QCAA Economics Global economic issues

While a subsidy might eventually lead to a lower market price, its primary definition and direct purpose is to reduce the costs of production for domestic producers, not directly to manipulate the market price.

Subsidies are typically provided to domestic producers to help them compete against foreign companies, not applied to imported goods to make imports cheaper.

A tax increases the cost of a good or service rather than reducing it. A subsidy is a financial payment or benefit, not a tax.

Incorrect. While fuels and mining products are a major component of global trade, they account for a smaller share of total merchandise exports than manufactured goods.

Incorrect. Agricultural products make up a relatively small percentage of total world merchandise trade, lagging significantly behind manufactured goods.

Incorrect. Education and tourism are classified as commercial services, not merchandise (physical goods) exports.

Protectionist policies, such as tariffs or quotas, typically restrict supply and increase the prices of goods for domestic consumers rather than keeping them low.

Reducing imports can actually increase production costs for domestic firms that rely on cheaper imported raw materials or intermediate goods.

While national security is sometimes used as an argument for protectionism, the idea that trading during conflict harms cooperation is not a standard economic justification for protecting domestic industries.

Regional trade agreements are designed to stimulate economic growth by expanding market access and reducing trade barriers, rather than limiting it.

Bilateral trade agreements typically focus on tariff reduction or elimination to promote free trade, rather than implementing new tariffs.

Bilateral trade agreements involve exactly two countries. Agreements involving three or more countries are known as multilateral or regional trade agreements.

This is a likely effect of trade liberalisation, as increased foreign competition forces domestic firms to innovate and reduce costs to remain competitive.

This is a likely effect, because free trade generally lowers prices, increases the variety of goods available, and promotes efficient resource allocation, enhancing long-term material living standards.

This is a likely effect, as the removal of tariffs and quotas makes imported raw materials and intermediate goods cheaper for domestic producers.

A decrease in tariffs reduces the tax burden on imported goods, which lowers their price rather than raising it.

Decreasing tariffs lowers the price of imports, which would lead to an increase in quantity demanded, not a decrease.

While the price of imports will fall, the law of demand states that a lower price will lead to an increase in the quantity demanded, not a decrease.

While tariffs do decrease imports, these protectionist policies distort free market prices and create deadweight loss, which reduces rather than improves market efficiency.

Tariffs are taxes placed on imported goods, which makes them more expensive for domestic consumers and leads to a decrease in imports, not an increase.

Protectionist policies like tariffs and subsidies restrict international trade, leading to a decrease in both imports and exports, and they reduce market efficiency by distorting resource allocation.

Globalisation exposes the currency to global market forces, which can lead to both appreciation and depreciation depending on economic conditions, rather than a guaranteed appreciation.

Globalisation typically helps to lower inflation, as increased international competition and access to cheaper imported goods keep domestic prices down.

While globalisation can cause structural unemployment as uncompetitive domestic industries decline, cyclical unemployment is driven by fluctuations in the domestic business cycle.

While trade liberalization and improved transport facilitate globalization, increased tariff protection (iv) is a form of protectionism that restricts international trade and hinders globalization.

Although improvements in transport and the expansion of multinational corporations facilitate globalization, this option incorrectly excludes trade liberalization (i), which is a major driver of global economic integration.

Increased tariff protection (iv) actually hinders globalization by creating barriers to trade. Additionally, this option misses key factors like trade liberalization and the expansion of multinational corporations.

Removing a tariff reduces the cost of supplying imported cars, which increases supply and shifts the supply curve to the right, not the left.

Tariffs act as a cost of supplying goods, so removing them directly affects the supply curve, not the demand curve.

Removing a tariff only shifts the supply curve to the right; it does not cause a shift in the demand curve.

Retaliation is a common argument used to justify trade restrictions, often implemented in response to another country's tariffs or unfair trade practices.

Protecting domestic workers and industries from the competition of cheaper foreign labour is a frequently cited argument in favour of implementing trade restrictions.

Promoting economic diversification is a valid argument for trade restrictions, as tariffs can protect emerging industries and help a country avoid over-reliance on a single export.

Structural change associated with globalisation typically causes short-term job losses, known as structural unemployment, as domestic industries adjust to increased foreign competition.

Globalisation does not eliminate comparative advantage; rather, it relies heavily on it by encouraging countries to specialize in producing goods where they have a lower opportunity cost.

Globalisation increases the interconnectedness of financial systems, which can actually increase volatility and the risk of financial contagion spreading rapidly across global markets.