Question 1

A country's balance on current account will always equal its balance on capital account.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 21-3 Potatoes and wheat output (tons per day)
  
-In Exhibit 21-3,the United States has a comparative advantage in producing:

Accepted Answer

A)  potatoes. 
B)  wheat. 
C)  both. 
D)  neither. 
A)  potatoes. 
B)  wheat. 
C)  both. 
D)  neither.

Question 3

If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000,the exchange rate is:

Accepted Answer

A)  1,000 yen per dollar. 
B)  1,000 dollars per yen. 
C)  0.001 dollars per yen. 
D)  none of the above. 
A)  1,000 yen per dollar. 
B)  1,000 dollars per yen. 
C)  0.001 dollars per yen. 
D)  none of the above.

Question 4

GATT stands for:

Accepted Answer

A)  Good and Total Trade. 
B)  General Agreement on Tariffs and Trade. 
C)  Greater Agreements Toward Trade. 
D)  Gold and Trade Totals. 
E)  Greater Area Trade Transactions. 
A)  Good and Total Trade. 
B)  General Agreement on Tariffs and Trade. 
C)  Greater Agreements Toward Trade. 
D)  Gold and Trade Totals. 
E)  Greater Area Trade Transactions.

Question 5

A tariff is:

Accepted Answer

A)  a duty that a company must pay its own government on exports. 
B)  the price charged by one country to buyers of a good in another country. 
C)  a price reduction designed to encourage international trade. 
D)  a tax on an import. 
A)  a duty that a company must pay its own government on exports. 
B)  the price charged by one country to buyers of a good in another country. 
C)  a price reduction designed to encourage international trade. 
D)  a tax on an import.

Question 6

The current account in the BOP records:

Accepted Answer

A)  all money flowing between countries. 
B)  a nation's yearly exports and imports of goods and services. 
C)  only the transactions involving capital goods in international trade. 
D)  only the transactions involving consumer goods in international trade. 
E)  only those goods and services purchased on credit in international transactions. 
A)  all money flowing between countries. 
B)  a nation's yearly exports and imports of goods and services. 
C)  only the transactions involving capital goods in international trade. 
D)  only the transactions involving consumer goods in international trade. 
E)  only those goods and services purchased on credit in international transactions.

Question 7

The principal objective of WTO is to:

Accepted Answer

A)  reduce the level of all tariffs. 
B)  establish fair prices for all goods traded internationally. 
C)  prevent the trading of services across nations' borders. 
D)  encourage countries to establish quotas. 
A)  reduce the level of all tariffs. 
B)  establish fair prices for all goods traded internationally. 
C)  prevent the trading of services across nations' borders. 
D)  encourage countries to establish quotas.

Question 8

Which of the following statements is true?

Accepted Answer

A)  A tariff is a physical limit on the quantity of a good allowed to enter a country. 
B)  An embargo is a tax on an imported good. 
C)  A quota is a law that bars trade with another country. 
D)  When a nation exports more than it imports it is running a balance of trade surplus. 
A)  A tariff is a physical limit on the quantity of a good allowed to enter a country. 
B)  An embargo is a tax on an imported good. 
C)  A quota is a law that bars trade with another country. 
D)  When a nation exports more than it imports it is running a balance of trade surplus.

Question 9

Exhibit 21-2 Production possibilities curves for U. S. and Mexico
  
-As shown in Exhibit 21-2,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

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

Accepted Answer

A)  equilibrium quantity of dollars to decrease. 
B)  equilibrium quantity of dollars to increase. 
C)  equilibrium quantity to remain unchanged. 
D)  all of the above. 
A)  equilibrium quantity of dollars to decrease. 
B)  equilibrium quantity of dollars to increase. 
C)  equilibrium quantity to remain unchanged. 
D)  all of the above.

Question 11

A favorable 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 12

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 supply 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 13

Which of the following changes in the exchange rate represents a depreciation of the dollar?

Accepted Answer

A)  100 yen = $1 to 110 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 250 francs = $10 
A)  100 yen = $1 to 110 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 250 francs = $10

Question 14

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

Accepted Answer

A)  Foreign producers must be stopped from selling their products in this country below cost of production. 
B)  Domestic workers must be protected from the lower wages paid in foreign countries. 
C)  The nation's security demands we ensure an adequate domestic supply capacity of certain products. 
D)  Do unto others as they do unto you. 
E)  Industries in the early stages of development must be protected from more mature producers. 
A)  Foreign producers must be stopped from selling their products in this country below cost of production. 
B)  Domestic workers must be protected from the lower wages paid in foreign countries. 
C)  The nation's security demands we ensure an adequate domestic supply capacity of certain products. 
D)  Do unto others as they do unto you. 
E)  Industries in the early stages of development must be protected from more mature producers.

Question 15

Comparative advantage indicates that:

Accepted Answer

A)  specialization and exchange will permit trading partners to maximize their joint consumption. 
B)  a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. 
C)  a nation can gain from trade only when its trading partners are not low-wage countries. 
D)  countries should export products for which they are high-opportunity cost producers. 
A)  specialization and exchange will permit trading partners to maximize their joint consumption. 
B)  a nation can gain from trade only if it is not at an absolute disadvantage in producing all goods. 
C)  a nation can gain from trade only when its trading partners are not low-wage countries. 
D)  countries should export products for which they are high-opportunity cost producers.

Question 16

Which of the following changes in the exchange rate represents an appreciation of the dollar?

Accepted Answer

A)  100 yen = $1 to 90 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 190 francs = $10 
A)  100 yen = $1 to 90 yen = $1 
B)  1 yen = $.10 to 1 yen = $.08 
C)  1 peso = $10 to 1 peso = $11 
D)  200 francs = $10 to 190 francs = $10

Question 17

The theory of comparative advantage suggests that nations should produce a good if they:

Accepted Answer

A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation. 
A)  have the lowest opportunity cost. 
B)  have the lowest wages. 
C)  have the most resources. 
D)  can produce more of the good than any other nation.

Question 18

Trade can increase the consumption possibilities of nations.

Accepted Answer

A) True 
 B)False

Question 19

The account which records a nation's foreign economic transactions is called the

Accepted Answer

A)  Trade Account. 
B)  T account. 
C)  Exchange Market. 
D)  Balance of Payments. 
A)  Trade Account. 
B)  T account. 
C)  Exchange Market. 
D)  Balance of Payments.

Question 20

If free trade is opened between two countries,then one country must gain at the other country's expense.

Accepted Answer

A) True 
 B)False

Exam 21: International Trade and Finance

A country's balance on current account will always equal its balance on capital account.

Exhibit 21-3 Potatoes and wheat output (tons per day) -In Exhibit 21-3,the United States has a comparative advantage in producing:

If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000,the exchange rate is:

GATT stands for:

A tariff is:

The current account in the BOP records:

The principal objective of WTO is to:

Which of the following statements is true?

Exhibit 21-2 Production possibilities curves for U. S. and Mexico -As shown in Exhibit 21-2,the United States has a comparative advantage over Mexico in:

A decrease in the supply of dollars to holders of Mexican pesos would cause the:

A favorable balance of trade occurs when:

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

Which of the following changes in the exchange rate represents a depreciation of the dollar?

Which of the following is an infant-industry argument in favor of restrictions on foreign trade?

Comparative advantage indicates that:

Which of the following changes in the exchange rate represents an appreciation of the dollar?

The theory of comparative advantage suggests that nations should produce a good if they:

Trade can increase the consumption possibilities of nations.

The account which records a nation's foreign economic transactions is called the

If free trade is opened between two countries,then one country must gain at the other country's expense.

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