Question 1

A country is said to have an absolute advantage in the production of a good when:

Accepted Answer

A) its opportunity cost of producing the good is lower than another country. 
B) it can produce the good using fewer resources than another country. 
C) it specializes in the production of the good. 
D) all of these. 
A) its opportunity cost of producing the good is lower than another country. 
B) it can produce the good using fewer resources than another country. 
C) it specializes in the production of the good. 
D) all of these.

Question 2

The purchase of U.S. assets by foreigners is a:

Accepted Answer

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

Question 3

If Japan has a current account surplus, then it must:

Accepted Answer

A) have an offsetting capital account deficit. 
B) also have a surplus in its capital account. 
C) import more goods than it exports. 
D) have a positive balance of payments. 
A) have an offsetting capital account deficit. 
B) also have a surplus in its capital account. 
C) import more goods than it exports. 
D) have a positive balance of payments.

Question 4

The balance of trade is measured by which of the following expressions?

Accepted Answer

A) The value of exported goods and services minus the value of imported goods and services 
B) The value of income receipts on investments minus income payments on investments 
C) The value of goods exports minus the value of goods imports 
D) The value of government spending minus the value of all taxes received 
E) The balance on capital account plus the balance on current account 
A) The value of exported goods and services minus the value of imported goods and services 
B) The value of income receipts on investments minus income payments on investments 
C) The value of goods exports minus the value of goods imports 
D) The value of government spending minus the value of all taxes received 
E) The balance on capital account plus the balance on current account

Question 5

If a country has a lower opportunity cost of producing oranges, then this is:

Accepted Answer

A) inefficient resource use. 
B) an absolute advantage. 
C) a tariff. 
D) a comparative advantage. 
E) a situation where oranges should be imported. 
A) inefficient resource use. 
B) an absolute advantage. 
C) a tariff. 
D) a comparative advantage. 
E) a situation where oranges should be imported.

Question 6

Exhibit 15-4 Coffee and tea output (pounds per hour)
  As shown in Exhibit 15-4, compared to Brazil, China has a comparative advantage in the production of:

Accepted Answer

A) coffee. 
B) tea. 
C) both coffee and tea. 
D) neither coffee nor tea. 
A) coffee. 
B) tea. 
C) both coffee and tea. 
D) neither coffee nor tea.

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

A basic problem with the infant-industry argument is that:

Accepted Answer

A) most industries need protection when they are mature, not when they are first established. 
B) the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C) political pressure will likely prevent the withdrawal of the tariff when the industry matures. 
D) domestic consumers will continue to buy the foreign products anyway, regardless of the tariff. 
A) most industries need protection when they are mature, not when they are first established. 
B) the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C) political pressure will likely prevent the withdrawal of the tariff when the industry matures. 
D) domestic consumers will continue to buy the foreign products anyway, regardless of the tariff.

Question 9

Which of the following would cause the supply of dollars curve in the United States to shift to the right?

Accepted Answer

A) Japanese imports become less popular. 
B) The value of the dollar falls. 
C) The supply of dollars decreases. 
D) Japanese imports became more popular. 
A) Japanese imports become less popular. 
B) The value of the dollar falls. 
C) The supply of dollars decreases. 
D) Japanese imports became more popular.

Question 10

Exhibit 15-2 Production possibilities curves for U.S. and Mexico   As shown in Exhibit 15-2, in Mexico, producing 1 additional ton of wheat costs:

Accepted Answer

A) 1\2 ton of cloth. 
B) 2\3 ton of cloth. 
C) 1 ton of cloth. 
D) 1 1\2 tons of cloth. 
A) 1\2 ton of cloth. 
B) 2\3 ton of cloth. 
C) 1 ton of cloth. 
D) 1 1\2 tons of cloth.

Question 11

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 12

A country is said to have a comparative advantage in the production of a good when it:

Accepted Answer

A) has the lower opportunity cost of producing the good. 
B) can produce the good using fewer resources than another country. 
C) requires fewer labor hours to produce the good. 
D) all of these. 
A) has the lower opportunity cost of producing the good. 
B) can produce the good using fewer resources than another country. 
C) requires fewer labor hours to produce the good. 
D) all of these.

Question 13

Which of the following is a partially valid economic argument for restricting free trade?

Accepted Answer

A) Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B) Removal of restrictions that have existed for years will initially cause inflation. 
C) Infant industries need permanent protection to develop and gain productive efficiency. 
D) A nation needs to protect industries that are vital to national defense in case of future international conflict. 
A) Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B) Removal of restrictions that have existed for years will initially cause inflation. 
C) Infant industries need permanent protection to develop and gain productive efficiency. 
D) A nation needs to protect industries that are vital to national defense in case of future international conflict.

Question 14

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 15

Discuss the determinants of a nation's exchange rate value for its currency in foreign exchange markets. What happens to a nation's balance of trade if the nation's currency appreciates? Why?

Accepted Answer

A nation's exchange rate value is determ

Question 16

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 17

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 18

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 19

Which of the following would be recorded in the U.S. goods export account?

Accepted Answer

A) Harry, an American citizen, spends 1,000 francs on vacation in the south of France. 
B) A machine shop in Ohio purchases a grinder made in Italy. 
C) Martha receives a $50 dividend check on stock she owns in a business in Germany. 
D) The U.S. government subsidizes American farmers for planting corn for export. 
E) France purchases a new jet fighter aircraft from the Boeing Company in the United States. 
A) Harry, an American citizen, spends 1,000 francs on vacation in the south of France. 
B) A machine shop in Ohio purchases a grinder made in Italy. 
C) Martha receives a $50 dividend check on stock she owns in a business in Germany. 
D) The U.S. government subsidizes American farmers for planting corn for export. 
E) France purchases a new jet fighter aircraft from the Boeing Company in the United States.

Question 20

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.

Exam 18: International Trade and Finance

A country is said to have an absolute advantage in the production of a good when:

The purchase of U.S. assets by foreigners is a:

If Japan has a current account surplus, then it must:

The balance of trade is measured by which of the following expressions?

If a country has a lower opportunity cost of producing oranges, then this is:

Exhibit 15-4 Coffee and tea output (pounds per hour) As shown in Exhibit 15-4, compared to Brazil, China has a comparative advantage in the production of:

With the benefits of international trade:

A basic problem with the infant-industry argument is that:

Which of the following would cause the supply of dollars curve in the United States to shift to the right?

Exhibit 15-2 Production possibilities curves for U.S. and Mexico As shown in Exhibit 15-2, in Mexico, producing 1 additional ton of wheat costs:

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

A country is said to have a comparative advantage in the production of a good when it:

Which of the following is a partially valid economic argument for restricting free trade?

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

Discuss the determinants of a nation's exchange rate value for its currency in foreign exchange markets. What happens to a nation's balance of trade if the nation's currency appreciates? Why?

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

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

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

Which of the following would be recorded in the U.S. goods export account?

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

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

Capital accounts are a measure of how much have invested .