Question 1

Which of the following statements best describes the relationship between the capital and the current account?

Accepted Answer

A) When the current account is in deficit, so too will be the capital account. 
B) When the current account is in surplus, so too will be the capital account. 
C) A current account deficit must be paid for by selling Australian assets to foreign interests. 
D) A current account deficit must be paid for by selling more exports. 
E) The current account balance must always equal zero. 
A) When the current account is in deficit, so too will be the capital account. 
B) When the current account is in surplus, so too will be the capital account. 
C) A current account deficit must be paid for by selling Australian assets to foreign interests. 
D) A current account deficit must be paid for by selling more exports. 
E) The current account balance must always equal zero.

Question 2

The current account balance on goods and services is:

Accepted Answer

A) the (G - M) component of GDP. 
B) the (C + I) component of GDP. 
C) the (M - X) component of GDP. 
D) the (X - M) component of GDP. 
A) the (G - M) component of GDP. 
B) the (C + I) component of GDP. 
C) the (M - X) component of GDP. 
D) the (X - M) component of GDP.

Question 3

Which of the following statements is true with respect to a tariff on imported cheese?

Accepted Answer

A) It lowers the price of cheese. 
B) It lowers domestic cheese producers' profits. 
C) It creates tax revenues for the government. 
D) It cannot result in retaliation. 
E) It increases the amount of foreign cheese sold. 
A) It lowers the price of cheese. 
B) It lowers domestic cheese producers' profits. 
C) It creates tax revenues for the government. 
D) It cannot result in retaliation. 
E) It increases the amount of foreign cheese sold.

Question 4

The current account balance on goods and services is:

Accepted Answer

A) the (G - M) component of GDP. 
B) the (C + I) component of GDP. 
C) the (M - X) component of GDP. 
D) the (X - M) component of GDP. 
A) the (G - M) component of GDP. 
B) the (C + I) component of GDP. 
C) the (M - X) component of GDP. 
D) the (X - M) component of GDP.

Question 5

If the yen price of dollars falls,then the dollar price of yen rises.

Accepted Answer

A) True 
 B)False

Question 6

A favourable 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 7

An embargo is:

Accepted Answer

A) an ad valorem tariff. 
B) the strongest limit on trade. 
C) a law that allows free trade with another country. 
D) a direct tax on production. 
A) an ad valorem tariff. 
B) the strongest limit on trade. 
C) a law that allows free trade with another country. 
D) a direct tax on production.

Question 8

Free trade agreement between Australia and New Zealand is called:

Accepted Answer

A) Closer Economic Relations or CER. 
B) Creating Economic Relations or CER. 
C) Clever Economic Relations or CER. 
D) Closed Economic Relations or CER. 
A) Closer Economic Relations or CER. 
B) Creating Economic Relations or CER. 
C) Clever Economic Relations or CER. 
D) Closed Economic Relations or CER.

Question 9

Exhibit 18-2 Production possibilities curves for US and Mexico
  
-As shown in Exhibit 18-2,the United States has a comparative advantage over Mexico in:

Accepted Answer

A) wheat but not in cloth. 
B) cloth but not in wheat. 
C) both wheat and cloth. 
D) neither wheat nor cloth 
A) wheat but not in cloth. 
B) cloth but not in wheat. 
C) both wheat and cloth. 
D) neither wheat nor cloth

Question 10

The depreciation of a country's currency implies:

Accepted Answer

A) exports have become more expensive. 
B) imports have become cheaper. 
C) the risk of imported inflation may increase. 
D) import-competing domestic producers will be negatively affected. 
E) the country has high real interest rates relative to other countries. 
A) exports have become more expensive. 
B) imports have become cheaper. 
C) the risk of imported inflation may increase. 
D) import-competing domestic producers will be negatively affected. 
E) the country has high real interest rates relative to other countries.

Question 11

The principal objective of the WTO is to:

Accepted Answer

A) reduce the level of all tariffs. 
B) establish fair prices for all goods traded internationally. 
C) act as the world's police officer to prevent dumping. 
D) prevent the trading of services across nations' borders. 
E) encourage countries to establish quotas. 
A) reduce the level of all tariffs. 
B) establish fair prices for all goods traded internationally. 
C) act as the world's police officer to prevent dumping. 
D) prevent the trading of services across nations' borders. 
E) encourage countries to establish quotas.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 18-5 Foreign exchange market for US dollars and British pounds
  
-Which of the following could cause the dollar-pound exchange rate to change as shown in Exhibit 18-5?

Accepted Answer

A) American goods become more popular in Great Britain. 
B) British incomes rise while US incomes remain unchanged. 
C) The US price level rises while the British price level remains unchanged. 
D) The US real interest rate rises while the British real interest rate remains unchanged. 
A) American goods become more popular in Great Britain. 
B) British incomes rise while US incomes remain unchanged. 
C) The US price level rises while the British price level remains unchanged. 
D) The US real interest rate rises while the British real interest rate remains unchanged.

Question 14

Which of the following would cause the Australian dollar to depreciate against the Japanese yen?

Accepted Answer

A) Greater popularity of Australian exports in Japan. 
B) A higher price level in Japan. 
C) Higher real interest rates in Australia. 
D) Higher incomes in Australia. 
A) Greater popularity of Australian exports in Japan. 
B) A higher price level in Japan. 
C) Higher real interest rates in Australia. 
D) Higher incomes in Australia.

Question 15

A tariff has the effect of granting _____ a larger share of the domestic market.

Accepted Answer

A) domestic consumers 
B) foreign consumers 
C) domestic producers 
D) foreign producers 
E) neither producers or consumers 
A) domestic consumers 
B) foreign consumers 
C) domestic producers 
D) foreign producers 
E) neither producers or consumers

Question 16

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 17

By continually running current account deficits,Australia:

Accepted Answer

A) has been experiencing a lower standard of living than it otherwise might have. 
B) has encouraged continual capital account deficits. 
C) is accumulating more assets overseas than foreign interests accumulate here. 
D) is effectively spending more than it is earning. 
A) has been experiencing a lower standard of living than it otherwise might have. 
B) has encouraged continual capital account deficits. 
C) is accumulating more assets overseas than foreign interests accumulate here. 
D) is effectively spending more than it is earning.

Question 18

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 19

The Australian supply curve of dollars is upward-sloping because:

Accepted Answer

A) a higher number of yen per dollar means Japanese goods are cheaper in Japan. 
B) a higher number of yen per dollar means Japanese goods are cheaper in Australia. 
C) a lower number of yen per dollar means Japanese goods are cheaper in Australia. 
D) Japanese goods cannot be compared to Australian goods. 
A) a higher number of yen per dollar means Japanese goods are cheaper in Japan. 
B) a higher number of yen per dollar means Japanese goods are cheaper in Australia. 
C) a lower number of yen per dollar means Japanese goods are cheaper in Australia. 
D) Japanese goods cannot be compared to Australian goods.

Question 20

It is possible for a nation to have an absolute advantage in the production of a product,but not a comparative advantage in the production of the same product.

Accepted Answer

A) True 
 B)False

Which of the following statements best describes the relationship between the capital and the current account?

The current account balance on goods and services is:

Which of the following statements is true with respect to a tariff on imported cheese?

The current account balance on goods and services is:

If the yen price of dollars falls,then the dollar price of yen rises.

A favourable balance of trade occurs when:

An embargo is:

Free trade agreement between Australia and New Zealand is called:

Exhibit 18-2 Production possibilities curves for US and Mexico -As shown in Exhibit 18-2,the United States has a comparative advantage over Mexico in:

The depreciation of a country's currency implies:

The principal objective of the WTO is to:

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

Exhibit 18-5 Foreign exchange market for US dollars and British pounds -Which of the following could cause the dollar-pound exchange rate to change as shown in Exhibit 18-5?

Which of the following would cause the Australian dollar to depreciate against the Japanese yen?

A tariff has the effect of granting _____ a larger share of the domestic market.

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

By continually running current account deficits,Australia:

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

The Australian supply curve of dollars is upward-sloping because:

It is possible for a nation to have an absolute advantage in the production of a product,but not a comparative advantage in the production of the same product.

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

Applying graphs to economics

Filters

Exam 18: International trade and finance

Which of the following statements best describes the relationship between the capital and the current account?

The current account balance on goods and services is:

Which of the following statements is true with respect to a tariff on imported cheese?

The current account balance on goods and services is:

If the yen price of dollars falls,then the dollar price of yen rises.

A favourable balance of trade occurs when:

An embargo is:

Free trade agreement between Australia and New Zealand is called:

Exhibit 18-2 Production possibilities curves for US and Mexico -As shown in Exhibit 18-2,the United States has a comparative advantage over Mexico in:

The depreciation of a country's currency implies:

The principal objective of the WTO is to:

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

Exhibit 18-5 Foreign exchange market for US dollars and British pounds -Which of the following could cause the dollar-pound exchange rate to change as shown in Exhibit 18-5?

Which of the following would cause the Australian dollar to depreciate against the Japanese yen?

A tariff has the effect of granting _____ a larger share of the domestic market.

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

By continually running current account deficits,Australia:

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

The Australian supply curve of dollars is upward-sloping because:

It is possible for a nation to have an absolute advantage in the production of a product,but not a comparative advantage in the production of the same product.

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

Applying graphs to economics

Filters