Question 1

Expenditures for services such as tourism,income for foreign investment,and foreign gifts are tabulated in the:

Accepted Answer

A)  current account. 
B)  capital account. 
C)  official reserve account. 
D)  goods account. 
A)  current account. 
B)  capital account. 
C)  official reserve account. 
D)  goods account. A

Question 2

Which of the following would cause the U.S.demand curve for Japanese yen to shift to the right?

Accepted Answer

A)  An increase in the U.S. inflation rate compared to the rate in Japan. 
B)  A higher real rate of interest on investments in Japan than on investments in the United States. 
C)  The popularity of Japanese products increases in the United States. 
D)  All of the above. 
A)  An increase in the U.S. inflation rate compared to the rate in Japan. 
B)  A higher real rate of interest on investments in Japan than on investments in the United States. 
C)  The popularity of Japanese products increases in the United States. 
D)  All of the above. D

Question 3

Absolute advantage governs the potential for gains from trade.

Accepted Answer

A) True 
 B)False  False

Question 4

Suppose the exchange rate changes so that more Japanese yen are required to buy a dollar.We could conclude that:

Accepted Answer

A)  the Japanese yen has appreciated in value. 
B)  U.S. citizens will buy more Japanese imports. 
C)  Japanese will demand more U.S. exports. 
D)  U.S. citizens will buy less Japanese imports. 
A)  the Japanese yen has appreciated in value. 
B)  U.S. citizens will buy more Japanese imports. 
C)  Japanese will demand more U.S. exports. 
D)  U.S. citizens will buy less Japanese imports.

Question 5

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 6

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

Question 7

An increase in a nation's trade deficit occurs when that nation's exports rise and/or its imports fall.

Accepted Answer

A) True 
 B)False

Question 8

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.

Question 9

A tariff has the effect of:

Accepted Answer

A)  raising the price of the exported product. 
B)  increasing the demand for the exported product. 
C)  increasing the demand for the imported product. 
D)  increasing the supply of the imported product. 
E)  raising the price of the imported product. 
A)  raising the price of the exported product. 
B)  increasing the demand for the exported product. 
C)  increasing the demand for the imported product. 
D)  increasing the supply of the imported product. 
E)  raising the price of the imported product.

Question 10

A tariff will decrease the supply of the product.

Accepted Answer

A) True 
 B)False

Question 11

If it costs the DuPont Chemical Company more to make the chemical flaxinate in the United States than it does to make it in Formosa,the Formosans must have:

Accepted Answer

A)  lower demand for flaxinate. 
B)  tariffs on flaxinate. 
C)  inefficient markets. 
D)  a more favorable political environment. 
E)  an absolute advantage in flaxinate production. 
A)  lower demand for flaxinate. 
B)  tariffs on flaxinate. 
C)  inefficient markets. 
D)  a more favorable political environment. 
E)  an absolute advantage in flaxinate production.

Question 12

The balance of payments ____.

Accepted Answer

A)  b and e 
B)  is always zero 
C)  is positive when the nation runs a trade surplus 
D)  is negative when the nation runs a trade deficit 
E)  is an itemized account of a nation's foreign economic transactions 
A)  b and e 
B)  is always zero 
C)  is positive when the nation runs a trade surplus 
D)  is negative when the nation runs a trade deficit 
E)  is an itemized account of a nation's foreign economic transactions

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Suppose a quota on foreign-made automobiles is proposed in Congress.Which of the following groups is most likely to oppose the bill?

Accepted Answer

A)  American Automobiles Manufacturers. 
B)  Consumers. 
C)  American Steel Workers. 
D)  United Auto Workers. 
A)  American Automobiles Manufacturers. 
B)  Consumers. 
C)  American Steel Workers. 
D)  United Auto Workers.

Question 16

The term "balance of payments" refers to a nation's:

Accepted Answer

A)  goods exports minus imports. 
B)  record of all international transactions. 
C)  capital inflows minus outflows. 
D)  official reserves inflows minus outflows. 
A)  goods exports minus imports. 
B)  record of all international transactions. 
C)  capital inflows minus outflows. 
D)  official reserves inflows minus outflows.

Question 17

The balance of trade is measured by which of the following expressions?

Accepted Answer

A)  The value of exported goods and services minus the value of imported goods and services 
B)  The value of income receipts on investments minus income payments on investments 
C)  The value of goods exports minus the value of goods imports 
D)  The value of government spending minus the value of all taxes received 
E)  The balance on capital account plus the balance on current account 
A)  The value of exported goods and services minus the value of imported goods and services 
B)  The value of income receipts on investments minus income payments on investments 
C)  The value of goods exports minus the value of goods imports 
D)  The value of government spending minus the value of all taxes received 
E)  The balance on capital account plus the balance on current account

Question 18

Which of the following would not be counted in the U.S.BOP current account?

Accepted Answer

A)  Helen, an American oil engineer, is a paid adviser to Middle Eastern countries in the area of petroleum extraction. 
B)  General Motors Corporation owns buildings that are situated in Mexico. 
C)  France purchases a new jet fighter aircraft from the Boeing Company in the U.S. 
D)  Martha receives a $50 dividend check on stock she owns in a business in Germany. 
E)  A wealthy Italian purchases numerous antiques in the United States for his villa. 
A)  Helen, an American oil engineer, is a paid adviser to Middle Eastern countries in the area of petroleum extraction. 
B)  General Motors Corporation owns buildings that are situated in Mexico. 
C)  France purchases a new jet fighter aircraft from the Boeing Company in the U.S. 
D)  Martha receives a $50 dividend check on stock she owns in a business in Germany. 
E)  A wealthy Italian purchases numerous antiques in the United States for his villa.

Question 19

The balance of payments ____.

Accepted Answer

A)  b and e 
B)  is always zero 
C)  with some nations is different than it is with others 
D)  is negative when the nation runs a trade deficit 
E)  can only be expanded when the government has foreign exchange reserves 
A)  b and e 
B)  is always zero 
C)  with some nations is different than it is with others 
D)  is negative when the nation runs a trade deficit 
E)  can only be expanded when the government has foreign exchange reserves

Question 20

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

Exam 21: International Trade and Finance

Expenditures for services such as tourism,income for foreign investment,and foreign gifts are tabulated in the:

Which of the following would cause the U.S.demand curve for Japanese yen to shift to the right?

Absolute advantage governs the potential for gains from trade.

Suppose the exchange rate changes so that more Japanese yen are required to buy a dollar.We could conclude that:

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

Imposing a restrictive quota on imported plasma TVs will:

An increase in a nation's trade deficit occurs when that nation's exports rise and/or its imports fall.

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

A tariff has the effect of:

A tariff will decrease the supply of the product.

If it costs the DuPont Chemical Company more to make the chemical flaxinate in the United States than it does to make it in Formosa,the Formosans must have:

The balance of payments ____.

Persistent negative current account balances will lead to ____.

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

Suppose a quota on foreign-made automobiles is proposed in Congress.Which of the following groups is most likely to oppose the bill?

The term "balance of payments" refers to a nation's:

The balance of trade is measured by which of the following expressions?

Which of the following would not be counted in the U.S.BOP current account?

The balance of payments ____.

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.

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: 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

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Economies in Transition

Growth and the Less-Developed Countries

Filters