Question 1

Fracking has proven to have minimal environmental effects, so the environmental costs of fracking are insignificant.

Accepted Answer

A) True 
 B)False  False

Question 2

What is the proper characterization of the European Union (EU), and what is its primary accomplishment?

Accepted Answer

A) The EU is a regional trade bloc which controls the money supply in each member country. 
B) The EU is a regional trade agreement that has eliminated most trade barriers between member countries. 
C) The EU is a trade treaty that provides a forum where member countries can resolve their trade disputes. 
D) The EU is a trading cooperative that protects member countries from unfair trade tactics by non-member countries. 
A) The EU is a regional trade bloc which controls the money supply in each member country. 
B) The EU is a regional trade agreement that has eliminated most trade barriers between member countries. 
C) The EU is a trade treaty that provides a forum where member countries can resolve their trade disputes. 
D) The EU is a trading cooperative that protects member countries from unfair trade tactics by non-member countries. B

Question 3

After 2006, why did the cost of new natural gas wells in the U.S. and Canada increase?

Accepted Answer

A) The amount of natural gas being imported into the U.S.and Canada was increasing. 
B) The lowest cost sources of natural gas using standard production technologies had been exhausted. 
C) Government regulations on new natural gas production increased the cost of production. 
D) Natural gas production in other parts of the world decreased thereby increasing world-wide demand for natural gas. 
A) The amount of natural gas being imported into the U.S.and Canada was increasing. 
B) The lowest cost sources of natural gas using standard production technologies had been exhausted. 
C) Government regulations on new natural gas production increased the cost of production. 
D) Natural gas production in other parts of the world decreased thereby increasing world-wide demand for natural gas. B

Question 4

If natural gas produced in the U.S. was exported to countries in Asia and Europe, what factor would likely increase the price of that natural gas in the importing countries?

Accepted Answer

A) The U.S.would impose export charges on each unit of natural gas exported and those charges would be passed along to the importing countries. 
B) Exporters in the U.S.would arbitrarily inflate the costs of production so that the importing countries would pay higher prices. 
C) Importing countries would impose tariffs on the imported natural gas and those tariffs be passed along by exporting companies to importing countries. 
D) Natural gas from the U.S.would have to be liquefied and transported in specially- designed ships to Asia and Europe, so transportation costs would increase the price of the imported natural gas in Asia and Europe. 
A) The U.S.would impose export charges on each unit of natural gas exported and those charges would be passed along to the importing countries. 
B) Exporters in the U.S.would arbitrarily inflate the costs of production so that the importing countries would pay higher prices. 
C) Importing countries would impose tariffs on the imported natural gas and those tariffs be passed along by exporting companies to importing countries. 
D) Natural gas from the U.S.would have to be liquefied and transported in specially- designed ships to Asia and Europe, so transportation costs would increase the price of the imported natural gas in Asia and Europe.

Question 5

In 2010-2011, several EU countries received large bailouts from the EU. What were those countries?

Accepted Answer

A) Germany, Italy, and Greece 
B) England, Greece, and Ireland 
C) Germany, England, and France 
D) Ireland, Portugal, and Greece 
A) Germany, Italy, and Greece 
B) England, Greece, and Ireland 
C) Germany, England, and France 
D) Ireland, Portugal, and Greece

Question 6

U.S. firms could not make a profit on the export of natural gas to Asia and Europe because of increasing production costs and transportation costs.

Accepted Answer

A) True 
 B)False

Question 7

"Job-seeking immigration brings net economic benefits not only to the immigrants, but also to the receiving country overall." But there are winners and losers within the receiving country. Who among the following can be considered as a winner within the receiving country?

Accepted Answer

A) The workers who compete with the immigrants for jobs 
B) The government of the receiving country 
C) The consumers who buy the products that the immigrants help to produce 
D) None of these options are correct. 
A) The workers who compete with the immigrants for jobs 
B) The government of the receiving country 
C) The consumers who buy the products that the immigrants help to produce 
D) None of these options are correct.

Question 8

A number of EU countries encountered financial difficulties during the euro crisis in the first decade of the 21st century, and some of those countries received bailouts from the EU. Spain encountered financial difficulties in this period, but Spain did not require a bailout. Why was Spain's situation different from the situations that required other EU countries to be bailed out?

Accepted Answer

A) Spain was not part of the EU, so the EU did not have the authority to bailout Spain. 
B) Spain was bailed out by the U.S. 
C) While other EU countries had government debt that exceed GDP, Spain's debt was less than GDP, so Spain's financial situation was not as dire as in other EU countries. 
D) Spain refused a bailout by the EU and defaulted on its government debt. 
A) Spain was not part of the EU, so the EU did not have the authority to bailout Spain. 
B) Spain was bailed out by the U.S. 
C) While other EU countries had government debt that exceed GDP, Spain's debt was less than GDP, so Spain's financial situation was not as dire as in other EU countries. 
D) Spain refused a bailout by the EU and defaulted on its government debt.

Question 9

In September 2008 the investment bank Lehman Brothers lost its access to short-term funding and averted failure when it was purchased by J.P. Morgan Chase.

Accepted Answer

A) True 
 B)False

Question 10

Under a fixed exchange rate system, the revaluation of the local currency against the dollar would result in an improvement in the country's trade balance with the United States.

Accepted Answer

A) True 
 B)False

Question 11

The value of a country's currency in terms of some other country's currency is called _____.

Accepted Answer

A) the stock exchange 
B) the exchange rate 
C) the nominal interest rate 
D) dollarization 
A) the stock exchange 
B) the exchange rate 
C) the nominal interest rate 
D) dollarization

Question 12

A mortgage-backed security is a debt instrument based on a pool of mortgages, and payment of that debt depends on the mortgages in the pool being paid. Many European banks invested in mortgage-backed securities. What was the effect of the financial crisis that began in the U.S. on these European banks?

Accepted Answer

A) Since most of the mortgages in these mortgage pools were guaranteed by agencies of the U.S.government, these European banks did not suffer unexpected losses. 
B) When the mortgages in the pools were not paid, the mortgage-backed securities lost value or became worthless and these European banks suffered significant losses. 
C) These European banks might have suffered significant losses but the European central Bank bought the securities at face value. 
D) These European banks hedged their investment in U.S.mortgage-backed securities with investments in European mortgage-backed securities, so losses on U.S.mortgage-backed securities were offset by gains on European mortgage-backed securities. 
A) Since most of the mortgages in these mortgage pools were guaranteed by agencies of the U.S.government, these European banks did not suffer unexpected losses. 
B) When the mortgages in the pools were not paid, the mortgage-backed securities lost value or became worthless and these European banks suffered significant losses. 
C) These European banks might have suffered significant losses but the European central Bank bought the securities at face value. 
D) These European banks hedged their investment in U.S.mortgage-backed securities with investments in European mortgage-backed securities, so losses on U.S.mortgage-backed securities were offset by gains on European mortgage-backed securities.

Question 13

Dow Chemical objected to the export of natural gas from the U.S. to foreign countries. What does the economic analysis of the export of natural gas from the U.S. suggest the effect of those exports will be for Dow Chemical?

Accepted Answer

A) The export of natural gas from the U.S.will decrease the supply of natural gas available to Dow Chemical and other users of large amounts of natural gas and increase the price of natural gas in the U.S. 
B) Dow Chemical does not directly use natural gas, but does use electricity that can be generated by natural gas, so the effect on Dow Chemical will depends on alternative means of producing electricity. 
C) The transportation costs of exporting natural gas from the U.S.to Asia and Europe will keep the price of natural gas in the U.S.relatively low, so Dow Chemical will benefit from that low price. 
D) The export of natural gas from the U.S.will eventually deplete U.S.supplies of natural gas so Dow Chemical will have to find other sources of energy. 
A) The export of natural gas from the U.S.will decrease the supply of natural gas available to Dow Chemical and other users of large amounts of natural gas and increase the price of natural gas in the U.S. 
B) Dow Chemical does not directly use natural gas, but does use electricity that can be generated by natural gas, so the effect on Dow Chemical will depends on alternative means of producing electricity. 
C) The transportation costs of exporting natural gas from the U.S.to Asia and Europe will keep the price of natural gas in the U.S.relatively low, so Dow Chemical will benefit from that low price. 
D) The export of natural gas from the U.S.will eventually deplete U.S.supplies of natural gas so Dow Chemical will have to find other sources of energy.

Question 14

The Chinese government's intervention in the foreign exchange market by buying U.S. dollars and selling yuan had the effect of

Accepted Answer

A) weakening the U.S dollar to increase the U.S.trade deficit with China. 
B) strengthening the U.S dollar to increase the U.S.trade deficit with China. 
C) strengthening the yuan to increase the U.S.trade deficit with China. 
D) weakening the yuan to decrease the U.S.trade deficit with China. 
A) weakening the U.S dollar to increase the U.S.trade deficit with China. 
B) strengthening the U.S dollar to increase the U.S.trade deficit with China. 
C) strengthening the yuan to increase the U.S.trade deficit with China. 
D) weakening the yuan to decrease the U.S.trade deficit with China.

Question 15

Which of the following is a relevant monetary policy during an acute financial crisis in an economy?

Accepted Answer

A) Investment in foreign government bonds should be increased. 
B) The domestic currency should be revalued. 
C) The reserve requirements for the commercial banks should be increased. 
D) The nominal interest rates should be lowered. 
A) Investment in foreign government bonds should be increased. 
B) The domestic currency should be revalued. 
C) The reserve requirements for the commercial banks should be increased. 
D) The nominal interest rates should be lowered.

Question 16

Which of the following factors is most likely to lead to a decline in a country's exports?

Accepted Answer

A) An decrease in corporate taxes 
B) A decline in the nominal interest rate 
C) A decline in the input prices 
D) An appreciation of the domestic currency vis-à-vis foreign currencies 
A) An decrease in corporate taxes 
B) A decline in the nominal interest rate 
C) A decline in the input prices 
D) An appreciation of the domestic currency vis-à-vis foreign currencies

Question 17

What was the basis of the financial crisis that Greece suffered in the first decade of the 21st century?

Accepted Answer

The debts that the Greek government owed

Question 18

In 2009, Greece's fiscal deficit was 16 percent of its GDP, and its debts were 130 percent of its GDP. What did Greece do in response to this situation?

Accepted Answer

A) Greece had to borrow money from the Federal Reserve System in the U.S. 
B) Greece had to issue new bonds to raise money to pay its debts relying on the credit of the EU rather than on its own credit. 
C) Greece decided that it could not afford to borrow money to pay its debts because the interest rate it would have to pay was so much more than other EU countries were paying. 
D) Greece decided that it had to increase its GDP and adopted a series of measures that required the expenditure of the equivalent of billions of U.S.dollars to improve its production efficiency. 
A) Greece had to borrow money from the Federal Reserve System in the U.S. 
B) Greece had to issue new bonds to raise money to pay its debts relying on the credit of the EU rather than on its own credit. 
C) Greece decided that it could not afford to borrow money to pay its debts because the interest rate it would have to pay was so much more than other EU countries were paying. 
D) Greece decided that it had to increase its GDP and adopted a series of measures that required the expenditure of the equivalent of billions of U.S.dollars to improve its production efficiency.

Question 19

National sovereignty means that no one person or group is in charge of the international economy.

Accepted Answer

A) True 
 B)False

Question 20

Relatively high costs of converting natural gas to LNG will increase the price of natural gas in the U.S. and reduce consumption of natural gas in the U.S.

Accepted Answer

A) True 
 B)False

Exam 1: International Economics Is Different

Fracking has proven to have minimal environmental effects, so the environmental costs of fracking are insignificant.

What is the proper characterization of the European Union (EU), and what is its primary accomplishment?

After 2006, why did the cost of new natural gas wells in the U.S. and Canada increase?

If natural gas produced in the U.S. was exported to countries in Asia and Europe, what factor would likely increase the price of that natural gas in the importing countries?

In 2010-2011, several EU countries received large bailouts from the EU. What were those countries?

U.S. firms could not make a profit on the export of natural gas to Asia and Europe because of increasing production costs and transportation costs.

"Job-seeking immigration brings net economic benefits not only to the immigrants, but also to the receiving country overall." But there are winners and losers within the receiving country. Who among the following can be considered as a winner within the receiving country?

In September 2008 the investment bank Lehman Brothers lost its access to short-term funding and averted failure when it was purchased by J.P. Morgan Chase.

Under a fixed exchange rate system, the revaluation of the local currency against the dollar would result in an improvement in the country's trade balance with the United States.

The value of a country's currency in terms of some other country's currency is called _____.

Dow Chemical objected to the export of natural gas from the U.S. to foreign countries. What does the economic analysis of the export of natural gas from the U.S. suggest the effect of those exports will be for Dow Chemical?

The Chinese government's intervention in the foreign exchange market by buying U.S. dollars and selling yuan had the effect of

Which of the following is a relevant monetary policy during an acute financial crisis in an economy?

Which of the following factors is most likely to lead to a decline in a country's exports?

What was the basis of the financial crisis that Greece suffered in the first decade of the 21st century?

In 2009, Greece's fiscal deficit was 16 percent of its GDP, and its debts were 130 percent of its GDP. What did Greece do in response to this situation?

National sovereignty means that no one person or group is in charge of the international economy.

Relatively high costs of converting natural gas to LNG will increase the price of natural gas in the U.S. and reduce consumption of natural gas in the U.S.

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

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