Unit 7 Topic 2 Practice Quiz

William is studying international trade and comes across a term that means "A tax on imported goods." Which of the following best defines this term?

• Quota

• Trade Restrictions

• Embargo

• Tariff

Answer explanation

A tariff is specifically a tax imposed on imported goods, making it the correct choice. A quota limits the quantity of goods, trade restrictions encompass various barriers, and an embargo prohibits trade altogether.

Benjamin is studying international trade agreements and wants to know which of the following is 1 FTA of which the US is NOT a part?

• CAFTA-DR

• KORUS

• US-Mexico-Canada Agreement

• The European Union

Answer explanation

The European Union is a political and economic union of member states in Europe, and the US is not a member. In contrast, CAFTA-DR, KORUS, and the US-Mexico-Canada Agreement are all trade agreements involving the US.

Abigail and Aiden are discussing international trade agreements. Abigail mentions that both Free Trade Agreements (FTAs) and the World Trade Organization (WTO) have faced criticisms. Which of the following are criticisms of both FTAs and the WTO?

• Taxes increase when both get involved in trade issues.

• Both seems to favor richer countries over poorer countries

• Both decrease the amount of markets to which businesses can sell their goods/services.

• Quotas and Embargoes decrease when both get involved in trade disputes.

Answer explanation

Both FTAs and the WTO are often criticized for favoring richer countries over poorer ones, as wealthier nations typically have more negotiating power and resources, leading to imbalances in trade agreements.

India has traditionally imported cars from overseas and had no domestic production of cars. The government of India has decided to help fund the creation of a domestic automotive industry. To help with this, the government has imposed a 25% tax on all foreign-produced cars coming into India.

This scenario is an example of which argument against free trade?

• National Defense

• Protect Jobs

• Protect Infant Industries

• Anti-Dumping

Answer explanation

The government's 25% tax on foreign cars aims to nurture India's nascent automotive industry, illustrating the 'Protect Infant Industries' argument against free trade, which advocates for shielding emerging sectors from foreign competition.

Charlotte is studying the impact of international trade on different groups. She wants to know which of the following groups are likely to argue for limiting international trade?

I. Consumers of foreign goods/services

II. Workers and Labor Unions who could lose jobs

III. Businesses and Industries who have to compete against foreign businesses/industries

• I & III

• II & III

• I & II

• II, only

Answer explanation

Workers and labor unions (II) argue for limiting trade to protect jobs, while businesses (III) may seek limits to reduce foreign competition. Consumers of foreign goods (I) generally benefit from trade, so they are less likely to argue for limits.

Hannah is studying international trade policies and comes across a case where a 75% tax is imposed on shoes imported from Vietnam. What type of trade restriction is this?

• quota

• embargo

• tariff

• sanction

Answer explanation

A 75% tax on imported shoes from Vietnam is a tariff, which is a tax imposed on goods when they cross international borders. This is different from quotas, embargoes, or sanctions, which are other forms of trade restrictions.

Evelyn is studying how the US government increases its revenue through trade restrictions. Which trade restriction has been used by the US government to achieve this?

• Tariffs

• Quotas

• Embargoes

Answer explanation

Tariffs are taxes imposed on imported goods, which increase government revenue by raising the cost of foreign products, making domestic goods more competitive. This is a common trade restriction used by the US government.

Harper is studying international trade policies and learns that a country has imposed quotas on certain imported goods. What is the primary purpose of this action?

• To increase government revenue

• To limit the quantity of goods entering a country

• To encourage foreign investment

• To promote free trade

Answer explanation

The primary purpose of imposing quotas is to limit the quantity of goods entering a country. This action helps protect domestic industries by controlling foreign competition and ensuring local markets are not overwhelmed.

Charlotte is discussing with her classmates about the economic policies of their country. She argues that one of the benefits of trade protectionism is that it helps in a specific way. Which of the following is a common argument in favor of trade protectionism?

• It reduces consumer prices

• It encourages international cooperation

• It protects domestic industries from foreign competition

• It increases the variety of goods available

Answer explanation

A common argument in favor of trade protectionism is that it protects domestic industries from foreign competition, allowing them to grow and maintain jobs, which is crucial for the economy.

Emma is studying international trade policies and wants to know which tool is used to completely ban trade with a specific country. Can you help her?

• Tariff

• Embargo

• Subsidy

• Quota

Answer explanation

An embargo is a government order that restricts or prohibits trade with a specific country, making it the correct tool for completely banning trade. Tariffs, subsidies, and quotas do not impose total trade bans.