BE - International Trade

International trade refers to the exchange of goods and services between:

• Individuals within a country

• Businesses within a country

• Governments within a country

• Countries

The main reason for international trade is to:

• Limit competition

• Increase self-sufficiency

• Take advantage of comparative advantage

• Hinder economic growth

Comparative advantage suggests that a country should produce and export goods that it can:

• Produce at a higher cost than other countries

• Produce at a lower relative cost than other countries

• Import more cheaply than it can produce itself

• Restrict trade with other countries

A tariff is a tax imposed on:

• Exports

• Imports

• Domestic goods

• Services

A quota is a restriction on the:

• Price of imported goods

• Quantity of imported goods

• Quality of exported goods

• Value of exported goods

Protectionism refers to government policies that:

• Encourage free trade

• Restrict international trade

• Promote foreign investment

• Discourage domestic production

The World Trade Organization (WTO) is an international organization that:

• Sets tariffs on international trade

• Regulates international trade agreements

• Provides financial aid to developing countries

• Promotes regional trade blocs

A free trade agreement (FTA) is an agreement between two or more countries to:

• Increase tariffs on specific goods

• Reduce or eliminate tariffs and trade barriers

• Impose quotas on each other's exports

• Limit foreign investment

The balance of trade refers to the difference between a country's:

• Exports and domestic consumption

• Government spending and tax revenue

• Exports and imports

• Investment and savings

A trade surplus occurs when a country's:

• Imports exceed exports

• Government spending is high

• Unemployment rate is low

• Exports exceed imports