Which of the following best summarizes the relationship between trade openness and the required rate of return investors demand for assets in a country with persistent geopolitical risk?
Explanation
Countries with persistent geopolitical risk typically face higher required returns and lower valuations; openness and stability attract capital while uncertainty increases risk premia (Chapter 6).
Other questions
Which of the following is a primary reason countries gain from international trade according to comparative advantage theory?
In a monopolistically competitive industry, why can two-way (intra-industry) trade occur between similar countries?
A small importing country imposes a per-unit tariff t that raises the domestic price from the world price P* to Pt. Which of the following statements about welfare effects is correct?
Which is a key difference between an import quota and an equivalent tariff that restricts imports to the same quantity?
An export subsidy paid per unit exported will most likely lead to which of the following domestic outcomes in a small exporting country?
In the textbook example, if South Africa (a small country) imposes a 20 percent tariff raising the imported paper price from USD5.00 to USD6.00, and domestic consumption falls from 200,000 to 170,000 tons, what is the tariff revenue if imports after the tariff equal 40,000 tons?
Which statement best describes trade creation in a customs union?
Consider Qualor and Vulcan form a customs union. Prior to the union Qualor imports shirts from Aurelia (a nonmember) at lowest cost. After the union Qualor imports from Vulcan (a member) because of eliminated tariffs. This is an example of:
Which integration arrangement requires member countries to coordinate economic policies and possibly adopt a common currency?
Which of the following best captures why some workers in developed countries may oppose trade liberalization?
If a small country imposes an import quota that reduces imports to the same level as an equivalent tariff, under what condition will the quota produce a larger national welfare loss than the tariff?
A country imposes a domestic content requirement on an exported good, mandating X percent domestic inputs. Which of the following is a likely economic implication?
Which of the following best explains why a large country might gain (in theory) from imposing a tariff whereas a small country generally does not?
Which of the following is an economic rationale often used to justify temporary protection for an infant industry?
If a customs union leads to net trade creation exceeding trade diversion, which of the following is true?
Which of the following is a likely consequence for an investor if their target country introduces an unexpected quota on a key input?
A small open economy is considering a tariff to protect a nascent industry. According to the chapter, when would this intervention be more likely to increase national welfare?
Which of the following best describes a voluntary export restraint (VER)?
If an importing country's quota is equivalent to a tariff that would raise price to Pt, but the quota rents are captured by domestic importers rather than foreigners, what is the practical implication for domestic importers?
Which of the following policy instruments is most directly used to stimulate exports by lowering their effective price to foreign buyers?
A country that has limited natural resources and sits at a major trade crossroads tends to be highly dependent on globalization. Which of the following is most likely to describe its trade strategy?
Which metric should an investor focus on when assessing whether a specific trade-policy event merits portfolio action?
If a regional trade agreement causes member countries to have more synchronized business cycles, which investor risk becomes more important within the bloc?
An investor expects that the government will likely impose a tariff on imported steel within six months. Which portfolio action is most consistent with tactical risk management described in the chapter?
Which of the following describes the primary reason a customs union is politically easier to form than a global multilateral liberalization under the WTO?
In the context of trade policy analysis, what is meant by the statement 'winners could, in theory, compensate losers and still be better off'?
Which of these is an example of a cooperative economic tool used to deepen integration among countries?
How do economies of scale amplify gains from trade for firms in integrated markets?
Which of the following most accurately captures the effect of a tariff on consumer surplus and producer surplus in the importing country?
Which of these is NOT typically considered a static cost of trade liberalization in developed economies?
An importer faces an import quota that is enforced via auctioned licenses sold by the government. Compared to an equivalent tariff, what would be the welfare effect for the importing country?
Which of the following best describes why economists say that purchasing power parity (PPP) is a poor short-term guide for forecasting exchange rates?
An economy that is 'dollarized' has which characteristic regarding its currency and monetary policy?
Which of these is a primary advantage that firms in a trading bloc often experience compared with operating in a single national market?
Which of the following best explains why quotas can generate higher foreign producer profits than equivalent tariffs?
If trade liberalization in a partner country increases the variety of imported intermediate inputs for a domestic manufacturing sector, what is the most likely direct effect on domestic firms?
Which of the following is an example of a dynamic gain from trade emphasized in newer models?
Which of the following best captures why regional integration can increase bargaining power internationally?
Which of the following best explains the effect of trade liberalization on product variety available to consumers?
Which of the following best describes a customs union compared with a free trade area (FTA)?
If a government aims to protect strategic industries for national security, which trade policy instrument discussed in the chapter is it most likely to use?
Which mechanism explains how trade can lead to improved domestic institutions and innovation, as highlighted in the chapter?
When comparing tariff and quota outcomes, which actor's behavior determines whether quota rents accrue domestically or abroad?
Which of the following best explains why investors might use scenario analysis for trade-policy risks?
Which of the following is a likely macroeconomic long-run benefit of trade liberalization cited in the chapter?
Which of these statements regarding a regional common market is correct?
Which of the following best explains why trade restrictions are sometimes used as a political tool rather than purely economic protectionism?
If a regional trading bloc raises member country growth via spillovers, which sector is most likely to benefit first according to the chapter's examples?
Which of the following best summarizes why investors should monitor signposts related to trade policy changes?