4.6.2 Trade

• International trade is the exchange of goods, services, and capital across national borders
• Match the advantage of international trade with its description:

  Increased Competition ↔️ Promotes efficiency and lowers prices

  Access to New Technologies ↔️ Enables innovation and economic growth

  Diversification of Markets ↔️ Reduces dependency on domestic demand
• Order the types of goods traded in international trade from most basic to most processed:

  1️⃣ Raw Materials

  2️⃣ Consumer Goods

  3️⃣ Intermediate Goods

  4️⃣ Capital Goods
• Why might job losses occur in domestic industries due to international trade?

  Outsourcing to cheaper labor
• Match the country with its comparative advantage based on the given example:

  US ↔️ Good B

  China ↔️ Good A
• What are three benefits of comparative advantage in international trade?

  Increased efficiency, lower prices, economic growth
• Order the steps in the process of international trade from production to market diversification:

  1️⃣ Increased Competition

  2️⃣ Access to New Technologies

  3️⃣ Diversification of Markets
• What did David Ricardo emphasize in his classical trade theory?

  Comparative advantage
• Adam Smith argued for free trade based on absolute advantage.


  True
• Raw materials are an example of goods traded in international trade.


  True
• Increased competition in international trade promotes efficiency and lowers prices
• How does diversification of markets benefit a country's economy?

  Reduces dependency on domestic demand
• Comparative advantage and absolute advantage refer to the same concept in international trade.

  False
• Comparative advantage refers to the ability of a country to produce goods at a lower opportunity cost
• International trade involves countries buying from and selling to each other, resulting in mutual benefits
• International trade may lead to job losses due to the outsourcing of domestic jobs to cheaper markets
• Comparative advantage differs from absolute advantage, which is the ability to produce more of a good using the same amount of resources.
• Comparative advantage focuses on the ability to produce goods at a lower opportunity cost.


  True
• What is a "trade war" caused by retaliation to trade barriers?

  Reduced overall trade
• Order the levels of economic integration from least to most integrated:

  1️⃣ Free Trade Agreement

  2️⃣ Customs Union

  3️⃣ Common Market

  4️⃣ Economic Union
• What is international trade defined as?

  Exchange across national borders
• What are three key advantages of international trade?

  Increased competition, new technologies, market diversification
• International trade always results in mutual benefits for all countries involved.

  True
• Increased competition in international trade can lead to the closure of local industries
• Who developed the classical trade theories that emphasize comparative advantage?

  Adam Smith and David Ricardo
• In the example, the US has a comparative advantage in producing Good A.

  False
• How does increased competition in international trade affect consumers?

  Lowers prices
• Comparative advantage is the ability to produce more of a good using fewer resources than another country.

  False
• Comparative advantage refers to a country's ability to produce a good at a lower opportunity cost than another country.
• David Ricardo showed that countries can benefit from trade even without absolute advantage in any sector.


  True
• What are the benefits of comparative advantage in international trade?

  Increased efficiency, lower prices
• Trade barriers can lead to higher prices and reduced quality for consumers.


  True
• While trade barriers may protect domestic industries, they often reduce consumer welfare.


  True
• Free trade agreements eliminate tariffs and trade barriers between member countries.

  True
• FTAs and customs unions typically boost GDP by increasing trade and investment
• Common markets allow the free movement of labor and capital
• Match the trade organization with its function:

  WTO ↔️ Resolves trade disputes

  IMF ↔️ Monitors global economies

  World Bank ↔️ Offers financial assistance
• Key advantages of international trade include increased competition, access to new technologies, and diversification of markets
• Dependency on foreign markets makes countries vulnerable to disruptions in global supply chains.


  True
• Match the trade barrier with its description:

  Tariffs ↔️ Taxes on imported goods

  Quotas ↔️ Limits on import quantities