Question 1

If a country's goods exports are less than its goods imports, then it experiences a:

Accepted Answer

A)  balance of payments surplus. 
B)  balance of payments deficit. 
C)  balance of trade surplus. 
D)  balance of trade deficit. 
A)  balance of payments surplus. 
B)  balance of payments deficit. 
C)  balance of trade surplus. 
D)  balance of trade deficit.

Question 2

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(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. 
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 3

A country's imports of goods minus its exports of goods is reported in the goods balance.

Accepted Answer

A) True 
 B)False

Question 4

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. 
E)  China and the United States. 
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. 
E)  China and the United States.

Question 5

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)  the diversity of industry argument. 
E)  a quota. 
A)  a tariff. 
B)  free trade. 
C)  comparative advantage. 
D)  the diversity of industry argument. 
E)  a quota.

Question 6

GATT stands for:

Accepted Answer

A)  Good and Total Trade. 
B)  General Agreement on Tariffs and Trade. 
C)  Greater Agreements Toward Trade. 
D)  Gold and Trade Totals. 
E)  Greater Area Trade Transactions. 
A)  Good and Total Trade. 
B)  General Agreement on Tariffs and Trade. 
C)  Greater Agreements Toward Trade. 
D)  Gold and Trade Totals. 
E)  Greater Area Trade Transactions.

Question 7

"More productive workers receive higher wages than less productive workers." This observation is a major flaw in which of the following arguments for protectionism?

Accepted Answer

A)  The infant industry argument. 
B)  The national security argument. 
C)  The employment argument. 
D)  The cheap foreign labor argument. 
A)  The infant industry argument. 
B)  The national security argument. 
C)  The employment argument. 
D)  The cheap foreign labor argument.

Question 8

Without trade, the consumption possibilities for two nations are:

Accepted Answer

A)  outside their production possibilities curve. 
B)  inside their production possibilities curve. 
C)  along their production possibilities curve. 
D)  at a point equal to the world production possibilities curve. 
A)  outside their production possibilities curve. 
B)  inside their production possibilities curve. 
C)  along their production possibilities curve. 
D)  at a point equal to the world production possibilities curve.

Question 9

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 10

The average National Basketball Association player is over 6 feet tall. The average horse jockey is shorter than 5 1/2 feet tall. This is because height provides NBA players with:

Accepted Answer

A)  d and e. 
B)  an absolute advantage for horse racing. 
C)  an absolute disadvantage for other sports in general. 
D)  a comparative disadvantage in horse racing. 
E)  a comparative advantage in basketball. 
A)  d and e. 
B)  an absolute advantage for horse racing. 
C)  an absolute disadvantage for other sports in general. 
D)  a comparative disadvantage in horse racing. 
E)  a comparative advantage in basketball.

Question 11

Trade restrictions imposed in the name of national security have been recommended by protectionists in order to:

Accepted Answer

A)  develop strong defense-related industries. 
B)  avoid dependence on foreign suppliers during wartime. 
C)  reduce the necessity of stockpiling strategic supplies. 
D)  all of the above. 
A)  develop strong defense-related industries. 
B)  avoid dependence on foreign suppliers during wartime. 
C)  reduce the necessity of stockpiling strategic supplies. 
D)  all of the above.

Question 12

The current account in the BOP records:

Accepted Answer

A)  all money flowing between countries. 
B)  a nation's yearly exports and imports of goods and services. 
C)  only the transactions involving capital goods in international trade. 
D)  only the transactions involving consumer goods in international trade. 
E)  only those goods and services purchased on credit in international transactions. 
A)  all money flowing between countries. 
B)  a nation's yearly exports and imports of goods and services. 
C)  only the transactions involving capital goods in international trade. 
D)  only the transactions involving consumer goods in international trade. 
E)  only those goods and services purchased on credit in international transactions.

Question 13

A tariff has the effect of:

Accepted Answer

A)  raising the price of the exported product. 
B)  increasing the demand for the exported product. 
C)  increasing the demand for the imported product. 
D)  increasing the supply of the imported product. 
E)  raising the price of the imported product. 
A)  raising the price of the exported product. 
B)  increasing the demand for the exported product. 
C)  increasing the demand for the imported product. 
D)  increasing the supply of the imported product. 
E)  raising the price of the imported product.

Question 14

Exhibit 21-1  Production possibilities curves   In Exhibit 21-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Nabia the cost of producing one more unit of wheat is equal to:

Accepted Answer

A)  4 units of corn. 
B)  4 units of wheat. 
C)  1/4 unit of corn. 
D)  15 units of corn. 
E)  60 units of corn. 
A)  4 units of corn. 
B)  4 units of wheat. 
C)  1/4 unit of corn. 
D)  15 units of corn. 
E)  60 units of corn.

Question 15

An itemized account of a nation's foreign economic transactions is its:

Accepted Answer

A)  gross domestic product. 
B)  goods exports. 
C)  goods imports. 
D)  balance of payments. 
E)  foreign exchange reserves. 
A)  gross domestic product. 
B)  goods exports. 
C)  goods imports. 
D)  balance of payments. 
E)  foreign exchange reserves.

Question 16

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Accepted Answer

A)  people in Portugal will not want to buy as many hats. 
B)  Spain no longer has a comparative advantage in hats. 
C)  Portugal is flooding the market with too many doormats. 
D)  some of the gains from trade shift to Portugal. 
E)  some of the gains from trade shift to Spain. 
A)  people in Portugal will not want to buy as many hats. 
B)  Spain no longer has a comparative advantage in hats. 
C)  Portugal is flooding the market with too many doormats. 
D)  some of the gains from trade shift to Portugal. 
E)  some of the gains from trade shift to Spain.

Question 17

Which of the following changes in the exchange rate represents an appreciation of the dollar?

Accepted Answer

A)  100 yen = $1 to 90 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 190 francs = $10 
A)  100 yen = $1 to 90 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 190 francs = $10

Question 18

One big difference between tariffs and quotas is that tariffs:

Accepted Answer

A)  raise the price of a good while quotas lower it. 
B)  generate tax revenues while quotas do not. 
C)  stimulate international trade while quotas inhibit it. 
D)  hurt domestic producers while quotas help them. 
E)  give the same outcome as free trade while quotas do not. 
A)  raise the price of a good while quotas lower it. 
B)  generate tax revenues while quotas do not. 
C)  stimulate international trade while quotas inhibit it. 
D)  hurt domestic producers while quotas help them. 
E)  give the same outcome as free trade while quotas do not.

Question 19

According to the infant industry argument, a new domestic industry needs protection because it has higher costs than established foreign competitors.

Accepted Answer

A) True 
 B)False

Question 20

The WTO was:

Accepted Answer

A)  formed shortly after World War II. 
B)  authorized in the American Constitution. 
C)  formed in 1995. 
D)  formed in 1876. 
E)  formed to unify the European continent. 
A)  formed shortly after World War II. 
B)  authorized in the American Constitution. 
C)  formed in 1995. 
D)  formed in 1876. 
E)  formed to unify the European continent.

Exam 21: International Trade and Finance

If a country's goods exports are less than its goods imports, then it experiences a:

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(A) is determined by:

A country's imports of goods minus its exports of goods is reported in the goods balance.

The North American Free Trade Agreement affects trade between:

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:

GATT stands for:

"More productive workers receive higher wages than less productive workers." This observation is a major flaw in which of the following arguments for protectionism?

Without trade, the consumption possibilities for two nations are:

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

The average National Basketball Association player is over 6 feet tall. The average horse jockey is shorter than 5 1/2 feet tall. This is because height provides NBA players with:

Trade restrictions imposed in the name of national security have been recommended by protectionists in order to:

The current account in the BOP records:

A tariff has the effect of:

Exhibit 21-1 Production possibilities curves In Exhibit 21-1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Nabia the cost of producing one more unit of wheat is equal to:

An itemized account of a nation's foreign economic transactions is its:

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Which of the following changes in the exchange rate represents an appreciation of the dollar?

One big difference between tariffs and quotas is that tariffs:

According to the infant industry argument, a new domestic industry needs protection because it has higher costs than established foreign competitors.

The WTO was:

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