Question 1

The principal objective of WTO is to:

Accepted Answer

A)  reduce the level of all tariffs. 
B)  establish fair prices for all goods traded internationally. 
C)  prevent the trading of services across nations' borders. 
D)  encourage countries to establish quotas. 
A)  reduce the level of all tariffs. 
B)  establish fair prices for all goods traded internationally. 
C)  prevent the trading of services across nations' borders. 
D)  encourage countries to establish quotas.

Question 2

Absolute advantage governs the potential for gains from trade.

Accepted Answer

A) True 
 B)False

Question 3

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, Nabia should specialize in the production of:

Accepted Answer

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

Question 4

The exchange rate is:

Accepted Answer

A)  the rate at which goods will exchange for each other in the international market. 
B)  the number of units of one currency required in exchange for one unit of another currency. 
C)  set by the International Trade Commission. 
D)  established by the ratio of the values of gold to silver. 
E)  set by each individual country. 
A)  the rate at which goods will exchange for each other in the international market. 
B)  the number of units of one currency required in exchange for one unit of another currency. 
C)  set by the International Trade Commission. 
D)  established by the ratio of the values of gold to silver. 
E)  set by each individual country.

Question 5

The balance of trade is measured by which of the following expressions?

Accepted Answer

A)  The value of exported goods and services minus the value of imported goods and services 
B)  The value of income receipts on investments minus income payments on investments 
C)  The value of goods exports minus the value of goods imports 
D)  The value of government spending minus the value of all taxes received 
E)  The balance on capital account plus the balance on current account 
A)  The value of exported goods and services minus the value of imported goods and services 
B)  The value of income receipts on investments minus income payments on investments 
C)  The value of goods exports minus the value of goods imports 
D)  The value of government spending minus the value of all taxes received 
E)  The balance on capital account plus the balance on current account

Question 6

It is possible for a nation to have an absolute advantage in the production of a product, but not a comparative advantage in the production of the same product.

Accepted Answer

A) True 
 B)False

Question 7

Comparative advantage explains why a nation will benefit from trade when:

Accepted Answer

A)  it exports more than it imports. 
B)  its trading partners are experiencing offsetting losses. 
C)  it exports goods for which it is a high-opportunity cost producer, while importing those for which it is a low-opportunity cost producer. 
D)  it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer. 
A)  it exports more than it imports. 
B)  its trading partners are experiencing offsetting losses. 
C)  it exports goods for which it is a high-opportunity cost producer, while importing those for which it is a low-opportunity cost producer. 
D)  it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer.

Question 8

Without trade, the consumption possibilities for two nations are:

Accepted Answer

A)  outside their production possibilities curve. 
B)  inside their production possibilities curve. 
C)  along their production possibilities curve. 
D)  at a point equal to the world production possibilities curve. 
A)  outside their production possibilities curve. 
B)  inside their production possibilities curve. 
C)  along their production possibilities curve. 
D)  at a point equal to the world production possibilities curve.

Question 9

A tariff has the effect of:

Accepted Answer

A)  raising the price of the exported product. 
B)  increasing the demand for the exported product. 
C)  increasing the demand for the imported product. 
D)  increasing the supply of the imported product. 
E)  raising the price of the imported product. 
A)  raising the price of the exported product. 
B)  increasing the demand for the exported product. 
C)  increasing the demand for the imported product. 
D)  increasing the supply of the imported product. 
E)  raising the price of the imported product.

Question 10

Which of the following is excluded in the current account?

Accepted Answer

A)  Goods exports. 
B)  Goods imports. 
C)  Capital inflow and outflow. 
D)  Net unilateral transfers. 
A)  Goods exports. 
B)  Goods imports. 
C)  Capital inflow and outflow. 
D)  Net unilateral transfers.

Question 11

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:

Accepted Answer

A)  Greece should specialize in producing cheese. 
B)  Italy should specialize in producing cheese. 
C)  both Greece and Italy should produce cheese. 
D)  Greece gives up fewer goods to produce cheese than Italy does. 
E)  Italy has a better economy than Greece. 
A)  Greece should specialize in producing cheese. 
B)  Italy should specialize in producing cheese. 
C)  both Greece and Italy should produce cheese. 
D)  Greece gives up fewer goods to produce cheese than Italy does. 
E)  Italy has a better economy than Greece.

Question 12

The U.S. balance of trade has been in a large surplus since 2001.

Accepted Answer

A) True 
 B)False

Question 13

If a country has a comparative advantage in oil, then this means that the opportunity cost of producing oil is:

Accepted Answer

A)  high. 
B)  low. 
C)  zero. 
D)  infinite. 
E)  equal to all other goods. 
A)  high. 
B)  low. 
C)  zero. 
D)  infinite. 
E)  equal to all other goods.

Question 14

The nice thing about foreign exchange markets is that the goods are money, and they are paid for with money. This means that if the U.S. dollar ____ the Japanese yen ____.

Accepted Answer

A)  goes down; goes down 
B)  goes up; goes up 
C)  buys more yen; buys more dollars 
D)  buys fewer yen; buys fewer dollars 
E)  buys more yen; buys fewer dollars 
A)  goes down; goes down 
B)  goes up; goes up 
C)  buys more yen; buys more dollars 
D)  buys fewer yen; buys fewer dollars 
E)  buys more yen; buys fewer dollars

Question 15

A nation benefits from international trade if it:

Accepted Answer

A)  exports more than it imports. 
B)  imports more than it exports. 
C)  imports goods for which it is a low opportunity cost producer. 
D)  exports goods for which it is a low opportunity cost producer. 
A)  exports more than it imports. 
B)  imports more than it exports. 
C)  imports goods for which it is a low opportunity cost producer. 
D)  exports goods for which it is a low opportunity cost producer.

Question 16

Expenditures for services such as tourism, income for foreign investment, and foreign gifts are tabulated in the:

Accepted Answer

A)  current account. 
B)  capital account. 
C)  official reserve account. 
D)  goods account. 
A)  current account. 
B)  capital account. 
C)  official reserve account. 
D)  goods account.

Question 17

The infant-industry argument about tariffs argues that:

Accepted Answer

A)  it is unfair to levy tariffs on items intended for use by infants. 
B)  tariffs should be levied on foreign products that compete with new domestic industries only in the short run. 
C)  if a newly established domestic industry can survive in the short run, a tariff should be levied to protect it from foreign competition in the long run. 
D)  permanent tariffs should be levied on foreign products that compete with those produced by newly established domestic industries. 
A)  it is unfair to levy tariffs on items intended for use by infants. 
B)  tariffs should be levied on foreign products that compete with new domestic industries only in the short run. 
C)  if a newly established domestic industry can survive in the short run, a tariff should be levied to protect it from foreign competition in the long run. 
D)  permanent tariffs should be levied on foreign products that compete with those produced by newly established domestic industries.

Question 18

The purchase of U.S. assets by foreigners is a:

Accepted Answer

A)  capital inflow. 
B)  capital outflow. 
C)  current account deficit. 
D)  unilateral transfer. 
A)  capital inflow. 
B)  capital outflow. 
C)  current account deficit. 
D)  unilateral transfer.

Question 19

Which of the following is the correct name of the free-trade agreement between Mexico, the U.S., and Canada?

Accepted Answer

A)  The American Free Trade Agreement (AFT
A) . 
B)  The North American Free Trade Agreement (NAFT
A) . 
C)  The Pacific Free Trade Agreement (PFT
A) . 
D)  The Trans-American Free Trade Agreement (TAF
A) . 
A)  The American Free Trade Agreement (AFT
A) . 
B)  The North American Free Trade Agreement (NAFT
A) . 
C)  The Pacific Free Trade Agreement (PFT
A) . 
D)  The Trans-American Free Trade Agreement (TAF
A) .

Question 20

Most industrialized nations today use a gold standard to establish exchange rates.

Accepted Answer

A) True 
 B)False

The principal objective of WTO is to:

Absolute advantage governs the potential for gains from trade.

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, Nabia should specialize in the production of:

The exchange rate is:

The balance of trade is measured by which of the following expressions?

It is possible for a nation to have an absolute advantage in the production of a product, but not a comparative advantage in the production of the same product.

Comparative advantage explains why a nation will benefit from trade when:

Without trade, the consumption possibilities for two nations are:

A tariff has the effect of:

Which of the following is excluded in the current account?

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:

The U.S. balance of trade has been in a large surplus since 2001.

If a country has a comparative advantage in oil, then this means that the opportunity cost of producing oil is:

The nice thing about foreign exchange markets is that the goods are money, and they are paid for with money. This means that if the U.S. dollar the Japanese yen .

A nation benefits from international trade if it:

Expenditures for services such as tourism, income for foreign investment, and foreign gifts are tabulated in the:

The infant-industry argument about tariffs argues that:

The purchase of U.S. assets by foreigners is a:

Which of the following is the correct name of the free-trade agreement between Mexico, the U.S., and Canada?

Most industrialized nations today use a gold standard to establish exchange rates.

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 principal objective of WTO is to:

Absolute advantage governs the potential for gains from trade.

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, Nabia should specialize in the production of:

The exchange rate is:

The balance of trade is measured by which of the following expressions?

It is possible for a nation to have an absolute advantage in the production of a product, but not a comparative advantage in the production of the same product.

Comparative advantage explains why a nation will benefit from trade when:

Without trade, the consumption possibilities for two nations are:

A tariff has the effect of:

Which of the following is excluded in the current account?

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:

The U.S. balance of trade has been in a large surplus since 2001.

If a country has a comparative advantage in oil, then this means that the opportunity cost of producing oil is:

The nice thing about foreign exchange markets is that the goods are money, and they are paid for with money. This means that if the U.S. dollar ____ the Japanese yen ____.

A nation benefits from international trade if it:

Expenditures for services such as tourism, income for foreign investment, and foreign gifts are tabulated in the:

The infant-industry argument about tariffs argues that:

The purchase of U.S. assets by foreigners is a:

Which of the following is the correct name of the free-trade agreement between Mexico, the U.S., and Canada?

Most industrialized nations today use a gold standard to establish exchange rates.

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

The nice thing about foreign exchange markets is that the goods are money, and they are paid for with money. This means that if the U.S. dollar the Japanese yen .