Question 1

The exchange rate is:

Accepted Answer

A)  the rate at which goods will exchange for each other in the international market. 
B)  the number of units of one currency required in exchange for one unit of another currency. 
C)  set by the International Trade Commission. 
D)  established by the ratio of the values of gold to silver. 
E)  set by each individual country. 
A)  the rate at which goods will exchange for each other in the international market. 
B)  the number of units of one currency required in exchange for one unit of another currency. 
C)  set by the International Trade Commission. 
D)  established by the ratio of the values of gold to silver. 
E)  set by each individual country.

Question 2

A country that can produce a good using fewer resources than another country has a(n):

Accepted Answer

A)  lower opportunity cost of producing the good than another country. 
B)  absolute advantage. 
C)  specialization in the production of the good. 
D)  all of the above. 
A)  lower opportunity cost of producing the good than another country. 
B)  absolute advantage. 
C)  specialization in the production of the good. 
D)  all of the above.

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

Exhibit 21-7  Foreign exchange market for U.S. dollars and British pounds   Exhibit 21-7 shows a situation in which:

Accepted Answer

A)  both the dollar and the pound have depreciated. 
B)  both the dollar and the pound have appreciated. 
C)  the dollar has depreciated and the pound has appreciated. 
D)  the dollar has appreciated and the pound has depreciated. 
A)  both the dollar and the pound have depreciated. 
B)  both the dollar and the pound have appreciated. 
C)  the dollar has depreciated and the pound has appreciated. 
D)  the dollar has appreciated and the pound has depreciated.

Question 5

Which of the following would not be counted in the U.S. BOP current account?

Accepted Answer

A)  Helen, an American oil engineer, is a paid adviser to Middle Eastern countries in the area of petroleum extraction. 
B)  General Motors Corporation owns buildings that are situated in Mexico. 
C)  France purchases a new jet fighter aircraft from the Boeing Company in the U.S. 
D)  Martha receives a $50 dividend check on stock she owns in a business in Germany. 
E)  A wealthy Italian purchases numerous antiques in the United States for his villa. 
A)  Helen, an American oil engineer, is a paid adviser to Middle Eastern countries in the area of petroleum extraction. 
B)  General Motors Corporation owns buildings that are situated in Mexico. 
C)  France purchases a new jet fighter aircraft from the Boeing Company in the U.S. 
D)  Martha receives a $50 dividend check on stock she owns in a business in Germany. 
E)  A wealthy Italian purchases numerous antiques in the United States for his villa.

Question 6

Capital accounts are a measure of how much ____ have invested ____.

Accepted Answer

A)  c and d 
B)  d and e 
C)  U.S. stockholders; in the market 
D)  foreign stockholders; in foreign firms 
E)  U.S. firms; in foreign nations 
A)  c and d 
B)  d and e 
C)  U.S. stockholders; in the market 
D)  foreign stockholders; in foreign firms 
E)  U.S. firms; in foreign nations

Question 7

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

Accepted Answer

A)  fire Jill, practice law during the day, and do her own typing at night. 
B)  practice law and leave all the typing to the secretary. 
C)  divide her time equally between typing and practicing law. 
D)  quit practicing law and take a job as a secretary. 
E)  have Jill attend law school. 
A)  fire Jill, practice law during the day, and do her own typing at night. 
B)  practice law and leave all the typing to the secretary. 
C)  divide her time equally between typing and practicing law. 
D)  quit practicing law and take a job as a secretary. 
E)  have Jill attend law school.

Question 8

The infant industry argument is based on the idea that:

Accepted Answer

A)  competitive pressure from established foreign firms would encourage the infant industry's prospects for future growth. 
B)  failure to shelter these infant industries tends to lead to political instability. 
C)  small firms must be protected. 
D)  none of the above. 
A)  competitive pressure from established foreign firms would encourage the infant industry's prospects for future growth. 
B)  failure to shelter these infant industries tends to lead to political instability. 
C)  small firms must be protected. 
D)  none of the above.

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 balance of payments ____.

Accepted Answer

A)  b and e 
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 
E)  can only be expanded when the government has foreign exchange reserves 
A)  b and e 
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 
E)  can only be expanded when the government has foreign exchange reserves

Question 11

Suppose a German bank purchases a U.S. Treasury bond. This transaction would be recorded in the:

Accepted Answer

A)  capital account. 
B)  current account. 
C)  goods trade balance. 
D)  unilateral transfers. 
A)  capital account. 
B)  current account. 
C)  goods trade balance. 
D)  unilateral transfers.

Question 12

A favorable balance of trade occurs when:

Accepted Answer

A)  exports equal imports. 
B)  the balance of payments balances. 
C)  the current and capital account in the BOP are equal. 
D)  the value of the exports of goods exceeds the value of the imports of goods. 
E)  the value of the exports of goods is less than the value of the imports of goods . 
A)  exports equal imports. 
B)  the balance of payments balances. 
C)  the current and capital account in the BOP are equal. 
D)  the value of the exports of goods exceeds the value of the imports of goods. 
E)  the value of the exports of goods is less than the value of the imports of goods .

Question 13

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 supply 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 14

If one U. S. dollar can be exchanged for 5 Swiss francs, then 1 franc can be exchanged for:

Accepted Answer

A)  5 cents. 
B)  20 cents. 
C)  50 cents. 
D)  2 dollars. 
A)  5 cents. 
B)  20 cents. 
C)  50 cents. 
D)  2 dollars.

Question 15

The balance on the current account ____.

Accepted Answer

A)  d and e 
B)  c and d 
C)  will show a trade deficit or surplus, if one exists 
D)  must always be zero 
E)  multiplied by -1 becomes the capital account 
A)  d and e 
B)  c and d 
C)  will show a trade deficit or surplus, if one exists 
D)  must always be zero 
E)  multiplied by -1 becomes the capital account

Question 16

Exhibit 21-6  Dollars per British pound   In Exhibit 21-6, the equilibrium exchange rate is:

Accepted Answer

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

Question 17

Which of the following would cause the U.S. dollar to depreciate against the Japanese yen?

Accepted Answer

A)  Greater popularity of U.S. exports in Japan. 
B)  A higher price level in Japan. 
C)  Higher real interest rates in the United States. 
D)  Higher incomes in the United States. 
A)  Greater popularity of U.S. exports in Japan. 
B)  A higher price level in Japan. 
C)  Higher real interest rates in the United States. 
D)  Higher incomes in the United States.

Question 18

Following the principle of comparative advantage, specialization:

Accepted Answer

A)  permits greater levels of total production than would be attained without it. 
B)  increases the dependency of countries on trade. 
C)  both of the above. 
D)  neither of the above. 
A)  permits greater levels of total production than would be attained without it. 
B)  increases the dependency of countries on trade. 
C)  both of the above. 
D)  neither of the above.

Question 19

A country is said to have a comparative advantage in the production of a good when it:

Accepted Answer

A)  has the lower opportunity cost of producing the good. 
B)  can produce the good using fewer resources than another country. 
C)  requires fewer labor hours to produce the good. 
D)  all of the above. 
A)  has the lower opportunity cost of producing the good. 
B)  can produce the good using fewer resources than another country. 
C)  requires fewer labor hours to produce the good. 
D)  all of the above.

Question 20

If the exchange rate of yen for dollars increases from 100 yen = $1 to 110 yen = $1, then:

Accepted Answer

A)  Japanese-produced goods would become more expensive. 
B)  the dollar has depreciated. 
C)  the yen has appreciated. 
D)  U.S.-produced goods would become more expensive. 
E)  U.S. exports would increase. 
A)  Japanese-produced goods would become more expensive. 
B)  the dollar has depreciated. 
C)  the yen has appreciated. 
D)  U.S.-produced goods would become more expensive. 
E)  U.S. exports would increase.

Exam 21: International Trade and Finance

The exchange rate is:

A country that can produce a good using fewer resources than another country has a(n):

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

Exhibit 21-7 Foreign exchange market for U.S. dollars and British pounds Exhibit 21-7 shows a situation in which:

Which of the following would not be counted in the U.S. BOP current account?

Capital accounts are a measure of how much ____ have invested ____.

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

The infant industry argument is based on the idea that:

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

The balance of payments ____.

Suppose a German bank purchases a U.S. Treasury bond. This transaction would be recorded in the:

A favorable balance of trade occurs when:

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 supply curve in graph 5(B) is determined by:

If one U. S. dollar can be exchanged for 5 Swiss francs, then 1 franc can be exchanged for:

The balance on the current account ____.

Exhibit 21-6 Dollars per British pound In Exhibit 21-6, the equilibrium exchange rate is:

Which of the following would cause the U.S. dollar to depreciate against the Japanese yen?

Following the principle of comparative advantage, specialization:

A country is said to have a comparative advantage in the production of a good when it:

If the exchange rate of yen for dollars increases from 100 yen = $1 to 110 yen = $1, then:

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

Capital accounts are a measure of how much have invested .