GBE final exam
Views international trade as a zero-sum
game where nations should maximize
exports and minimize imports to accu-
What is mercantilism, and how does it mulate wealth. Modern theories like com-
compare to modern trade theories such parative advantage, proposed by David
as comparative advantage? Ricardo, argue that countries should
specialize in producing goods where
they have a relative efficiency, benefiting
all trading partners.
States that in the absence of trade bar-
riers and transportation costs, identi-
How does purchasing power parity cal goods should have the same price
(PPP) explain price levels across coun- across countries when expressed in a
tries, and what assumptions does it rely common currency. This theory assumes
on? perfect market conditions and does not
account for factors like tariffs, taxes, or
differences in consumer preferences.
Ownership, Location, and Internaliza-
tion. Ownership refers to a firm's propri-
etary knowledge or technology; Location
involves benefits of operating in specif-
What are OLI advantages, and how do
ic regions (e.g., access to resources or
they influence a firm's decision to en-
markets); Internalization means manag-
gage in FDI?
ing operations in-house to protect intel-
lectual property and reduce transaction
costs. These advantages collectively jus-
tify a firm's investment in foreign markets.
Proximity to key markets, access to raw
materials, skilled labor, and favorable
Provide examples of location advan-
regulatory environments. For the firm,
tages that encourage FDI. How do these
these advantages reduce costs and en-
factors benefit both the investing firm and
hance market access. For the host coun-
the host country?
try, they bring job creation, technology
transfer, and infrastructure development.
Fosters innovation and efficiency as
How does agglomeration contribute to
firms in similar industries cluster togeth-
the success of industries in specific lo-
er, benefiting from shared resources, tal-
1/5
, GBE final exam
ent, and knowledge. Examples include
cations? Provide examples of industries
technology companies in Silicon Valley
that benefit from this clustering.
and automobile manufacturers in Detroit.
Reduces transportation costs and en-
sures timely delivery of inputs and out-
Why might a firm prioritize proximity to
puts. For example, mining companies set
raw materials and markets when decid-
up operations near ore deposits, while
ing on a location for FDI?
consumer goods firms establish plants
near large markets.
Developed countries offer advantages
like advanced infrastructure, stable polit-
How do location advantages vary be-
ical environments, and skilled labor. De-
tween developed and developing coun-
veloping countries often provide low la-
tries?
bor costs, abundant natural resources,
and emerging market potential.
Mediates trade disputes, ensuring that
Discuss the role of the WTO in resolving countries adhere to agreed-upon rules.
trade disputes. Why is this role critical in This role is vital for maintaining trust in
a global economy? the global trading system and preventing
trade wars that could disrupt economies.
Eliminates tariffs among member coun-
tries but allow individual trade policies
What distinguishes a free trade area like with non-members. Economic unions in-
NAFTA/USMCA from an economic union tegrate member countries' economies
like the EU? further, adopting common policies on
trade, labor, and monetary issues (e.g.,
the euro in the EU).
They reduce trade barriers, fostering
How do global trade agreements pro- competition, innovation, and efficiency.
mote economic growth among member By increasing market access and en-
nations? couraging specialization, trade agree-
ments boost GDP and create jobs.
To make imported goods more expen-
Why do governments impose tariffs, and
sive, encouraging consumers to buy do-
how do they protect domestic industries?
mestic products. For example, the U.S.
Provide real-world examples.
has imposed tariffs on steel imports to
2/5
Views international trade as a zero-sum
game where nations should maximize
exports and minimize imports to accu-
What is mercantilism, and how does it mulate wealth. Modern theories like com-
compare to modern trade theories such parative advantage, proposed by David
as comparative advantage? Ricardo, argue that countries should
specialize in producing goods where
they have a relative efficiency, benefiting
all trading partners.
States that in the absence of trade bar-
riers and transportation costs, identi-
How does purchasing power parity cal goods should have the same price
(PPP) explain price levels across coun- across countries when expressed in a
tries, and what assumptions does it rely common currency. This theory assumes
on? perfect market conditions and does not
account for factors like tariffs, taxes, or
differences in consumer preferences.
Ownership, Location, and Internaliza-
tion. Ownership refers to a firm's propri-
etary knowledge or technology; Location
involves benefits of operating in specif-
What are OLI advantages, and how do
ic regions (e.g., access to resources or
they influence a firm's decision to en-
markets); Internalization means manag-
gage in FDI?
ing operations in-house to protect intel-
lectual property and reduce transaction
costs. These advantages collectively jus-
tify a firm's investment in foreign markets.
Proximity to key markets, access to raw
materials, skilled labor, and favorable
Provide examples of location advan-
regulatory environments. For the firm,
tages that encourage FDI. How do these
these advantages reduce costs and en-
factors benefit both the investing firm and
hance market access. For the host coun-
the host country?
try, they bring job creation, technology
transfer, and infrastructure development.
Fosters innovation and efficiency as
How does agglomeration contribute to
firms in similar industries cluster togeth-
the success of industries in specific lo-
er, benefiting from shared resources, tal-
1/5
, GBE final exam
ent, and knowledge. Examples include
cations? Provide examples of industries
technology companies in Silicon Valley
that benefit from this clustering.
and automobile manufacturers in Detroit.
Reduces transportation costs and en-
sures timely delivery of inputs and out-
Why might a firm prioritize proximity to
puts. For example, mining companies set
raw materials and markets when decid-
up operations near ore deposits, while
ing on a location for FDI?
consumer goods firms establish plants
near large markets.
Developed countries offer advantages
like advanced infrastructure, stable polit-
How do location advantages vary be-
ical environments, and skilled labor. De-
tween developed and developing coun-
veloping countries often provide low la-
tries?
bor costs, abundant natural resources,
and emerging market potential.
Mediates trade disputes, ensuring that
Discuss the role of the WTO in resolving countries adhere to agreed-upon rules.
trade disputes. Why is this role critical in This role is vital for maintaining trust in
a global economy? the global trading system and preventing
trade wars that could disrupt economies.
Eliminates tariffs among member coun-
tries but allow individual trade policies
What distinguishes a free trade area like with non-members. Economic unions in-
NAFTA/USMCA from an economic union tegrate member countries' economies
like the EU? further, adopting common policies on
trade, labor, and monetary issues (e.g.,
the euro in the EU).
They reduce trade barriers, fostering
How do global trade agreements pro- competition, innovation, and efficiency.
mote economic growth among member By increasing market access and en-
nations? couraging specialization, trade agree-
ments boost GDP and create jobs.
To make imported goods more expen-
Why do governments impose tariffs, and
sive, encouraging consumers to buy do-
how do they protect domestic industries?
mestic products. For example, the U.S.
Provide real-world examples.
has imposed tariffs on steel imports to
2/5
