Question 1

If a hotel room priced at 120,000 Venezuela bolivar per night can be purchased for 80 U.S. dollars, the exchange rate is:

Accepted Answer

A)  9,600 bolivar per dollar. 
B)  1,500 dollars per lira. 
C)  1,500 bolivar per dollar. 
D)  .00066 bolivar per dollar. 
A)  9,600 bolivar per dollar. 
B)  1,500 dollars per lira. 
C)  1,500 bolivar per dollar. 
D)  .00066 bolivar per dollar.

Question 2

If a country has a comparative advantage in the production of all goods, it should:

Accepted Answer

A)  specialize in the production of goods with the lowest opportunity cost. 
B)  specialize in the production of goods with the highest opportunity cost. 
C)  specialize in the production of goods with the absolute advantage. 
D)  specialize in the production of goods without the absolute advantage. 
E)  not specialize at all and produce all the goods itself. 
A)  specialize in the production of goods with the lowest opportunity cost. 
B)  specialize in the production of goods with the highest opportunity cost. 
C)  specialize in the production of goods with the absolute advantage. 
D)  specialize in the production of goods without the absolute advantage. 
E)  not specialize at all and produce all the goods itself.

Question 3

How is a tariff different from a quota?

Accepted Answer

A)  A tariff sets a limit on the quantity of a good that may be imported, while a quota is a tax on an import. 
B)  A tariff and a quota are different words for the same thing. 
C)  A tariff is a tax on an import, while a quota set a limit on the quantity of a good that may be imported. 
D)  None of the above are correct. 
A)  A tariff sets a limit on the quantity of a good that may be imported, while a quota is a tax on an import. 
B)  A tariff and a quota are different words for the same thing. 
C)  A tariff is a tax on an import, while a quota set a limit on the quantity of a good that may be imported. 
D)  None of the above are correct.

Question 4

The infant-industry argument about tariffs argues that:

Accepted Answer

A)  it is unfair to levy tariffs on items intended for use by infants. 
B)  tariffs should be levied on foreign products that compete with new domestic industries only in the short run. 
C)  if a newly established domestic industry can survive in the short run, a tariff should be levied to protect it from foreign competition in the long run. 
D)  permanent tariffs should be levied on foreign products that compete with those produced by newly established domestic industries. 
A)  it is unfair to levy tariffs on items intended for use by infants. 
B)  tariffs should be levied on foreign products that compete with new domestic industries only in the short run. 
C)  if a newly established domestic industry can survive in the short run, a tariff should be levied to protect it from foreign competition in the long run. 
D)  permanent tariffs should be levied on foreign products that compete with those produced by newly established domestic industries.

Question 5

An increase in the price level in Japan relative to the price level in the United States will shift the demand curve for dollars leftward and the dollar depreciates or becomes weaker.

Accepted Answer

A) True 
 B)False

Question 6

A major difference between a tariff and a quota is that a tariff:

Accepted Answer

A)  will reduce imports, but a quota generally will not. 
B)  can easily be rescinded, but a quota cannot. 
C)  will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports. 
D)  typically generates tax revenue, while a quota does not. 
A)  will reduce imports, but a quota generally will not. 
B)  can easily be rescinded, but a quota cannot. 
C)  will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports. 
D)  typically generates tax revenue, while a quota does not.

Question 7

Which of the following transactions would be excluded in the capital account?

Accepted Answer

A)  A Japanese citizen purchases a U.S. Treasury bill. 
B)  A Japanese citizen purchases an office building in Manhattan. 
C)  A U.S. citizen purchases a share of stock from a Japanese company. 
D)  An American purchases a Toyota. 
A)  A Japanese citizen purchases a U.S. Treasury bill. 
B)  A Japanese citizen purchases an office building in Manhattan. 
C)  A U.S. citizen purchases a share of stock from a Japanese company. 
D)  An American purchases a Toyota.

Question 8

It is possible for the balance of trade to be negative, and the current account to be positive. ​

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is true ?

Accepted Answer

A)  A tariff is a physical limit on the quantity of a good allowed to enter a country. 
B)  An embargo is a tax on an imported good. 
C)  A quota is a law that bars trade with another country. 
D)  When a nation exports more than it imports it is running a balance of trade surplus. 
A)  A tariff is a physical limit on the quantity of a good allowed to enter a country. 
B)  An embargo is a tax on an imported good. 
C)  A quota is a law that bars trade with another country. 
D)  When a nation exports more than it imports it is running a balance of trade surplus.

Question 10

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

Accepted Answer

A)  the dollar has depreciated in value. 
B)  U.S.-made goods will become more expensive to Japanese citizens. 
C)  the dollar has appreciated in value. 
D)  Japanese-made goods will become less expensive to U.S. citizens. 
E)  there will be a decrease in the demand for dollars in the foreign exchange market. 
A)  the dollar has depreciated in value. 
B)  U.S.-made goods will become more expensive to Japanese citizens. 
C)  the dollar has appreciated in value. 
D)  Japanese-made goods will become less expensive to U.S. citizens. 
E)  there will be a decrease in the demand for dollars in the foreign exchange market.

Question 11

If goods imports are greater than goods exports, the nation is experiencing a:

Accepted Answer

A)  negative balance on current account. 
B)  goods trade deficit. 
C)  capital account imbalance. 
D)  weakening of its currency. 
E)  growth in foreign reserves. 
A)  negative balance on current account. 
B)  goods trade deficit. 
C)  capital account imbalance. 
D)  weakening of its currency. 
E)  growth in foreign reserves.

Question 12

Comparative advantage explains why a nation will benefit from trade when:

Accepted Answer

A)  it exports more than it imports. 
B)  its trading partners are experiencing offsetting losses. 
C)  it exports goods for which it is a high-opportunity cost producer, while importing those for which it is a low-opportunity cost producer. 
D)  it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer. 
A)  it exports more than it imports. 
B)  its trading partners are experiencing offsetting losses. 
C)  it exports goods for which it is a high-opportunity cost producer, while importing those for which it is a low-opportunity cost producer. 
D)  it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer.

Question 13

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 Pada produces at point B on its PPC. How much corn is the country able to produce?

Accepted Answer

A)  2. 
B)  15. 
C)  10. 
D)  6. 
E)  13. 
A)  2. 
B)  15. 
C)  10. 
D)  6. 
E)  13.

Question 14

Tariffs help consumers by lowering the price of imported goods.

Accepted Answer

A) True 
 B)False

Question 15

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

Accepted Answer

A)  the opportunity cost of producing bicycles in the United States is higher than in Japan. 
B)  Japan has a comparative advantage in the production of bicycles. 
C)  the United States has an absolute advantage in the production of rice. 
D)  total output will be highest if the United States specializes in rice and Japan specializes in bicycles. 
E)  total output will be highest if Japan specializes in rice and the United States specializes in bicycles. 
A)  the opportunity cost of producing bicycles in the United States is higher than in Japan. 
B)  Japan has a comparative advantage in the production of bicycles. 
C)  the United States has an absolute advantage in the production of rice. 
D)  total output will be highest if the United States specializes in rice and Japan specializes in bicycles. 
E)  total output will be highest if Japan specializes in rice and the United States specializes in bicycles.

Question 16

Which of the following would cause the supply of dollars curve in the United States to shift to the right?

Accepted Answer

A)  Japanese imports become less popular. 
B)  The value of the dollar falls. 
C)  The supply of dollars decreases. 
D)  Japanese imports became more popular. 
A)  Japanese imports become less popular. 
B)  The value of the dollar falls. 
C)  The supply of dollars decreases. 
D)  Japanese imports became more popular.

Question 17

Exhibit 21-4  Coffee and tea output (pounds per hour)   As shown in Exhibit 21-4, the opportunity cost to Brazil of producing one pound of coffee is:

Accepted Answer

A)  1 pound of tea. 
B)  5 pounds of tea. 
C)  1/2 pound of tea. 
D)  10 pounds of tea. 
A)  1 pound of tea. 
B)  5 pounds of tea. 
C)  1/2 pound of tea. 
D)  10 pounds of tea.

Question 18

If India has an absolute advantage in rug production when compared to England, then:

Accepted Answer

A)  India should export rugs to England. 
B)  England should export rugs to India. 
C)  international trade should not occur. 
D)  England uses fewer resources to produce rugs than India. 
E)  India uses fewer resources to produce rugs than England. 
A)  India should export rugs to England. 
B)  England should export rugs to India. 
C)  international trade should not occur. 
D)  England uses fewer resources to produce rugs than India. 
E)  India uses fewer resources to produce rugs than England.

Question 19

Suppose Japan has a comparative advantage over Canada in the production of VCRs. This means that Japan:

Accepted Answer

A)  needs fewer resources to produce DVDS than does Canada. 
B)  has better technology for producing DVDs than does Canada. 
C)  has a lower opportunity cost of DVD production than does Canada. 
D)  can produce more VCRs in a given period of time than can Canada. 
A)  needs fewer resources to produce DVDS than does Canada. 
B)  has better technology for producing DVDs than does Canada. 
C)  has a lower opportunity cost of DVD production than does Canada. 
D)  can produce more VCRs in a given period of time than can Canada.

Question 20

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

Exam 21: International Trade and Finance

If a hotel room priced at 120,000 Venezuela bolivar per night can be purchased for 80 U.S. dollars, the exchange rate is:

If a country has a comparative advantage in the production of all goods, it should:

How is a tariff different from a quota?

The infant-industry argument about tariffs argues that:

An increase in the price level in Japan relative to the price level in the United States will shift the demand curve for dollars leftward and the dollar depreciates or becomes weaker.

A major difference between a tariff and a quota is that a tariff:

Which of the following transactions would be excluded in the capital account?

It is possible for the balance of trade to be negative, and the current account to be positive. ​

Which of the following statements is true ?

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

If goods imports are greater than goods exports, the nation is experiencing a:

Comparative advantage explains why a nation will benefit from trade when:

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 Pada produces at point B on its PPC. How much corn is the country able to produce?

Tariffs help consumers by lowering the price of imported goods.

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

Which of the following would cause the supply of dollars curve in the United States to shift to the right?

Exhibit 21-4 Coffee and tea output (pounds per hour) As shown in Exhibit 21-4, the opportunity cost to Brazil of producing one pound of coffee is:

If India has an absolute advantage in rug production when compared to England, then:

Suppose Japan has a comparative advantage over Canada in the production of VCRs. This means that Japan:

Imposing a restrictive quota on imported plasma TVs will:

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

It is possible for the balance of trade to be negative, and the current account to be positive.