International Trade Economics Quiz
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Questions and Answers

What is the branch of economics that studies how countries interact through trade, investment, finance, and policies?

  • Macroeconomics
  • Global Finance
  • International Trade
  • International Economics (correct)

    • The Trade War of 2018 was initiated by President Donald Trump and primarily targeted China.

    True

    The theory of comparative advantage suggests that trade between nations is only beneficial when one country has an absolute advantage in producing all goods.

    False

    Which of the following is NOT a key point of Ricardo's Comparative Advantage Theory?

    <p>Absolute Advantage in Trade</p> Signup and view all the answers

    Protectionism refers to government policies aimed at encouraging and expanding international trade.

    <p>False</p> Signup and view all the answers

    Which of the following is NOT a common form of protectionism?

    <p>Free Trade Agreements</p> Signup and view all the answers

    The implementation of a tariff increases the price of imported goods, potentially leading to higher prices for consumers.

    <p>True</p> Signup and view all the answers

    What is the primary goal of protectionism?

    <p>To protect domestic industries from foreign competition.</p> Signup and view all the answers

    Economists generally agree that free trade always leads to short-term benefits while protectionism offers potentially long-term advantages.

    <p>False</p> Signup and view all the answers

    What is the name of the lecturer in the International Economics and Trade course?

    <p>Julija Gavėnaitė-Sirvydienė</p> Signup and view all the answers

    Which of the following is NOT a topic covered in the International Economics and Trade course?

    <p>Game theory</p> Signup and view all the answers

    According to the presentation, approximately ______ million people, or 3% of the world's population, reside outside their country of birth.

    <p>260</p> Signup and view all the answers

    Which of the following is NOT a key issue in the 2018 Trade War between the US and China?

    <p>High oil prices</p> Signup and view all the answers

    International economic analysis suggests that immigration generally brings net economic benefits.

    <p>True</p> Signup and view all the answers

    Which of the following is NOT a reason why many voters in the UK chose to leave the EU in the Brexit referendum?

    <p>To increase immigration</p> Signup and view all the answers

    Which of the following is NOT a consequence of the Brexit referendum?

    <p>Increased immigration</p> Signup and view all the answers

    What does the theory of comparative advantage emphasize?

    <p>Relative efficiency or opportunity cost</p> Signup and view all the answers

    What does the Leontief Paradox suggest about trade patterns?

    <p>It suggests that factors beyond resource abundance, like technology and consumer preferences, play significant roles in trade patterns.</p> Signup and view all the answers

    Which of the following is NOT a criticism of protectionism?

    <p>Increased innovation</p> Signup and view all the answers

    Protectionism is always beneficial for a country's economy.

    <p>False</p> Signup and view all the answers

    What does protectionism sometimes prevent?

    <p>Resources from flowing to the most efficient producers.</p> Signup and view all the answers

    The implementation of a tariff increases the price of imported goods.

    <p>True</p> Signup and view all the answers

    What is the main goal of the US in imposing tariffs on imported steel and aluminum in 2018?

    <p>To protect domestic steel and aluminum producers.</p> Signup and view all the answers

    Study Notes

    Course Information

    • Course: International Economics and Trade
    • Date: 2024.11.07
    • Instructor: Dr. Julija Gavėnaitė-Sirvydienė
    • Contact Information: [email protected], 866204092
    • Course Topics & Dates:
      • Introduction to International economics and trade; 2024.11.07
      • Theory of Comparative Advantage; 2024.11.07
      • Heckscher-Ohlin Model; 2024.11.20
      • Alternative Trade Theories; 2024.11.20
      • Tariffs; 2024.11.28
      • Balance of Payments; 2024.11.28
      • Foreign Exchange Determination; 2024.11.28
      • International Lending and Financial Crises; 2024.12.05
      • Test; 2024.12.05
      • Business Challenge Presentation; 2025.01.09

    Instructor Information

    • PhD in Economics
    • Risk management expertise
    • Cybersecurity issues in financial sector
    • Customer experience management
    • Travel enthusiast
    • Former rock band guitarist

    Getting to Know Each Other (Icebreaker)

    • Unlimited Ice cream vs. Unlimited fries
    • Super strength vs. Super speed
    • Invisible vs. Able to fly
    • Batman vs. Spiderman
    • Brush hair vs. Brush teeth
    • Study every day vs. Study last minute

    International Economics and Trade - Introduction

    • International Economics: Studies how countries interact through trade, investment, finance, and policies.
    • Aims to understand: effects of cross-border economic activity, factors influencing trade flows, and impacts of policies on global markets.

    International Economics & Trade - Introduction (Key topics)

    • International Economics: exchange across borders, why trade, trade's effect on welfare, trade theories
    • International Finance: capital flows, exchange rates, balance of payments, international investments' influence on economies, financial institutions (e.g., the IMF), managing crises, managing economic crises.

    International Economics and Trade - Introduction (Additional info)

    • Explains:
      • How nations benefit from interdependence
      • Impact of globalization on national economies
      • How countries balance global participation's challenges and benefits

    Controversial Developments

    • Trade War of 2018 (initiated by President Trump)
    • Immigration
    • Brexit (Brexit referendum)
    • China's exchange rate

    Trade War of 2018 Details

    • Key issues: intellectual property, currency manipulation, access for US companies
    • Objectives: reduce trade deficit, protect American jobs, and force policy changes.
    • Economic impact: increased costs for US consumers and businesses, hurt American industries and consumers more than helped (debate exists by economists)

    Immigration

    • Global population: 260 million reside outside their country of birth; high in some countries.
    • Economic analysis: immigration generally brings net benefits by filling labor shortages, contributing to economic growth, and supporting firms.
    • Certain low-skilled workers experience negative impacts.

    Brexit

    • June 23, 2016 referendum: 52% voted to leave the EU.
    • Reasons for leaving: sovereignty concerns, immigration fears, economic benefits
    • Consequences: political & economic uncertainty, Northern Ireland border challenges, formal exit March 2019, ongoing negotiations (for the UK) defined the new trading relationships.

    China's Exchange Rate:

    • Exchange rate: value of one country's currency relative to another.
    • Controversy: China's currency manipulation, unfair trade advantage.
    • Effects:
      • Trade surpluses for China
      • Inflation & economic control (in China)
      • Global tensions between China and other countries (e.g., US)
      • Investment flows, currency volatility, pressure on reserves.

    Demand and Supply

    • Basic economic concepts that describe price and quantity determination in a market.
    • Four key questions:
      • Why do countries trade?
      • How does trade affect production & consumption?
      • How does trade affect economic well-being?
      • How does trade affect income distribution?

    Demand and Supply: Answers

    • Differences in demand & supply conditions across countries drive trade.
    • Trade initiates due to arbitrage opportunities (profit from price differences in separated markets).
    • Countries export goods where prices are lower and import where they are higher.
    • Free Trade changes equilibrium prices, impacting consumption and production in each country.

    Demand and Supply: Answers Continued

    • Trade impacts each country's economic well-being, with gains for those producing/importing goods and losses to those affected by trade (producers of import-competing products + consumers of exportable products).

    Theory of Comparative Advantage

    • David Ricardo's theory
    • Trade is beneficial even if one country has no absolute advantage in all goods (relative advantage & efficiency matter).
    • Opportunity cost: Cost of creating one good, preventing production of another.

    Theory of Comparative Advantage (Elaboration)

    • Relative productivity differences between nations are the key driver behind beneficial trade.
    • Nations should specialize in products where their relative inefficiency is the lowest.
    • Trade without absolute advantage is still mutually beneficial.

    Theory of Comparative Advantage (Implications)

    • Impact on the South (low-wage countries):
      • Can develop export-driven industries, potentially boosting income and employment.
      • Possible job losses in sectors where they lack comparative advantage.
      • Wages may remain low, but increased productivity can lead to better standards.
    • Impact on the North (high-productivity & high-income countries):
      • Export of high-value goods and services where their productivity is higher than in the South.
      • No harm, instead expansion on trade.

    Addressing the Fairness Concerns (in trade)

    • Wage differences are often a result of productivity differences rather than exploitation through trade.
    • Increased productivity in the South can lead to higher wages and improved living standards.
    • Crucial is to focus investments and strategic reforms on boosting productivity rather than just trade.

    Protectionism and Free Trade

    • Protectionism: Government restrictions on international trade to protect domestic industries, justified by job preservation, supporting emerging industries, and national security.
    • Types of protectionism: Tariffs, quotas, subsidies, and import restrictions.

    Criticisms of Protectionism

    • Higher prices for consumers due to limited imports
    • Reduced efficiency and innovation in the lack of competition
    • Retaliation, trade wars from other countries
    • Resource allocation distortions (lacks flow of resources to most efficient producers): slower growth

    Imposition of a Tariff

    • Tariffs raise prices (imposed on imported goods) leading to consumers buying less imports and supporting domestic producers.
    • Tariffs are used to protect domestic industries but can come at a cost (reduced efficiency + competition from other countries).

    Protectionism: Overall

    • Aims to protect domestic industries
    • Comes at a cost to consumers (higher prices/less choice, reduced innovation), efficiency, + trade relations; a complex policy.
    • Benefits exist in short-term, but economists advocate for long term benefits of free trade (greater efficiency + innovation).

    Next steps in the course

    • Practice subgroup 2, 2024.11.14; 14:40 - 16:10
    • Practice subgroup 1, 2024.11.14; 16:20 - 17:50

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    Related Documents

    International Economics and Trade 2024 Lecture Notes PDF
    The Heckscher-Ohlin Model PDF (2024)

    Description

    Test your knowledge on international trade and economic theories such as comparative advantage and protectionism. This quiz covers key principles and the impact of trade policies, including historical examples like the Trade War of 2018. Challenge yourself to understand how nations interact through trade and investment.

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