Question 1

If a country has a comparative advantage in the production of all goods, it should:

Accepted Answer

A)  specialize in the production of goods with the lowest opportunity cost. 
B)  specialize in the production of goods with the highest opportunity cost. 
C)  specialize in the production of goods with the absolute advantage. 
D)  specialize in the production of goods without the absolute advantage. 
E)  not specialize at all and produce all the goods itself. 
A)  specialize in the production of goods with the lowest opportunity cost. 
B)  specialize in the production of goods with the highest opportunity cost. 
C)  specialize in the production of goods with the absolute advantage. 
D)  specialize in the production of goods without the absolute advantage. 
E)  not specialize at all and produce all the goods itself.

Question 2

Which of the following changes in the exchange rate represents an appreciation of the dollar?

Accepted Answer

A)  100 yen = $1 to 90 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 190 francs = $10 
A)  100 yen = $1 to 90 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 190 francs = $10

Question 3

The current account balance tabulates the value of a country's exports of goods and services minus the value of its imports of goods and services.

Accepted Answer

A) True 
 B)False

Question 4

If the yen price of dollars falls, then the dollar price of yen rises.

Accepted Answer

A) True 
 B)False

Question 5

An increase in demand for a nation's currency in the foreign exchange market will:

Accepted Answer

A)  cause the nation's currency to appreciate. 
B)  make it more expensive for the nation to import goods. 
C)  cause the nation's balance on current account to shift toward a surplus. 
D)  make it less expensive for foreigners to buy the nation's goods. 
A)  cause the nation's currency to appreciate. 
B)  make it more expensive for the nation to import goods. 
C)  cause the nation's balance on current account to shift toward a surplus. 
D)  make it less expensive for foreigners to buy the nation's goods.

Question 6

International trade forces countries to consume a combination of goods that is inside their production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 7

A fixed exchange rate is:

Accepted Answer

A)  determined by the forces of supply and demand. 
B)  the value of a nation's money in gold. 
C)  the value of a nation's money determined by the World Bank. 
D)  none of these. 
A)  determined by the forces of supply and demand. 
B)  the value of a nation's money in gold. 
C)  the value of a nation's money determined by the World Bank. 
D)  none of these.

Question 8

A limit on the quantity of a good that may be imported in a given time period is called:

Accepted Answer

A)  an embargo. 
B)  a tariff. 
C)  a quota. 
D)  dumping. 
A)  an embargo. 
B)  a tariff. 
C)  a quota. 
D)  dumping.

Question 9

If a box of Swiss chocolate priced at 100 francs can be purchased for $50, the exchange rate is:

Accepted Answer

A)  0.50 francs per dollar. 
B)  4.00 francs per dollar. 
C)  0.50 dollars per franc. 
D)  none of these. 
A)  0.50 francs per dollar. 
B)  4.00 francs per dollar. 
C)  0.50 dollars per franc. 
D)  none of these.

Question 10

The demand curve for Japanese yen is downward sloping because when the exchange rate (measured in dollars per yen) falls,

Accepted Answer

A)  Japanese goods become relatively cheaper so foreigners buy more of them and need more yen to do so. 
B)  foreigners need more dollars to buy one yen so they can now afford more Japanese goods. 
C)  the yen demand curve shifts to the right as foreigners try to buy more Japanese goods. 
D)  the dollar becomes weaker and this reduces the strength of both economies. 
E)  everyone wants fewer yen because they have lost some of their underlying value. 
A)  Japanese goods become relatively cheaper so foreigners buy more of them and need more yen to do so. 
B)  foreigners need more dollars to buy one yen so they can now afford more Japanese goods. 
C)  the yen demand curve shifts to the right as foreigners try to buy more Japanese goods. 
D)  the dollar becomes weaker and this reduces the strength of both economies. 
E)  everyone wants fewer yen because they have lost some of their underlying value.

Question 11

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

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)  that nation B could not benefit by engaging in trade with A. 
D)  that nation A should acquire this product by trading with B. 
E)  that 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)  that nation B could not benefit by engaging in trade with A. 
D)  that nation A should acquire this product by trading with B. 
E)  that nation A could not benefit by engaging in trade with B.

Question 12

A country's balance on current account will always equal its balance on capital account.

Accepted Answer

A) True 
 B)False

Question 13

A country's imports of goods minus its exports of goods is reported in the goods balance.

Accepted Answer

A) True 
 B)False

Question 14

Absolute advantage is the ability of a country to produce a good with ________ than another country.

Accepted Answer

A)  a lower opportunity cost 
B)  a higher opportunity cost 
C)  fewer resources 
D)  more resources 
A)  a lower opportunity cost 
B)  a higher opportunity cost 
C)  fewer resources 
D)  more resources

Question 15

The WTO was:

Accepted Answer

A)  formed shortly after World War II. 
B)  authorized in the American Constitution. 
C)  formed in 1995. 
D)  formed in 1876. 
E)  formed to unify the European continent. 
A)  formed shortly after World War II. 
B)  authorized in the American Constitution. 
C)  formed in 1995. 
D)  formed in 1876. 
E)  formed to unify the European continent.

Question 16

Since World War II, tariff reductions have occurred in large part because of negotiations under the:

Accepted Answer

A)  Industry and Trade Administration Act. 
B)  Employment Act. 
C)  Monetary Control Act. 
D)  General Agreement on Tariffs and Trade. 
A)  Industry and Trade Administration Act. 
B)  Employment Act. 
C)  Monetary Control Act. 
D)  General Agreement on Tariffs and Trade.

Question 17

Capital accounts are a measure of how much ____ have invested ____.

Accepted Answer

A)  c and d 
B)  d and e 
C)  U.S. stockholders; in the market 
D)  foreign stockholders; in foreign firms 
E)  U.S. firms; in foreign nations 
A)  c and d 
B)  d and e 
C)  U.S. stockholders; in the market 
D)  foreign stockholders; in foreign firms 
E)  U.S. firms; in foreign nations

Question 18

A tariff is a tax on ____ goods that is designed to ____.

Accepted Answer

A)  exported; protect domestic industries 
B)  exported; hurt foreign industries 
C)  imported; made domestic consumers pay more 
D)  imported; protect domestic industries 
E)  domestic; discourage imports 
A)  exported; protect domestic industries 
B)  exported; hurt foreign industries 
C)  imported; made domestic consumers pay more 
D)  imported; protect domestic industries 
E)  domestic; discourage imports

Question 19

Purchases of foreign assets by U.S. residents are tabulated in the U.S. balance of payments as a:

Accepted Answer

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

Question 20

Comparative advantage indicates that:

Accepted Answer

A)  specialization and exchange will cause trading partners to reduce their joint output. 
B)  a nation can gain from trade even when it is at an absolute disadvantage in producing all goods. 
C)  trade with low-wage countries will pull down the wages of workers in high-wage countries. 
D)  all of these. 
A)  specialization and exchange will cause trading partners to reduce their joint output. 
B)  a nation can gain from trade even when it is at an absolute disadvantage in producing all goods. 
C)  trade with low-wage countries will pull down the wages of workers in high-wage countries. 
D)  all of these.

If a country has a comparative advantage in the production of all goods, it should:

Which of the following changes in the exchange rate represents an appreciation of the dollar?

The current account balance tabulates the value of a country's exports of goods and services minus the value of its imports of goods and services.

If the yen price of dollars falls, then the dollar price of yen rises.

An increase in demand for a nation's currency in the foreign exchange market will:

International trade forces countries to consume a combination of goods that is inside their production possibilities curve.

A fixed exchange rate is:

A limit on the quantity of a good that may be imported in a given time period is called:

If a box of Swiss chocolate priced at 100 francs can be purchased for $50, the exchange rate is:

The demand curve for Japanese yen is downward sloping because when the exchange rate (measured in dollars per yen) falls,

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

A country's balance on current account will always equal its balance on capital account.

A country's imports of goods minus its exports of goods is reported in the goods balance.

Absolute advantage is the ability of a country to produce a good with ________ than another country.

The WTO was:

Since World War II, tariff reductions have occurred in large part because of negotiations under the:

Capital accounts are a measure of how much have invested .

A tariff is a tax on goods that is designed to .

Purchases of foreign assets by U.S. residents are tabulated in the U.S. balance of payments as a:

Comparative advantage indicates that:

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 a country has a comparative advantage in the production of all goods, it should:

Which of the following changes in the exchange rate represents an appreciation of the dollar?

The current account balance tabulates the value of a country's exports of goods and services minus the value of its imports of goods and services.

If the yen price of dollars falls, then the dollar price of yen rises.

An increase in demand for a nation's currency in the foreign exchange market will:

International trade forces countries to consume a combination of goods that is inside their production possibilities curve.

A fixed exchange rate is:

A limit on the quantity of a good that may be imported in a given time period is called:

If a box of Swiss chocolate priced at 100 francs can be purchased for $50, the exchange rate is:

The demand curve for Japanese yen is downward sloping because when the exchange rate (measured in dollars per yen) falls,

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

A country's balance on current account will always equal its balance on capital account.

A country's imports of goods minus its exports of goods is reported in the goods balance.

Absolute advantage is the ability of a country to produce a good with ________ than another country.

The WTO was:

Since World War II, tariff reductions have occurred in large part because of negotiations under the:

Capital accounts are a measure of how much ____ have invested ____.

A tariff is a tax on ____ goods that is designed to ____.

Purchases of foreign assets by U.S. residents are tabulated in the U.S. balance of payments as a:

Comparative advantage indicates that:

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

Capital accounts are a measure of how much have invested .

A tariff is a tax on goods that is designed to .