strategy successfully to achieve development.
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Description
Test your knowledge on international trade concepts, including bilateral and multinational trade. This quiz covers the roles of markets and the differences in trade practices between LEDCs and MEDCs. Challenge yourself and understand the dynamics of global commerce!
