Question 1

An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:

Accepted Answer

A)  increase the price of the dollar in Indian rupees. 
B)  increase the supply of dollars by those holding U.S. dollars. 
C)  decrease the equilibrium exchange rate of Indian rupees per dollar. 
D)  all of these. 
A)  increase the price of the dollar in Indian rupees. 
B)  increase the supply of dollars by those holding U.S. dollars. 
C)  decrease the equilibrium exchange rate of Indian rupees per dollar. 
D)  all of these.

Question 2

If the exchange rate between the yen and the dollar changes from 100 yen = $1 to 110 yen = $1, then:

Accepted Answer

A)  the dollar has depreciated in value. 
B)  U.S.-made goods will become less expensive to Japanese citizens. 
C)  the dollar has appreciated in value. 
D)  Japanese-made goods will become more expensive to U.S. citizens. 
E)  there will be an increase in the demand for dollars in the foreign exchange market. 
A)  the dollar has depreciated in value. 
B)  U.S.-made goods will become less expensive to Japanese citizens. 
C)  the dollar has appreciated in value. 
D)  Japanese-made goods will become more expensive to U.S. citizens. 
E)  there will be an increase in the demand for dollars in the foreign exchange market.

Question 3

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(B) 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 4

Persistent negative current account balances will lead to ____.

Accepted Answer

A)  c and d 
B)  d and e 
C)  budget deficits 
D)  appreciation of foreign currency 
E)  depreciation of domestic currency 
A)  c and d 
B)  d and e 
C)  budget deficits 
D)  appreciation of foreign currency 
E)  depreciation of domestic currency

Question 5

Suppose Japan has a comparative advantage over Canada in the production of DVDs. This means that Japan:

Accepted Answer

A)  needs fewer resources to produce DVDS than does Canada. 
B)  has better technology for producing DVDs than does Canada. 
C)  has a lower opportunity cost of DVD production than does Canada. 
D)  can produce more DVDs in a given period of time than can Canada. 
A)  needs fewer resources to produce DVDS than does Canada. 
B)  has better technology for producing DVDs than does Canada. 
C)  has a lower opportunity cost of DVD production than does Canada. 
D)  can produce more DVDs in a given period of time than can Canada.

Question 6

A country should export the goods in which it has an absolute advantage.

Accepted Answer

A) True 
 B)False

Question 7

With the benefits of international trade:

Accepted Answer

A)  there can be increased consumption for all. 
B)  global production will be increased. 
C)  world resources will be used more efficiently. 
D)  all of these are true. 
A)  there can be increased consumption for all. 
B)  global production will be increased. 
C)  world resources will be used more efficiently. 
D)  all of these are true.

Question 8

Exhibit 15-1 Production possibilities curves  
-In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Pada the cost of producing one more unit of corn is equal to:

Accepted Answer

A)  3 units of wheat. 
B)  3 units of corn. 
C)  1/3 unit of wheat. 
D)  15 units of wheat. 
E)  30 units of wheat. 
A)  3 units of wheat. 
B)  3 units of corn. 
C)  1/3 unit of wheat. 
D)  15 units of wheat. 
E)  30 units of wheat.

Question 9

The theory of comparative advantage suggests that a(n):

Accepted Answer

A)  industrialized country should not import. 
B)  country that is not competitive should import everything. 
C)  country specialize in producing goods or services for which it has a lower opportunity cost. 
D)  none of these. 
A)  industrialized country should not import. 
B)  country that is not competitive should import everything. 
C)  country specialize in producing goods or services for which it has a lower opportunity cost. 
D)  none of these.

Question 10

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

Accepted Answer

A)  The dollar will depreciate; the current account will move toward a deficit. 
B)  The dollar will depreciate; the current account will move toward a surplus. 
C)  The dollar will appreciate; the current account will move toward a deficit. 
D)  The dollar will appreciate; the current account will move toward a surplus. 
A)  The dollar will depreciate; the current account will move toward a deficit. 
B)  The dollar will depreciate; the current account will move toward a surplus. 
C)  The dollar will appreciate; the current account will move toward a deficit. 
D)  The dollar will appreciate; the current account will move toward a surplus.

Question 11

A quota is a:

Accepted Answer

A)  tax on a specific quantity of imported goods. 
B)  limited number of foreign firms that can sell imported goods. 
C)  restrictive health and safety standard that raises costs. 
D)  tax on domestic producers so that they can make higher profits. 
E)  limit on the quantity of a good that can be imported. 
A)  tax on a specific quantity of imported goods. 
B)  limited number of foreign firms that can sell imported goods. 
C)  restrictive health and safety standard that raises costs. 
D)  tax on domestic producers so that they can make higher profits. 
E)  limit on the quantity of a good that can be imported.

Question 12

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, when the exchange rate is 3 dollars per pound,

Accepted Answer

A)  there is an excess supply of 110 pounds. 
B)  there is an excess demand of 110 pounds. 
C)  there is an excess supply of 110 dollars. 
D)  there is an excess demand of 110 dollars. 
E)  the market is in equilibrium. 
A)  there is an excess supply of 110 pounds. 
B)  there is an excess demand of 110 pounds. 
C)  there is an excess supply of 110 dollars. 
D)  there is an excess demand of 110 dollars. 
E)  the market is in equilibrium.

Question 13

If nation A has an absolute advantage over nation B in the production of a product, this implies that:

Accepted Answer

A)  it requires fewer resources in A to produce the good than in B. 
B)  the cost of producing the good in terms of some other good's production that must be sacrificed is lower in A than in B. 
C)  nation B could not benefit by engaging in trade with A. 
D)  nation A should acquire this product by trading with B. 
E)  nation A could not benefit by engaging in trade with B. 
A)  it requires fewer resources in A to produce the good than in B. 
B)  the cost of producing the good in terms of some other good's production that must be sacrificed is lower in A than in B. 
C)  nation B could not benefit by engaging in trade with A. 
D)  nation A should acquire this product by trading with B. 
E)  nation A could not benefit by engaging in trade with B.

Question 14

The infant industry argument is based on the idea that:

Accepted Answer

A)  competitive pressure from established foreign firms would encourage the infant industry's prospects for future growth. 
B)  failure to shelter these infant industries tends to lead to political instability. 
C)  small firms must be protected. 
D)  none of these. 
A)  competitive pressure from established foreign firms would encourage the infant industry's prospects for future growth. 
B)  failure to shelter these infant industries tends to lead to political instability. 
C)  small firms must be protected. 
D)  none of these.

Question 15

Which of the following statements is true?

Accepted Answer

A)  A tariff is a physical limit on the quantity of a good allowed to enter a country. 
B)  An embargo is a tax on an imported good. 
C)  A quota is a law that bars trade with another country. 
D)  When a nation exports more than it imports it is running a balance of trade surplus. 
A)  A tariff is a physical limit on the quantity of a good allowed to enter a country. 
B)  An embargo is a tax on an imported good. 
C)  A quota is a law that bars trade with another country. 
D)  When a nation exports more than it imports it is running a balance of trade surplus.

Question 16

If goods imports are greater than goods exports, the nation is experiencing a:

Accepted Answer

A)  negative balance on current account. 
B)  goods trade deficit. 
C)  capital account imbalance. 
D)  weakening of its currency. 
E)  growth in foreign reserves. 
A)  negative balance on current account. 
B)  goods trade deficit. 
C)  capital account imbalance. 
D)  weakening of its currency. 
E)  growth in foreign reserves.

Question 17

A country that can produce a good using fewer resources than another country has a(n):

Accepted Answer

A)  lower opportunity cost of producing the good than another country. 
B)  absolute advantage. 
C)  specialization in the production of the good. 
D)  all of these. 
A)  lower opportunity cost of producing the good than another country. 
B)  absolute advantage. 
C)  specialization in the production of the good. 
D)  all of these.

Question 18

According to the principle of comparative advantage, total output and consumption levels will be highest when goods are produced in nations according to which of the following conditions?

Accepted Answer

A)  Opportunity costs are lowest. 
B)  Absolute advantages are highest. 
C)  Opportunity costs are equal. 
D)  Absolute advantages are lowest. 
A)  Opportunity costs are lowest. 
B)  Absolute advantages are highest. 
C)  Opportunity costs are equal. 
D)  Absolute advantages are lowest.

Question 19

Which of the following statements is true?

Accepted Answer

A)  Specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves. 
B)  Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. 
C)  According to the theory of comparative advantage, a nation should specialize in the production of those goods for which it has an absolute advantage. 
D)  All of these. 
A)  Specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves. 
B)  Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. 
C)  According to the theory of comparative advantage, a nation should specialize in the production of those goods for which it has an absolute advantage. 
D)  All of these.

Question 20

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 exchange rate will have no tendency to change when it is equal to:

Accepted Answer

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

An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:

If the exchange rate between the yen and the dollar changes from 100 yen = $1 to 110 yen = $1, then:

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(B) is determined by:

Persistent negative current account balances will lead to ____.

Suppose Japan has a comparative advantage over Canada in the production of DVDs. This means that Japan:

A country should export the goods in which it has an absolute advantage.

With the benefits of international 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. In Pada the cost of producing one more unit of corn is equal to:

The theory of comparative advantage suggests that a(n):

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

A quota is a:

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, when the exchange rate is 3 dollars per pound,

If nation A has an absolute advantage over nation B in the production of a product, this implies that:

The infant industry argument is based on the idea that:

Which of the following statements is true?

If goods imports are greater than goods exports, the nation is experiencing a:

A country that can produce a good using fewer resources than another country has a(n):

According to the principle of comparative advantage, total output and consumption levels will be highest when goods are produced in nations according to which of the following conditions?

Which of the following statements is true?

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 exchange rate will have no tendency to change when it is equal 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

An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:

If the exchange rate between the yen and the dollar changes from 100 yen = $1 to 110 yen = $1, then:

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(B) is determined by:

Persistent negative current account balances will lead to ____.

Suppose Japan has a comparative advantage over Canada in the production of DVDs. This means that Japan:

A country should export the goods in which it has an absolute advantage.

With the benefits of international 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. In Pada the cost of producing one more unit of corn is equal to:

The theory of comparative advantage suggests that a(n):

If real interest rates in the United States are higher than those of our trading partners, what will tend to happen to the foreign exchange value of the dollar and the U.S. current account deficit or surplus?

A quota is a:

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, when the exchange rate is 3 dollars per pound,

If nation A has an absolute advantage over nation B in the production of a product, this implies that:

The infant industry argument is based on the idea that:

Which of the following statements is true?

If goods imports are greater than goods exports, the nation is experiencing a:

A country that can produce a good using fewer resources than another country has a(n):

According to the principle of comparative advantage, total output and consumption levels will be highest when goods are produced in nations according to which of the following conditions?

Which of the following statements is true?

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 exchange rate will have no tendency to change when it is equal 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