Question 1

A tariff can be defined as a:

Accepted Answer

A)  tax on imports. 
B)  tax on exports. 
C)  legal limit on imports. 
D)  legal limit on exports. 
A)  tax on imports. 
B)  tax on exports. 
C)  legal limit on imports. 
D)  legal limit on exports.

Question 2

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

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)  nation B could not benefit by engaging in trade with A. 
D)  nation A should acquire this product by trading with B. 
E)  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)  nation B could not benefit by engaging in trade with A. 
D)  nation A should acquire this product by trading with B. 
E)  nation A could not benefit by engaging in trade with B.

Question 3

If one dollar exchanges for 20 Thailand baht, then:

Accepted Answer

A)  a baht is worth $20. 
B)  $20 will exchange for one baht. 
C)  a baht is worth $2. 
D)  the United States and Thailand would not engage in trade. 
E)  a baht is worth a nickel. 
A)  a baht is worth $20. 
B)  $20 will exchange for one baht. 
C)  a baht is worth $2. 
D)  the United States and Thailand would not engage in trade. 
E)  a baht is worth a nickel.

Question 4

Persistent negative current account balances will lead to ____.

Accepted Answer

A)  c and d 
B)  d and e 
C)  budget deficits 
D)  appreciation of foreign currency 
E)  depreciation of domestic currency 
A)  c and d 
B)  d and e 
C)  budget deficits 
D)  appreciation of foreign currency 
E)  depreciation of domestic currency

Question 5

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

Accepted Answer

A)  The domestic price of shoes would fall. 
B)  The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. 
C)  The number of unemployed workers in the domestic shoe industry would decline. 
D)  The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations. 
A)  The domestic price of shoes would fall. 
B)  The supply of foreign shoes to the domestic market would decline, causing shoe prices to rise. 
C)  The number of unemployed workers in the domestic shoe industry would decline. 
D)  The demand for foreign-produced shoes would decrease, causing the price of shoes to increase in other nations.

Question 6

A country that has a lower opportunity cost of producing a good:

Accepted Answer

A)  has a comparative advantage. 
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 a comparative advantage. 
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 7

The account which records a nation's foreign economic transactions is called the

Accepted Answer

A)  Trade Account. 
B)  T account. 
C)  Exchange Market. 
D)  Balance of Payments. 
A)  Trade Account. 
B)  T account. 
C)  Exchange Market. 
D)  Balance of Payments.

Question 8

An appreciation in the U.S. dollar benefits which of the following groups of people?

Accepted Answer

A)  All people living in the United States 
B)  U.S. producers who export farm equipment to other countries 
C)  U.S. consumers who buy imported automobiles 
D)  Foreigners who wish to travel to the United States 
E)  U.S. consumers who buy only goods made entirely in the United States 
A)  All people living in the United States 
B)  U.S. producers who export farm equipment to other countries 
C)  U.S. consumers who buy imported automobiles 
D)  Foreigners who wish to travel to the United States 
E)  U.S. consumers who buy only goods made entirely in the United States

Question 9

A favorable balance of trade occurs when:

Accepted Answer

A)  goods exports are greater than goods imports. 
B)  goods imports are greater than goods exports. 
C)  international trade is an increasing share of total output. 
D)  the balance on capital account equals the balance on current account. 
E)  unilateral transfers are positive. 
A)  goods exports are greater than goods imports. 
B)  goods imports are greater than goods exports. 
C)  international trade is an increasing share of total output. 
D)  the balance on capital account equals the balance on current account. 
E)  unilateral transfers are positive.

Question 10

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n):

Accepted Answer

A)  increase in the general level of prices in Japan. 
B)  increase in the U.S. demand for domestically-built automobiles. 
C)  decrease in the U.S. income relative to the income in Japan. 
D)  increase in the supply of dollars on the foreign market. 
A)  increase in the general level of prices in Japan. 
B)  increase in the U.S. demand for domestically-built automobiles. 
C)  decrease in the U.S. income relative to the income in Japan. 
D)  increase in the supply of dollars on the foreign market.

Question 11

Discuss the determinants of a nation's exchange rate value for its currency in foreign exchange markets. What happens to a nation's balance of trade if the nation's currency appreciates? Why?

Accepted Answer

A nation's exchange rate value is determ

Question 12

The current account balance tabulates the value of a country's exports of goods and services minus the value of its imports of goods and services.

Accepted Answer

A) True 
 B)False

Question 13

If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that would mean that Canadians would have to spend ____ to buy a $12 watch in New York City.

Accepted Answer

A)  c and e 
B)  10 U.S. dollars 
C)  12 U.S. dollars 
D)  14.4 U.S. dollars 
E)  14.4 Canadian dollars 
A)  c and e 
B)  10 U.S. dollars 
C)  12 U.S. dollars 
D)  14.4 U.S. dollars 
E)  14.4 Canadian dollars

Question 14

A tax on an imported good is called:

Accepted Answer

A)  an export. 
B)  dumping. 
C)  a quota. 
D)  a tariff. 
E)  free trade. 
A)  an export. 
B)  dumping. 
C)  a quota. 
D)  a tariff. 
E)  free trade.

Question 15

In terms of production possibilities curves, the benefits of trade between two nations are that each nation moves to a higher:

Accepted Answer

A)  standard of living. 
B)  consumption possibilities combination. 
C)  both a and b. 
D)  neither a nor b. 
A)  standard of living. 
B)  consumption possibilities combination. 
C)  both a and b. 
D)  neither a nor b.

Question 16

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

Accepted Answer

A)  equilibrium quantity of dollars to decrease. 
B)  equilibrium quantity of dollars to increase. 
C)  equilibrium quantity to remain unchanged. 
D)  all of the above. 
A)  equilibrium quantity of dollars to decrease. 
B)  equilibrium quantity of dollars to increase. 
C)  equilibrium quantity to remain unchanged. 
D)  all of the above.

Question 17

If the U.S. dollar appreciates relative to the British pound, then we pay fewer dollars for a pound.

Accepted Answer

A) True 
 B)False

Question 18

An appreciation of one's currency means that:

Accepted Answer

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

Question 19

Which of the following provides the foundation of the case for free trade?

Accepted Answer

A)  The law of diminishing marginal utility 
B)  The anti-dumping argument 
C)  The industrial diversity argument 
D)  The theory of comparative advantage 
A)  The law of diminishing marginal utility 
B)  The anti-dumping argument 
C)  The industrial diversity argument 
D)  The theory of comparative advantage

Question 20

The argument that import restrictions save jobs and promote prosperity fails to recognize that:

Accepted Answer

A)  there are no secondary effects of import restrictions. 
B)  import restrictions will lower prices in the protected industries. 
C)  import restrictions cannot create jobs in any industries. 
D)  U.S. imports provide people in other countries with the dollars power required for the purchase of U.S. exports. 
A)  there are no secondary effects of import restrictions. 
B)  import restrictions will lower prices in the protected industries. 
C)  import restrictions cannot create jobs in any industries. 
D)  U.S. imports provide people in other countries with the dollars power required for the purchase of U.S. exports.

Exam 21: International Trade and Finance

A tariff can be defined as a:

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

If one dollar exchanges for 20 Thailand baht, then:

Persistent negative current account balances will lead to ____.

Which of the following would be expected if the tariff on foreign-produced shoes were decreased?

A country that has a lower opportunity cost of producing a good:

The account which records a nation's foreign economic transactions is called the

An appreciation in the U.S. dollar benefits which of the following groups of people?

A favorable balance of trade occurs when:

An increase in the equilibrium price of Japanese yen per dollar could be caused by a(n):

Discuss the determinants of a nation's exchange rate value for its currency in foreign exchange markets. What happens to a nation's balance of trade if the nation's currency appreciates? Why?

The current account balance tabulates the value of a country's exports of goods and services minus the value of its imports of goods and services.

If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that would mean that Canadians would have to spend ____ to buy a $12 watch in New York City.

A tax on an imported good is called:

In terms of production possibilities curves, the benefits of trade between two nations are that each nation moves to a higher:

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

If the U.S. dollar appreciates relative to the British pound, then we pay fewer dollars for a pound.

An appreciation of one's currency means that:

Which of the following provides the foundation of the case for free trade?

The argument that import restrictions save jobs and promote prosperity fails to recognize that:

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