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Quizzes > Quizzes for Business > Business

International Trade Knowledge Test Quiz

Explore Global Commerce Concepts in This Quiz

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art illustrating a quiz on International Trade Knowledge Test

Are you ready to test your knowledge of global trade? This International Trade Knowledge Test covers tariffs and trade agreements, making it perfect for students and professionals alike. Dive into practical scenarios, refine your skills in international commerce, and gain insights that can enhance your career prospects. Feel free to customise any question in our editor and explore the Trade Economics Revision Quiz or the International Law Knowledge Test. Discover more engaging quizzes today!

What is a tariff?
A limit on the quantity of exports
A subsidy to domestic producers
A tax on imported goods
A policy fixing exchange rates
A tariff is a government-imposed tax on imported goods to protect domestic industries and generate revenue. It is distinct from quotas and subsidies because it directly increases the cost of imports.
Which organization administers the rules of international trade and facilitates trade negotiations?
International Monetary Fund (IMF)
United Nations (UN)
World Health Organization (WHO)
World Trade Organization (WTO)
The WTO oversees global trade rules and provides a platform for trade negotiations and dispute resolution. Unlike the IMF, which focuses on financial stability, the WTO specifically addresses trade policies.
What does the principle of comparative advantage state?
Only the largest economies benefit from trade
International trade always leads to trade deficits
Countries should specialize in goods they can produce at lower opportunity cost
Countries should aim for self-sufficiency in all goods
Comparative advantage means a country benefits by specializing in goods it can produce at the lowest opportunity cost. Trade then allows all parties to consume more than they could under autarky.
What is a free trade agreement?
A pact to remove tariffs between member countries
A policy to fix exchange rates among countries
A quota on imports from non-members
A subsidy program for domestic exporters
A free trade agreement eliminates tariffs and often other barriers among member countries to encourage trade. It differs from exchange rate policies or quotas which regulate currency or quantities rather than trade costs.
What is an import quota?
A tax on imported goods
A regulation fixing export prices
A limit on the quantity of a good that can be imported
A subsidy for domestic exports
An import quota restricts the maximum amount of a specific good that can enter a country. This differs from a tariff, which taxes imports rather than capping their volume.
What is a likely effect of imposing a tariff on imported steel?
Lower production costs for domestic steel firms
Higher domestic steel prices
Increased variety of imported steel
Decreased domestic steel output
A tariff on imported steel raises the cost of foreign steel, leading to higher domestic steel prices. This protects local producers but can hurt consumers and downstream industries.
Which account records a country's exports and imports of goods and services?
Reserve account
Capital account
Current account
Financial account
The current account tracks the flow of goods and services, including exports and imports. Capital and financial accounts record financial transactions like investments and loans.
In a floating exchange rate system, what primarily determines the exchange rate?
Market supply and demand for currencies
Fixed parity to gold
Government decree
World Bank directives
Floating exchange rates fluctuate based on currency supply and demand in foreign exchange markets. Governments generally do not set the rate directly under a pure floating regime.
Which agreement replaced NAFTA in 2020?
European Free Trade Association (EFTA)
Association of Southeast Asian Nations (ASEAN) Free Trade Area
United States - Mexico - Canada Agreement (USMCA)
Trans-Pacific Partnership (TPP)
The USMCA updated and replaced NAFTA in 2020, modernizing provisions on digital trade and labor. Other agreements like the TPP involve different countries.
What is an export subsidy?
A payment to domestic producers to lower export costs
A tax on exported goods
A tariff on imported inputs
A limit on export quantity
An export subsidy reduces the cost borne by domestic producers when selling abroad, making exports more competitive. It is distinct from tariffs, which tax imports.
Which of the following is an example of a non-tariff barrier?
Product safety standards
Import tariff
Currency devaluation
Export subsidy
Product safety standards can restrict imports by imposing complex regulations. Tariffs and subsidies are direct financial measures, while currency devaluation is a macroeconomic policy.
Country A can produce 10 cars or 20 computers, and Country B can produce 5 cars or 15 computers. Which country has a comparative advantage in car production?
Country A
Both countries
Country B
Neither country
Country A's opportunity cost of one car is 2 computers, while Country B's is 3 computers per car. Since Country A has the lower opportunity cost, it holds the comparative advantage in cars.
How does a currency devaluation typically affect a country's trade balance in the short term?
It leads to immediate capital flight
Trade balance remains unchanged
Exports become cheaper and imports more expensive, improving the trade balance
Exports become more expensive, worsening the trade balance
A devaluation lowers the foreign-currency price of exports and raises that of imports, often improving the trade balance. However, it may also increase import costs and inflationary pressures.
What is the primary role of the IMF in international trade?
Negotiating free trade agreements
Providing financial assistance and promoting macroeconomic stability
Setting global tariff rates
Subsidizing exports for developing countries
The IMF offers financial support and policy advice to help countries maintain balance of payments stability. It does not directly negotiate trade deals or set tariffs.
Which strategy can help firms mitigate global supply chain risks?
Relying on a single low-cost supplier
Centralizing all production in one location
Diversifying suppliers across multiple regions
Eliminating safety stock entirely
By sourcing from multiple regions, firms reduce the impact of disruptions in any one area. Overreliance on a single supplier increases vulnerability to geopolitical or logistical shocks.
What is the main effect of an optimal tariff on a large importing country?
It always reduces domestic consumer prices
It leads to a welfare loss regardless of country size
It has no effect on world prices
It can improve national welfare by shifting the terms of trade in its favor
A large country can influence world prices by imposing an optimal tariff, improving its terms of trade and welfare. This effect does not apply to small countries that cannot affect world prices.
In a tariff war between two large economies, which outcome is most likely?
Complete elimination of trade barriers
Improved welfare for both from increased domestic production
Significant increase in foreign direct investment
Mutual welfare loss due to reduced trade and retaliation
Tariff wars provoke retaliatory measures that reduce trade volumes and welfare in both countries. Gains in domestic production are typically outweighed by higher costs and trade losses.
Terms of trade is best defined as:
The ratio of a country's export prices to its import prices
The numerical difference between exports and imports
The exchange rate between two currencies
The total volume of bilateral trade
Terms of trade measure the relative price of exports in terms of imports, indicating how many imports can be purchased per unit of exports. It differs from trade balance or exchange rates.
What does the J-curve effect describe in exchange rate adjustments?
No change in the trade balance following currency adjustment
Continuous deterioration of the trade balance
An initial worsening of the trade balance after devaluation before eventual improvement
Immediate improvement in the trade balance after devaluation
The J-curve effect shows that contracts and adjustment delays cause the trade balance to worsen initially after a devaluation, before exports respond and improve the balance. Over time, cheaper exports boost volumes.
How do global value chains contribute to trade diversification?
By centralizing production in domestic markets
By allowing firms to specialize in specific production stages across countries
By fixing exchange rates internationally
By eliminating all trade barriers
Global value chains enable firms to fragment production processes across locations, encouraging multiple trade relationships. This specialization disperses risk and diversifies trade beyond whole”goods exports.
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Learning Outcomes

  1. Analyse key principles of import and export regulations
  2. Evaluate the impact of tariffs and trade barriers
  3. Identify major international trade agreements and organizations
  4. Apply concepts of balance of payments and exchange rates
  5. Demonstrate understanding of comparative advantage theory
  6. Master strategies for navigating global supply chains

Cheat Sheet

  1. Import & Export Regulations - Dive into the essentials of international shipping rules and learn how customs authorities keep goods moving smoothly across borders. Grasp the Harmonized System (HS) codes so you can classify products correctly and avoid costly delays. Trade Facilitation - World Trade Organization
  2. Types of Tariffs - Explore specific, ad valorem, and compound tariffs to see how each one affects the final price of imported goods. You'll discover why a fixed fee per unit behaves differently from a percentage-based levy and how governments use these tools strategically. The Basics of Tariffs and Trade Barriers - Investopedia
  3. Non-Tariff Barriers - From quotas to embargoes and technical standards, non-tariff barriers can shape global trade just as powerfully as taxes. Learn why these measures exist and how savvy businesses navigate them to keep their products on the world stage. Trade Barriers: Types and Effects on Global Commerce - International Trade Council
  4. Major Trade Agreements - Study landmark deals like GATT and the founding of the WTO, which have set the rules for free trade and dispute settlement for decades. Understanding these agreements will show you how countries cooperate - and sometimes clash - over market access. General Agreement on Tariffs and Trade - Wikipedia
  5. Balance of Payments - Get to know the ledger that tracks every dollar flowing in and out of a country - trade in goods, services, investments, and more. A healthy balance sheet signals economic stability, while persistent deficits or surpluses can trigger policy shifts. Balance of Payments - International Monetary Fund
  6. Exchange Rate Mechanisms - Discover how currencies find their value on foreign exchange markets and why a strong domestic currency can be both a blessing and a curse for exporters. You'll learn about floating vs. fixed rates and what drives exchange rate swings. Exchange Rate - Investopedia
  7. Comparative Advantage - Unearth the classic economic principle that tells us why nations benefit by specializing in what they do best. Through simple examples, you'll see how trade raises overall welfare even when one country is more efficient at everything. Comparative Advantage - Library of Economics and Liberty
  8. Global Supply Chain Strategies - Learn to build resilient supply networks, diversify suppliers, and manage risks from political upheaval to natural disasters. Understanding cultural differences and communication best practices will keep your goods flowing. Global Supply Chains in a Post-Pandemic World - Harvard Business Review
  9. Trade Remedies - Anti-dumping duties and countervailing measures are powerful tools nations use to shield local industries from unfair pricing or subsidized imports. See how these safeguards balance free trade with protecting domestic jobs. Understanding Trade Barriers in International Commerce - International Trade Council
  10. Technical Barriers to Trade (TBT) - Examine the WTO's TBT Agreement, which ensures that safety standards, labeling requirements, and testing procedures don't become hidden obstacles to trade. You'll learn how harmonization efforts simplify market access. Agreement on Technical Barriers to Trade - Wikipedia
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