Question 1

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 2

If Country A has an absolute advantage over Country B in the production of every commodity:

Accepted Answer

A) mutual gains from trade between Country A and Country B would be impossible. 
B) Country B would be able to gain from trade but not country A. 
C) the joint output of the two countries could not be increased through specialization and exchange. 
D) mutual gains from trade would still be possible. 
A) mutual gains from trade between Country A and Country B would be impossible. 
B) Country B would be able to gain from trade but not country A. 
C) the joint output of the two countries could not be increased through specialization and exchange. 
D) mutual gains from trade would still be possible.

Question 3

The primary benefits derived from tariffs usually accrue to the:

Accepted Answer

A) domestic consumers of goods protected by the tariffs. 
B) foreign producers of goods protected by the tariffs. 
C) domestic producers of export goods. 
D) domestic suppliers of goods protected by the tariffs. 
A) domestic consumers of goods protected by the tariffs. 
B) foreign producers of goods protected by the tariffs. 
C) domestic producers of export goods. 
D) domestic suppliers of goods protected by the tariffs.

Question 4

If one dollar exchanges for 20 Thailand baht, then:

Accepted Answer

A) a baht is worth $20. 
B) $20 will exchange for one baht. 
C) a baht is worth $2. 
D) the United States and Thailand would not engage in trade. 
E) a baht is worth a nickel. 
A) a baht is worth $20. 
B) $20 will exchange for one baht. 
C) a baht is worth $2. 
D) the United States and Thailand would not engage in trade. 
E) a baht is worth a nickel.

Question 5

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

Accepted Answer

A) a tariff. 
B) free trade. 
C) comparative advantage. 
D) the diversity of industry argument. 
E) a quota. 
A) a tariff. 
B) free trade. 
C) comparative advantage. 
D) the diversity of industry argument. 
E) a quota.

Question 6

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 7

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 8

An increase in inflation in the United States relative to the rate in France would make:

Accepted Answer

A) U.S. goods relatively less expensive in the United States and in France. 
B) French goods relatively less expensive in the United States and U.S. goods relatively more expensive in France. 
C) French goods relatively more expensive in the United States and in France. 
D) French goods relatively more expensive in the United States and U.S. goods relatively less expensive in France. 
A) U.S. goods relatively less expensive in the United States and in France. 
B) French goods relatively less expensive in the United States and U.S. goods relatively more expensive in France. 
C) French goods relatively more expensive in the United States and in France. 
D) French goods relatively more expensive in the United States and U.S. goods relatively less expensive in France.

Question 9

Which of the following transactions would be recorded as a credit in the U.S. current account?

Accepted Answer

A) A Japanese bank's purchase of IBM stock. 
B) A Japanese consumer's purchase of an Apple computer. 
C) An American tourist's payment to a Japanese hotel. 
D) An American consumer's purchase of a Toshiba VCR. 
A) A Japanese bank's purchase of IBM stock. 
B) A Japanese consumer's purchase of an Apple computer. 
C) An American tourist's payment to a Japanese hotel. 
D) An American consumer's purchase of a Toshiba VCR.

Question 10

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 11

Suppose rice can be produced in country X at a lower cost than in country Y, while tuna can be produced in country Y at a lower cost than in country X. International competition will:

Accepted Answer

A) destroy the rice market in both countries. 
B) drive X to specialize in rice and Y to specialize in tuna. 
C) drive Y to specialize in rice and X to specialize in tuna. 
D) cause both X and Y to reject international specialization. 
E) result in lower total output of rice and tuna. 
A) destroy the rice market in both countries. 
B) drive X to specialize in rice and Y to specialize in tuna. 
C) drive Y to specialize in rice and X to specialize in tuna. 
D) cause both X and Y to reject international specialization. 
E) result in lower total output of rice and tuna.

Question 12

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 13

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 14

If one country can produce a good with fewer resources than another country, this is called:

Accepted Answer

A) specialization. 
B) geographic advantage. 
C) comparative advantage. 
D) absolute advantage. 
E) free trade. 
A) specialization. 
B) geographic advantage. 
C) comparative advantage. 
D) absolute advantage. 
E) free trade.

Question 15

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

Accepted Answer

A) The domestic price of shoes would fall. 
B) The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. 
C) The number of unemployed workers in the domestic shoe industry would decline. 
D) The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations. 
A) The domestic price of shoes would fall. 
B) The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. 
C) The number of unemployed workers in the domestic shoe industry would decline. 
D) The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations.

Question 16

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 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Exam 18: International Trade and Finance

A nation benefits from international trade if it:

If Country A has an absolute advantage over Country B in the production of every commodity:

The primary benefits derived from tariffs usually accrue to the:

If one dollar exchanges for 20 Thailand baht, then:

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

One big difference between tariffs and quotas is that tariffs:

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:

An increase in inflation in the United States relative to the rate in France would make:

Which of the following transactions would be recorded as a credit in the U.S. current account?

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

Suppose rice can be produced in country X at a lower cost than in country Y, while tuna can be produced in country Y at a lower cost than in country X. International competition will:

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

A fixed exchange rate is:

If one country can produce a good with fewer resources than another country, this is called:

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

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

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

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

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

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

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters