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
In trade theory, 'terms of trade' refers to:
Answer: The ratio of export prices to import prices
Terms of trade measure the relative price of a country's exports compared to its imports, indicating the purchasing power of exports in terms of imports.
Which trade agreement created the world's largest free trade area by GDP when it came into force in 2022?
Answer: RCEP
The Regional Comprehensive Economic Partnership (RCEP), comprising 15 Asia-Pacific nations, became the world's largest free trade agreement by combined GDP when it took effect in January 2022.
A specific tariff is calculated as:
Answer: A fixed dollar amount per unit of the imported good
A specific tariff is a fixed monetary charge per physical unit of the imported good (e.g., $5 per ton), regardless of the good's price.
Which concept describes the situation where a domestic industry is protected in its early stages to allow it to grow and compete internationally?
Answer: Infant industry argument
The infant industry argument justifies temporary protection of new domestic industries that have not yet achieved the scale or experience to compete with established foreign rivals.
The Stolper-Samuelson theorem predicts that trade liberalization will:
Answer: Benefit the abundant factor and harm the scarce factor
The Stolper-Samuelson theorem states that opening to trade raises the real return of the abundant factor and lowers the real return of the scarce factor in each country.
When a regional trade agreement diverts trade from a low-cost non-member country to a higher-cost member country, this is called:
Answer: Trade diversion
Trade diversion occurs when a preferential trade agreement causes imports to shift from a more efficient non-member producer to a less efficient member producer due to the tariff preference.
Which measure captures all cross-border transactions including goods, services, income, and current transfers?
Answer: Current account
The current account records a country's transactions with the rest of the world in goods, services, primary income, and secondary income (current transfers).