D311 EXAM 1 CERTIFICATION
QUESTIONS WITH CORRECT
ANSWERS
Why Gov't intervene in trade: Economic Rational -Answer- Fighting Unemployment,
protecting infant industries, promoting industrialization, improving comparative position
Why Gov't intervene in trade: Non-Economic Rational -Answer- Maintaining essential
industries(Nations do not want to be dependent on foreign supplies), promoting
acceptable practices abroad, preserving national culture, maintaining or extending
spheres of influence
Protectionism -Answer- governmental actions to influence international trade
Fighting Unemployment -Answer- unemployed workers have more time to protest
publicly, restrict imports decreases jobs in that country that is importing
Infant industries -Answer- Developing industries that require protection to get started,
gov't does this until it can compete on its own
Industrialization argument -Answer- Can use surplus agricultural workers more easily,
brings in investment funds, diversifies the economy, brings faster growth than primary
products do.
Terms of trade -Answer- Country A must sell to Country B
Import Substitution -Answer- A government policy that uses trade restrictions and
subsidies to encourage domestic production of manufactured goods
export-led development -Answer- promote the development of industries with export
potential
Balance of Trade Adjustments -Answer- trade deficit may cause a govt to reduce
imports or encourage exports
Comparable Access or Fairness -Answer- Industries are entitled to the same access to
foreign markets as foreign industries have to theirs
Import Restrictions as Bargaining Tool -Answer- Believably & Importance/ aim to raise
or lower exporters prices
, Export Restrictions -Answer- Limit exports when you have short supply to favor
domestic consumers/ limit sale to raise prices abroad
Prevention of Foreign Monopolies -Answer- Foreign producers have very low prices that
drive producers out of business in importing country
Prevention of Dumping -Answer- exporting below cost/ below home country price
Optimum- tariff theory -Answer- a foreign producer will lower its export prices if the
importing country places a tax on its products
Tariffs -Answer- Tax levied on a good shipped internationally/ revenue for government
Specific duty -Answer- A per unit basis
Ad valorem duty -Answer- tariff based on % of value
Compound duty -Answer- A combination of specific and ad valorem duties
Subsidies -Answer- Financial support from the government to boost companies
cometitiveness
Aids & Loans -Answer- Government requires foreign aid/loan recipients to spend the
funds in the donor country
customs valuation -Answer- the process of determining the value of an imported product
Quotas -Answer- limits on the quantity of goods that can be imported or
exported/generate revenue for companies
Embargo -Answer- specific type of quota that prohibits all trade
How do companies deal with governmental trade influences? -Answer- Try to get
government protection (restrict import or export), move operations to another country,
Concentrate on market niches that attract less international competition, Adopt internal
innovations, such as greater efficiency or superior products
Price Control -Answer- withholding goods to impact pricing or favor domestic
consumption (OPEC and oil, US and natural gas)
Free Trade Agreement -Answer- Trade barriers drop for member countries, trade
barriers remain higher for nonmember countries, market-size increase(home countries
increases FDI to achieve economies of scale)
Which term refers to money denominated in the currency of another nation or group of
nations?
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