Question 1

International specialization and trade according to the principle of comparative advantage is mutually beneficial for all economies involved.

Accepted Answer

A) True 
 B)False

Question 2

The balance on the current account ____.

Accepted Answer

A) d and e 
B) c and d 
C) will show a trade deficit or surplus, if one exists 
D) must always be zero 
E) multiplied by - 1 becomes the capital account 
A) d and e 
B) c and d 
C) will show a trade deficit or surplus, if one exists 
D) must always be zero 
E) multiplied by - 1 becomes the capital account

Question 3

The argument that foreign trade should be restricted to protect domestic employment and output is based on the idea that:

Accepted Answer

A) consumers are willing to pay higher prices for domestic goods. 
B) producers will not exploit reduced foreign competition by charging higher prices. 
C) foreign companies are more costly to deal with than domestic companies. 
D) sales of imports come at the expense of domestic goods and jobs. 
A) consumers are willing to pay higher prices for domestic goods. 
B) producers will not exploit reduced foreign competition by charging higher prices. 
C) foreign companies are more costly to deal with than domestic companies. 
D) sales of imports come at the expense of domestic goods and jobs.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

The account which records a nation's foreign economic transactions is called the:

Accepted Answer

A) Trade Account. 
B) T account. 
C) Exchange Market. 
D) Balance of Payments. 
A) Trade Account. 
B) T account. 
C) Exchange Market. 
D) Balance of Payments.

Question 6

Tariffs help consumers by lowering the price of imported goods.

Accepted Answer

A) True 
 B)False

Question 7

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 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

Absolute advantage governs the potential for gains from trade.

Accepted Answer

A) True 
 B)False

Question 10

A favorable balance of trade occurs when:

Accepted Answer

A) exports equal imports. 
B) the balance of payments balances. 
C) the current and capital account in the BOP are equal. 
D) the value of the exports of goods exceeds the value of the imports of goods. 
E) the value of the exports of goods is less than the value of the imports of goods . 
A) exports equal imports. 
B) the balance of payments balances. 
C) the current and capital account in the BOP are equal. 
D) the value of the exports of goods exceeds the value of the imports of goods. 
E) the value of the exports of goods is less than the value of the imports of goods .

Question 11

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:

Accepted Answer

A) Greece should specialize in producing cheese. 
B) Italy should specialize in producing cheese. 
C) both Greece and Italy should produce cheese. 
D) Greece gives up fewer goods to produce cheese than Italy does. 
E) Italy has a better economy than Greece. 
A) Greece should specialize in producing cheese. 
B) Italy should specialize in producing cheese. 
C) both Greece and Italy should produce cheese. 
D) Greece gives up fewer goods to produce cheese than Italy does. 
E) Italy has a better economy than Greece.

Question 12

A nation's trade deficit will expand when its:

Accepted Answer

A) currency appreciates. 
B) economy is shrinking. 
C) investment environment is less attractive to foreigners. 
D) all of these are true. 
A) currency appreciates. 
B) economy is shrinking. 
C) investment environment is less attractive to foreigners. 
D) all of these are true.

Question 13

Exhibit 15-6 Dollars per British pound   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 14

Protective tariffs help a nation reach which of the following goals?

Accepted Answer

A) Decreased domestic consumer prices. 
B) Increased domestic employment. 
C) Increased amount of goods for consumers to purchase. 
D) Increased competition among domestic and foreign producers. 
E) None of these. 
A) Decreased domestic consumer prices. 
B) Increased domestic employment. 
C) Increased amount of goods for consumers to purchase. 
D) Increased competition among domestic and foreign producers. 
E) None of these.

Question 15

A depreciation in the value of the U.S. dollar would:

Accepted Answer

A) encourage foreigners to travel on American owned airlines. 
B) make U.S. goods more expensive to foreign consumers. 
C) decrease the number of dollars it takes to buy a Swiss franc. 
D) make it more expensive for U.S. citizens to travel abroad. 
A) encourage foreigners to travel on American owned airlines. 
B) make U.S. goods more expensive to foreign consumers. 
C) decrease the number of dollars it takes to buy a Swiss franc. 
D) make it more expensive for U.S. citizens to travel abroad.

Question 16

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a:

Accepted Answer

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

Question 17

A tariff has the effect of granting ____ a larger share of the domestic market.

Accepted Answer

A) domestic consumers 
B) foreign consumers 
C) domestic producers 
D) foreign producers 
E) no producers or consumers 
A) domestic consumers 
B) foreign consumers 
C) domestic producers 
D) foreign producers 
E) no producers or consumers

Question 18

If a country's goods exports are less than its goods imports, then it experiences a:

Accepted Answer

A) balance of payments surplus. 
B) balance of payments deficit. 
C) balance of trade surplus. 
D) balance of trade deficit. 
A) balance of payments surplus. 
B) balance of payments deficit. 
C) balance of trade surplus. 
D) balance of trade deficit.

Question 19

A tariff can be defined as a:

Accepted Answer

A) tax on imports. 
B) tax on exports. 
C) legal limit on imports. 
D) legal limit on exports. 
A) tax on imports. 
B) tax on exports. 
C) legal limit on imports. 
D) legal limit on exports.

Question 20

Exhibit 15-2 Production possibilities curves for U.S. and Mexico   As shown in Exhibit 15-2, the United States has a comparative advantage over Mexico in:

Accepted Answer

A) wheat, but not in cloth. 
B) cloth, but not in wheat. 
C) both wheat and cloth. 
D) neither wheat nor cloth 
A) wheat, but not in cloth. 
B) cloth, but not in wheat. 
C) both wheat and cloth. 
D) neither wheat nor cloth

Exam 18: International Trade and Finance

International specialization and trade according to the principle of comparative advantage is mutually beneficial for all economies involved.

The balance on the current account ____.

The argument that foreign trade should be restricted to protect domestic employment and output is based on the idea that:

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

The account which records a nation's foreign economic transactions is called the:

Tariffs help consumers by lowering the price of imported goods.

The infant industry argument is based on the idea that:

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:

Absolute advantage governs the potential for gains from trade.

A favorable balance of trade occurs when:

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:

A nation's trade deficit will expand when its:

Exhibit 15-6 Dollars per British pound In Exhibit 15-6, when the exchange rate is 3 dollars per pound,

Protective tariffs help a nation reach which of the following goals?

A depreciation in the value of the U.S. dollar would:

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a:

A tariff has the effect of granting ____ a larger share of the domestic market.

If a country's goods exports are less than its goods imports, then it experiences a:

A tariff can be defined as a:

Exhibit 15-2 Production possibilities curves for U.S. and Mexico As shown in Exhibit 15-2, the United States has a comparative advantage over Mexico in:

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