Question 1

If one country can produce a good with fewer resources than another country, this is called:

Accepted Answer

A)  specialization. 
B)  geographic advantage. 
C)  comparative advantage. 
D)  absolute advantage. 
E)  free trade. 
A)  specialization. 
B)  geographic advantage. 
C)  comparative advantage. 
D)  absolute advantage. 
E)  free trade.

Question 2

Exhibit 21-6  Dollars per British pound   In Exhibit 21-6, when the exchange rate is 1 dollar per pound,

Accepted Answer

A)  the market is in equilibrium. 
B)  there is a surplus of 30 pounds. 
C)  there is a surplus of 60 pounds. 
D)  there is a shortage of 30 pounds. 
E)  there is a shortage of 60 pounds. 
A)  the market is in equilibrium. 
B)  there is a surplus of 30 pounds. 
C)  there is a surplus of 60 pounds. 
D)  there is a shortage of 30 pounds. 
E)  there is a shortage of 60 pounds.

Question 3

If the dollar appreciates:

Accepted Answer

A)  imports to the United States become more expensive for foreigners. 
B)  exports from the United States become more expensive for foreigners. 
C)  imports become more expensive for U.S. citizens. 
D)  exports from the United States become cheaper. 
E)  the dollar will exchange for fewer units of a foreign currency. 
A)  imports to the United States become more expensive for foreigners. 
B)  exports from the United States become more expensive for foreigners. 
C)  imports become more expensive for U.S. citizens. 
D)  exports from the United States become cheaper. 
E)  the dollar will exchange for fewer units of a foreign currency.

Question 4

What are the different types of trade barriers? What are the arguments for trade barriers? What are the consequences of trade barriers?

Accepted Answer

Trade barriers include the use of embarg

Question 5

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(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 6

If nation A has a comparative advantage over nation B in the production of a product, this implies:

Accepted Answer

A)  it requires fewer resources in A to produce the good than in B. 
B)  the cost of producing the good in terms of some other good's production that must be sacrificed is lower in A than in B. 
C)  that nation B could not benefit by engaging in trade with A. 
D)  that nation A should acquire this product by trading with B. 
E)  that nation A could not benefit by engaging in trade with B. 
A)  it requires fewer resources in A to produce the good than in B. 
B)  the cost of producing the good in terms of some other good's production that must be sacrificed is lower in A than in B. 
C)  that nation B could not benefit by engaging in trade with A. 
D)  that nation A should acquire this product by trading with B. 
E)  that nation A could not benefit by engaging in trade with B.

Question 7

Opening trade between two nations would:

Accepted Answer

A)  shift their production possibilities curves outward. 
B)  shift their production possibilities curves inward. 
C)  leave the production possibilities unchanged and increase their consumption possibilities. 
D)  leave the production possibilities unchanged and decreased their consumption possibilities. 
A)  shift their production possibilities curves outward. 
B)  shift their production possibilities curves inward. 
C)  leave the production possibilities unchanged and increase their consumption possibilities. 
D)  leave the production possibilities unchanged and decreased their consumption possibilities.

Question 8

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

Accepted Answer

A)  Foreign producers must be stopped from selling their products in this country below cost of production. 
B)  Domestic workers must be protected from the lower wages paid in foreign countries. 
C)  The nation's security demands we ensure an adequate domestic supply capacity of certain products. 
D)  Do unto others as they do unto you. 
E)  Industries in the early stages of development must be protected from more mature producers. 
A)  Foreign producers must be stopped from selling their products in this country below cost of production. 
B)  Domestic workers must be protected from the lower wages paid in foreign countries. 
C)  The nation's security demands we ensure an adequate domestic supply capacity of certain products. 
D)  Do unto others as they do unto you. 
E)  Industries in the early stages of development must be protected from more mature producers.

Question 9

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

Accepted Answer

A)  an increase in the U.S. inflation rate relative to the rate in Mexico. 
B)  a change in U.S. consumers' tastes away from Mexican products and toward products made in South Korea, India, and Taiwan. 
C)  U.S. buyers perceiving that domestically-produced products are of a lower quality than products made in Mexico. 
D)  all of the above. 
A)  an increase in the U.S. inflation rate relative to the rate in Mexico. 
B)  a change in U.S. consumers' tastes away from Mexican products and toward products made in South Korea, India, and Taiwan. 
C)  U.S. buyers perceiving that domestically-produced products are of a lower quality than products made in Mexico. 
D)  all of the above.

Question 10

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

Accepted Answer

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

Question 11

A tariff differs from a quota in that a tariff is:

Accepted Answer

A)  levied on imports, whereas a quota is imposed on exports. 
B)  levied on exports, whereas a quota is imposed on imports. 
C)  a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D)  a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported. 
A)  levied on imports, whereas a quota is imposed on exports. 
B)  levied on exports, whereas a quota is imposed on imports. 
C)  a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. 
D)  a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Question 12

A limit on the quantity of a good that may be imported in a given time period is called:

Accepted Answer

A)  an embargo. 
B)  a tariff. 
C)  a quota. 
D)  dumping. 
A)  an embargo. 
B)  a tariff. 
C)  a quota. 
D)  dumping.

Question 13

Exhibit 21-6  Dollars per British pound   In Exhibit 21-6, when the exchange rate is 3 dollars per pound,

Accepted Answer

A)  there is an excess supply of 110 pounds. 
B)  there is an excess demand of 110 pounds. 
C)  there is an excess supply of 110 dollars. 
D)  there is an excess demand of 110 dollars. 
E)  the market is in equilibrium. 
A)  there is an excess supply of 110 pounds. 
B)  there is an excess demand of 110 pounds. 
C)  there is an excess supply of 110 dollars. 
D)  there is an excess demand of 110 dollars. 
E)  the market is in equilibrium.

Question 14

If U.S. buyers purchased $500 billion of foreign goods and foreign buyers purchased $400 billion of U.S. goods, the U.S. balance of trade would be:

Accepted Answer

A)  -$100 billion. 
B)  $100 billion. 
C)  $400 billion. 
D)  none of the above. 
A)  -$100 billion. 
B)  $100 billion. 
C)  $400 billion. 
D)  none of the above.

Question 15

An unfavorable 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 16

The primary purpose of WTO is to:

Accepted Answer

A)  protect the United States from cheap foreign labor. 
B)  foster trade among nations. 
C)  promote the dumping of foreign products. 
D)  increase worldwide tariffs. 
E)  form a union of European nations. 
A)  protect the United States from cheap foreign labor. 
B)  foster trade among nations. 
C)  promote the dumping of foreign products. 
D)  increase worldwide tariffs. 
E)  form a union of European nations.

Question 17

A tariff is a tax on ____ goods that is designed to ____.

Accepted Answer

A)  exported; protect domestic industries 
B)  exported; hurt foreign industries 
C)  imported; made domestic consumers pay more 
D)  imported; protect domestic industries 
E)  domestic; discourage imports 
A)  exported; protect domestic industries 
B)  exported; hurt foreign industries 
C)  imported; made domestic consumers pay more 
D)  imported; protect domestic industries 
E)  domestic; discourage imports

Question 18

A depreciation of one's currency means that:

Accepted Answer

A)  the country's exports will become more expensive. 
B)  the country's imports will become more expensive. 
C)  the country's imports will become less expensive. 
D)  it now requires less of this currency in exchange for one unit of another currency. 
E)  it now requires more units of other currencies in exchange for one unit of this currency. 
A)  the country's exports will become more expensive. 
B)  the country's imports will become more expensive. 
C)  the country's imports will become less expensive. 
D)  it now requires less of this currency in exchange for one unit of another currency. 
E)  it now requires more units of other currencies in exchange for one unit of this currency.

Question 19

The principal objective of the is to:

Accepted Answer

A)  reduce the level of all tariffs. 
B)  establish fair prices for all goods traded internationally. 
C)  prevent the trading of services across nations' borders. 
D)  encourage countries to establish quotas. 
A)  reduce the level of all tariffs. 
B)  establish fair prices for all goods traded internationally. 
C)  prevent the trading of services across nations' borders. 
D)  encourage countries to establish quotas.

Question 20

A depreciation in the value of the U.S. dollar would:

Accepted Answer

A)  encourage foreigners to travel on American owned airlines. 
B)  make U.S. goods more expensive to foreign consumers. 
C)  decrease the number of dollars it takes to buy a Swiss franc. 
D)  make it more expensive for U.S. citizens to travel abroad. 
A)  encourage foreigners to travel on American owned airlines. 
B)  make U.S. goods more expensive to foreign consumers. 
C)  decrease the number of dollars it takes to buy a Swiss franc. 
D)  make it more expensive for U.S. citizens to travel abroad.

Exam 21: International Trade and Finance

If one country can produce a good with fewer resources than another country, this is called:

Exhibit 21-6 Dollars per British pound In Exhibit 21-6, when the exchange rate is 1 dollar per pound,

If the dollar appreciates:

What are the different types of trade barriers? What are the arguments for trade barriers? What are the consequences of trade barriers?

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(A) is determined by:

If nation A has a comparative advantage over nation B in the production of a product, this implies:

Opening trade between two nations would:

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

A shift of the U.S. demand curve for Mexican pesos to the left and a decrease in the pesos price per dollar would likely result from:

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

A tariff differs from a quota in that a tariff is:

A limit on the quantity of a good that may be imported in a given time period is called:

Exhibit 21-6 Dollars per British pound In Exhibit 21-6, when the exchange rate is 3 dollars per pound,

If U.S. buyers purchased $500 billion of foreign goods and foreign buyers purchased $400 billion of U.S. goods, the U.S. balance of trade would be:

An unfavorable balance of trade occurs when:

The primary purpose of WTO is to:

A tariff is a tax on ____ goods that is designed to ____.

A depreciation of one's currency means that:

The principal objective of the is to:

A depreciation in the value of the U.S. dollar would:

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

A tariff is a tax on goods that is designed to .