Question 1

Expenditures for services such as tourism, income for foreign investment, and foreign gifts are tabulated in the:

Accepted Answer

A)  current account. 
B)  capital account. 
C)  official reserve account. 
D)  goods account. 
A)  current account. 
B)  capital account. 
C)  official reserve account. 
D)  goods account.

Question 2

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 3

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 4

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 5

A nation should specialize in the production of the product for which it has a(n):

Accepted Answer

A)  absolute advantage. 
B)  exchange rate. 
C)  specialization. 
D)  comparative advantage. 
E)  terms of trade. 
A)  absolute advantage. 
B)  exchange rate. 
C)  specialization. 
D)  comparative advantage. 
E)  terms of trade.

Question 6

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 7

A tariff is:

Accepted Answer

A)  a duty that a company must pay its own government on exports. 
B)  the price charged by one country to buyers of a good in another country. 
C)  a price reduction designed to encourage international trade. 
D)  a tax on an import. 
A)  a duty that a company must pay its own government on exports. 
B)  the price charged by one country to buyers of a good in another country. 
C)  a price reduction designed to encourage international trade. 
D)  a tax on an import.

Question 8

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 9

If Dana can paint his house faster than Luke, a professional house painter, then:

Accepted Answer

A)  Dana has a comparative advantage in house painting. 
B)  Dana has an absolute advantage in house painting. 
C)  Luke has a comparative advantage in house painting. 
D)  Luke has an absolute advantage in house painting. 
E)  Dana should always paint his own house. 
A)  Dana has a comparative advantage in house painting. 
B)  Dana has an absolute advantage in house painting. 
C)  Luke has a comparative advantage in house painting. 
D)  Luke has an absolute advantage in house painting. 
E)  Dana should always paint his own house.

Question 10

With the benefits of international trade:

Accepted Answer

A)  there can be increased consumption for all. 
B)  global production will be increased. 
C)  world resources will be used more efficiently. 
D)  all of the above are true. 
A)  there can be increased consumption for all. 
B)  global production will be increased. 
C)  world resources will be used more efficiently. 
D)  all of the above are true.

Question 11

Trade can increase the consumption possibilities of nations.

Accepted Answer

A) True 
 B)False

Question 12

In a two good, two-country world, a country has a comparative advantage in any good for which it has a:

Accepted Answer

A)  lower absolute cost than the other country. 
B)  lower opportunity cost than the other country. 
C)  higher absolute cost than the other country. 
D)  higher opportunity cost than the other country. 
A)  lower absolute cost than the other country. 
B)  lower opportunity cost than the other country. 
C)  higher absolute cost than the other country. 
D)  higher opportunity cost than the other country.

Question 13

Which of the following would cause the U.S. demand curve for Japanese yen to shift to the right?

Accepted Answer

A)  An increase in the U.S. inflation rate compared to the rate in Japan. 
B)  A higher real rate of interest on investments in Japan than on investments in the United States. 
C)  The popularity of Japanese products increases in the United States. 
D)  All of the above. 
A)  An increase in the U.S. inflation rate compared to the rate in Japan. 
B)  A higher real rate of interest on investments in Japan than on investments in the United States. 
C)  The popularity of Japanese products increases in the United States. 
D)  All of the above.

Question 14

Exhibit 21-2  Production possibilities curves for U. S. and Mexico   As shown in Exhibit 21-2, the United States has a comparative advantage over Mexico in:

Accepted Answer

A)  wheat, but not in cloth. 
B)  cloth, but not in wheat. 
C)  both wheat and cloth. 
D)  neither wheat nor cloth 
A)  wheat, but not in cloth. 
B)  cloth, but not in wheat. 
C)  both wheat and cloth. 
D)  neither wheat nor cloth

Question 15

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 16

International trade has the potential to ____ the availability of goods and services to ____.

Accepted Answer

A)  increase, those nations who export more than they import 
B)  increase, nations that have an absolute advantage in the production of a good or service 
C)  increase, all nations 
D)  decrease, all nations 
A)  increase, those nations who export more than they import 
B)  increase, nations that have an absolute advantage in the production of a good or service 
C)  increase, all nations 
D)  decrease, all nations

Question 17

A weak U.S. dollar is one that has:

Accepted Answer

A)  c and e. 
B)  d and e. 
C)  depreciated. 
D)  appreciated. 
E)  helped U.S. exporters. 
A)  c and e. 
B)  d and e. 
C)  depreciated. 
D)  appreciated. 
E)  helped U.S. exporters.

Question 18

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a(n):

Accepted Answer

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

Question 19

The balance of trade is measured by which of the following expressions?

Accepted Answer

A)  The value of exported goods and services minus the value of imported goods and services 
B)  The value of income receipts on investments minus income payments on investments 
C)  The value of goods exports minus the value of goods imports 
D)  The value of government spending minus the value of all taxes received 
E)  The balance on capital account plus the balance on current account 
A)  The value of exported goods and services minus the value of imported goods and services 
B)  The value of income receipts on investments minus income payments on investments 
C)  The value of goods exports minus the value of goods imports 
D)  The value of government spending minus the value of all taxes received 
E)  The balance on capital account plus the balance on current account

Question 20

Borrowing from foreign banks by U.S. firms represents a capital inflow.

Accepted Answer

A) True 
 B)False

Exam 21: International Trade and Finance

Expenditures for services such as tourism, income for foreign investment, and foreign gifts are tabulated in the:

Specialization and trade allow an economy to expand its:

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

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

A nation should specialize in the production of the product for which it has a(n):

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

A tariff is:

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

If Dana can paint his house faster than Luke, a professional house painter, then:

With the benefits of international trade:

Trade can increase the consumption possibilities of nations.

In a two good, two-country world, a country has a comparative advantage in any good for which it has a:

Which of the following would cause the U.S. demand curve for Japanese yen to shift to the right?

Exhibit 21-2 Production possibilities curves for U. S. and Mexico As shown in Exhibit 21-2, the United States has a comparative advantage over Mexico in:

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

International trade has the potential to ____ the availability of goods and services to ____.

A weak U.S. dollar is one that has:

In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a(n):

The balance of trade is measured by which of the following expressions?

Borrowing from foreign banks by U.S. firms represents a capital inflow.

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

International trade has the potential to the availability of goods and services to .