BBB4M1 – Unit 2 Test
International Trade in the Modern World
Part A: True and False (15 Marks)
Answer the following questions with true (T) or false (F). Correct the false statements T
Positive effects of globalization include: improved human rights, increased productivity, and innovation. 2.___ F
Trade agreements are beneficial because they eliminate trade barriers and encourage foreign investment. 3.___ The North American Free Trade Agreement (NAFTA) is advantageous for Canada because manufacturing jobs have been sent to Mexico where labour is cheaper. T
T – Losing manufacturing jobs to Mexico, because of cheap labour is a disadvantage because it decreases the manufacturing sector in Canada, losing skilled and unskilled labour jobs. 4.___ T
A common currency decreases the risk of exchange rate fluctuations. 5.___ F
The Group of Eight (G8) and Group of Twenty (G20) discuss macroeconomic issues such as economic growth, trade liberalization, and helping developing countries. 6.___ Organizations such as the United Nations (UN) do not concern themselves with economic issues. Instead, they only focus on human rights and international peace. T
T – The UN is highly involved in the international economy. They are responsible for organizations that affect international business. They also endeavour to improve economic conditions throughout the world. 7.___ T
International Trade is not always beneficial and can lead to cultural identity issues. 8.___ F
International Trade can be beneficial by attracting foreign investment in the domestic market. 9.___ Global sourcing in an effective way of increasing the cost to produce a product. T
T – Global sourcing actually decreases the cost of production by moving production locations to areas where the cost of labour is cheaper. 10.___ A franchise is a simple way for a company to operate because they are not responsible for doing the work of running the store, but they receive a share of the profits for use of their brand. 11.___ T
A joint venture can be very profitable for both participants, but it can also be very risky. 12.___ F
Tariffs are beneficial for international trade because they increase an international company’s revenue. T
T – Tariffs are not beneficial for international trade because they increase the cost of foreign goods. Companies have to reduce their profit margin if they wish to compete with local goods that do not have tariffs on them. 13.___ F
Protectionism may benefit a country, but it severely limits a countries’ opportunity for foreign trade and investment. 14.___ A highly valued Canadian dollar is beneficial because it encourages Canadian tourism. T
T – The Canadian tourism industry actually suffers because of a high Canadian dollar; people are not attracted to Canada because it costs more to exchange their native currency into Canadian money. 15.___ Exchange rates can be affected by the economic condition of a country, such as inflation rate, unemployment rate, and interest rates.
Part B: Multiple Choice (20 Marks)
Answer the following multiple choice questions.
1. A trade agreement is
a) A system of tariffs between two countries
b) A treaty that eliminates trade barriers between multiple countries c) A sale of goods between two countries
d) An appointed monopoly of one country over another.
2. The World Bank and International Monetary fund were created by e) The Geneva Convention
f) The Treaty Of Versailles
g) The General Agreement on Trade and Tariffs
h) The Bretton Woods Conference
3. The _________________ is responsible for: making loans to cash squeezed countries, helping countries to restructure their economies, and manage their debt: i) The World...
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