Question 1

A nation's trade deficit will expand when its:

Accepted Answer

A)  currency appreciates. 
B)  economy is shrinking. 
C)  investment environment is less attractive to foreigners. 
D)  all of the above are true. 
A)  currency appreciates. 
B)  economy is shrinking. 
C)  investment environment is less attractive to foreigners. 
D)  all of the above are true.

Question 2

What are the benefits and costs to a nation that participates in international trade? Do the benefits outweigh the costs or do the costs outweigh the benefits?

Accepted Answer

The benefits to a nation of specializing

Question 3

A weak 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 4

A nation benefits from international trade if it:

Accepted Answer

A)  exports more than it imports. 
B)  imports more than it exports. 
C)  imports goods for which it is a low opportunity cost producer. 
D)  exports goods for which it is a low opportunity cost producer. 
A)  exports more than it imports. 
B)  imports more than it exports. 
C)  imports goods for which it is a low opportunity cost producer. 
D)  exports goods for which it is a low opportunity cost producer.

Question 5

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 6

A depreciation of one's currency means that:

Accepted Answer

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

Question 7

Which of the following is a partially valid economic argument for restricting free trade?

Accepted Answer

A)  Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B)  Removal of restrictions that have existed for years will initially cause inflation. 
C)  Infant industries need permanent protection to develop and gain productive efficiency. 
D)  A nation needs to protect industries that are vital to national defense in case of future international conflict. 
A)  Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B)  Removal of restrictions that have existed for years will initially cause inflation. 
C)  Infant industries need permanent protection to develop and gain productive efficiency. 
D)  A nation needs to protect industries that are vital to national defense in case of future international conflict.

Question 8

If specialization were carried out by each country in Exhibit 21-4 on the basis of comparative advantage,then:

Accepted Answer

A)  Brazil would produce neither coffee nor tea. 
B)  China would produce both coffee and tea. 
C)  Brazil would produce tea and China would produce coffee. 
D)  Brazil would produce coffee and China would produce tea. 
A)  Brazil would produce neither coffee nor tea. 
B)  China would produce both coffee and tea. 
C)  Brazil would produce tea and China would produce coffee. 
D)  Brazil would produce coffee and China would produce tea.

Question 9

What country is our largest trading partner,as measured by exports and imports?

Accepted Answer

A)  Japan. 
B)  The United Kingdom 
C)  China. 
D)  Canada. 
E)  Mexico. 
A)  Japan. 
B)  The United Kingdom 
C)  China. 
D)  Canada. 
E)  Mexico.

Question 10

An itemized account of a nation's foreign economic transactions is its:

Accepted Answer

A)  gross domestic product. 
B)  goods exports. 
C)  goods imports. 
D)  balance of payments. 
E)  foreign exchange reserves. 
A)  gross domestic product. 
B)  goods exports. 
C)  goods imports. 
D)  balance of payments. 
E)  foreign exchange reserves.

Question 11

An increase in inflation in the United States relative to the rate in France would make:

Accepted Answer

A)  U.S. goods relatively less expensive in the United States and in France. 
B)  French goods relatively less expensive in the United States and U.S. goods relatively more expensive in France. 
C)  French goods relatively more expensive in the United States and in France. 
D)  French goods relatively more expensive in the United States and U.S. goods relatively less expensive in France. 
A)  U.S. goods relatively less expensive in the United States and in France. 
B)  French goods relatively less expensive in the United States and U.S. goods relatively more expensive in France. 
C)  French goods relatively more expensive in the United States and in France. 
D)  French goods relatively more expensive in the United States and U.S. goods relatively less expensive in France.

Question 12

The exchange rate is:

Accepted Answer

A)  the rate at which goods will exchange for each other in the international market. 
B)  the number of units of one currency required in exchange for one unit of another currency. 
C)  set by the International Trade Commission. 
D)  established by the ratio of the values of gold to silver. 
E)  set by each individual country. 
A)  the rate at which goods will exchange for each other in the international market. 
B)  the number of units of one currency required in exchange for one unit of another currency. 
C)  set by the International Trade Commission. 
D)  established by the ratio of the values of gold to silver. 
E)  set by each individual country.

Question 13

Tariff rates on products imported into the United States:

Accepted Answer

A)  were prohibited by the Constitution. 
B)  have dropped substantially over the past 50 years. 
C)  reached an all time high in 1996. 
D)  have steadily increased since 1920. 
E)  have never played a big part in U.S. trade policy. 
A)  were prohibited by the Constitution. 
B)  have dropped substantially over the past 50 years. 
C)  reached an all time high in 1996. 
D)  have steadily increased since 1920. 
E)  have never played a big part in U.S. trade policy.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

If Dana can paint his house faster than Luke,a professional house painter,then:

Accepted Answer

A)  Dana has a comparative advantage in house painting. 
B)  Dana has an absolute advantage in house painting. 
C)  Luke has a comparative advantage in house painting. 
D)  Luke has an absolute advantage in house painting. 
E)  Dana should always paint his own house. 
A)  Dana has a comparative advantage in house painting. 
B)  Dana has an absolute advantage in house painting. 
C)  Luke has a comparative advantage in house painting. 
D)  Luke has an absolute advantage in house painting. 
E)  Dana should always paint his own house.

Question 16

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

Question 17

The main explanation for why the cheap foreign labor argument is a poor reason for restricting international trade is that:

Accepted Answer

A)  workers who get paid less tend to have lower productivity than those who get paid more. 
B)  all firms and workers gain when there are no restrictions on international trade. 
C)  infant industries such as steel and automobiles need to be protected. 
D)  specialization and free trade usually raise the prices of all the traded goods, so that the workers can get paid more. 
E)  labor costs tend to be the same worldwide in the long run because of worker mobility. 
A)  workers who get paid less tend to have lower productivity than those who get paid more. 
B)  all firms and workers gain when there are no restrictions on international trade. 
C)  infant industries such as steel and automobiles need to be protected. 
D)  specialization and free trade usually raise the prices of all the traded goods, so that the workers can get paid more. 
E)  labor costs tend to be the same worldwide in the long run because of worker mobility.

Question 18

A nation should specialize in the production of the product for which it has a(n):

Accepted Answer

A)  absolute advantage. 
B)  exchange rate. 
C)  specialization. 
D)  comparative advantage. 
E)  terms of trade. 
A)  absolute advantage. 
B)  exchange rate. 
C)  specialization. 
D)  comparative advantage. 
E)  terms of trade.

Question 19

A limit on the quantity of a good that may be imported in a given time period is called:

Accepted Answer

A)  an embargo. 
B)  a tariff. 
C)  a quota. 
D)  dumping. 
A)  an embargo. 
B)  a tariff. 
C)  a quota. 
D)  dumping.

Question 20

An increase in the real rate of interest that can be earned on U.S.investments above the rate that can be earned on investments in India would:

Accepted Answer

A)  increase the price of the dollar in Indian rupees. 
B)  increase the supply of dollars by those holding U.S. dollars. 
C)  decrease the equilibrium exchange rate of Indian rupees per dollar. 
D)  all of the above. 
A)  increase the price of the dollar in Indian rupees. 
B)  increase the supply of dollars by those holding U.S. dollars. 
C)  decrease the equilibrium exchange rate of Indian rupees per dollar. 
D)  all of the above.

Exam 21: International Trade and Finance

A nation's trade deficit will expand when its:

What are the benefits and costs to a nation that participates in international trade? Do the benefits outweigh the costs or do the costs outweigh the benefits?

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

A nation benefits from international trade if it:

An appreciation of one's currency means that:

A depreciation of one's currency means that:

Which of the following is a partially valid economic argument for restricting free trade?

If specialization were carried out by each country in Exhibit 21-4 on the basis of comparative advantage,then:

What country is our largest trading partner,as measured by exports and imports?

An itemized account of a nation's foreign economic transactions is its:

An increase in inflation in the United States relative to the rate in France would make:

The exchange rate is:

Tariff rates on products imported into the United States:

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

If Dana can paint his house faster than Luke,a professional house painter,then:

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.

The main explanation for why the cheap foreign labor argument is a poor reason for restricting international trade is that:

A nation should specialize in the production of the product for which it has a(n):

A limit on the quantity of a good that may be imported in a given time period is called:

An increase in the real rate of interest that can be earned on U.S.investments above the rate that can be earned on investments in India would:

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