Question 1

If free trade is opened between two countries, then one country must gain at the other country's expense.

Accepted Answer

A) True 
 B)False

Question 2

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

Accepted Answer

A)  fire Jill, practice law during the day, and do her own typing at night. 
B)  practice law and leave all the typing to the secretary. 
C)  divide her time equally between typing and practicing law. 
D)  quit practicing law and take a job as a secretary. 
E)  have Jill attend law school. 
A)  fire Jill, practice law during the day, and do her own typing at night. 
B)  practice law and leave all the typing to the secretary. 
C)  divide her time equally between typing and practicing law. 
D)  quit practicing law and take a job as a secretary. 
E)  have Jill attend law school.

Question 3

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

Accepted Answer

A)  an increase in the U.S. inflation rate relative to the rate in Mexico. 
B)  a change in U.S. consumers' tastes away from Mexican products and toward products made in South Korea, India, and Taiwan. 
C)  U.S. buyers perceiving that domestically-produced products are of a lower quality than products made in Mexico. 
D)  all of these. 
A)  an increase in the U.S. inflation rate relative to the rate in Mexico. 
B)  a change in U.S. consumers' tastes away from Mexican products and toward products made in South Korea, India, and Taiwan. 
C)  U.S. buyers perceiving that domestically-produced products are of a lower quality than products made in Mexico. 
D)  all of these.

Question 4

It is possible for the balance of trade to be negative, and the current account to be positive.

Accepted Answer

A) True 
 B)False

Question 5

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 demand 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 6

Exhibit 15-1 Production possibilities curves  
-In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If these two nations trade, Pada should specialize in the production of:

Accepted Answer

A)  corn. 
B)  corn and wheat. 
C)  neither product since Nabia has the comparative advantage in the production of both. 
D)  neither product since Nabia has the absolute advantage in the production of both. 
E)  wheat. 
A)  corn. 
B)  corn and wheat. 
C)  neither product since Nabia has the comparative advantage in the production of both. 
D)  neither product since Nabia has the absolute advantage in the production of both. 
E)  wheat.

Question 7

If people's incomes decrease, their demand for other currencies shifts to the right.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following changes in the exchange rate represents a depreciation of the dollar?

Accepted Answer

A)  100 yen = $1 to 110 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 250 francs = $10 
A)  100 yen = $1 to 110 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 250 francs = $10

Question 9

Specialization and trade allow an economy to expand its:

Accepted Answer

A)  production possibilities. 
B)  consumption possibilities. 
C)  technological advantage. 
D)  absolute advantage. 
A)  production possibilities. 
B)  consumption possibilities. 
C)  technological advantage. 
D)  absolute advantage.

Question 10

GATT stands for:

Accepted Answer

A)  Good and Total Trade. 
B)  General Agreement on Tariffs and Trade. 
C)  Greater Agreements Toward Trade. 
D)  Gold and Trade Totals. 
E)  Greater Area Trade Transactions. 
A)  Good and Total Trade. 
B)  General Agreement on Tariffs and Trade. 
C)  Greater Agreements Toward Trade. 
D)  Gold and Trade Totals. 
E)  Greater Area Trade Transactions.

Question 11

A tariff differs from a quota in that a tariff is:

Accepted Answer

A)  levied on imports, whereas a quota is imposed on exports. 
B)  levied on exports, whereas a quota is imposed on imports. 
C)  a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D)  a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported. 
A)  levied on imports, whereas a quota is imposed on exports. 
B)  levied on exports, whereas a quota is imposed on imports. 
C)  a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D)  a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Question 12

Which of the following would be recorded in the U.S. goods export account?

Accepted Answer

A)  Harry, an American citizen, spends 1,000 francs on vacation in the south of France. 
B)  A machine shop in Ohio purchases a grinder made in Italy. 
C)  Martha receives a $50 dividend check on stock she owns in a business in Germany. 
D)  The U.S. government subsidizes American farmers for planting corn for export. 
E)  France purchases a new jet fighter aircraft from the Boeing Company in the United States. 
A)  Harry, an American citizen, spends 1,000 francs on vacation in the south of France. 
B)  A machine shop in Ohio purchases a grinder made in Italy. 
C)  Martha receives a $50 dividend check on stock she owns in a business in Germany. 
D)  The U.S. government subsidizes American farmers for planting corn for export. 
E)  France purchases a new jet fighter aircraft from the Boeing Company in the United States.

Question 13

If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that would mean that Canadians would have to spend ____ to buy a $12 watch in New York City.

Accepted Answer

A)  c and e 
B)  10 U.S. dollars 
C)  12 U.S. dollars 
D)  14.4 U.S. dollars 
E)  14.4 Canadian dollars 
A)  c and e 
B)  10 U.S. dollars 
C)  12 U.S. dollars 
D)  14.4 U.S. dollars 
E)  14.4 Canadian dollars

Question 14

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

Accepted Answer

A)  Foreign producers must be stopped from selling their products in this country below cost of production. 
B)  Domestic workers must be protected from the lower wages paid in foreign countries. 
C)  The nation's security demands we ensure an adequate domestic supply capacity of certain products. 
D)  Do unto others as they do unto you. 
E)  Industries in the early stages of development must be protected from more mature producers. 
A)  Foreign producers must be stopped from selling their products in this country below cost of production. 
B)  Domestic workers must be protected from the lower wages paid in foreign countries. 
C)  The nation's security demands we ensure an adequate domestic supply capacity of certain products. 
D)  Do unto others as they do unto you. 
E)  Industries in the early stages of development must be protected from more mature producers.

Question 15

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

Accepted Answer

A)  a tariff. 
B)  free trade. 
C)  comparative advantage. 
D)  the diversity of industry argument. 
E)  a quota. 
A)  a tariff. 
B)  free trade. 
C)  comparative advantage. 
D)  the diversity of industry argument. 
E)  a quota.

Question 16

A major difference between a tariff and a quota is that a tariff:

Accepted Answer

A)  will reduce imports, but a quota generally will not. 
B)  can easily be rescinded, but a quota cannot. 
C)  will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports. 
D)  typically generates tax revenue, while a quota does not. 
A)  will reduce imports, but a quota generally will not. 
B)  can easily be rescinded, but a quota cannot. 
C)  will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports. 
D)  typically generates tax revenue, while a quota does not.

Question 17

A weaker dollar will stimulate sales of U.S. exports.

Accepted Answer

A) True 
 B)False

Question 18

The term "balance of trade" refers to the:

Accepted Answer

A)  importing and exporting of goods. 
B)  importing and exporting of goods and services. 
C)  current account trade balance. 
D)  capital outflows minus inflows. 
A)  importing and exporting of goods. 
B)  importing and exporting of goods and services. 
C)  current account trade balance. 
D)  capital outflows minus inflows.

Question 19

"More productive workers receive higher wages than less productive workers." This observation is a major flaw in which of the following arguments for protectionism?

Accepted Answer

A)  The infant industry argument. 
B)  The national security argument. 
C)  The employment argument. 
D)  The cheap foreign labor argument. 
A)  The infant industry argument. 
B)  The national security argument. 
C)  The employment argument. 
D)  The cheap foreign labor argument.

Question 20

Suppose there are two countries, X and Y. If the exchange rate, as measured in X's currency, is currently 9, what do citizens of the nation of Y see when they read their newspapers?

Accepted Answer

A)  The exchange rate for X's currency is 9. 
B)  The exchange rate for X's currency is more than 9. 
C)  The exchange rate for X's currency is 3. 
D)  The exchange rate for X's currency is 0.11. 
E)  Knowing one exchange rate does not mean we can tell the other exchange rate. 
A)  The exchange rate for X's currency is 9. 
B)  The exchange rate for X's currency is more than 9. 
C)  The exchange rate for X's currency is 3. 
D)  The exchange rate for X's currency is 0.11. 
E)  Knowing one exchange rate does not mean we can tell the other exchange rate.

If free trade is opened between two countries, then one country must gain at the other country's expense.

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

It is possible for the balance of trade to be negative, and the current account to be positive.

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 demand curve in graph 15-5(A) is determined by:

Exhibit 15-1 Production possibilities curves -In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If these two nations trade, Pada should specialize in the production of:

If people's incomes decrease, their demand for other currencies shifts to the right.

Which of the following changes in the exchange rate represents a depreciation of the dollar?

Specialization and trade allow an economy to expand its:

GATT stands for:

A tariff differs from a quota in that a tariff is:

Which of the following would be recorded in the U.S. goods export account?

If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that would mean that Canadians would have to spend ____ to buy a $12 watch in New York City.

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

A major difference between a tariff and a quota is that a tariff:

A weaker dollar will stimulate sales of U.S. exports.

The term "balance of trade" refers to the:

"More productive workers receive higher wages than less productive workers." This observation is a major flaw in which of the following arguments for protectionism?

Suppose there are two countries, X and Y. If the exchange rate, as measured in X's currency, is currently 9, what do citizens of the nation of Y see when they read their newspapers?

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

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Exam 15: International Trade and Finance

If free trade is opened between two countries, then one country must gain at the other country's expense.

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

It is possible for the balance of trade to be negative, and the current account to be positive.

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 demand curve in graph 15-5(A) is determined by:

Exhibit 15-1 Production possibilities curves -In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If these two nations trade, Pada should specialize in the production of:

If people's incomes decrease, their demand for other currencies shifts to the right.

Which of the following changes in the exchange rate represents a depreciation of the dollar?

Specialization and trade allow an economy to expand its:

GATT stands for:

A tariff differs from a quota in that a tariff is:

Which of the following would be recorded in the U.S. goods export account?

If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that would mean that Canadians would have to spend ____ to buy a $12 watch in New York City.

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

A major difference between a tariff and a quota is that a tariff:

A weaker dollar will stimulate sales of U.S. exports.

The term "balance of trade" refers to the:

"More productive workers receive higher wages than less productive workers." This observation is a major flaw in which of the following arguments for protectionism?

Suppose there are two countries, X and Y. If the exchange rate, as measured in X's currency, is currently 9, what do citizens of the nation of Y see when they read their newspapers?

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

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