IB-Chapter 5-Government Policy and International Trade

What is the primary purpose of government trade policy?

• To promote only local businesses without restrictions.

• To eliminate all forms of international trade.

• To increase tariffs on all imports.

• To regulate international trade and protect domestic industries.

How do tariffs affect international trade?

• Tariffs increase international trade by lowering the cost of imports.

• Tariffs have no impact on international trade dynamics.

• Tariffs promote free trade by eliminating barriers.

• Tariffs reduce international trade by increasing the cost of imports, leading to decreased demand and potential trade disputes.

What is a trade deficit, and why is it significant?

• A trade deficit occurs when a country exports more than it imports.

• A trade deficit is a measure of a country's total exports only.

• A trade deficit is when a country's imports exceed its exports, and it is significant as it can affect the economy, currency value, and trade policies.

• A trade deficit has no impact on a country's economy or currency.

Explain the concept of free trade agreements.

• Free trade agreements impose tariffs on imports to protect local industries.

• Free trade agreements are treaties that reduce or eliminate trade barriers between countries to promote trade and economic cooperation.

• Free trade agreements are only applicable to countries within the same continent.

• Free trade agreements are designed to restrict trade between nations.

What role do international organizations play in trade policy?

• International organizations are responsible for setting national tax rates.

• International organizations primarily focus on environmental issues.

• International organizations only provide financial aid to developing countries.

• International organizations help establish trade rules, reduce tariffs, and resolve disputes.

How can government subsidies impact domestic industries?

• Government subsidies can lead to increased imports and reduced local production.

• Subsidies have no effect on the competitiveness of domestic industries.

• Government subsidies can enhance competitiveness of domestic industries by reducing costs and encouraging production.

• Government subsidies primarily benefit foreign companies over local industries.

What are non-tariff barriers, and how do they influence trade?

• Free trade agreements between countries

• Subsidies provided to domestic industries

• Tariffs imposed on imported goods

• Non-tariff barriers are trade restrictions that do not involve tariffs, such as quotas and regulations, which influence trade by limiting foreign competition.

Discuss the effects of globalization on national trade policies.

• Countries become isolated and reduce international trade agreements due to globalization.

• Globalization has no impact on national trade policies.

• Globalization leads to increased tariffs and protectionist policies.

• Globalization encourages countries to liberalize trade policies, reduce tariffs, and engage in international trade agreements.

What is the relationship between trade policy and economic growth?

• Trade policy only benefits large corporations and not the economy.

• Economic growth is solely determined by domestic policies.

• Trade policy has no effect on economic growth.

• Trade policy can significantly impact economic growth by facilitating or hindering trade, competition, and innovation.

How do exchange rates affect international trade?

• Exchange rates only affect domestic markets.

• Higher exchange rates always benefit exporters.

• Exchange rates significantly influence the cost and competitiveness of international trade.

• Exchange rates have no impact on trade.