Question 1

If foreign exchange rates are determined by the interaction of supply and demand forces for the various currencies,then the exchange rate is:

Accepted Answer

A)  fixed. 
B)  government-determined. 
C)  set by the value of gold. 
D)  floating. 
E)  improper. 
A)  fixed. 
B)  government-determined. 
C)  set by the value of gold. 
D)  floating. 
E)  improper.

Question 2

The U.S.supply curve of dollars is upward-sloping because a:

Accepted Answer

A)  higher number of yen per dollar means Japanese goods are cheaper in Japan. 
B)  higher number of yen per dollar means Japanese goods are cheaper in the U.S. 
C)  lower number of yen per dollar means Japanese goods are cheaper in the U.S. 
D)  none of the above. 
A)  higher number of yen per dollar means Japanese goods are cheaper in Japan. 
B)  higher number of yen per dollar means Japanese goods are cheaper in the U.S. 
C)  lower number of yen per dollar means Japanese goods are cheaper in the U.S. 
D)  none of the above.

Question 3

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 demand 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 4

Juanita,a lawyer,can type faster than Jill,her secretary.Jill,on the other hand,does not have the ability or skills to practice law.Applying the principles of international trade to this situation,an economic consultant advises Juanita to:

Accepted Answer

A)  fire Jill, practice law during the day, and do her own typing at night. 
B)  practice law and leave all the typing to the secretary. 
C)  divide her time equally between typing and practicing law. 
D)  quit practicing law and take a job as a secretary. 
E)  have Jill attend law school. 
A)  fire Jill, practice law during the day, and do her own typing at night. 
B)  practice law and leave all the typing to the secretary. 
C)  divide her time equally between typing and practicing law. 
D)  quit practicing law and take a job as a secretary. 
E)  have Jill attend law school.

Question 5

Which of the following is included in the current account?

Accepted Answer

A)  Net unilateral transfers. 
B)  Goods imports. 
C)  Goods exports. 
D)  All are included in the current account. 
A)  Net unilateral transfers. 
B)  Goods imports. 
C)  Goods exports. 
D)  All are included in the current account.

Question 6

A tariff is a:

Accepted Answer

A)  tax on an exported product. 
B)  limit on the number of goods that can be exported. 
C)  limit on the number of goods that can be imported. 
D)  tax on an imported product. 
E)  subsidy on an imported product. 
A)  tax on an exported product. 
B)  limit on the number of goods that can be exported. 
C)  limit on the number of goods that can be imported. 
D)  tax on an imported product. 
E)  subsidy on an imported product.

Question 7

One big difference between tariffs and quotas is that tariffs:

Accepted Answer

A)  raise the price of a good while quotas lower it. 
B)  generate tax revenues while quotas do not. 
C)  stimulate international trade while quotas inhibit it. 
D)  hurt domestic producers while quotas help them. 
E)  give the same outcome as free trade while quotas do not. 
A)  raise the price of a good while quotas lower it. 
B)  generate tax revenues while quotas do not. 
C)  stimulate international trade while quotas inhibit it. 
D)  hurt domestic producers while quotas help them. 
E)  give the same outcome as free trade while quotas do not.

Question 8

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 demand curve in graph 5(B)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 9

The WTO was:

Accepted Answer

A)  formed shortly after World War II. 
B)  authorized in the American Constitution. 
C)  formed in 1995. 
D)  formed in 1876. 
E)  formed to unify the European continent. 
A)  formed shortly after World War II. 
B)  authorized in the American Constitution. 
C)  formed in 1995. 
D)  formed in 1876. 
E)  formed to unify the European continent.

Question 10

If one U.S.dollar can be exchanged for 5 Swiss francs,then 1 franc can be exchanged for:

Accepted Answer

A)  5 cents. 
B)  20 cents. 
C)  50 cents. 
D)  2 dollars. 
A)  5 cents. 
B)  20 cents. 
C)  50 cents. 
D)  2 dollars.

Question 11

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 12

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

Accepted Answer

A)  goods exports minus imports. 
B)  current account balance. 
C)  capital account balance. 
D)  net balance of all international transactions. 
A)  goods exports minus imports. 
B)  current account balance. 
C)  capital account balance. 
D)  net balance of all international transactions.

Question 13

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 14

A strong U.S.dollar is one that has:

Accepted Answer

A) c and e. 
B) d and e. 
C) depreciated. 
D) appreciated. 
E) helped U.S.exporters. 
A) c and e. 
B) d and e. 
C) depreciated. 
D) appreciated. 
E) helped U.S.exporters.

Question 15

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 16

Purchases of foreign assets by U.S.residents are tabulated in the U.S.balance of payments as a:

Accepted Answer

A)  capital inflow. 
B)  capital outflow. 
C)  current account outflow. 
D)  unilateral transfer. 
A)  capital inflow. 
B)  capital outflow. 
C)  current account outflow. 
D)  unilateral transfer.

Question 17

How is a tariff different from a quota?

Accepted Answer

A)  A tariff sets a limit on the quantity of a good that may be imported, while a quota is a tax on an import. 
B)  A tariff and a quota are different words for the same thing. 
C)  A tariff is a tax on an import, while a quota set a limit on the quantity of a good that may be imported. 
D)  None of the above are correct. 
A)  A tariff sets a limit on the quantity of a good that may be imported, while a quota is a tax on an import. 
B)  A tariff and a quota are different words for the same thing. 
C)  A tariff is a tax on an import, while a quota set a limit on the quantity of a good that may be imported. 
D)  None of the above are correct.

Question 18

Which of the following statements is true?

Accepted Answer

A)  Specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves. 
B)  Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. 
C)  According to the theory of comparative advantage, a nation should specialize in the production of those goods for which it has an absolute advantage. 
D)  All of the above. 
A)  Specialization and trade along the lines of comparative advantage allows nations to consume more than if they were to produce just for themselves. 
B)  Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. 
C)  According to the theory of comparative advantage, a nation should specialize in the production of those goods for which it has an absolute advantage. 
D)  All of the above.

Question 19

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 20

Which of the following would be recorded in the U.S.goods export account?

Accepted Answer

A)  Harry, an American citizen, spends 1,000 francs on vacation in the south of France. 
B)  A machine shop in Ohio purchases a grinder made in Italy. 
C)  Martha receives a $50 dividend check on stock she owns in a business in Germany. 
D)  The U.S. government subsidizes American farmers for planting corn for export. 
E)  France purchases a new jet fighter aircraft from the Boeing Company in the United States. 
A)  Harry, an American citizen, spends 1,000 francs on vacation in the south of France. 
B)  A machine shop in Ohio purchases a grinder made in Italy. 
C)  Martha receives a $50 dividend check on stock she owns in a business in Germany. 
D)  The U.S. government subsidizes American farmers for planting corn for export. 
E)  France purchases a new jet fighter aircraft from the Boeing Company in the United States.

Exam 21: International Trade and Finance

If foreign exchange rates are determined by the interaction of supply and demand forces for the various currencies,then the exchange rate is:

The U.S.supply curve of dollars is upward-sloping because a:

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 demand curve in graph 5(A)is determined by:

Juanita,a lawyer,can type faster than Jill,her secretary.Jill,on the other hand,does not have the ability or skills to practice law.Applying the principles of international trade to this situation,an economic consultant advises Juanita to:

Which of the following is included in the current account?

A tariff is a:

One big difference between tariffs and quotas is that tariffs:

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 demand curve in graph 5(B)is determined by:

The WTO was:

If one U.S.dollar can be exchanged for 5 Swiss francs,then 1 franc can be exchanged for:

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

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

A tariff can be defined as a:

A strong U.S.dollar is one that has:

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

Purchases of foreign assets by U.S.residents are tabulated in the U.S.balance of payments as a:

How is a tariff different from a quota?

Which of the following statements is true?

Opening trade between two nations would:

Which of the following would be recorded in the U.S.goods export account?

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