Question 1

The current account in the BOP records:

Accepted Answer

A) all money flowing between countries. 
B) a nation's yearly exports and imports of goods and services. 
C) only the transactions involving capital goods in international trade. 
D) only the transactions involving consumer goods in international trade. 
E) only those goods and services purchased on credit in international transactions. 
A) all money flowing between countries. 
B) a nation's yearly exports and imports of goods and services. 
C) only the transactions involving capital goods in international trade. 
D) only the transactions involving consumer goods in international trade. 
E) only those goods and services purchased on credit in international transactions.

Question 2

If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000, the exchange rate is:

Accepted Answer

A) 1,000 yen per dollar. 
B) 1,000 dollars per yen. 
C) 0.001 dollars per yen. 
D) none of these. 
A) 1,000 yen per dollar. 
B) 1,000 dollars per yen. 
C) 0.001 dollars per yen. 
D) none of these.

Question 3

Exhibit 15-3 Potatoes and wheat output (tons per day)   In Exhibit 15-3, the United States has an absolute advantage in producing:

Accepted Answer

A) potatoes. 
B) wheat. 
C) both. 
D) neither. 
A) potatoes. 
B) wheat. 
C) both. 
D) neither.

Question 4

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

Accepted Answer

A) equilibrium quantity of dollars to decrease. 
B) equilibrium quantity of dollars to increase. 
C) equilibrium quantity to remain unchanged. 
D) all of these. 
A) equilibrium quantity of dollars to decrease. 
B) equilibrium quantity of dollars to increase. 
C) equilibrium quantity to remain unchanged. 
D) all of these.

Question 5

What are the benefits and costs to a nation that participates in international trade? Do the benefits outweigh the costs or do the costs outweigh the benefits?

Accepted Answer

The benefits to a nation of specializing

Question 6

Exhibit 15-4 Coffee and tea output (pounds per hour)
  If specialization were carried out by each country in Exhibit 15-4 on the basis of comparative advantage, then:

Accepted Answer

A) Brazil would produce neither coffee nor tea. 
B) China would produce both coffee and tea. 
C) Brazil would produce tea and China would produce coffee. 
D) Brazil would produce coffee and China would produce tea. 
A) Brazil would produce neither coffee nor tea. 
B) China would produce both coffee and tea. 
C) Brazil would produce tea and China would produce coffee. 
D) Brazil would produce coffee and China would produce tea.

Question 7

Trade can increase the consumption possibilities of nations.

Accepted Answer

A) True 
 B)False

Question 8

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 15-1 Production possibilities curves   In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. Suppose Nabia produces at point A on its PPC. How many units of wheat is the country able to produce?

Accepted Answer

A) 15. 
B) 60. 
C) 5. 
D) 20. 
E) 40. 
A) 15. 
B) 60. 
C) 5. 
D) 20. 
E) 40.

Question 10

An itemized account of a nation's foreign economic transactions is its:

Accepted Answer

A) gross domestic product. 
B) goods exports. 
C) goods imports. 
D) balance of payments. 
E) foreign exchange reserves. 
A) gross domestic product. 
B) goods exports. 
C) goods imports. 
D) balance of payments. 
E) foreign exchange reserves.

Question 11

Specialization and trade allow an economy to expand its:

Accepted Answer

A) production possibilities. 
B) consumption possibilities. 
C) technological advantage. 
D) absolute advantage. 
A) production possibilities. 
B) consumption possibilities. 
C) technological advantage. 
D) absolute advantage.

Question 12

A tax on an imported good is called:

Accepted Answer

A) an export. 
B) dumping. 
C) a quota. 
D) a tariff. 
E) free trade. 
A) an export. 
B) dumping. 
C) a quota. 
D) a tariff. 
E) free trade.

Question 13

The balance of payments ____.

Accepted Answer

A) b and e 
B) is always zero 
C) is positive when the nation runs a trade surplus 
D) is negative when the nation runs a trade deficit 
E) is an itemized account of a nation's foreign economic transactions 
A) b and e 
B) is always zero 
C) is positive when the nation runs a trade surplus 
D) is negative when the nation runs a trade deficit 
E) is an itemized account of a nation's foreign economic transactions

Question 14

Most industrialized nations today use a gold standard to establish exchange rates.

Accepted Answer

A) True 
 B)False

Question 15

If the exchange rate between the yen and the dollar changes from 110 yen = $1 to 100 yen = $1, then:

Accepted Answer

A) the dollar has depreciated in value. 
B) U.S.-made goods will become more expensive to Japanese citizens. 
C) the dollar has appreciated in value. 
D) Japanese-made goods will become less expensive to U.S. citizens. 
E) there will be a decrease in the demand for dollars in the foreign exchange market. 
A) the dollar has depreciated in value. 
B) U.S.-made goods will become more expensive to Japanese citizens. 
C) the dollar has appreciated in value. 
D) Japanese-made goods will become less expensive to U.S. citizens. 
E) there will be a decrease in the demand for dollars in the foreign exchange market.

Question 16

Exchange rates are for currency what:

Accepted Answer

A) c, d and e. 
B) discounts are for sales. 
C) interest is for capital. 
D) prices are for apples. 
E) wages are for labor. 
A) c, d and e. 
B) discounts are for sales. 
C) interest is for capital. 
D) prices are for apples. 
E) wages are for labor.

Question 17

Which of the following transactions would be excluded in the capital account?

Accepted Answer

A) A Japanese citizen purchases a U.S. Treasury bill. 
B) A Japanese citizen purchases an office building in Manhattan. 
C) A U.S. citizen purchases a share of stock from a Japanese company. 
D) An American purchases a Toyota. 
A) A Japanese citizen purchases a U.S. Treasury bill. 
B) A Japanese citizen purchases an office building in Manhattan. 
C) A U.S. citizen purchases a share of stock from a Japanese company. 
D) An American purchases a Toyota.

Question 18

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. Now the exchange rate changes to 90 yen = $1. Then the:

Accepted Answer

A) machine would now cost more dollars. 
B) machine would now cost the Japanese citizen less yen. 
C) machine would now cost less dollars. 
D) machine would now cost the Japanese citizen more yen. 
E) yen has depreciated in value. 
A) machine would now cost more dollars. 
B) machine would now cost the Japanese citizen less yen. 
C) machine would now cost less dollars. 
D) machine would now cost the Japanese citizen more yen. 
E) yen has depreciated in value.

Question 19

The current account balance tabulates the value of a country's exports of goods and services minus the value of its imports of goods and services.

Accepted Answer

A) True 
 B)False

Question 20

According to the infant industry argument, a new domestic industry needs protection because it has higher costs than established foreign competitors.

Accepted Answer

A) True 
 B)False

Exam 18: International Trade and Finance

The current account in the BOP records:

If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000, the exchange rate is:

Exhibit 15-3 Potatoes and wheat output (tons per day) In Exhibit 15-3, the United States has an absolute advantage in producing:

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

What are the benefits and costs to a nation that participates in international trade? Do the benefits outweigh the costs or do the costs outweigh the benefits?

Exhibit 15-4 Coffee and tea output (pounds per hour) If specialization were carried out by each country in Exhibit 15-4 on the basis of comparative advantage, then:

Trade can increase the consumption possibilities of nations.

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

Exhibit 15-1 Production possibilities curves In Exhibit 15-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. Suppose Nabia produces at point A on its PPC. How many units of wheat is the country able to produce?

An itemized account of a nation's foreign economic transactions is its:

Specialization and trade allow an economy to expand its:

A tax on an imported good is called:

The balance of payments ____.

Most industrialized nations today use a gold standard to establish exchange rates.

If the exchange rate between the yen and the dollar changes from 110 yen = $1 to 100 yen = $1, then:

Exchange rates are for currency what:

Which of the following transactions would be excluded in the capital account?

Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. Now the exchange rate changes to 90 yen = $1. Then the:

The current account balance tabulates the value of a country's exports of goods and services minus the value of its imports of goods and services.

According to the infant industry argument, a new domestic industry needs protection because it has higher costs than established foreign competitors.

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

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