GEB 3373 Exam #2, All Questions with
accurate answers. Rated A. 2022/2023
Trade is _____ a zero sum game - ✔✔not
Is trade voluntary? - ✔✔yes
What is the direct effect exports and imports have on nationl economies? - ✔✔Direct effect: affects the
GDP
exports directly add to the GDP
imports directly reduce GDP
GDP Formula - ✔✔Y = C + I + G + NX
NX = Exports - Imports
Y = GDP
C = Consumption
I = Investment
G = Government purchases
What is the indirect effect exports and imports have on nationl economies? - ✔✔the Multiplier Effect-
an increase in exports sparks other domestic economic activity
,Imports Increase competition
Developing economies acount for roughyl _____ of world exports and imports - ✔✔Half
The number one exporter is - ✔✔China
The number one importer is - ✔✔United States
What are three reasons one should care about international trade theories? - ✔✔1. International trade
is ubiquitous and pervasive
2. Government use these theories
3. You can use them in your career
What are the different groups of trade theories? - ✔✔Classical Trade Theories
Modern Trade Theories
Classical Trade Theories - ✔✔theories that were developed to explain trade betwee countries
What are the Classical Trade Theories useful for analyzing? - ✔✔the trade of Commodities- standarized
goods such as wheat, suagr, lumber, or oil
commodities are bought on the basis of price rather than brand name
What are the Classical Trade Theories? - ✔✔1. Mercantilism
2. Absolute Advantage
3. Comparative Advantage
,4. Heckscher-Ohlin Theory
5. Leontief Paradox
Modern Trade theories - ✔✔theories that were developed to explain trade betwee firms
useful for explaining trade patterns for differentiated goods
demand for differentitated goods can be drivan by differecnes in uality, technology, custoemr loyalty,
brand name
What are the Modern Trade theories - ✔✔1. Product Life Cycle
2. Country Similarity Theory
3. New Trade Theory
4. Porter's Theory of National Competitive Advantage
What are the Modern Trade Theories useful for analyzing? - ✔✔the trade of differentiated goods- cars,
personal care products consumer electronics etc.
depend on brand name etc.
What are the pros and cons of Mercantilism - ✔✔Pros:
-Increase's country's exports
-managed competition from foreign firms via tariffs and quotas
Cons:
-higher taxes needed to pay for subsidies
-higher prices of goods and services due to decreased competition from foreigners
Adam Smith wrote what work? - ✔✔Wealth of Nations
, Adam Smith proposed what theory? - ✔✔the theory of absolute advantage
What did Adam Smith argue? - ✔✔that individuals who are acting for their own benefit will do what's
best for society when they are allowed to produce and exchange goods, services, and assets without
government intervention
Who proposed the theory of comparative advantage? - ✔✔David Ricardo
Country-based theoris expalin ______ trade but can not explain _______ trade - ✔✔intraindustry trade
What are the three stages of the Product life cycle? - ✔✔Stage 1: New Product Stage
Stage 2: Maturing Product Stage
Stage 3: Standardized Product Stage
New Product Stage - ✔✔firms develop and introduce a new product to meet a need in the market
profits are uncertain, so firms generally only sell to domestic markets
the goal is to closely monitor consumer reaction and then fine-tune the product before making a
significant investment in the global market
Maturing Product stage - ✔✔demand picks up and the company expands its capacity to meet foreign
and domestic demand
the company ebgins to look to foreign markets as a lucratie source of deand for the product
accurate answers. Rated A. 2022/2023
Trade is _____ a zero sum game - ✔✔not
Is trade voluntary? - ✔✔yes
What is the direct effect exports and imports have on nationl economies? - ✔✔Direct effect: affects the
GDP
exports directly add to the GDP
imports directly reduce GDP
GDP Formula - ✔✔Y = C + I + G + NX
NX = Exports - Imports
Y = GDP
C = Consumption
I = Investment
G = Government purchases
What is the indirect effect exports and imports have on nationl economies? - ✔✔the Multiplier Effect-
an increase in exports sparks other domestic economic activity
,Imports Increase competition
Developing economies acount for roughyl _____ of world exports and imports - ✔✔Half
The number one exporter is - ✔✔China
The number one importer is - ✔✔United States
What are three reasons one should care about international trade theories? - ✔✔1. International trade
is ubiquitous and pervasive
2. Government use these theories
3. You can use them in your career
What are the different groups of trade theories? - ✔✔Classical Trade Theories
Modern Trade Theories
Classical Trade Theories - ✔✔theories that were developed to explain trade betwee countries
What are the Classical Trade Theories useful for analyzing? - ✔✔the trade of Commodities- standarized
goods such as wheat, suagr, lumber, or oil
commodities are bought on the basis of price rather than brand name
What are the Classical Trade Theories? - ✔✔1. Mercantilism
2. Absolute Advantage
3. Comparative Advantage
,4. Heckscher-Ohlin Theory
5. Leontief Paradox
Modern Trade theories - ✔✔theories that were developed to explain trade betwee firms
useful for explaining trade patterns for differentiated goods
demand for differentitated goods can be drivan by differecnes in uality, technology, custoemr loyalty,
brand name
What are the Modern Trade theories - ✔✔1. Product Life Cycle
2. Country Similarity Theory
3. New Trade Theory
4. Porter's Theory of National Competitive Advantage
What are the Modern Trade Theories useful for analyzing? - ✔✔the trade of differentiated goods- cars,
personal care products consumer electronics etc.
depend on brand name etc.
What are the pros and cons of Mercantilism - ✔✔Pros:
-Increase's country's exports
-managed competition from foreign firms via tariffs and quotas
Cons:
-higher taxes needed to pay for subsidies
-higher prices of goods and services due to decreased competition from foreigners
Adam Smith wrote what work? - ✔✔Wealth of Nations
, Adam Smith proposed what theory? - ✔✔the theory of absolute advantage
What did Adam Smith argue? - ✔✔that individuals who are acting for their own benefit will do what's
best for society when they are allowed to produce and exchange goods, services, and assets without
government intervention
Who proposed the theory of comparative advantage? - ✔✔David Ricardo
Country-based theoris expalin ______ trade but can not explain _______ trade - ✔✔intraindustry trade
What are the three stages of the Product life cycle? - ✔✔Stage 1: New Product Stage
Stage 2: Maturing Product Stage
Stage 3: Standardized Product Stage
New Product Stage - ✔✔firms develop and introduce a new product to meet a need in the market
profits are uncertain, so firms generally only sell to domestic markets
the goal is to closely monitor consumer reaction and then fine-tune the product before making a
significant investment in the global market
Maturing Product stage - ✔✔demand picks up and the company expands its capacity to meet foreign
and domestic demand
the company ebgins to look to foreign markets as a lucratie source of deand for the product
