Question 1

If the current account and capital account are both in surplus,the official reserve account does not have to be in deficit.

Accepted Answer

A) True 
 B)False

Question 2

If Japan has a current account surplus,then it must:

Accepted Answer

A) have an offsetting capital account deficit. 
B) also have a surplus in its capital account. 
C) import more goods than it exports. 
D) have a positive balance of payments. 
A) have an offsetting capital account deficit. 
B) also have a surplus in its capital account. 
C) import more goods than it exports. 
D) have a positive balance of payments.

Question 3

It is argued that strategic trade may not work because:

Accepted Answer

A) comparative advantage never changes. 
B) the government is less successful at 'picking winners' than the private sector. 
C) comparative advantage is dynamic over time. 
D) the private sector is less successful at 'picking winners' than the government. 
A) comparative advantage never changes. 
B) the government is less successful at 'picking winners' than the private sector. 
C) comparative advantage is dynamic over time. 
D) the private sector is less successful at 'picking winners' than the government.

Question 4

A bilateral trade agreement involves:

Accepted Answer

A) all countries and is overseen by the WTO. 
B) only two goods, one from each country. 
C) two countries agreeing to reduce trade barriers. 
D) two companies agreeing to reduce trade barriers. 
A) all countries and is overseen by the WTO. 
B) only two goods, one from each country. 
C) two countries agreeing to reduce trade barriers. 
D) two companies agreeing to reduce trade barriers.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would not be counted in the Australian BOP current account?

Accepted Answer

A) Helen, an Australian oil engineer, is a paid adviser to Middle Eastern countries in the area of petroleum extraction. 
B) BHP owns buildings that are situated in Mexico. 
C) France purchases a new ferry from a company in Tasmania. 
D) John receives a $50 dividend cheque on stock he owns in a business in Germany. 
E) A wealthy Italian purchases numerous antiques in Australia for her villa. 
A) Helen, an Australian oil engineer, is a paid adviser to Middle Eastern countries in the area of petroleum extraction. 
B) BHP owns buildings that are situated in Mexico. 
C) France purchases a new ferry from a company in Tasmania. 
D) John receives a $50 dividend cheque on stock he owns in a business in Germany. 
E) A wealthy Italian purchases numerous antiques in Australia for her villa.

Question 7

If Australia has a current account deficit,then:

Accepted Answer

A) we must sell more exports to pay for it. 
B) we will have a capital account surplus of the same amount. 
C) we must buy more assets overseas. 
D) the capital account will also be in deficit. 
A) we must sell more exports to pay for it. 
B) we will have a capital account surplus of the same amount. 
C) we must buy more assets overseas. 
D) the capital account will also be in deficit.

Question 8

Assume that the opportunity cost of producing wheat is lower in Australia compared with Malaysia.Further assume that the opportunity cost of producing cars is higher in Australia compared with Malaysia.Which country has a comparative advantage in producing cars?

Accepted Answer

A) Australia and Malaysia. 
B) Australia. 
C) Malaysia. 
D) Both countries have to specialise in producing wheat. 
A) Australia and Malaysia. 
B) Australia. 
C) Malaysia. 
D) Both countries have to specialise in producing wheat.

Question 9

Specialisation and trade can:

Accepted Answer

A) only be useful if the nation has an absolute advantage in everything. 
B) be detrimental for all nations. 
C) only increase the nation's debt. 
D) help a nation to achieve a higher standard of living. 
A) only be useful if the nation has an absolute advantage in everything. 
B) be detrimental for all nations. 
C) only increase the nation's debt. 
D) help a nation to achieve a higher standard of living.

Question 10

The infant industry argument is based on:

Accepted Answer

A) the idea that competitive pressure from established foreign firms would encourage the infant industry's prospects for future growth. 
B) the idea that failure to shelter these infant industries tends to lead to political instability. 
C) the idea that small firms must be protected. 
D) the idea that the industry is not yet ready to compete with established foreign competitors. 
A) the idea that competitive pressure from established foreign firms would encourage the infant industry's prospects for future growth. 
B) the idea that failure to shelter these infant industries tends to lead to political instability. 
C) the idea that small firms must be protected. 
D) the idea that the industry is not yet ready to compete with established foreign competitors.

Question 11

In a two-good,two-country world,a country has a comparative advantage in any good for which it has a:

Accepted Answer

A) lower absolute cost than the other country. 
B) lower opportunity cost than the other country. 
C) higher absolute cost than the other country. 
D) higher opportunity cost than the other country. 
A) lower absolute cost than the other country. 
B) lower opportunity cost than the other country. 
C) higher absolute cost than the other country. 
D) higher opportunity cost than the other country.

Question 12

The Reserve Bank of Australia buys and sells currencies to:

Accepted Answer

A) prevent large swings in the exchange rate and to smooth the excessive fluctuations in the exchange rate. 
B) prevent large swings in the exchange rate and to reverse any changes in the exchange rate. 
C) bring the market to the desired equilibrium. 
D) allow large swings in the exchange rate and to smooth the excessive fluctuations in the exchange rate. 
A) prevent large swings in the exchange rate and to smooth the excessive fluctuations in the exchange rate. 
B) prevent large swings in the exchange rate and to reverse any changes in the exchange rate. 
C) bring the market to the desired equilibrium. 
D) allow large swings in the exchange rate and to smooth the excessive fluctuations in the exchange rate.

Question 13

A country is said to have an absolute advantage in the production of a good when:

Accepted Answer

A) its opportunity cost of producing the good is lower than another country. 
B) it can produce the good using less resources than another country. 
C) it specialises in the production of the good. 
D) its opportunity cost of producing the good is higher than another country. 
A) its opportunity cost of producing the good is lower than another country. 
B) it can produce the good using less resources than another country. 
C) it specialises in the production of the good. 
D) its opportunity cost of producing the good is higher than another country.

Question 14

Which of the following statements is true?

Accepted Answer

A) Comparative advantage is the ability of a country to produce goods and services at lower opportunity costs than another country. 
B) Free trade theory suggests that when trade takes place any gains made by one nation come at the expense of another. 
C) According to the theory of comparative advantage, a nation should specialise in the production of those goods for which it has an absolute advantage. 
D) Countries should only trade in goods and services they have an absolute advantage producing. 
A) Comparative advantage is the ability of a country to produce goods and services at lower opportunity costs than another country. 
B) Free trade theory suggests that when trade takes place any gains made by one nation come at the expense of another. 
C) According to the theory of comparative advantage, a nation should specialise in the production of those goods for which it has an absolute advantage. 
D) Countries should only trade in goods and services they have an absolute advantage producing.

Question 15

When a nation totally bans trade with another country,it is imposing:

Accepted Answer

A) free trade. 
B) an embargo. 
C) a quota. 
D) a tariff. 
A) free trade. 
B) an embargo. 
C) a quota. 
D) a tariff.

Question 16

Which of the following are expressed concerns over regional trade agreements?

Accepted Answer

A) They will ultimately have no real economic benefits. 
B) It may make future multilateral agreements more difficult. 
C) Some countries will gain, but many will lose. 
D) They never involve the world's major trading nations. 
A) They will ultimately have no real economic benefits. 
B) It may make future multilateral agreements more difficult. 
C) Some countries will gain, but many will lose. 
D) They never involve the world's major trading nations.

Question 17

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 specialises 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 18

If a nation follows a policy of being self-sufficient,its:

Accepted Answer

A) production possibilities equal its consumption possibilities. 
B) consumption possibilities are greater than its production possibilities. 
C) production possibilities curve shifts rightward. 
D) consumption possibilities are less than its production possibilities. 
A) production possibilities equal its consumption possibilities. 
B) consumption possibilities are greater than its production possibilities. 
C) production possibilities curve shifts rightward. 
D) consumption possibilities are less than its production possibilities.

Question 19

Strategic trade theory refers to the idea that governments should be using the game theory advances to facilitate the free trade.

Accepted Answer

A) True 
 B)False

Question 20

If the Australian dollar depreciates,the effect of this is likely to be:

Accepted Answer

A) exports will be more expensive. 
B) imports will be cheaper. 
C) import-competing domestic goods will be relatively expensive. 
D) 'imported inflation' may become a problem. 
A) exports will be more expensive. 
B) imports will be cheaper. 
C) import-competing domestic goods will be relatively expensive. 
D) 'imported inflation' may become a problem.

If the current account and capital account are both in surplus,the official reserve account does not have to be in deficit.

If Japan has a current account surplus,then it must:

It is argued that strategic trade may not work because:

A bilateral trade agreement involves:

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

Which of the following would not be counted in the Australian BOP current account?

If Australia has a current account deficit,then:

Assume that the opportunity cost of producing wheat is lower in Australia compared with Malaysia.Further assume that the opportunity cost of producing cars is higher in Australia compared with Malaysia.Which country has a comparative advantage in producing cars?

Specialisation and trade can:

The infant industry argument is based on:

In a two-good,two-country world,a country has a comparative advantage in any good for which it has a:

The Reserve Bank of Australia buys and sells currencies to:

A country is said to have an absolute advantage in the production of a good when:

Which of the following statements is true?

When a nation totally bans trade with another country,it is imposing:

Which of the following are expressed concerns over regional trade agreements?

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 specialises and then trades with the other.If the price starts at four hats per doormat,and then increases to five hats per doormat,then:

If a nation follows a policy of being self-sufficient,its:

Strategic trade theory refers to the idea that governments should be using the game theory advances to facilitate the free trade.

If the Australian dollar depreciates,the effect of this is likely to be:

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

If the current account and capital account are both in surplus,the official reserve account does not have to be in deficit.

If Japan has a current account surplus,then it must:

It is argued that strategic trade may not work because:

A bilateral trade agreement involves:

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

Which of the following would not be counted in the Australian BOP current account?

If Australia has a current account deficit,then:

Assume that the opportunity cost of producing wheat is lower in Australia compared with Malaysia.Further assume that the opportunity cost of producing cars is higher in Australia compared with Malaysia.Which country has a comparative advantage in producing cars?

Specialisation and trade can:

The infant industry argument is based on:

In a two-good,two-country world,a country has a comparative advantage in any good for which it has a:

The Reserve Bank of Australia buys and sells currencies to:

A country is said to have an absolute advantage in the production of a good when:

Which of the following statements is true?

When a nation totally bans trade with another country,it is imposing:

Which of the following are expressed concerns over regional trade agreements?

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 specialises and then trades with the other.If the price starts at four hats per doormat,and then increases to five hats per doormat,then:

If a nation follows a policy of being self-sufficient,its:

Strategic trade theory refers to the idea that governments should be using the game theory advances to facilitate the free trade.

If the Australian dollar depreciates,the effect of this is likely to be:

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