Question 1

Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

Accepted Answer

A) A decrease in domestic interest rates 
B) An increase in foreign interest rates 
C) Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices 
D) Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation 
A) A decrease in domestic interest rates 
B) An increase in foreign interest rates 
C) Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices 
D) Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation

Question 2

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 wheat is equal to:

Accepted Answer

A) 3 units of corn. 
B) 1\3 unit of corn. 
C) 1\3 unit of wheat. 
D) 15 units of corn. 
E) 30 units of corn. 
A) 3 units of corn. 
B) 1\3 unit of corn. 
C) 1\3 unit of wheat. 
D) 15 units of corn. 
E) 30 units of corn.

Question 3

The term "balance of trade" refers to the:

Accepted Answer

A) importing and exporting of goods. 
B) importing and exporting of goods and services. 
C) current account trade balance. 
D) capital outflows minus inflows. 
A) importing and exporting of goods. 
B) importing and exporting of goods and services. 
C) current account trade balance. 
D) capital outflows minus inflows.

Question 4

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

Accepted Answer

A) in larger quantities than 
B) faster than 
C) that is desired by 
D) more efficiently than 
E) only consumed by 
A) in larger quantities than 
B) faster than 
C) that is desired by 
D) more efficiently than 
E) only consumed by

Question 5

The demand curve for Japanese yen is downward sloping because when the exchange rate (measured in dollars per yen)falls,

Accepted Answer

A) Japanese goods become relatively cheaper so foreigners buy more of them and need more yen to do so. 
B) foreigners need more dollars to buy one yen so they can now afford more Japanese goods. 
C) the yen demand curve shifts to the right as foreigners try to buy more Japanese goods. 
D) the dollar becomes weaker and this reduces the strength of both economies. 
E) everyone wants fewer yen because they have lost some of their underlying value. 
A) Japanese goods become relatively cheaper so foreigners buy more of them and need more yen to do so. 
B) foreigners need more dollars to buy one yen so they can now afford more Japanese goods. 
C) the yen demand curve shifts to the right as foreigners try to buy more Japanese goods. 
D) the dollar becomes weaker and this reduces the strength of both economies. 
E) everyone wants fewer yen because they have lost some of their underlying value.

Question 6

When an exchange rate is determined strictly by the demands and supplies for a nation's currency, it is called:

Accepted Answer

A) fixed. 
B) arbitrage. 
C) floating. 
D) unilateral. 
E) balance of payments. 
A) fixed. 
B) arbitrage. 
C) floating. 
D) unilateral. 
E) balance of payments.

Question 7

When a nation totally bans trade with another country, it is imposing a(n):

Accepted Answer

A) tariff. 
B) embargo. 
C) quota. 
D) none of these. 
A) tariff. 
B) embargo. 
C) quota. 
D) none of these.

Question 8

A restriction on the quantity of a good that can be imported into a country is a(n):

Accepted Answer

A) tariff. 
B) quota. 
C) embargo. 
D) restricted exchange rate. 
A) tariff. 
B) quota. 
C) embargo. 
D) restricted exchange rate.

Question 9

Which of the following is excluded in the current account?

Accepted Answer

A) Goods exports. 
B) Goods imports. 
C) Capital inflow and outflow. 
D) Net unilateral transfers. 
A) Goods exports. 
B) Goods imports. 
C) Capital inflow and outflow. 
D) Net unilateral transfers.

Question 10

Opening trade between two nations would:

Accepted Answer

A) shift their production possibilities curves outward. 
B) shift their production possibilities curves inward. 
C) leave the production possibilities unchanged and increase their consumption possibilities. 
D) leave the production possibilities unchanged and decreased their consumption possibilities. 
A) shift their production possibilities curves outward. 
B) shift their production possibilities curves inward. 
C) leave the production possibilities unchanged and increase their consumption possibilities. 
D) leave the production possibilities unchanged and decreased their consumption possibilities.

Question 11

Suppose there are two countries, X and Y. If the exchange rate, as measured in X's currency, is currently 9, what do citizens of the nation of Y see when they read their newspapers?

Accepted Answer

A) The exchange rate for X's currency is 9. 
B) The exchange rate for X's currency is more than 9. 
C) The exchange rate for X's currency is 3. 
D) The exchange rate for X's currency is 0.11. 
E) Knowing one exchange rate does not mean we can tell the other exchange rate. 
A) The exchange rate for X's currency is 9. 
B) The exchange rate for X's currency is more than 9. 
C) The exchange rate for X's currency is 3. 
D) The exchange rate for X's currency is 0.11. 
E) Knowing one exchange rate does not mean we can tell the other exchange rate.

Question 12

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 demand 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 13

Purchases of foreign assets by U.S. residents are tabulated in the U.S. balance of payments as a:

Accepted Answer

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

Question 14

If the dollar appreciates:

Accepted Answer

A) imports to the United States become more expensive for foreigners 
B) exports from the United States become more expensive for foreigners 
C) imports become more expensive for U.S. citizens. 
D) exports from the United States become cheaper 
E) the dollar will exchange for fewer units of a foreign currency 
A) imports to the United States become more expensive for foreigners 
B) exports from the United States become more expensive for foreigners 
C) imports become more expensive for U.S. citizens. 
D) exports from the United States become cheaper 
E) the dollar will exchange for fewer units of a foreign currency

Question 15

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

Accepted Answer

A) Foreign producers must be stopped from selling their products in this country below cost of production. 
B) Domestic workers must be protected from the lower wages paid in foreign countries. 
C) The nation's security demands we ensure an adequate domestic supply capacity of certain products. 
D) Do unto others as they do unto you. 
E) Industries in the early stages of development must be protected from more mature producers. 
A) Foreign producers must be stopped from selling their products in this country below cost of production. 
B) Domestic workers must be protected from the lower wages paid in foreign countries. 
C) The nation's security demands we ensure an adequate domestic supply capacity of certain products. 
D) Do unto others as they do unto you. 
E) Industries in the early stages of development must be protected from more mature producers.

Question 16

The theory of comparative advantage suggests that nations should produce a good if they:

Accepted Answer

A) have the lowest opportunity cost. 
B) have the lowest wages. 
C) have the most resources. 
D) can produce more of the good than any other nation. 
A) have the lowest opportunity cost. 
B) have the lowest wages. 
C) have the most resources. 
D) can produce more of the good than any other nation.

Question 17

If the U.S. dollar appreciates relative to the British pound, then we pay fewer dollars for a pound.

Accepted Answer

A) True 
 B)False

Question 18

The term "balance of trade" refers to a nation's:

Accepted Answer

A) goods exports minus imports. 
B) current account balance. 
C) capital account balance. 
D) net balance of all international transactions. 
A) goods exports minus imports. 
B) current account balance. 
C) capital account balance. 
D) net balance of all international transactions.

Question 19

A lawyer once said, "I could paint my house and fix my plumbing if I just had some technical training and good tools. But, I would rather hire a painter and a plumber." When it comes to fixing a leaking sink, the plumber:

Accepted Answer

A) d and e. 
B) charges more per hour than the lawyer does. 
C) charges less per hour than the lawyer does. 
D) is more efficient. 
E) has a comparative advantage. 
A) d and e. 
B) charges more per hour than the lawyer does. 
C) charges less per hour than the lawyer does. 
D) is more efficient. 
E) has a comparative advantage.

Question 20

Protectionist policies such as tariffs and quotas are beneficial to the nation imposing those trade barriers.

Accepted Answer

A) True 
 B)False

Exam 18: International Trade and Finance

Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market?

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 wheat is equal to:

The term "balance of trade" refers to the:

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

The demand curve for Japanese yen is downward sloping because when the exchange rate (measured in dollars per yen)falls,

When an exchange rate is determined strictly by the demands and supplies for a nation's currency, it is called:

When a nation totally bans trade with another country, it is imposing a(n):

A restriction on the quantity of a good that can be imported into a country is a(n):

Which of the following is excluded in the current account?

Opening trade between two nations would:

Suppose there are two countries, X and Y. If the exchange rate, as measured in X's currency, is currently 9, what do citizens of the nation of Y see when they read their newspapers?

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 demand curve in graph 15-5(B)is determined by:

Purchases of foreign assets by U.S. residents are tabulated in the U.S. balance of payments as a:

If the dollar appreciates:

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

The theory of comparative advantage suggests that nations should produce a good if they:

If the U.S. dollar appreciates relative to the British pound, then we pay fewer dollars for a pound.

The term "balance of trade" refers to a nation's:

A lawyer once said, "I could paint my house and fix my plumbing if I just had some technical training and good tools. But, I would rather hire a painter and a plumber." When it comes to fixing a leaking sink, the plumber:

Protectionist policies such as tariffs and quotas are beneficial to the nation imposing those trade barriers.

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