Question 1

Which of the following statements is true ?

Accepted Answer

A)  Specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves. 
B)  Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. 
C)  According to the theory of comparative advantage, a nation should specialize in the production of those goods for which it has an absolute advantage. 
D)  One country can have the comparative advantage in both goods, but it can only have the absolute advantage in one good as long as the opportunity costs are different. 
A)  Specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves. 
B)  Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. 
C)  According to the theory of comparative advantage, a nation should specialize in the production of those goods for which it has an absolute advantage. 
D)  One country can have the comparative advantage in both goods, but it can only have the absolute advantage in one good as long as the opportunity costs are different.

Question 2

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 3

An increase in inflation in the United States relative to the rate in France would make:

Accepted Answer

A)  U.S. goods relatively less expensive in the United States and in France. 
B)  French goods relatively less expensive in the United States and U.S. goods relatively more expensive in France. 
C)  French goods relatively more expensive in the United States and in France. 
D)  French goods relatively more expensive in the United States and U.S. goods relatively less expensive in France. 
A)  U.S. goods relatively less expensive in the United States and in France. 
B)  French goods relatively less expensive in the United States and U.S. goods relatively more expensive in France. 
C)  French goods relatively more expensive in the United States and in France. 
D)  French goods relatively more expensive in the United States and U.S. goods relatively less expensive in France.

Question 4

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. 
A)  3 units of wheat. 
B)  3 units of corn. 
C)  1/3 unit of wheat. 
D)  15 units of wheat.

Question 5

Imposing a restrictive quota on imported plasma TVs will:

Accepted Answer

A)  increase the price of the plasma TVs and decrease the quantity consumed. 
B)  increase both the price of the plasma TVs and the quantity consumed. 
C)  leave the price of the plasma TVs unchanged but decrease the quantity consumed. 
D)  leave the price and the quantity consumed of plasma TVs unchanged, because domestic producers will expand production to make up for the reduction in imports 
A)  increase the price of the plasma TVs and decrease the quantity consumed. 
B)  increase both the price of the plasma TVs and the quantity consumed. 
C)  leave the price of the plasma TVs unchanged but decrease the quantity consumed. 
D)  leave the price and the quantity consumed of plasma TVs unchanged, because domestic producers will expand production to make up for the reduction in imports

Question 6

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 7

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 supply 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 8

The Japanese demand curve for dollars is downward-sloping because a:

Accepted Answer

A)  higher number of yen per dollar means U.S. goods are cheaper in Japan. 
B)  lower number of yen per dollar means U.S. goods are cheaper in Japan. 
C)  lower number of yen per dollar means U.S. goods are more expensive in Japan. 
D)  lower number of yen per dollar means U.S. goods are less expensive in the U.S. 
A)  higher number of yen per dollar means U.S. goods are cheaper in Japan. 
B)  lower number of yen per dollar means U.S. goods are cheaper in Japan. 
C)  lower number of yen per dollar means U.S. goods are more expensive in Japan. 
D)  lower number of yen per dollar means U.S. goods are less expensive in the U.S.

Question 9

Flexible, or floating, exchange rate is determined by the:

Accepted Answer

A)  World Bank. 
B)  forces of supply and demand. 
C)  price of gold. 
D)  Federal Reserve. 
A)  World Bank. 
B)  forces of supply and demand. 
C)  price of gold. 
D)  Federal Reserve.

Question 10

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. 
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.

Question 11

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 12

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 machine would now cost

Accepted Answer

A)  more dollars. 
B)  the Japanese citizen less yen. 
C)  fewer dollars. 
D)  the Japanese citizen more yen. 
A)  more dollars. 
B)  the Japanese citizen less yen. 
C)  fewer dollars. 
D)  the Japanese citizen more yen.

Question 13

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 14

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)  18 Canadian dollars 
B)  10 U.S. dollars 
C)  12 U.S. dollars 
D)  14.4 U.S. dollars 
A)  18 Canadian dollars 
B)  10 U.S. dollars 
C)  12 U.S. dollars 
D)  14.4 U.S. dollars

Question 15

Which of the following would be expected if the tariff on foreign-produced automobiles were increased?

Accepted Answer

A)  The domestic price of automobiles would fall. 
B)  The supply of foreign automobiles to the domestic market would decline, causing auto prices to rise. 
C)  The number of unemployed workers in the domestic automobile industry would rise. 
D)  The demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations. 
A)  The domestic price of automobiles would fall. 
B)  The supply of foreign automobiles to the domestic market would decline, causing auto prices to rise. 
C)  The number of unemployed workers in the domestic automobile industry would rise. 
D)  The demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations.

Question 16

Suppose a country with a large domestic textile industry removed all tariffs on imported textiles, we would expect domestic:

Accepted Answer

A)  textile prices to decline. 
B)  textile production to increase. 
C)  textile employment to increase. 
D)  textile prices to rise. 
A)  textile prices to decline. 
B)  textile production to increase. 
C)  textile employment to increase. 
D)  textile prices to rise.

Question 17

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

Accepted Answer

A)  the dollar has depreciated in value. 
B)  U.S.-made goods will become less expensive to Japanese citizens. 
C)  the dollar has appreciated in value. 
D)  Japanese-made goods will become more expensive to U.S. citizens. 
A)  the dollar has depreciated in value. 
B)  U.S.-made goods will become less expensive to Japanese citizens. 
C)  the dollar has appreciated in value. 
D)  Japanese-made goods will become more expensive to U.S. citizens.

Question 18

If U.S. buyers purchased $500 billion of foreign goods and foreign buyers purchased $400 billion of U.S. goods, the U.S. balance of trade would be:

Accepted Answer

A)  − $100 billion. 
B)  $100 billion. 
C)  $400 billion. 
D)  -$500 billion. 
A)  − $100 billion. 
B)  $100 billion. 
C)  $400 billion. 
D)  -$500 billion.

Question 19

A tax levied on imported goods is called a(n):

Accepted Answer

A)  excise tax. 
B)  quota. 
C)  foreign profits tax. 
D)  tariff. 
A)  excise tax. 
B)  quota. 
C)  foreign profits tax. 
D)  tariff.

Question 20

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

Accepted Answer

A)  an increase in the U.S. inflation rate relative to the rate in Mexico. 
B)  a change in U.S. consumers' tastes away from Mexican products and toward products made in South Korea, India, and Taiwan. 
C)  U.S. buyers perceiving that domestically-produced products are of a lower quality than products made in Mexico. 
D)  a decrease in the supply of pesos. 
A)  an increase in the U.S. inflation rate relative to the rate in Mexico. 
B)  a change in U.S. consumers' tastes away from Mexican products and toward products made in South Korea, India, and Taiwan. 
C)  U.S. buyers perceiving that domestically-produced products are of a lower quality than products made in Mexico. 
D)  a decrease in the supply of pesos.

Exam 28: International Trade and Finance

Which of the following statements is true ?

Opening trade between two nations would:

An increase in inflation in the United States relative to the rate in France would make:

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:

Imposing a restrictive quota on imported plasma TVs will:

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

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 supply curve in graph 15-5(A) is determined by:

The Japanese demand curve for dollars is downward-sloping because a:

Flexible, or floating, exchange rate is determined by the:

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

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

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 machine would now cost

In international trade, an infant industry is one:

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.

Which of the following would be expected if the tariff on foreign-produced automobiles were increased?

Suppose a country with a large domestic textile industry removed all tariffs on imported textiles, we would expect domestic:

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

If U.S. buyers purchased $500 billion of foreign goods and foreign buyers purchased $400 billion of U.S. goods, the U.S. balance of trade would be:

A tax levied on imported goods is called a(n):

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

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

Filters