Question 1

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

Accepted Answer

A)  a tariff. 
B)  free trade. 
C)  comparative advantage. 
D)  a quota. 
A)  a tariff. 
B)  free trade. 
C)  comparative advantage. 
D)  a quota.

Question 2

According to the principle of comparative advantage, total output and consumption levels will be highest when goods are produced in nations according to which of the following conditions?

Accepted Answer

A)  Opportunity costs are lowest. 
B)  Absolute advantages are highest. 
C)  Opportunity costs are equal. 
D)  Absolute advantages are lowest. 
A)  Opportunity costs are lowest. 
B)  Absolute advantages are highest. 
C)  Opportunity costs are equal. 
D)  Absolute advantages are lowest.

Question 3

If Country A has an absolute advantage over Country B in the production of every commodity:

Accepted Answer

A)  mutual gains from trade between Country A and Country B would be impossible. 
B)  Country B would be able to gain from trade but not country A. 
C)  the joint output of the two countries could not be increased through specialization and exchange. 
D)  mutual gains from trade would still be possible. 
A)  mutual gains from trade between Country A and Country B would be impossible. 
B)  Country B would be able to gain from trade but not country A. 
C)  the joint output of the two countries could not be increased through specialization and exchange. 
D)  mutual gains from trade would still be possible.

Question 4

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 5

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 6

A U.S. citizen's gift for famine relief in Somalia would be considered a:

Accepted Answer

A)  capital inflow. 
B)  capital outflow. 
C)  current account transaction. 
D)  service trade transaction. 
A)  capital inflow. 
B)  capital outflow. 
C)  current account transaction. 
D)  service trade transaction.

Question 7

The balance of payments:

Accepted Answer

A)  can only be expanded when the government has foreign exchange reserves. 
B)  is always zero 
C)  with some nations is different than it is with others 
D)  is negative when the nation runs a trade deficit 
A)  can only be expanded when the government has foreign exchange reserves. 
B)  is always zero 
C)  with some nations is different than it is with others 
D)  is negative when the nation runs a trade deficit

Question 8

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles. The U.S. should specialize in:

Accepted Answer

A)  airplanes. 
B)  automobiles. 
C)  both goods. 
D)  neither good. 
A)  airplanes. 
B)  automobiles. 
C)  both goods. 
D)  neither good.

Question 9

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds
 
Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 15-7?

Accepted Answer

A)  American goods become more popular in Great Britain. 
B)  British incomes rise, while U.S. incomes remain unchanged. 
C)  The U.S. price level rises, while the British price level remains unchanged. 
D)  The U.S. real interest rate rises, while the British real interest rate remains unchanged. 
A)  American goods become more popular in Great Britain. 
B)  British incomes rise, while U.S. incomes remain unchanged. 
C)  The U.S. price level rises, while the British price level remains unchanged. 
D)  The U.S. real interest rate rises, while the British real interest rate remains unchanged.

Question 10

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)  500 yen. 
B)  5,000 yen. 
C)  10,000 yen. 
D)  50,000 yen. 
A)  500 yen. 
B)  5,000 yen. 
C)  10,000 yen. 
D)  50,000 yen.

Question 11

The North American Free Trade Agreement affects trade between:

Accepted Answer

A)  the United States, Cuba, and Brazil. 
B)  the United States, Canada, and Mexico. 
C)  the United States, Puerto Rico, and Cuba. 
D)  Brazil, Bolivia, Peru, and Columbia. 
A)  the United States, Cuba, and Brazil. 
B)  the United States, Canada, and Mexico. 
C)  the United States, Puerto Rico, and Cuba. 
D)  Brazil, Bolivia, Peru, and Columbia.

Question 12

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 13

What are the different types of trade barriers? What are the arguments for trade barriers? What are the consequences of trade barriers?

Accepted Answer

Trade barriers include the use of embarg

Question 14

If India has an absolute advantage in rug production when compared to England, then:

Accepted Answer

A)  India should export rugs to England. 
B)  England should export rugs to India. 
C)  India uses fewer resources to produce rugs than England. 
D)  England uses fewer resources to produce rugs than India. 
A)  India should export rugs to England. 
B)  England should export rugs to India. 
C)  India uses fewer resources to produce rugs than England. 
D)  England uses fewer resources to produce rugs than India.

Question 15

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 
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

Question 16

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(A) 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. 
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.

Question 17

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

Accepted Answer

A)  supply of 110 pounds. 
B)  demand of 110 pounds. 
C)  supply of 110 dollars. 
D)  demand of 110 dollars. 
A)  supply of 110 pounds. 
B)  demand of 110 pounds. 
C)  supply of 110 dollars. 
D)  demand of 110 dollars.

Question 18

Suppose a quota on foreign-made automobiles is proposed in Congress. Which of the following groups is most likely to oppose the bill?

Accepted Answer

A)  American Automobiles Manufacturers 
B)  consumers 
C)  American Steel Workers 
D)  United Auto Workers 
A)  American Automobiles Manufacturers 
B)  consumers 
C)  American Steel Workers 
D)  United Auto Workers

Question 19

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

Accepted Answer

A)  goods exports minus imports. 
B)  record of all international transactions. 
C)  capital inflows minus outflows. 
D)  official reserves inflows minus outflows. 
A)  goods exports minus imports. 
B)  record of all international transactions. 
C)  capital inflows minus outflows. 
D)  official reserves inflows minus outflows.

Question 20

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

Exam 28: International Trade and Finance

Suppose the United States decides to impose a $1,000 tax on every Japanese minivan sold in the United States. This is an example of:

According to the principle of comparative advantage, total output and consumption levels will be highest when goods are produced in nations according to which of the following conditions?

If Country A has an absolute advantage over Country B in the production of every commodity:

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

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

A U.S. citizen's gift for famine relief in Somalia would be considered a:

The balance of payments:

Assume the United States can use a given amount of its resources to produce either 20 airplanes or 8 automobiles and Japan can employ the same amount of its resources to produce either 20 airplanes or 10 automobiles. The U.S. should specialize in:

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 15-7?

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

The North American Free Trade Agreement affects trade between:

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

What are the different types of trade barriers? What are the arguments for trade barriers? What are the consequences of trade barriers?

If India has an absolute advantage in rug production when compared to England, then:

If the dollar appreciates:

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(A) is determined by:

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

Suppose a quota on foreign-made automobiles is proposed in Congress. Which of the following groups is most likely to oppose the bill?

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

Which of the following is excluded in the current account?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

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