WorksheetsEdexcel Economics Unit 4 Quiz 1 (Trade; Poverty)
Total questions: 1
Worksheet time: 3570secs
What is the definition of globalisation?
A) A reversal of the process of globalisation
B) Slowdown in the speed of globalisation
C) The deepening of relationships between countries, reflected in an increasing level of cross-border trade and investment and migration
D) The process of reducing trade barriers
Which of the following is NOT a characteristic of globalisation?
A) Increased trade in goods and services
B) De-industrialisation and structural unemployment in developed economies
C) Decreasing interdependency of economic agents
D) Greater specialisation and division of global labour force
What is one of the causes of globalisation?
A) Decreasing size and number of trading blocs
B) Increasing influence of powerful corporations (MNCs/TNCs)
C) Higher trade barriers
D) Decreasing FDI flows between countries
Which of the following is a benefit of globalisation?
A) Higher consumer prices
B) Slower economic growth
C) Freer movement of labour
D) Decreased awareness of global economic challenges
What does the term "slower globalisation" refer to?
A) A reversal of the process of globalisation
B) Slowdown in the speed of globalisation
C) The deepening of relationships between countries
D) Increasing trade barriers
What is the role of multi- or trans-national companies (MNCs or TNCs) in globalisation?
A) They operate in only one country
B) They reduce the need for global supply chains
C) They operate in more than one country
D) They focus solely on local markets
Which of the following is a cost of globalisation?
Increased access to foreign markets
Improved productivity and innovation
Environmental costs
Attraction of foreign investment
What is a cause of de-globalisation?
Increased access to global markets
Economic shocks
Improved productivity and innovation
Increased access to knowledge and technology
Which of the following is a benefit of globalisation on developed countries?
Job displacement/structural unemployment
Rise in income inequality
Increased access to foreign markets
Environmental degradation
What is a systemic risk of negative global shocks?
Increased access to global markets
Financial crises
Improved productivity and innovation
Attraction of foreign investment
Which of the following is a cost of globalisation on developing countries?
Increased access to global markets
Increase in foreign investment
Economic dependence such as primary product dependency
Increased access to knowledge and technology
What is a benefit of globalisation on developing countries?
Exploitation of labour and issues with emigration
Environmental degradation
Increased access to knowledge and technology
Economic dependence such as primary product dependency
Which of the following is NOT a reason why countries trade?
To increase the availability of resources, goods, and services
To increase choice for consumers/more product differentiation
To decrease efficiency and increase costs
To reduce prices
What is international specialisation?
When countries focus on producing and exporting goods or services in which they have a comparative advantage
When countries produce all goods and services domestically
When countries avoid trading with other nations
When countries focus on producing goods with the highest costs
What is the definition of absolute advantage?
A country produces a good at a lower direct cost
A country produces a good at a higher direct cost
A country imports all goods and services
A country avoids specialization
Which country has an absolute advantage in the production of Good X?
Country A
Country B
Both Country A and Country B
Neither Country A nor Country B
What is the opportunity cost of producing 1 unit of Good Y in Country A?
Which country has a comparative advantage in the production of Good Y?
Country A
Country B
Both Country A and Country B
Neither Country A nor Country B
What is the total production of Good X and Good Y after specialisation?
200 units of Good X and 110 units of Good Y
180 units of Good X and 105 units of Good Y
150 units of Good X and 90 units of Good Y
100 units of Good X and 50 units of Good Y
What is meant by "mutually beneficial terms of trade"?
Trade that benefits only one country
Trade that benefits both countries
Trade that benefits neither country
Trade that benefits only the exporting country
What is the opportunity cost ratio for Country A before trade?
1X:0.75Y
1Y:1.34X
1X:0.5Y
1Y:2X
What is the opportunity cost ratio for Country B before trade?
1X:0.75Y
1Y:1.34X
1X:0.5Y
1Y:2X
After trade and specialisation, how much of Good X does Country A export to Country B?
43X
63X
48X
62X
What is the definition of "competitive advantage"?
When a country has no transport costs
When a country has access to technology or innovations that allow cheaper and/or more efficient production of goods
When a country has no barriers to trade
When a country has perfect knowledge
Who was David Ricardo?
A modern economist who developed the theory of absolute advantage
One of the founding fathers of classical economics who developed the idea of comparative advantage
A politician who promoted free trade
A scientist who studied environmental costs of trade
What is the basic rule of comparative advantage according to David Ricardo?
Specialise a country’s scarce factor resources in goods and services that they are relatively best at
Specialise a country’s abundant factor resources in goods and services that they are relatively worst at
Specialise a country’s scarce factor resources in goods and services that they are relatively worst at
Specialise a country’s abundant factor resources in goods and services that they are relatively best at
What is one of the assumptions underlying comparative advantage?
No transport costs
High environmental costs
Imperfect knowledge
Factor immobility between uses
What is the result of specialisation and trade for both countries?
Both countries are worse off than before
Both countries are better off than before
Only one country benefits
Neither country benefits
What does Country A gain after trade and specialisation?
What does Country B gain after trade and specialisation?
What does the diagram showing absolute and comparative advantage illustrate?
A has absolute advantage in Y and B has absolute advantage in X
No gains from trade. Opportunity cost ratios are the same. (Parallel)
A has comparative advantage in X and B has comparative advantage in Y
All of the above
What is the definition of the pattern of trade?
The mix of goods and services that a country imports and exports in international trade
The economic policies a country follows
The political relationships between trading countries
The cultural exchanges between countries
Which of the following is NOT a factor influencing the pattern of trade?
Absolute and comparative advantages
Factor endowments
Cultural exchanges
Exchange rate movements
What does the geographical pattern of trade describe?
How businesses and consumers in other countries trade with businesses and consumers in a country
The types of products traded internationally
The economic policies of a country
The cultural exchanges between countries
What is the Gravity theory of trade?
Countries tend to trade most with other nations in closest proximity
Countries trade based on their economic policies
Countries trade based on cultural similarities
Countries trade based on political alliances
What is primary product dependency?
Where a country's economy heavily relies on the export of raw materials or primary products
Where a country's economy relies on the import of finished goods
Where a country's economy is based on service industries
Where a country's economy is based on technological innovation
Which of the following is an example of a country with primary product dependency?
Cote d'Ivoire
Germany
USA
Japan
What is an emerging market?
An economy that cannot yet be classified as 'developed' and is investing heavily in its productive capacity
An economy that is fully developed and has a high standard of living
An economy that relies solely on agricultural exports
An economy that does not engage in international trade
What percentage of UK exports go to the European Union post-Brexit?
46%
53%
13%
3.6%
Which country is the largest single export market for the UK?
USA
Germany
China
Netherlands
What type of products does the UK trade most in?
Petroleum products, road vehicles, pharmaceutical products
Agricultural goods, textiles, food products
Electronics, software, hardware
Furniture, clothing, accessories
What is a trading bloc?
A group of countries that trade more freely amongst themselves but may set barriers against non-members
A single country that trades with multiple other countries
A bilateral agreement between two companies
A local market within a country
Which type of trading bloc involves free trade between members and a common external tariff (CET) on non-members?
Preferential Trading Area (PTA)
Free trade area/agreement (FTA)
Customs union
Monetary union
What is the main characteristic of a single (common) market?
Free trade and common policies on product regulation
Trade agreements between the EU and less developed countries
Members share a common currency and central bank
Free trade between members with tariffs and quotas removed
What does trade creation refer to in the context of a customs union?
Removal of tariffs between members increases trade between businesses within the bloc
Trade is diverted from outside to inside the bloc
Setting up a common external tariff (CET)
Establishing a single market
Which of the following is an example of a free trade area?
Eurozone
ASEAN
EU single market
Customs union
What is the purpose of the 'country of origin rule' in a free trade area?
To ensure that a certain percentage of goods traded must originate from a member state to qualify for tariff-free internal trade
To establish a common currency among member states
To set a common external tariff on non-members
To create a level playing field for trade by removing NTBs
What happens to consumer surplus when a tariff is removed in a customs union?
It decreases
It remains the same
It increases
It is eliminated
What is the main benefit of a single or common market?
Free trade between members with tariffs and quotas removed
Free movement of goods, services, capital, and labor
Members share a common currency and central bank
Trade agreements between the EU and less developed countries
Which of the following is an advantage of Regional Trade Agreements (RTAs)?
Increased trade
Trade diversion
Complexity
Exclusion
What is one of the key functions of the World Trade Organisation (WTO)?
Trade diversion
Dispute settlement
Exclusion
Inequality
Which of the following is a disadvantage of RTAs?
Efficiency gains
Economies of scale
Political cooperation
Loss of sovereignty
What does the term "trade diversion" refer to in the context of RTAs?
Increased trade among member countries
Reduction of trade barriers
Members trading more with each other but less with non-members
Providing technical assistance to developing countries
Which of the following is a challenge faced by the WTO?
Increased trade
Efficiency gains
Multilateral negotiations gridlock
Political cooperation
What is one of the factors influencing the potential success of a trading bloc?
Trade discrimination
Economic size of the bloc
Preferential treatment
Dispute resolution
What does "preferential treatment" mean in the context of RTAs and WTO?
RTAs provide preferential treatment to member countries
WTO rules generally favor non-discrimination
RTAs lead to trade diversion
RTAs may discriminate against non-members
Which of the following is a tax on imports?
Quota
Subsidy
Tariff
Non-tariff barrier (NTB)
What is a physical limit on the quantity of imports allowed?
Tariff
Quota
Subsidy
Rules of Origin
Which of the following is a payment by the government to reduce the costs of producers?
Tariff
Quota
Subsidy
Non-tariff barrier (NTB)
What are barriers such as import quotas, tough environmental and product standard rules, trade embargoes, and export subsidies called?
Tariff
Quota
Subsidy
Non-tariff barrier (NTB)
What are the rules of the national source of the traded goods, e.g., a minimum percentage for locally-sourced components, called?
Tariff
Quota
Rules of Origin
Subsidy
Which of the following is NOT a type of non-tariff barrier (NTB)?
Intellectual property laws
Technical barriers to trade
Preferential state procurement policies
Tariff
What is the effect of a quota on the market price?
Decreases the market price
Increases the market price
Has no effect on the market price
Eliminates the market price
What happens to consumer surplus when a tariff is imposed?
It increases
It remains the same
It falls
It fluctuates
What is the impact of a subsidy on imports?
Imports increase
Imports decrease
Imports remain the same
Imports are eliminated
Which of the following is a reason for protecting domestic industries through trade restrictions?
To increase consumer choice
To safeguard national security interests
To lower prices for consumers
To promote free trade
What is the "Infant Industry Argument" in favor of protectionism?
To protect established industries from foreign competition
To protect emerging industries until they can compete internationally
To reduce the prices of imported goods
To increase consumer choice
Which of the following is a problem associated with protectionism?
Higher prices for consumers
Increased consumer choice
Improved living standards
Enhanced international relations
How can trade restrictions improve a country's balance of payments?
By increasing imports
By reducing imports through tariffs or quotas
By promoting free trade
By increasing consumer choice
What is one of the benefits of protectionism mentioned in the document?
It leads to lower prices for consumers
It promotes free trade
It can protect jobs and prevent structural unemployment
It increases consumer choice
Which of the following is a potential issue with free trade?
Job creation in domestic industries
Wage suppression
Increased income equality
Higher living standards
What is a potential consequence of trade barriers and inequality?
Increased competition in certain sectors
Higher pricing power for companies
Lower profits for companies
Higher real wages for workers
What are the three key parts of a country's balance of payments account?
Current account, Capital account, Financial account
Trade balance, Services balance, Primary income
Exports, Imports, Net exports
Budget deficit, Trade deficit, Financial deficit
What does a trade surplus indicate?
The value of imports exceeds the value of exports
The value of exports exceeds the value of imports
The value of exports equals the value of imports
The value of imports equals the value of exports
What is recorded in the capital account of the balance of payments?
Transactions related to financial assets and liabilities
Transactions related to the acquisition or disposal of non-financial assets
Net transfers of money or goods between countries
Net flows of earnings from investments
Which of the following is included in the financial account of the balance of payments?
Trade in goods and services
Capital transfers
Foreign direct investment (FDI)
Secondary income
What does the current account record?
Transactions related to a country's trade in goods, services, primary and secondary income
Transactions related to the acquisition or disposal of non-financial assets
Transactions related to financial assets and liabilities
Net transfers of money or goods between countries
What is the difference between a current account deficit and a budget deficit?
A current account deficit occurs when the value of exports is greater than the value of imports, while a budget deficit occurs when the government spends less than it receives in tax revenue.
A current account deficit occurs when the value of exports is less than the value of imports, while a budget deficit occurs when the government spends more than it receives in tax revenue.
A current account deficit occurs when the value of imports is greater than the value of exports, while a budget deficit occurs when the government spends more than it receives in tax revenue.
A current account deficit occurs when the value of imports is less than the value of exports, while a budget deficit occurs when the government spends less than it receives in tax revenue.
What is a current account deficit?
When the value of exports of goods and services, investment incomes, and transfer inflows is higher than spending on imported goods and services.
When the value of exports of goods and services, investment incomes, and transfer inflows is lower than spending on imported goods and services.
When the value of exports of goods and services, investment incomes, and transfer inflows is equal to spending on imported goods and services.
When the value of exports of goods and services, investment incomes, and transfer inflows is not considered.
Which of the following is NOT a way to finance a current account deficit?
Attract inflows of FDI, portfolio investments, hot money, savings.
Use up foreign currency reserves.
Sell assets/property to foreign investors.
Increase domestic consumption.
What are the cyclical causes of a current account deficit?
Low rates of capital investment and high cost & price inflation.
Fall in value of exports and a boom in consumer spending.
Rising real incomes boosting consumer spending and increasing demand for imports.
Long-term decline of previously dominant export sectors.
What is a possible consequence of a current account deficit?
Increase in real output and GDP growth.
Depreciating exchange rate.
Positive multiplier effect.
Increase in foreign currency reserves.
What does the significance of a current account deficit depend on?
Its size relative to GDP and its persistence.
Its size relative to GDP and the level of foreign investment.
Its persistence and the level of foreign investment.
The level of foreign investment and the trade balance.
Which of the following is a characteristic of a current account surplus?
Net injection into the economy.
Positive export multiplier effects.
Trade surplus allows net exporting of capital.
All of the above.
Which of the following is NOT a method to correct a current account deficit?
Deflationary policies to reduce AD and spending on imports
Depreciation/devaluation of the currency
Increasing government spending on welfare
Direct controls on imports via tariffs, quotas, etc.
What is the primary goal of expenditure-switching policies?
To increase government spending
To change the relative prices of exports and imports
To reduce the supply of money
To increase the interest rates
Which of the following is an example of an expenditure-reducing policy?
An exchange rate depreciation
A tariff on imported goods
Higher direct taxes
Lower relative inflation
Which of the following is a supply-side policy to correct a current account deficit?
Depreciation of the currency
Investment in education
Higher direct taxes
Lower relative inflation
According to the Marshall-Lerner condition, for a depreciation to improve the current account, the absolute value of the sum of the PED for X and PED for M must be:
Less than 1
Equal to 1
Greater than or equal to 1
Greater than 2
What does the J-curve effect illustrate?
The immediate improvement in the trade balance after a currency depreciation
The time lag between a depreciation or devaluation and an improvement in the trade balance
The relationship between inflation and unemployment
The impact of tariffs on import prices
What is the definition of an exchange rate?
The price of a currency in terms of another.
The interest rate set by the central bank.
The amount of foreign direct investment.
The rate of inflation in an economy.
Which of the following is an example of a bilateral exchange rate?
£1 = $1.05
Effective or trade-weighted index
Real effective exchange rate
Inflation-adjusted exchange rate
What does a multilateral exchange rate represent?
One currency in terms of a group of other currencies.
One currency in terms of one other currency.
The rate of inflation in an economy.
The amount of foreign direct investment.
Which of the following factors influences the demand for a currency?
Domestic spending on imported goods and services.
Outflow of portfolio flows in property, shares, and bonds.
Buying exports of goods and services.
Outflows of foreign direct investment (FDI).
What is the impact of an increase in exports or inward investment on the demand for currency?
Demand for currency shifts right.
Demand for currency shifts left.
Supply of currency shifts right.
Supply of currency shifts left.
What happens to the supply of a currency when there is an outflow of foreign direct investment (FDI)?
Supply of currency increases.
Supply of currency decreases.
Demand for currency increases.
Demand for currency decreases.
What is the effect of a fall in interest rates on the demand and supply of currency?
Demand shifts left and supply shifts right.
Demand shifts right and supply shifts left.
Both demand and supply shift left.
Both demand and supply shift right.
What is the impact of speculation on the demand for currency if the currency is appreciating?
Demand shifts right.
Demand shifts left.
Supply shifts right.
Supply shifts left.
Which of the following is a characteristic of a freely floating exchange rate system?
Central bank intervention is frequent.
Currency value is set purely by demand and supply.
The exchange rate is pegged to another currency.
The central bank holds large foreign currency reserves.
In a managed floating exchange rate system, the central bank may intervene by:
Pegging the currency to a fixed rate.
Issuing more domestic currency without foreign reserves.
Buying or selling foreign exchange reserves.
Setting a target for the exchange rate.
