Question 1

If one U.S. dollar can be exchanged for 5 Swiss francs, then 1 franc can be exchanged for:

Accepted Answer

A)  5 cents. 
B)  20 cents. 
C)  50 cents. 
D)  2 dollars. 
A)  5 cents. 
B)  20 cents. 
C)  50 cents. 
D)  2 dollars.

Question 2

Tariff rates on products imported into the United States:

Accepted Answer

A)  were prohibited by the Constitution. 
B)  have dropped substantially over the past 50 years. 
C)  reached an all time high in 1996. 
D)  have steadily increased since 1920. 
E)  have never played a big part in U.S. trade policy. 
A)  were prohibited by the Constitution. 
B)  have dropped substantially over the past 50 years. 
C)  reached an all time high in 1996. 
D)  have steadily increased since 1920. 
E)  have never played a big part in U.S. trade policy.

Question 3

If the current account and capital account are both in surplus, the official reserve account does not have to be in deficit.

Accepted Answer

A) True 
 B)False

Question 4

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Accepted Answer

A)  people in Portugal will not want to buy as many hats. 
B)  Spain no longer has a comparative advantage in hats. 
C)  Portugal is flooding the market with too many doormats. 
D)  some of the gains from trade shift to Portugal. 
E)  some of the gains from trade shift to Spain. 
A)  people in Portugal will not want to buy as many hats. 
B)  Spain no longer has a comparative advantage in hats. 
C)  Portugal is flooding the market with too many doormats. 
D)  some of the gains from trade shift to Portugal. 
E)  some of the gains from trade shift to Spain.

Question 5

An increase in the price level in Japan relative to the price level in the United States will shift the demand curve for dollars leftward and the dollar depreciates or becomes weaker.

Accepted Answer

A) True 
 B)False

Question 6

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a:

Accepted Answer

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

Question 7

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. A Japanese citizen purchasing this machine would pay:

Accepted Answer

A)  100 yen. 
B)  500 yen. 
C)  5,000 yen. 
D)  10,000 yen. 
E)  50,000 yen. 
A)  100 yen. 
B)  500 yen. 
C)  5,000 yen. 
D)  10,000 yen. 
E)  50,000 yen.

Question 8

The main explanation for why the cheap foreign labor argument is a poor reason for restricting international trade is that:

Accepted Answer

A)  workers who get paid less tend to have lower productivity than those who get paid more. 
B)  all firms and workers gain when there are no restrictions on international trade. 
C)  infant industries such as steel and automobiles need to be protected. 
D)  specialization and free trade usually raise the prices of all the traded goods, so that the workers can get paid more. 
E)  labor costs tend to be the same worldwide in the long run because of worker mobility. 
A)  workers who get paid less tend to have lower productivity than those who get paid more. 
B)  all firms and workers gain when there are no restrictions on international trade. 
C)  infant industries such as steel and automobiles need to be protected. 
D)  specialization and free trade usually raise the prices of all the traded goods, so that the workers can get paid more. 
E)  labor costs tend to be the same worldwide in the long run because of worker mobility.

Question 9

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that:

Accepted Answer

A)  all industries will claim that they are infant industries in order to gain protection. 
B)  the protected industry will become too efficient and drive out foreign competition. 
C)  once in place, it is difficult to remove protection even as the industry matures. 
D)  it causes the goods that are produced in the protected industry to have lower prices. 
E)  this policy compromises national security if the infant industry produces military goods. 
A)  all industries will claim that they are infant industries in order to gain protection. 
B)  the protected industry will become too efficient and drive out foreign competition. 
C)  once in place, it is difficult to remove protection even as the industry matures. 
D)  it causes the goods that are produced in the protected industry to have lower prices. 
E)  this policy compromises national security if the infant industry produces military goods.

Question 10

One big difference between tariffs and quotas is that tariffs:

Accepted Answer

A)  raise the price of a good while quotas lower it. 
B)  generate tax revenues while quotas do not. 
C)  stimulate international trade while quotas inhibit it. 
D)  hurt domestic producers while quotas help them. 
E)  give the same outcome as free trade while quotas do not. 
A)  raise the price of a good while quotas lower it. 
B)  generate tax revenues while quotas do not. 
C)  stimulate international trade while quotas inhibit it. 
D)  hurt domestic producers while quotas help them. 
E)  give the same outcome as free trade while quotas do not.

Question 11

An increase in a nation's trade deficit occurs when that nation's exports rise and/or its imports fall.

Accepted Answer

A) True 
 B)False

Question 12

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

Accepted Answer

A)  in larger quantities than 
B)  faster than 
C)  that is desired by 
D)  more efficiently than 
E)  only consumed by 
A)  in larger quantities than 
B)  faster than 
C)  that is desired by 
D)  more efficiently than 
E)  only consumed by

Question 13

If the Japanese price level falls relative to the price level in the United States, then:

Accepted Answer

A)  Japanese buy less U.S. exports. 
B)  the demand for dollars decreases. 
C)  the supply of dollars increases. 
D)  the value of the dollar falls. 
E)  all of these are true. 
A)  Japanese buy less U.S. exports. 
B)  the demand for dollars decreases. 
C)  the supply of dollars increases. 
D)  the value of the dollar falls. 
E)  all of these are true.

Question 14

Imposing a restrictive quota on imported plasma TVs will:

Accepted Answer

A)  increase the price of the plasma TVs and decrease the quantity consumed. 
B)  increase both the price of the plasma TVs and the quantity consumed. 
C)  leave the price of the plasma TVs unchanged but decrease the quantity consumed. 
D)  leave the price and the quantity consumed of plasma TVs unchanged, because domestic producers will expand production to make up for the reduction in imports 
A)  increase the price of the plasma TVs and decrease the quantity consumed. 
B)  increase both the price of the plasma TVs and the quantity consumed. 
C)  leave the price of the plasma TVs unchanged but decrease the quantity consumed. 
D)  leave the price and the quantity consumed of plasma TVs unchanged, because domestic producers will expand production to make up for the reduction in imports

Question 15

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds  
-Exhibit 15-7 shows a situation in which:

Accepted Answer

A)  both the dollar and the pound have depreciated. 
B)  both the dollar and the pound have appreciated. 
C)  the dollar has depreciated and the pound has appreciated. 
D)  the dollar has appreciated and the pound has depreciated. 
A)  both the dollar and the pound have depreciated. 
B)  both the dollar and the pound have appreciated. 
C)  the dollar has depreciated and the pound has appreciated. 
D)  the dollar has appreciated and the pound has depreciated.

Question 16

Which of the following provides the foundation of the case for free trade?

Accepted Answer

A)  The law of diminishing marginal utility 
B)  The anti-dumping argument 
C)  The industrial diversity argument 
D)  The theory of comparative advantage 
A)  The law of diminishing marginal utility 
B)  The anti-dumping argument 
C)  The industrial diversity argument 
D)  The theory of comparative advantage

Question 17

Comparative advantage indicates that:

Accepted Answer

A)  specialization and exchange will permit trading partners to maximize their joint consumption. 
B)  a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. 
C)  a nation can gain from trade only when its trading partners are not low-wage countries. 
D)  countries should export products for which they are high-opportunity cost producers. 
A)  specialization and exchange will permit trading partners to maximize their joint consumption. 
B)  a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. 
C)  a nation can gain from trade only when its trading partners are not low-wage countries. 
D)  countries should export products for which they are high-opportunity cost producers.

Question 18

Exhibit 15-2 Production possibilities curves for U.S. and Mexico  
-As shown in Exhibit 15-2, the United States has a comparative advantage over Mexico in:

Accepted Answer

A)  wheat, but not in cloth. 
B)  cloth, but not in wheat. 
C)  both wheat and cloth. 
D)  neither wheat nor cloth 
A)  wheat, but not in cloth. 
B)  cloth, but not in wheat. 
C)  both wheat and cloth. 
D)  neither wheat nor cloth

Question 19

Trade can increase the consumption possibilities of nations.

Accepted Answer

A) True 
 B)False

Question 20

A favorable balance of trade occurs when:

Accepted Answer

A)  exports equal imports. 
B)  the balance of payments balances. 
C)  the current and capital account in the BOP are equal. 
D)  the value of the exports of goods exceeds the value of the imports of goods. 
E)  the value of the exports of goods is less than the value of the imports of goods . 
A)  exports equal imports. 
B)  the balance of payments balances. 
C)  the current and capital account in the BOP are equal. 
D)  the value of the exports of goods exceeds the value of the imports of goods. 
E)  the value of the exports of goods is less than the value of the imports of goods .

If one U.S. dollar can be exchanged for 5 Swiss francs, then 1 franc can be exchanged for:

Tariff rates on products imported into the United States:

If the current account and capital account are both in surplus, the official reserve account does not have to be in deficit.

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

An increase in the price level in Japan relative to the price level in the United States will shift the demand curve for dollars leftward and the dollar depreciates or becomes weaker.

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a:

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. A Japanese citizen purchasing this machine would pay:

The main explanation for why the cheap foreign labor argument is a poor reason for restricting international trade is that:

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that:

One big difference between tariffs and quotas is that tariffs:

An increase in a nation's trade deficit occurs when that nation's exports rise and/or its imports fall.

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

If the Japanese price level falls relative to the price level in the United States, then:

Imposing a restrictive quota on imported plasma TVs will:

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds -Exhibit 15-7 shows a situation in which:

Which of the following provides the foundation of the case for free trade?

Comparative advantage indicates that:

Exhibit 15-2 Production possibilities curves for U.S. and Mexico -As shown in Exhibit 15-2, the United States has a comparative advantage over Mexico in:

Trade can increase the consumption possibilities of nations.

A favorable balance of trade occurs when:

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

If one U.S. dollar can be exchanged for 5 Swiss francs, then 1 franc can be exchanged for:

Tariff rates on products imported into the United States:

If the current account and capital account are both in surplus, the official reserve account does not have to be in deficit.

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

An increase in the price level in Japan relative to the price level in the United States will shift the demand curve for dollars leftward and the dollar depreciates or becomes weaker.

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a:

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. A Japanese citizen purchasing this machine would pay:

The main explanation for why the cheap foreign labor argument is a poor reason for restricting international trade is that:

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that:

One big difference between tariffs and quotas is that tariffs:

An increase in a nation's trade deficit occurs when that nation's exports rise and/or its imports fall.

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

If the Japanese price level falls relative to the price level in the United States, then:

Imposing a restrictive quota on imported plasma TVs will:

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds -Exhibit 15-7 shows a situation in which:

Which of the following provides the foundation of the case for free trade?

Comparative advantage indicates that:

Exhibit 15-2 Production possibilities curves for U.S. and Mexico -As shown in Exhibit 15-2, the United States has a comparative advantage over Mexico in:

Trade can increase the consumption possibilities of nations.

A favorable balance of trade occurs when:

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