1. What is an export?
A product sold only within the local market
A good or service sold by a country to buyers in another country
A good exchanged for another good without money involved
A good or service bought by a country from another country
Explanation:
An export is a good or service produced domestically and sold to foreign buyers. For Kenya, tea and horticultural products sold abroad are examples of exports.
2. Which of the following is a major export earner for Kenya?
Imported petrol and diesel
Locally consumed staple cereals only
Tea and horticultural products
Domestic bus services
Explanation:
Kenya earns foreign exchange from exporting tea, flowers and vegetables. Imported petrol and domestic services are not export earners.
3. What does the 'balance of trade' measure?
The total government budget deficit
The sum of all taxes collected by customs
The difference between the value of exports and imports of goods
Money held in a country's banks by foreigners
Explanation:
Balance of trade equals exports minus imports of goods. A positive value is a trade surplus; a negative value is a trade deficit.
4. What is a tariff?
A shipping document required for exports
A tax imposed on imported goods
A limit on the number of foreign workers allowed
A subsidy paid to exporters
Explanation:
A tariff is a tax charged on imports to raise revenue or protect local industries by making imported goods more expensive.
5. What is an import quota?
A tax on exported goods
A physical limit on the quantity of a good that can be imported
A subsidy for local manufacturers
A document allowing goods to enter a country
Explanation:
A quota restricts the volume of a specific imported good, helping protect domestic producers from foreign competition.
6. What does 'comparative advantage' mean in international trade?
A country restricts imports to protect local industries
A country can produce a good at a lower opportunity cost than another country
A country produces every good more efficiently than others
A country sets tariffs to increase revenue
Explanation:
Comparative advantage means focusing on goods a country produces relatively more efficiently (lower opportunity cost), which guides beneficial trade even if another country is absolutely better at everything.
7. What is one role of the World Trade Organization (WTO)?
To issue passports for international business travellers
To set domestic tax rates for member countries
To promote and regulate international trade and settle trade disputes
To provide loans to farmers in Kenya
Explanation:
The WTO sets rules for trade, facilitates negotiations, and provides a dispute settlement mechanism for members.
8. What does EAC stand for?
East African Community
Economic Association of Countries
European African Coalition
Export and Customs Alliance
Explanation:
EAC is the East African Community, a regional bloc including Kenya that promotes trade and economic integration among member states.
9. What is the main objective of the African Continental Free Trade Area (AfCFTA)?
To create a single continental market for goods and services across Africa
To provide military support to member states
To set common immigration policies for Africa
To ban all trade between African countries and the rest of the world
Explanation:
AfCFTA aims to increase intra-African trade by reducing tariffs and non-tariff barriers, creating a larger market for African producers.
10. If the Kenyan shilling depreciates against the US dollar, how are Kenyan exporters affected?
They must pay higher taxes on exports
Their goods become cheaper in dollar terms and may become more competitive abroad
They receive lower payments in shillings for foreign sales
They cannot export at all
Explanation:
Depreciation lowers the foreign-currency price of Kenyan goods, making exports more attractive; when converted back to shillings exporters usually earn more.
11. What is a trade deficit?
When foreign investors withdraw their money
When a country's imports exceed its exports
When the government spends less than it collects in taxes
When a country's exports exceed its imports
Explanation:
A trade deficit occurs when the value of imports is greater than exports. Kenya often tracks this to manage external balances.
12. Which of the following is an example of a non-tariff barrier?
A fixed quota on the number of imported phones
A government subsidy for local farmers
A tax applied to all imported cars
Strict sanitary and phytosanitary (SPS) standards for imports
Explanation:
Non-tariff barriers include regulations like SPS standards which can restrict trade without using taxes or quotas.
13. What does 'dumping' mean in international trade?
Exporting only luxury goods
Refusing to trade with a particular country
Destroying surplus goods to raise domestic prices
Selling goods in a foreign market at unfairly low prices, often below cost
Explanation:
Dumping involves pricing exports below fair market value to gain market share; countries may impose anti-dumping duties to protect local industries.
14. What is a bill of lading?
A certificate allowing duty-free import
A tax charged on exported goods
A transport document that acts as a receipt and contract for shipped goods
A licence to open a bank account for export businesses
Explanation:
A bill of lading is issued by carriers to exporters; it evidences the contract of carriage and ownership of the goods during shipment.
15. What is foreign direct investment (FDI)?
Short-term loans from foreign banks
Money sent home by Kenyans working abroad
Government grants to local schools
When a foreign company establishes or buys significant control of a business in another country
Explanation:
FDI involves lasting interest and control (like opening a factory). It brings capital, technology and jobs into Kenya.
16. Which two main accounts make up the balance of payments?
The customs account and the tourism account
The tax account and the export account
The current account and the financial (capital) account
The import account and the domestic savings account
Explanation:
The balance of payments records transactions in the current account (trade in goods/services, income, transfers) and financial account (investments, loans).
17. What is a subsidy in international trade policy?
A tax on exports
A payment by the government to local producers to lower their production costs
A restriction on foreign ownership
A shipping document for exported goods
Explanation:
Subsidies help domestic firms compete internationally by reducing their costs, encouraging production and exports.
18. Why might a government adopt protectionist policies?
To protect local industries and jobs from foreign competition
To weaken local currency intentionally
To encourage dumping by foreign firms
To increase imports and reduce domestic production
Explanation:
Protectionism (tariffs, quotas) shields domestic firms and employment, though it may increase consumer prices and reduce efficiency.
19. How do high import tariffs typically affect consumers?
They make imports more available and cheaper
They eliminate the need for customs checks
They raise the price of imported goods, making them more expensive for consumers
They lower domestic prices immediately
Explanation:
Tariffs add to the cost of imports, which often passes to consumers as higher prices; this protects local producers but can reduce consumer welfare.
20. What is one primary role of customs officials at the Port of Mombasa?
To negotiate trade agreements with other countries
To inspect goods, collect import duties and enforce trade regulations
To provide loans to exporters
To set interest rates for banks
Explanation:
Customs at ports inspect shipments, assess and collect duties, and ensure compliance with trade laws, which is vital for Kenya's trade operations.
21. Which of the following is Kenya's main seaport used for international trade?
Port of Lagos
Port of Alexandria
Port of Cape Town
Port of Mombasa
Explanation:
The Port of Mombasa is Kenya's primary seaport and a key gateway for imports and exports in East Africa.
22. What is a likely benefit for Kenya of joining a regional trade bloc?
Access to a larger market and reduced tariffs among member states
Higher tariffs on all exports to members
Mandatory closure of all domestic industries
Requirement to use a foreign currency for all domestic transactions
Explanation:
Trade blocs like the EAC reduce barriers among members, enabling Kenyan businesses to sell to more customers and benefit from economies of scale.
23. What do economists mean by 'terms of trade'?
The ratio of a country's export prices to its import prices
The total number of trade agreements a country has signed
The quantity of goods exchanged at the border without money
The customs fees applied to exports only
Explanation:
Terms of trade measure how many imports a country can buy per unit of exports; improving terms means exports buy more imports.
24. What distinguishes a bilateral trade agreement from a multilateral agreement?
A bilateral agreement always removes all tariffs, multilateral never does
A bilateral agreement is between two countries, while a multilateral involves three or more countries
Bilateral agreements only cover services, multilateral only goods
Bilateral agreements are negotiated by the WTO exclusively
Explanation:
Bilateral agreements are negotiated by two parties, while multilateral agreements include many countries, such as AfCFTA which involves many African states.
25. What is an import substitution policy?
A tax incentive for consumers to buy foreign goods
A policy to increase imports by lowering tariffs
A strategy to encourage local production to replace imported goods
A programme that bans all exports of raw materials
Explanation:
Import substitution aims to develop domestic industries so that imports are reduced, promoting self-sufficiency but sometimes reducing competitiveness.