Question 1

The account which records a nation's foreign economic transactions is called the:

Accepted Answer

A)  Trade Account. 
B)  T account. 
C)  Exchange Market. 
D)  Balance of Payments. 
A)  Trade Account. 
B)  T account. 
C)  Exchange Market. 
D)  Balance of Payments.

Question 2

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 3

The balance on the current account ____.

Accepted Answer

A)  d and e 
B)  c and d 
C)  will show a trade deficit or surplus, if one exists 
D)  must always be zero 
E)  multiplied by −1 becomes the capital account 
A)  d and e 
B)  c and d 
C)  will show a trade deficit or surplus, if one exists 
D)  must always be zero 
E)  multiplied by −1 becomes the capital account

Question 4

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

Accepted Answer

A)  the opportunity cost of producing bicycles in the United States is higher than in Japan. 
B)  Japan has a comparative advantage in the production of bicycles. 
C)  the United States has an absolute advantage in the production of rice. 
D)  total output will be highest if the United States specializes in rice and Japan specializes in bicycles. 
E)  total output will be highest if Japan specializes in rice and the United States specializes in bicycles. 
A)  the opportunity cost of producing bicycles in the United States is higher than in Japan. 
B)  Japan has a comparative advantage in the production of bicycles. 
C)  the United States has an absolute advantage in the production of rice. 
D)  total output will be highest if the United States specializes in rice and Japan specializes in bicycles. 
E)  total output will be highest if Japan specializes in rice and the United States specializes in bicycles.

Question 5

Opening trade between two nations would:

Accepted Answer

A)  shift their production possibilities curves outward. 
B)  shift their production possibilities curves inward. 
C)  leave the production possibilities unchanged and increase their consumption possibilities. 
D)  leave the production possibilities unchanged and decreased their consumption possibilities. 
A)  shift their production possibilities curves outward. 
B)  shift their production possibilities curves inward. 
C)  leave the production possibilities unchanged and increase their consumption possibilities. 
D)  leave the production possibilities unchanged and decreased their consumption possibilities.

Question 6

A nation's trade deficit will expand when its:

Accepted Answer

A)  currency appreciates. 
B)  economy is shrinking. 
C)  investment environment is less attractive to foreigners. 
D)  all of these are true. 
A)  currency appreciates. 
B)  economy is shrinking. 
C)  investment environment is less attractive to foreigners. 
D)  all of these are true.

Question 7

A basic problem with the infant-industry argument is that:

Accepted Answer

A)  most industries need protection when they are mature, not when they are first established. 
B)  the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C)  political pressure will likely prevent the withdrawal of the tariff when the industry matures. 
D)  domestic consumers will continue to buy the foreign products anyway, regardless of the tariff. 
A)  most industries need protection when they are mature, not when they are first established. 
B)  the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C)  political pressure will likely prevent the withdrawal of the tariff when the industry matures. 
D)  domestic consumers will continue to buy the foreign products anyway, regardless of the tariff.

Question 8

Under a fixed exchange rate system, a government is at risk of running out of foreign currency reserves when the country's imports exceed its exports.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 15-5 International currency markets  
-Exhibit 15-5 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph 15-5(A) is determined by:

Accepted Answer

A)  U.S. citizens attempting to purchase Japanese-made goods. 
B)  Japanese attempting to purchase U.S.-made goods. 
C)  U.S. businesses attempting to sell to the Japanese. 
D)  Japanese businesses attempting to sell to the U.S. 
E)  the U.S. government attempting to unload dollars to the international market. 
A)  U.S. citizens attempting to purchase Japanese-made goods. 
B)  Japanese attempting to purchase U.S.-made goods. 
C)  U.S. businesses attempting to sell to the Japanese. 
D)  Japanese businesses attempting to sell to the U.S. 
E)  the U.S. government attempting to unload dollars to the international market.

Question 10

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n):

Accepted Answer

A)  increase in the general level of prices in Japan. 
B)  increase in the U.S. demand for domestically-built automobiles. 
C)  decrease in the U.S. income relative to the income in Japan. 
D)  increase in the supply of dollars on the foreign market. 
A)  increase in the general level of prices in Japan. 
B)  increase in the U.S. demand for domestically-built automobiles. 
C)  decrease in the U.S. income relative to the income in Japan. 
D)  increase in the supply of dollars on the foreign market.

Question 11

An itemized account of a nation's foreign economic transactions is its:

Accepted Answer

A)  gross domestic product. 
B)  goods exports. 
C)  goods imports. 
D)  balance of payments. 
E)  foreign exchange reserves. 
A)  gross domestic product. 
B)  goods exports. 
C)  goods imports. 
D)  balance of payments. 
E)  foreign exchange reserves.

Question 12

When countries specialize, total world output increases, and, therefore, the potential for greater total world consumption also increases.

Accepted Answer

A) True 
 B)False

Question 13

A tariff has the effect of granting ____ a larger share of the domestic market.

Accepted Answer

A)  domestic consumers 
B)  foreign consumers 
C)  domestic producers 
D)  foreign producers 
E)  no producers or consumers 
A)  domestic consumers 
B)  foreign consumers 
C)  domestic producers 
D)  foreign producers 
E)  no producers or consumers

Question 14

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles. The U.S. should specialize in:

Accepted Answer

A)  airplanes. 
B)  automobiles. 
C)  both goods. 
D)  neither good. 
A)  airplanes. 
B)  automobiles. 
C)  both goods. 
D)  neither good.

Question 15

Protective tariffs help a nation reach which of the following goals?

Accepted Answer

A)  Decreased domestic consumer prices. 
B)  Increased domestic employment. 
C)  Increased amount of goods for consumers to purchase. 
D)  Increased competition among domestic and foreign producers. 
E)  None of these. 
A)  Decreased domestic consumer prices. 
B)  Increased domestic employment. 
C)  Increased amount of goods for consumers to purchase. 
D)  Increased competition among domestic and foreign producers. 
E)  None of these.

Question 16

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

Accepted Answer

A)  equilibrium quantity of dollars to decrease. 
B)  equilibrium quantity of dollars to increase. 
C)  equilibrium quantity to remain unchanged. 
D)  all of these. 
A)  equilibrium quantity of dollars to decrease. 
B)  equilibrium quantity of dollars to increase. 
C)  equilibrium quantity to remain unchanged. 
D)  all of these.

Question 17

If a country's goods exports are less than its goods imports, then it experiences a:

Accepted Answer

A)  balance of payments surplus. 
B)  balance of payments deficit. 
C)  balance of trade surplus. 
D)  balance of trade deficit. 
A)  balance of payments surplus. 
B)  balance of payments deficit. 
C)  balance of trade surplus. 
D)  balance of trade deficit.

Question 18

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

Accepted Answer

A)  The domestic price of shoes would fall. 
B)  The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. 
C)  The number of unemployed workers in the domestic shoe industry would decline. 
D)  The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations. 
A)  The domestic price of shoes would fall. 
B)  The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. 
C)  The number of unemployed workers in the domestic shoe industry would decline. 
D)  The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations.

Question 19

In international trade, an infant industry is one:

Accepted Answer

A)  that protects firms that produce products for infants. 
B)  with a large number of very small firms. 
C)  in which the firms are experiencing very small profits. 
D)  in the early stages of its development. 
A)  that protects firms that produce products for infants. 
B)  with a large number of very small firms. 
C)  in which the firms are experiencing very small profits. 
D)  in the early stages of its development.

Question 20

Trade restrictions imposed in the name of national security have been recommended by protectionists in order to:

Accepted Answer

A)  develop strong defense-related industries. 
B)  avoid dependence on foreign suppliers during wartime. 
C)  reduce the necessity of stockpiling strategic supplies. 
D)  all of these. 
A)  develop strong defense-related industries. 
B)  avoid dependence on foreign suppliers during wartime. 
C)  reduce the necessity of stockpiling strategic supplies. 
D)  all of these.

The account which records a nation's foreign economic transactions is called the:

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

The balance on the current account ____.

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

Opening trade between two nations would:

A nation's trade deficit will expand when its:

A basic problem with the infant-industry argument is that:

Under a fixed exchange rate system, a government is at risk of running out of foreign currency reserves when the country's imports exceed its exports.

Exhibit 15-5 International currency markets -Exhibit 15-5 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph 15-5(A) is determined by:

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n):

An itemized account of a nation's foreign economic transactions is its:

When countries specialize, total world output increases, and, therefore, the potential for greater total world consumption also increases.

A tariff has the effect of granting ____ a larger share of the domestic market.

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles. The U.S. should specialize in:

Protective tariffs help a nation reach which of the following goals?

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

If a country's goods exports are less than its goods imports, then it experiences a:

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

In international trade, an infant industry is one:

Trade restrictions imposed in the name of national security have been recommended by protectionists in order to:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

Economies in Transition

Growth and the

Filters

Exam 15: International Trade and Finance

The account which records a nation's foreign economic transactions is called the:

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

The balance on the current account ____.

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

Opening trade between two nations would:

A nation's trade deficit will expand when its:

A basic problem with the infant-industry argument is that:

Under a fixed exchange rate system, a government is at risk of running out of foreign currency reserves when the country's imports exceed its exports.

Exhibit 15-5 International currency markets -Exhibit 15-5 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The supply curve in graph 15-5(A) is determined by:

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n):

An itemized account of a nation's foreign economic transactions is its:

When countries specialize, total world output increases, and, therefore, the potential for greater total world consumption also increases.

A tariff has the effect of granting ____ a larger share of the domestic market.

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles. The U.S. should specialize in:

Protective tariffs help a nation reach which of the following goals?

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

If a country's goods exports are less than its goods imports, then it experiences a:

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

In international trade, an infant industry is one:

Trade restrictions imposed in the name of national security have been recommended by protectionists in order to:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

Economies in Transition

Growth and the

Filters