Question 1

Exhibit 21-6  Dollars per British pound   In Exhibit 21-6, the exchange rate will have no tendency to change when it is equal to:

Accepted Answer

A)  4. 
B)  2. 
C)  5. 
D)  1. 
E)  3. 
A)  4. 
B)  2. 
C)  5. 
D)  1. 
E)  3.

Question 2

A tariff will decrease the supply of the product.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Under a fixed exchange rate system, a government is at risk of running out of foreign currency reserves when the country's imports exceed its exports.

Accepted Answer

A) True 
 B)False

Question 5

If it costs the DuPont Chemical Company more to make the chemical flaxinate in the United States than it does to make it in Formosa, the Formosans must have:

Accepted Answer

A)  lower demand for flaxinate. 
B)  tariffs on flaxinate. 
C)  inefficient markets. 
D)  a more favorable political environment. 
E)  an absolute advantage in flaxinate production. 
A)  lower demand for flaxinate. 
B)  tariffs on flaxinate. 
C)  inefficient markets. 
D)  a more favorable political environment. 
E)  an absolute advantage in flaxinate production.

Question 6

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 the above. 
A)  tariff. 
B)  embargo. 
C)  quota. 
D)  none of the above.

Question 7

Which of the following is included in the current account?

Accepted Answer

A)  Net unilateral transfers. 
B)  Goods imports. 
C)  Goods exports. 
D)  All are included in the current account. 
A)  Net unilateral transfers. 
B)  Goods imports. 
C)  Goods exports. 
D)  All are included in the current account.

Question 8

Exhibit 21-2  Production possibilities curves for U. S. and Mexico   As shown in Exhibit 21-2, in Mexico, producing 1 additional ton of wheat costs:

Accepted Answer

A)  1/2 ton of cloth. 
B)  2/3 ton of cloth. 
C)  1 ton of cloth. 
D)  1 1/2 tons of cloth. 
A)  1/2 ton of cloth. 
B)  2/3 ton of cloth. 
C)  1 ton of cloth. 
D)  1 1/2 tons of cloth.

Question 9

Which of the following statements is true with respect to a tariff on imported cheese?

Accepted Answer

A)  It lowers the price of cheese. 
B)  It lowers domestic cheese producers' profits. 
C)  It creates tax revenues for the government. 
D)  It cannot result in retaliation. 
E)  It increases the amount of foreign cheese sold. 
A)  It lowers the price of cheese. 
B)  It lowers domestic cheese producers' profits. 
C)  It creates tax revenues for the government. 
D)  It cannot result in retaliation. 
E)  It increases the amount of foreign cheese sold.

Question 10

Exhibit 21-1  Production possibilities curves   In Exhibit 21-1, 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 11

Which of the following transactions would be recorded as a credit in the U.S. current account?

Accepted Answer

A)  A Japanese bank's purchase of IBM stock. 
B)  A Japanese consumer's purchase of an Apple computer. 
C)  An American tourist's payment to a Japanese hotel. 
D)  An American consumer's purchase of a Toshiba VCR. 
A)  A Japanese bank's purchase of IBM stock. 
B)  A Japanese consumer's purchase of an Apple computer. 
C)  An American tourist's payment to a Japanese hotel. 
D)  An American consumer's purchase of a Toshiba VCR.

Question 12

The nice thing about foreign exchange markets is that the goods are money, and they are paid for with money. This means that if the U.S. dollar ____ the Japanese yen ____.

Accepted Answer

A)  goes down; goes down 
B)  goes up; goes up 
C)  buys more yen; buys more dollars 
D)  buys fewer yen; buys fewer dollars 
E)  buys more yen; buys fewer dollars 
A)  goes down; goes down 
B)  goes up; goes up 
C)  buys more yen; buys more dollars 
D)  buys fewer yen; buys fewer dollars 
E)  buys more yen; buys fewer dollars

Question 13

An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:

Accepted Answer

A)  increase the price of the dollar in Indian rupees. 
B)  increase the supply of dollars by those holding U.S. dollars. 
C)  decrease the equilibrium exchange rate of Indian rupees per dollar. 
D)  all of the above. 
A)  increase the price of the dollar in Indian rupees. 
B)  increase the supply of dollars by those holding U.S. dollars. 
C)  decrease the equilibrium exchange rate of Indian rupees per dollar. 
D)  all of the above.

Question 14

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)  All of the above. 
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)  All of the above.

Question 15

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 16

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 the above. 
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 the above.

Question 17

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 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

Exhibit 21-5  International currency markets   Exhibit 21-5 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The demand curve in graph 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 20

The U.S. balance of trade has been in a large surplus since 2001. ​

Accepted Answer

A) True 
 B)False

Exam 21: International Trade and Finance

Exhibit 21-6 Dollars per British pound In Exhibit 21-6, the exchange rate will have no tendency to change when it is equal to:

A tariff will decrease the supply of the product.

Which of the following is excluded in the current account?

Under a fixed exchange rate system, a government is at risk of running out of foreign currency reserves when the country's imports exceed its exports.

If it costs the DuPont Chemical Company more to make the chemical flaxinate in the United States than it does to make it in Formosa, the Formosans must have:

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

Which of the following is included in the current account?

Exhibit 21-2 Production possibilities curves for U. S. and Mexico As shown in Exhibit 21-2, in Mexico, producing 1 additional ton of wheat costs:

Which of the following statements is true with respect to a tariff on imported cheese?

Exhibit 21-1 Production possibilities curves In Exhibit 21-1, 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?

Which of the following transactions would be recorded as a credit in the U.S. current account?

The nice thing about foreign exchange markets is that the goods are money, and they are paid for with money. This means that if the U.S. dollar ____ the Japanese yen ____.

An increase in the real rate of interest that can be earned on U.S. investments above the rate that can be earned on investments in India would:

Which of the following statements is true ?

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

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

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

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

Exhibit 21-5 International currency markets Exhibit 21-5 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The demand curve in graph 5(B) is determined by:

The U.S. balance of trade has been in a large surplus since 2001. ​

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Economies in Transition

Growth and the Less-Developed Countries

Filters

The nice thing about foreign exchange markets is that the goods are money, and they are paid for with money. This means that if the U.S. dollar the Japanese yen .

The U.S. balance of trade has been in a large surplus since 2001.