Trade in the Global Economy

Define 'Comparative Advantage'.

Organize these options into the right categories: Advantages and disadvantages of free trade

Groups:

(a) Advantages

,

(b) Disadvantages

• Efficient allocation of resources

• Encourages innovation

• Lower prices for consumers

• Increased inequality between nations

• Potential for exploitation of workers

• Dependence on foreign markets

• The issue of dumping

• Improved quality of products

• Environmental degradation

• Obtain g/s your country cannot produce

• Job losses in certain sectors

• Vulnerability to global economic fluctuations

• Specialisation of labour

• Achieve economies of scale

• Increased competition leading to innovation

• Trade imbalances

List and define all methods of protection.

What is the main purpose of tariffs in international trade?

• To encourage foreign companies to invest in domestic markets

• To increase the cost of imported goods and protect domestic industries

• To eliminate taxes on imported goods and encourage trade

• To provide subsidies to international exporters

Which of the following is an example of an import quota?

• The Australian government providing subsidies to fossil fuel industries

• A restriction on the number of bananas imported into Australia

• The elimination of tariffs in a free trade agreement

• A restriction on the number of bananas imported into Australia

How do subsidies differ from tariffs and quotas?

• Subsidies directly harm foreign competitors while tariffs do not

• Subsidies increase the price of imported goods while tariffs do not

• Subsidies help domestic industries by providing financial support rather than restricting foreign competition

• Subsidies are used only in developing economies

What is a key goal of local content rules?

• To prevent any foreign products from entering the domestic market

• To require that a certain percentage of goods contain locally produced components

• To increase the number of imported goods to boost competition

• To impose additional tariffs on exported goods

Which of the following is a potential negative effect of protectionist policies?

• Increase in domestic job opportunities

• Improved global trade relations

• Increase in FDIs

• Disruptions in global supply chains

How can protectionist policies lead to trade wars?

• Countries retaliate by imposing their own tariffs and trade restrictions

• Countries sign more free trade agreements to counteract tariffs

• Protectionism increases global trade efficiency

• Trade wars are unrelated to protectionist policies

What role does the World Trade Organization (WTO) play in global trade?

• It imposes trade restrictions on developing economies

• It provides financial aid to developing countries

• It replaces national governments in managing trade policies

• It ensures that international trade flows as freely as possible and resolves disputes