Question 1

Which of the following transactions would be excluded in the capital account?

Accepted Answer

A)  A Japanese citizen purchases a U.S. Treasury bill. 
B)  A Japanese citizen purchases an office building in Manhattan. 
C)  A U.S. citizen purchases a share of stock from a Japanese company. 
D)  An American purchases a Toyota. 
A)  A Japanese citizen purchases a U.S. Treasury bill. 
B)  A Japanese citizen purchases an office building in Manhattan. 
C)  A U.S. citizen purchases a share of stock from a Japanese company. 
D)  An American purchases a Toyota.

Question 2

A depreciation of one's currency means that:

Accepted Answer

A)  the country's exports will become more expensive. 
B)  the country's imports will become more expensive. 
C)  the country's imports will become less expensive. 
D)  it now requires less of this currency in exchange for one unit of another currency. 
E)  it now requires more units of other currencies in exchange for one unit of this currency. 
A)  the country's exports will become more expensive. 
B)  the country's imports will become more expensive. 
C)  the country's imports will become less expensive. 
D)  it now requires less of this currency in exchange for one unit of another currency. 
E)  it now requires more units of other currencies in exchange for one unit of this currency.

Question 3

Suppose rice can be produced in country X at a lower cost than in country Y, while tuna can be produced in country Y at a lower cost than in country X. International competition will:

Accepted Answer

A)  destroy the rice market in both countries. 
B)  drive X to specialize in rice and Y to specialize in tuna. 
C)  drive Y to specialize in rice and X to specialize in tuna. 
D)  cause both X and Y to reject international specialization. 
E)  result in lower total output of rice and tuna. 
A)  destroy the rice market in both countries. 
B)  drive X to specialize in rice and Y to specialize in tuna. 
C)  drive Y to specialize in rice and X to specialize in tuna. 
D)  cause both X and Y to reject international specialization. 
E)  result in lower total output of rice and tuna.

Question 4

If one dollar exchanges for 20 Thailand baht, then:

Accepted Answer

A)  a baht is worth $20. 
B)  $20 will exchange for one baht. 
C)  a baht is worth $2. 
D)  the United States and Thailand would not engage in trade. 
E)  a baht is worth a nickel. 
A)  a baht is worth $20. 
B)  $20 will exchange for one baht. 
C)  a baht is worth $2. 
D)  the United States and Thailand would not engage in trade. 
E)  a baht is worth a nickel.

Question 5

Protectionist policies such as tariffs and quotas are beneficial to the nation imposing those trade barriers.

Accepted Answer

A) True 
 B)False

Question 6

Discuss the determinants of a nation's exchange rate value for its currency in foreign exchange markets. What happens to a nation's balance of trade if the nation's currency appreciates? Why?

Accepted Answer

A nation's exchange rate value is determ

Question 7

An appreciation in the U.S. dollar benefits which of the following groups of people?

Accepted Answer

A)  All people living in the United States 
B)  U.S. producers who export farm equipment to other countries 
C)  U.S. consumers who buy imported automobiles 
D)  Foreigners who wish to travel to the United States 
E)  U.S. consumers who buy only goods made entirely in the United States 
A)  All people living in the United States 
B)  U.S. producers who export farm equipment to other countries 
C)  U.S. consumers who buy imported automobiles 
D)  Foreigners who wish to travel to the United States 
E)  U.S. consumers who buy only goods made entirely in the United States

Question 8

The theory of comparative advantage suggests that nations should produce a good if they:

Accepted Answer

A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation. 
A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation.

Question 9

A favorable balance of trade occurs when:

Accepted Answer

A)  goods exports are greater than goods imports. 
B)  goods imports are greater than goods exports. 
C)  international trade is an increasing share of total output. 
D)  the balance on capital account equals the balance on current account. 
E)  unilateral transfers are positive. 
A)  goods exports are greater than goods imports. 
B)  goods imports are greater than goods exports. 
C)  international trade is an increasing share of total output. 
D)  the balance on capital account equals the balance on current account. 
E)  unilateral transfers are positive.

Question 10

A country is said to have an absolute advantage in the production of a good when:

Accepted Answer

A)  its opportunity cost of producing the good is lower than another country. 
B)  it can produce the good using fewer resources than another country. 
C)  it specializes in the production of the good. 
D)  all of these. 
A)  its opportunity cost of producing the good is lower than another country. 
B)  it can produce the good using fewer resources than another country. 
C)  it specializes in the production of the good. 
D)  all of these.

Question 11

Exhibit 15-3 Potatoes and wheat output (tons per day)
$$\begin{array} { | l | c | c | } 
\hline \text { Country } & \text { Potatoes } & \text { Wheat } \
\hline \text { United States } & 4 & 2 \
\text { Ireland } & 3 & 1 \
\hline
\end{array}$$
-In Exhibit 15-3, the United States has an absolute advantage in producing:

Accepted Answer

A)  potatoes. 
B)  wheat. 
C)  both. 
D)  neither. 
A)  potatoes. 
B)  wheat. 
C)  both. 
D)  neither.

Question 12

The exchange rate is the:

Accepted Answer

A)  value of money. 
B)  quantity of dollars, yen, etc. that are traded. 
C)  amount of a foreign currency that is brought back to the United States by tourists. 
D)  number of units of your currency that it takes to buy one unit of a foreign currency. 
E)  number of units of a foreign currency that can be bought with one unit of your own currency. 
A)  value of money. 
B)  quantity of dollars, yen, etc. that are traded. 
C)  amount of a foreign currency that is brought back to the United States by tourists. 
D)  number of units of your currency that it takes to buy one unit of a foreign currency. 
E)  number of units of a foreign currency that can be bought with one unit of your own currency.

Question 13

Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

Accepted Answer

A)  A decrease in domestic interest rates 
B)  An increase in foreign interest rates 
C)  Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices 
D)  Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation 
A)  A decrease in domestic interest rates 
B)  An increase in foreign interest rates 
C)  Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices 
D)  Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation

Question 14

Exhibit 15-6 Dollars per British pound $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} & \begin{array} { c } 
\text { Dollars } \
\text { per P ound }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Supplied }
\end{array} \
\hline 200 & 5 & 600 \
240 & 4 & 480 \
300 & 3 & 410 \
360 & 2 & 360 \
390 & 1 & 330 \
\hline
\end{array}$$
-In Exhibit 15-6, the equilibrium exchange rate is:

Accepted Answer

A)  5. 
B)  4. 
C)  3. 
D)  2. 
E)  1. 
A)  5. 
B)  4. 
C)  3. 
D)  2. 
E)  1.

Question 15

Suppose a German bank purchases a U.S. Treasury bond. This transaction would be recorded in the:

Accepted Answer

A)  capital account. 
B)  current account. 
C)  goods trade balance. 
D)  unilateral transfers. 
A)  capital account. 
B)  current account. 
C)  goods trade balance. 
D)  unilateral transfers.

Question 16

Which of the following is a partially valid economic argument for restricting free trade?

Accepted Answer

A)  Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B)  Removal of restrictions that have existed for years will initially cause inflation. 
C)  Infant industries need permanent protection to develop and gain productive efficiency. 
D)  A nation needs to protect industries that are vital to national defense in case of future international conflict. 
A)  Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B)  Removal of restrictions that have existed for years will initially cause inflation. 
C)  Infant industries need permanent protection to develop and gain productive efficiency. 
D)  A nation needs to protect industries that are vital to national defense in case of future international conflict.

Question 17

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. Now the exchange rate changes to 90 yen = $1. Then the:

Accepted Answer

A)  machine would now cost more dollars. 
B)  machine would now cost the Japanese citizen less yen. 
C)  machine would now cost less dollars. 
D)  machine would now cost the Japanese citizen more yen. 
E)  yen has depreciated in value. 
A)  machine would now cost more dollars. 
B)  machine would now cost the Japanese citizen less yen. 
C)  machine would now cost less dollars. 
D)  machine would now cost the Japanese citizen more yen. 
E)  yen has depreciated in value.

Question 18

The rules of the WTO:

Accepted Answer

A)  apply only to domestic trade within a nation. 
B)  apply to both domestic trade within a nation and international trade with other nations. 
C)  apply only to trade among nations. 
D)  include a prohibition of tariffs. 
E)  encourage high tariffs. 
A)  apply only to domestic trade within a nation. 
B)  apply to both domestic trade within a nation and international trade with other nations. 
C)  apply only to trade among nations. 
D)  include a prohibition of tariffs. 
E)  encourage high tariffs.

Question 19

A tariff is:

Accepted Answer

A)  a duty that a company must pay its own government on exports. 
B)  the price charged by one country to buyers of a good in another country. 
C)  a price reduction designed to encourage international trade. 
D)  a tax on an import. 
A)  a duty that a company must pay its own government on exports. 
B)  the price charged by one country to buyers of a good in another country. 
C)  a price reduction designed to encourage international trade. 
D)  a tax on an import.

Question 20

The term "balance of trade" refers to a nation's:

Accepted Answer

A)  goods exports minus imports. 
B)  current account balance. 
C)  capital account balance. 
D)  net balance of all international transactions. 
A)  goods exports minus imports. 
B)  current account balance. 
C)  capital account balance. 
D)  net balance of all international transactions.

Which of the following transactions would be excluded in the capital account?

A depreciation of one's currency means that:

Suppose rice can be produced in country X at a lower cost than in country Y, while tuna can be produced in country Y at a lower cost than in country X. International competition will:

If one dollar exchanges for 20 Thailand baht, then:

Protectionist policies such as tariffs and quotas are beneficial to the nation imposing those trade barriers.

Discuss the determinants of a nation's exchange rate value for its currency in foreign exchange markets. What happens to a nation's balance of trade if the nation's currency appreciates? Why?

An appreciation in the U.S. dollar benefits which of the following groups of people?

The theory of comparative advantage suggests that nations should produce a good if they:

A favorable balance of trade occurs when:

A country is said to have an absolute advantage in the production of a good when:

Exhibit 15-3 Potatoes and wheat output (tons per day) Country Potatoes Wheat United States 4 2 Ireland 3 1 -In Exhibit 15-3, the United States has an absolute advantage in producing:

The exchange rate is the:

Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

Exhibit 15-6 Dollars per British pound Quantity Demanded Dollars per P ound Quantity Supplied 200 5 600 240 4 480 300 3 410 360 2 360 390 1 330 -In Exhibit 15-6, the equilibrium exchange rate is:

Suppose a German bank purchases a U.S. Treasury bond. This transaction would be recorded in the:

Which of the following is a partially valid economic argument for restricting free trade?

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. Now the exchange rate changes to 90 yen = $1. Then the:

The rules of the WTO:

A tariff is:

The term "balance of trade" refers to a nation's:

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

Which of the following transactions would be excluded in the capital account?

A depreciation of one's currency means that:

Suppose rice can be produced in country X at a lower cost than in country Y, while tuna can be produced in country Y at a lower cost than in country X. International competition will:

If one dollar exchanges for 20 Thailand baht, then:

Protectionist policies such as tariffs and quotas are beneficial to the nation imposing those trade barriers.

Discuss the determinants of a nation's exchange rate value for its currency in foreign exchange markets. What happens to a nation's balance of trade if the nation's currency appreciates? Why?

An appreciation in the U.S. dollar benefits which of the following groups of people?

The theory of comparative advantage suggests that nations should produce a good if they:

A favorable balance of trade occurs when:

A country is said to have an absolute advantage in the production of a good when:

Exhibit 15-3 Potatoes and wheat output (tons per day) Country Potatoes Wheat United States 4 2 Ireland 3 1 -In Exhibit 15-3, the United States has an absolute advantage in producing:

The exchange rate is the:

Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

Exhibit 15-6 Dollars per British pound Quantity Demanded Dollars per P ound Quantity Supplied 200 5 600 240 4 480 300 3 410 360 2 360 390 1 330 -In Exhibit 15-6, the equilibrium exchange rate is:

Suppose a German bank purchases a U.S. Treasury bond. This transaction would be recorded in the:

Which of the following is a partially valid economic argument for restricting free trade?

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. Now the exchange rate changes to 90 yen = $1. Then the:

The rules of the WTO:

A tariff is:

The term "balance of trade" refers to a nation's:

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