Question 1

Which of the following best describes the concept of 'comparative advantage' in international trade?

Accepted Answer

A country specializes in the production of goods for which it has the lowest opportunity cost compared to other nations.

Question 2

Suppose Country A can produce 10 units of cars or 20 units of computers with the same resources, while Country B can produce 8 units of cars or 16 units of computers. According to the theory of absolute advantage, which country should specialize in car production?

Accepted Answer

Country A, because it produces more cars per resource than Country B.

Question 3

Which of the following is NOT a factor that strengthens the international business cycle?

Accepted Answer

Regional factors

Question 4

A country experiences a rapid increase in its export prices while its import prices remain stable. What is the likely effect on its terms of trade ($$TOT$$)?

Accepted Answer

TOT will increase.

Question 5

Which of the following is a disadvantage of free trade according to the study materials?

Accepted Answer

It can lead to increased unemployment in domestic industries.

Question 6

Foreign direct investment (FDI) is best defined as:

Accepted Answer

Funds that are directly invested in economic activity or in purchasing companies through shares.

Question 7

If the exchange rate for the Australian dollar ($$AUD) $$rises against the US dollar ($$USD$$), what is the most likely impact on Australia's international competitiveness?

Accepted Answer

Australian exports become more expensive for US buyers, reducing competitiveness.

Question 8

Which international organisation is primarily responsible for implementing and advancing global trade agreements and resolving trade disputes between economies?

Accepted Answer

World Trade Organisation (WTO)

Question 9

A country has a high level of financial flows and advanced technology, but its domestic interest rates are rising. According to the study materials, what is the likely effect on its international business cycle?

Accepted Answer

Weakening of the international business cycle.

Question 10

Which of the following is a role of the World Bank in globalisation?

Accepted Answer

Providing financial and technical support to developing countries for economic development projects.

Question 11

Suppose the G20 meets to discuss global challenges. Which of the following is a direct outcome of such forums according to the study materials?

Accepted Answer

They significantly influence global economic policies.

Question 12

Which of the following best explains the impact of technological developments on globalisation?

Accepted Answer

They facilitate the integration of economies by making communication and transport faster and cheaper.

Question 13

If a country restricts immigration from poorer economies, what is the likely effect on its international division of labour?

Accepted Answer

It becomes more difficult for people to move jobs internationally.

Question 14

Which of the following is a disadvantage of free trade for the environment?

Accepted Answer

Environmentally irresponsible production methods may be adopted by undercutting standards.

Question 15

A transnational corporation (TNC) is most likely to:

Accepted Answer

Dominate global product and factor markets.

Question 16

Which of the following is a direct benefit of global financial flows?

Accepted Answer

They enable countries to obtain funds to finance their domestic investment.

Question 17

If a country joins a monetary union, what is a likely advantage according to the study materials?

Accepted Answer

It benefits from synchronisation of economic management and encourages investment as currency conversion costs are absent.

Question 18

Which of the following is a reason why regional business cycles may differ from the international business cycle?

Accepted Answer

Regional economies may be less integrated and more dependent on local factors such as weather or commodity prices.

Question 19

Which of the following is a plausible effect of the COVID-19 pandemic on global trade in services?

Accepted Answer

It reduced services such as tourism and international education.

Globalisation, Trade, and International Economic Integration: Study Notes

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