Comparative Advantage
AEC 309: International Agriculture and World Food Needs
FINAL - December 20, 2002
Answer each question carefully and thoughtfully. Have a wonderful holiday!
Multiple Choice: 3 points each
_____1. Import substitution policies were designed to
a. allow colonial powers to further exploit the natural resource base of many developing countries
b. rely on imported manufactured goods to stimulate economic growth
c. substitute raw agricultural goods with processed foods
d. replace imports with (protected) domestic production to increase a country’s self-sufficiency
_____2. Import substitution policies resulted in
a. foreign exchange shortages and stagnant economic growth
b. the diversion of resources to meet the needs of the export market
c. undervalued exchange rates
d. increasing terms of trade
e. all of the above
_____3. Reverse Linkages are
a. the conversion of BOP deficits to foreign exchange surpluses
b. trade liberalization policies between the North and the South
c. the integration of the financial and trade markets between the North and the South
d. the spread of infectious diseases, such as HIV, between the developed and the developing worlds
_____4. Reverse Linkages resulted in
a. a domino affect spreading the financial crises in Mexico and Asia to other parts of the world
b. the increase in HIV and Aids in developing countries
c. the NAFTA and Mercosur free trade accords
d. growing BOP surpluses
_____5. Terms of Trade refers to
a. the trade agreements between one or more countries
b. the cost of imports as exchange rates fluctuate
c. the purchasing power of export commodities (in terms of earning foreign exchange) to purchase imports
d. the insurance, transportation and tariff rates for any commodity
_____6. Declining Terms of Trade has resulted in
a. difficulty for developing countries to pay for increasingly costly imports with exports that continue to decline in value
b. lower insurance, transportation and tariff rates
c. higher prices for imports as exchange rates fell
d. fewer trade agreements between countries in Africa and southeast Asia
_____ 7. Structural Adjustment Reforms refer to
a. macroeconomic policies designed to stimulate private sector investment, capital markets and trade
b. rebuilding schools, hospitals, and housing after being destroyed by natural disasters