International Trade Flashcards
7 cards from real CBE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 International Trade flashcards as text
Which trade policy tool imposes a fixed limit on the quantity of a good that can be imported?
Answer: Import quota
An import quota is a quantitative restriction that sets a maximum limit on the amount of a specific good that can be imported during a given period.
The Heckscher-Ohlin theorem predicts that a country will export goods that intensively use its:
Answer: Abundant factors of production
The Heckscher-Ohlin theorem states that countries export goods whose production requires intensive use of their relatively abundant factors, such as labor or capital.
When a country's currency depreciates, what typically happens to its trade balance in the short run according to the J-curve effect?
Answer: Temporarily worsens before improving
The J-curve effect describes how a currency depreciation initially worsens the trade balance because import/export volumes adjust more slowly than prices.
Which organization replaced GATT as the primary international body governing trade rules in 1995?
Answer: WTO
The World Trade Organization (WTO) replaced the General Agreement on Tariffs and Trade (GATT) in January 1995 as the main international body overseeing global trade rules.
A trade surplus occurs when a country's:
Answer: Exports exceed imports
A trade surplus exists when the value of a country's exports is greater than the value of its imports over a given period.
Which of the following best describes 'dumping' in international trade?
Answer: Selling exports below cost or below home-market price
Dumping occurs when a country's firms sell exported goods at prices below production cost or below what they charge in their home market, often to gain market share.
The Marshall-Lerner condition states that a currency depreciation will improve the trade balance only if the sum of the price elasticities of demand for exports and imports is:
Answer: Greater than one
The Marshall-Lerner condition requires that the sum of the absolute values of the price elasticities of export and import demand exceeds one for depreciation to improve the trade balance.