International Trade Practices and Policies

Questions and Answers

What is the primary condition that necessitates a trade transaction between two economic actors?

Both parties consider it beneficial to their interests.

What is the key distinction between an import and an export in international trade?

An import is a good or service brought into the domestic country, while an export is a good or service sold to a foreign country.

How do differences in technology contribute to the bases of international trade?

Differences in technology create opportunities for trade, as countries with advanced technology can export high-tech goods, while countries with less advanced technology can import them.

What is the primary purpose of a balance of trade, and how is it calculated?

The primary purpose of a balance of trade is to capture the nation's import and export of commodities, and it is calculated by obtaining the net profit or loss from the import and export of goods. Signup and view all the answers

What is the key difference between a balance of trade and a balance of payment?

A balance of trade deals with the import and export of goods, while a balance of payment keeps track of all economic transactions, including goods, services, and income, between a country and the rest of the world. Signup and view all the answers

How do government policies influence the bases of international trade?

Government policies, such as tariffs, quotas, and subsidies, can create opportunities for trade by altering the relative prices of goods and services, or restrict trade by limiting market access. Signup and view all the answers

What is the primary objective of proper accounting of transactions conducted by a nation?

To ensure the accurate recording of the inflow and outflow of foreign exchange. Signup and view all the answers

How do subsidies, as a type of trade barrier, affect international trade?

Subsidies can distort international trade by providing an unfair advantage to domestic firms, leading to trade disputes. Signup and view all the answers

What is the main purpose of a Voluntary Export Restraint (VER) in international trade?

To restrict the quantity of a good that an exporting country is allowed to export to another country. Signup and view all the answers

How do tariffs, as a type of trade barrier, affect the importation of goods?

Tariffs impose a tax on imported goods, increasing their cost and making them less competitive in the market. Signup and view all the answers

What is the Infant Industry Argument, and how does it relate to trade barriers?

The Infant Industry Argument states that new industries require protection from international competitors until they become mature, stable, and competitive. Signup and view all the answers

How does the Cheap Foreign Labor Argument relate to the use of trade barriers?

The Cheap Foreign Labor Argument suggests that low foreign wages can be a competitive advantage, leading to the imposition of trade barriers to protect domestic industries. Signup and view all the answers