The Dynamic Environment of International Trade
Chapter 02
True / False Questions
2. The GATT became part of the World Trade Organization in 1995, with the ratification of
the Uruguay Round agreements.
TRUE
With the ratification of the Uruguay Round agreements, the GATT became part of the
World Trade Organization (WTO) in 1995, and its 117 original members moved into a
new era of free trade.
3. As part of the worldwide economic growth and rebuilding after World War II, countries
once classified as less developed were reclassified as underdeveloped countries.
FALSE
As part of the worldwide economic growth and rebuilding after World War II, countries
once classified as less developed were reclassified as newly industrialized countries
(NICs).
5. The Organization for Economic Cooperation and Development (OECD) has estimated
that the economies of the developed world will expand at much faster rates when
compared to the developing economies.
FALSE
The Organization for Economic Cooperation and Development (OECD) estimates that
the economies of member countries will expand an average of 3 percent annually for
the next 25 years, the same the economies of the developing world will grow at faster
rates—from an annual rate of 4 percent in the past quarter century to a rate of 6
percent for the next 25 years.
6. A nation’s balance-of-payments statement records all financial transactions between its
residents and those of the rest of the world during a given period of time.
TRUE
A nation’s balance-of-payments statement records all financial transactions between its
residents and those of the rest of the world during a given period of time—usually one
year.
11. A case might be made for temporary protection of markets with excess productive
capacity or excess labor when such protection could facilitate an orderly transition.
TRUE
A case might be made for temporary protection of markets with excess productive
capacity or excess labor when such protection could facilitate an orderly transition.
Unfortunately such protection often becomes long term and contributes to industrial
inefficiency while detracting from a nation’s realistic adjustment to its world situation.
, 12. To encourage development of domestic industries, governments work on reducing
trade barriers.
FALSE
While the inspiration for trade barriers may be economic or political, they are
encouraged by domestic industries.
13. In general, tariffs decrease inflationary pressures.
FALSE
In general, tariffs increase inflationary pressures, special interests’ privileges,
government control and political considerations in economic matters, and the number
of tariffs (they beget other tariffs via reciprocity).
24. The Omnibus Trade and Competitiveness Act of 1988 focuses on assisting businesses
to be more competitive in world markets as well as on correcting perceived injustice in
trade practices.
TRUE
The Omnibus Trade and Competitiveness Act of 1988 is many faceted, focusing on
assisting businesses to be more competitive in world markets as well as on correcting
perceived injustice in trade practices.
27. The GATT panels were formed to resolve bilateral trade disputes and thus have both
advisory and enforcement powers.
FALSE
GATT member nations seek to resolve their trade disputes bilaterally; if that fails,
special GATT panels are set up to recommend action. The panels are only advisory
and have no enforcement powers.
28. The decisions taken by the World Trade Organization in solving trade disputes among
members are binding ones.
TRUE
The World Trade Organization sets many rules governing trade among its 157
members, provides a panel of experts to hear and rule on trade disputes among
members, and, unlike GATT, issues binding decisions.
29. The World Bank was formed with the primary objective of overcoming inadequate
monetary reserves and dealing with unstable currencies which were particularly vexing
problems in global trade.
FALSE
The International Monetary Fund (IMF) was formed to overcome inadequate monetary
reserves and unstable currencies which were particularly vexing problems in global
trade.
Multiple Choice Questions
Chapter 02
True / False Questions
2. The GATT became part of the World Trade Organization in 1995, with the ratification of
the Uruguay Round agreements.
TRUE
With the ratification of the Uruguay Round agreements, the GATT became part of the
World Trade Organization (WTO) in 1995, and its 117 original members moved into a
new era of free trade.
3. As part of the worldwide economic growth and rebuilding after World War II, countries
once classified as less developed were reclassified as underdeveloped countries.
FALSE
As part of the worldwide economic growth and rebuilding after World War II, countries
once classified as less developed were reclassified as newly industrialized countries
(NICs).
5. The Organization for Economic Cooperation and Development (OECD) has estimated
that the economies of the developed world will expand at much faster rates when
compared to the developing economies.
FALSE
The Organization for Economic Cooperation and Development (OECD) estimates that
the economies of member countries will expand an average of 3 percent annually for
the next 25 years, the same the economies of the developing world will grow at faster
rates—from an annual rate of 4 percent in the past quarter century to a rate of 6
percent for the next 25 years.
6. A nation’s balance-of-payments statement records all financial transactions between its
residents and those of the rest of the world during a given period of time.
TRUE
A nation’s balance-of-payments statement records all financial transactions between its
residents and those of the rest of the world during a given period of time—usually one
year.
11. A case might be made for temporary protection of markets with excess productive
capacity or excess labor when such protection could facilitate an orderly transition.
TRUE
A case might be made for temporary protection of markets with excess productive
capacity or excess labor when such protection could facilitate an orderly transition.
Unfortunately such protection often becomes long term and contributes to industrial
inefficiency while detracting from a nation’s realistic adjustment to its world situation.
, 12. To encourage development of domestic industries, governments work on reducing
trade barriers.
FALSE
While the inspiration for trade barriers may be economic or political, they are
encouraged by domestic industries.
13. In general, tariffs decrease inflationary pressures.
FALSE
In general, tariffs increase inflationary pressures, special interests’ privileges,
government control and political considerations in economic matters, and the number
of tariffs (they beget other tariffs via reciprocity).
24. The Omnibus Trade and Competitiveness Act of 1988 focuses on assisting businesses
to be more competitive in world markets as well as on correcting perceived injustice in
trade practices.
TRUE
The Omnibus Trade and Competitiveness Act of 1988 is many faceted, focusing on
assisting businesses to be more competitive in world markets as well as on correcting
perceived injustice in trade practices.
27. The GATT panels were formed to resolve bilateral trade disputes and thus have both
advisory and enforcement powers.
FALSE
GATT member nations seek to resolve their trade disputes bilaterally; if that fails,
special GATT panels are set up to recommend action. The panels are only advisory
and have no enforcement powers.
28. The decisions taken by the World Trade Organization in solving trade disputes among
members are binding ones.
TRUE
The World Trade Organization sets many rules governing trade among its 157
members, provides a panel of experts to hear and rule on trade disputes among
members, and, unlike GATT, issues binding decisions.
29. The World Bank was formed with the primary objective of overcoming inadequate
monetary reserves and dealing with unstable currencies which were particularly vexing
problems in global trade.
FALSE
The International Monetary Fund (IMF) was formed to overcome inadequate monetary
reserves and unstable currencies which were particularly vexing problems in global
trade.
Multiple Choice Questions
