Question 1

A tariff differs from a quota in that a tariff is:

Accepted Answer

A) levied on imports, whereas a quota is imposed on exports. 
B) levied on exports, whereas a quota is imposed on imports. 
C) a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D) a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported. 
A) levied on imports, whereas a quota is imposed on exports. 
B) levied on exports, whereas a quota is imposed on imports. 
C) a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D) a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Question 2

Suppose a German bank purchases a U.S. Treasury bond. This transaction would be recorded in the:

Accepted Answer

A) capital account. 
B) current account. 
C) goods trade balance. 
D) unilateral transfers. 
A) capital account. 
B) current account. 
C) goods trade balance. 
D) unilateral transfers.

Question 3

Exhibit 15-1 Production possibilities curves   In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If these two nations trade, Nabia should specialize in the production of:

Accepted Answer

A) corn. 
B) corn and wheat. 
C) neither product since Pada has the comparative advantage in the production of both. 
D) neither product since Pada has the absolute advantage in the production of both. 
E) wheat. 
A) corn. 
B) corn and wheat. 
C) neither product since Pada has the comparative advantage in the production of both. 
D) neither product since Pada has the absolute advantage in the production of both. 
E) wheat.

Question 4

An increase in the value of the dollar in international exchange rate markets will cause the relative price of U.S. produced goods to foreigners to rise, the relative price of foreign produced goods to Americans to fall, causing U.S. exports to fall and U.S. imports to rise.

Accepted Answer

A) True 
 B)False

Question 5

The U.S. supply curve of dollars is upward-sloping because a:

Accepted Answer

A) higher number of yen per dollar means Japanese goods are cheaper in Japan. 
B) higher number of yen per dollar means Japanese goods are cheaper in the U.S. 
C) lower number of yen per dollar means Japanese goods are cheaper in the U.S. 
D) none of these. 
A) higher number of yen per dollar means Japanese goods are cheaper in Japan. 
B) higher number of yen per dollar means Japanese goods are cheaper in the U.S. 
C) lower number of yen per dollar means Japanese goods are cheaper in the U.S. 
D) none of these.

Question 6

If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that would mean that Canadians would have to spend ____ to buy a $12 watch in New York City.

Accepted Answer

A) c and e 
B) 10 U.S. dollars 
C) 12 U.S. dollars 
D) 14.4 U.S. dollars 
E) 14.4 Canadian dollars 
A) c and e 
B) 10 U.S. dollars 
C) 12 U.S. dollars 
D) 14.4 U.S. dollars 
E) 14.4 Canadian dollars

Question 7

If the exchange rate of yen for dollars increases from 100 yen = $1 to 110 yen = $1, then:

Accepted Answer

A) Japanese-produced goods would become more expensive. 
B) the dollar has depreciated. 
C) the yen has appreciated. 
D) U.S.-produced goods would become more expensive. 
E) U.S. exports would increase. 
A) Japanese-produced goods would become more expensive. 
B) the dollar has depreciated. 
C) the yen has appreciated. 
D) U.S.-produced goods would become more expensive. 
E) U.S. exports would increase.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

In international trade, an infant industry is one:

Accepted Answer

A) that protects firms that produce products for infants. 
B) with a large number of very small firms. 
C) in which the firms are experiencing very small profits. 
D) in the early stages of its development. 
A) that protects firms that produce products for infants. 
B) with a large number of very small firms. 
C) in which the firms are experiencing very small profits. 
D) in the early stages of its development.

Question 10

If foreign exchange rates are determined by the interaction of supply and demand forces for the various currencies, then the exchange rate is:

Accepted Answer

A) fixed. 
B) government-determined. 
C) set by the value of gold. 
D) floating. 
E) improper. 
A) fixed. 
B) government-determined. 
C) set by the value of gold. 
D) floating. 
E) improper.

Question 11

A tariff is:

Accepted Answer

A) a duty that a company must pay its own government on exports. 
B) the price charged by one country to buyers of a good in another country. 
C) a price reduction designed to encourage international trade. 
D) a tax on an import. 
A) a duty that a company must pay its own government on exports. 
B) the price charged by one country to buyers of a good in another country. 
C) a price reduction designed to encourage international trade. 
D) a tax on an import.

Question 12

An exchange rate is the number of units of:

Accepted Answer

A) a nation's money that is equal to one unit of another nation's money. 
B) a nation's output that is equal to one unit of another nation's output. 
C) gold backing a nation's money. 
D) none of these. 
A) a nation's money that is equal to one unit of another nation's money. 
B) a nation's output that is equal to one unit of another nation's output. 
C) gold backing a nation's money. 
D) none of these.

Question 13

Which of the following would cause the U.S. demand curve for Japanese yen to shift to the right?

Accepted Answer

A) An increase in the U.S. inflation rate compared to the rate in Japan. 
B) A higher real rate of interest on investments in Japan than on investments in the United States. 
C) The popularity of Japanese products increases in the United States. 
D) All of these. 
A) An increase in the U.S. inflation rate compared to the rate in Japan. 
B) A higher real rate of interest on investments in Japan than on investments in the United States. 
C) The popularity of Japanese products increases in the United States. 
D) All of these.

Question 14

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

Accepted Answer

A) fire Jill, practice law during the day, and do her own typing at night. 
B) practice law and leave all the typing to the secretary. 
C) divide her time equally between typing and practicing law. 
D) quit practicing law and take a job as a secretary. 
E) have Jill attend law school. 
A) fire Jill, practice law during the day, and do her own typing at night. 
B) practice law and leave all the typing to the secretary. 
C) divide her time equally between typing and practicing law. 
D) quit practicing law and take a job as a secretary. 
E) have Jill attend law school.

Question 15

The main explanation for why the cheap foreign labor argument is a poor reason for restricting international trade is that:

Accepted Answer

A) workers who get paid less tend to have lower productivity than those who get paid more. 
B) all firms and workers gain when there are no restrictions on international trade. 
C) infant industries such as steel and automobiles need to be protected. 
D) specialization and free trade usually raise the prices of all the traded goods, so that the workers can get paid more. 
E) labor costs tend to be the same worldwide in the long run because of worker mobility. 
A) workers who get paid less tend to have lower productivity than those who get paid more. 
B) all firms and workers gain when there are no restrictions on international trade. 
C) infant industries such as steel and automobiles need to be protected. 
D) specialization and free trade usually raise the prices of all the traded goods, so that the workers can get paid more. 
E) labor costs tend to be the same worldwide in the long run because of worker mobility.

Question 16

Exhibit 15-1 Production possibilities curves   In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If these two nations trade, Pada should specialize in the production of:

Accepted Answer

A) corn. 
B) corn and wheat. 
C) neither product since Nabia has the comparative advantage in the production of both. 
D) neither product since Nabia has the absolute advantage in the production of both. 
E) wheat. 
A) corn. 
B) corn and wheat. 
C) neither product since Nabia has the comparative advantage in the production of both. 
D) neither product since Nabia has the absolute advantage in the production of both. 
E) wheat.

Question 17

Which of the following is not included in the current account?

Accepted Answer

A) Exports of goods. 
B) Imports of goods. 
C) U.S. capital inflow and outflow. 
D) Unilateral transfers. 
A) Exports of goods. 
B) Imports of goods. 
C) U.S. capital inflow and outflow. 
D) Unilateral transfers.

Question 18

If a country has a comparative advantage in oil, then this means that the opportunity cost of producing oil is:

Accepted Answer

A) high. 
B) low. 
C) zero. 
D) infinite. 
E) equal to all other goods. 
A) high. 
B) low. 
C) zero. 
D) infinite. 
E) equal to all other goods.

Question 19

Borrowing from foreign banks by U.S. firms represents a capital inflow.

Accepted Answer

A) True 
 B)False

Question 20

If the dollar appreciates (becomes stronger)this causes:

Accepted Answer

A) the relative price of U.S. goods to increase for foreigners. 
B) the relative price of foreign goods to decrease for Americans. 
C) U.S. exports to fall and U.S. imports to rise. 
D) a balance of trade deficit for the U.S. 
E) all of these. 
A) the relative price of U.S. goods to increase for foreigners. 
B) the relative price of foreign goods to decrease for Americans. 
C) U.S. exports to fall and U.S. imports to rise. 
D) a balance of trade deficit for the U.S. 
E) all of these.

Exam 18: International Trade and Finance

A tariff differs from a quota in that a tariff is:

Suppose a German bank purchases a U.S. Treasury bond. This transaction would be recorded in the:

Exhibit 15-1 Production possibilities curves In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. If these two nations trade, Nabia should specialize in the production of:

An increase in the value of the dollar in international exchange rate markets will cause the relative price of U.S. produced goods to foreigners to rise, the relative price of foreign produced goods to Americans to fall, causing U.S. exports to fall and U.S. imports to rise.

The U.S. supply curve of dollars is upward-sloping because a:

If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that would mean that Canadians would have to spend ____ to buy a $12 watch in New York City.

If the exchange rate of yen for dollars increases from 100 yen = $1 to 110 yen = $1, then:

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

In international trade, an infant industry is one:

If foreign exchange rates are determined by the interaction of supply and demand forces for the various currencies, then the exchange rate is:

A tariff is:

An exchange rate is the number of units of:

Which of the following would cause the U.S. demand curve for Japanese yen to shift to the right?

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

The main explanation for why the cheap foreign labor argument is a poor reason for restricting international trade is 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. If these two nations trade, Pada should specialize in the production of:

Which of the following is not included in the current account?

If a country has a comparative advantage in oil, then this means that the opportunity cost of producing oil is:

Borrowing from foreign banks by U.S. firms represents a capital inflow.

If the dollar appreciates (becomes stronger)this causes:

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