Name:____________________________
1. Less developed countries account for about two-thirds of total international trade.
a. True
b. False
2. Although NAFTA removes all barriers to trade among member nations, each member nation loses the right to impose restrictions on trade with countries outside the free trade area.
a. True
b. False
3. Adding a nations exports and imports during a period and dividing by total world trade (measured in a common currency such as the $) gives that nation’s percentage world trade share.
a. True
b. False
4. A reciprocal, partial trade concession among a group of nations defines a free trade area.
a. True
b. False
5. Minimizing trade restrictions reduces trade diversion and increases trade creation.
a. True
b. False
6. New trade arrangements always encourage international trade.
a. True
b. False
7. If a manufacturer in a country outside of a trade bloc establishes production facilities in a nation within a trade bloc in order to complete production assembly and then sell the final product behind the trade barrier, this is called trade deflection.
a. True
b. False
8. The large importance of the U.S. in world trade effects trade share calculations but cannot influence NAFTA’s trade concentration ratio.
a. True
b. False
9. Trade concentration ratios of regional trading blocs involve taking the sum of bilateral trade among the nations within the bloc and dividing that total by the bloc’s world trade share. Trade concentration ratios that are greater than 1.0 indicate that trade is relatively more concentrated within the bloc.
a. True
b. False
10. Trade diversion caused by regional trade preferences can decrease economic efficiency and world trade, especially if it results in incomplete substitution of members’ imports for the imports of nonmembers.
a. True
b. False
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