QUESTION The emphasis of the European Free Trade Association has been on free trade in consumer goods. Indicate whether the statement is true or false. ANSWER FALSE The emphasis of the European Free Trade Association (EFTA) has been on free trade in industrial goods. Agriculture was left out of the arrangement, each member being […]
QUESTION In a customs union, a common currency is adopted. Indicate whether the statement is true or false. ANSWER FALSE A customs union eliminates trade barriers between member countries and adopts a common external trade policy. Establishment of a common external trade policy necessitates significant administrative machinery to oversee trade relations with nonmembers. It […]
QUESTION Economic theories suggest that free trade and investment is a positive-sum game, in which all participating countries stand to gain. Indicate whether the statement is true or false. ANSWER TRUE Economic theories of international trade predict that unrestricted free trade will allow countries to specialize in the production of goods and services that […]
QUESTION Which of the following is a major type of foreign investment risk that is insurable through government-backed programs? A. Lack of funds B. Risk of transaction loss C. Poor strategic tie-ups D. Risks of expropriation E. Losses due to natural calamities ANSWER D
QUESTION In terms of regional economic integration, linking neighboring economies and making them increasingly dependent on each other create incentives for political cooperation between the neighboring states. Indicate whether the statement is true or false. ANSWER TRUE The political case for regional economic integration also has loomed large in several attempts to establish free […]
QUESTION Offshore production refers to FDI undertaken: A. to focus on extractive industries, such as oil and gas. B. to serve the home market. C. in shipping industries. D. to decrease the prices of products in the host countries. E. to capture tax benefits in the host country. ANSWER B
QUESTION Some economists have pointed out that the benefits of regional integration are determined by the extent of trade diversion, as opposed to trade creation. Indicate whether the statement is true or false. ANSWER FALSE Some economists have expressed concern that the benefits of regional integration have been oversold, while the costs have often […]
QUESTION As an incentive to encourage domestic firms to undertake FDI, many countries have: A. eliminated double taxation of foreign income. B. started imposing local content requirements. C. imposed higher import tariffs. D. abolished the use of custom duties. E. eliminated subsidies. ANSWER A
QUESTION Trade creation occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area. Indicate whether the statement is true or false. ANSWER FALSE Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. It may also occur when higher-cost external producers are […]
QUESTION Which of the following is true regarding the pragmatic nationalist view of FDI? A. One aspect of pragmatic nationalism is the tendency to aggressively court FDI believed to be in the national interest by, for example, offering subsidies to foreign MNEs in the form of tax breaks or grants. B. The pragmatic nationalist view […]
