Question 1

The theory of comparative advantage suggests that a(n):

Accepted Answer

A)  industrialized country should not import. 
B)  country that is not competitive should import everything. 
C)  country specialize in producing goods or services for which it has a lower opportunity cost. 
D)  none of the above. 
A)  industrialized country should not import. 
B)  country that is not competitive should import everything. 
C)  country specialize in producing goods or services for which it has a lower opportunity cost. 
D)  none of the above.

Question 2

Who would benefit if the exchange rate with yen (in U.S.dollars)increased?

Accepted Answer

A) c and e. 
B) Japanese tourists. 
C) U.S.consumers. 
D) U.S.exporters. 
E) Japanese exporters. 
A) c and e. 
B) Japanese tourists. 
C) U.S.consumers. 
D) U.S.exporters. 
E) Japanese exporters.

Question 3

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

Accepted Answer

A)  in larger quantities than 
B)  faster than 
C)  that is desired by 
D)  more efficiently than 
E)  only consumed by 
A)  in larger quantities than 
B)  faster than 
C)  that is desired by 
D)  more efficiently than 
E)  only consumed by

Question 4

Flexible,or floating,exchange rate is determined by the:

Accepted Answer

A)  World Bank. 
B)  forces of supply and demand. 
C)  price of gold. 
D)  Federal Reserve. 
A)  World Bank. 
B)  forces of supply and demand. 
C)  price of gold. 
D)  Federal Reserve.

Question 5

Comparative advantage is the ability of a country to produce a good at a(n)____ opportunity cost relative to other countries.

Accepted Answer

A)  higher 
B)  lower 
C)  equivalent 
D)  none of the above 
A)  higher 
B)  lower 
C)  equivalent 
D)  none of the above

Question 6

In terms of production possibilities curves,the benefits of trade between two nations are that each nation moves to a higher:

Accepted Answer

A) standard of living. 
B) consumption possibilities combination. 
C) both a and b. 
D) neither a nor b. 
A) standard of living. 
B) consumption possibilities combination. 
C) both a and b. 
D) neither a nor b.

Question 7

Which of the following is not included in the current account?

Accepted Answer

A)  Exports of goods. 
B)  Imports of goods. 
C)  U.S. capital inflow and outflow. 
D)  Unilateral transfers. 
A)  Exports of goods. 
B)  Imports of goods. 
C)  U.S. capital inflow and outflow. 
D)  Unilateral transfers.

Question 8

If a box of Swiss chocolate priced at 100 francs can be purchased for $50,the exchange rate is:

Accepted Answer

A)  0.50 francs per dollar. 
B)  4.00 francs per dollar. 
C)  0.50 dollars per franc. 
D)  none of the above. 
A)  0.50 francs per dollar. 
B)  4.00 francs per dollar. 
C)  0.50 dollars per franc. 
D)  none of the above.

Question 9

The argument that import restrictions save jobs and promote prosperity fails to recognize that:

Accepted Answer

A)  there are no secondary effects of import restrictions. 
B)  import restrictions will lower prices in the protected industries. 
C)  import restrictions cannot create jobs in any industries. 
D)  U.S. imports provide people in other countries with the dollars power required for the purchase of U.S. exports. 
A)  there are no secondary effects of import restrictions. 
B)  import restrictions will lower prices in the protected industries. 
C)  import restrictions cannot create jobs in any industries. 
D)  U.S. imports provide people in other countries with the dollars power required for the purchase of U.S. exports.

Question 10

A tax levied on imported goods is called a(n):

Accepted Answer

A)  excise tax. 
B)  quota. 
C)  foreign profits tax. 
D)  tariff. 
A)  excise tax. 
B)  quota. 
C)  foreign profits tax. 
D)  tariff.

Question 11

An exchange rate is the number of units of:

Accepted Answer

A)  a nation's money that is equal to one unit of another nation's money. 
B)  a nation's output that is equal to one unit of another nation's output. 
C)  gold backing a nation's money. 
D)  none of the above. 
A)  a nation's money that is equal to one unit of another nation's money. 
B)  a nation's output that is equal to one unit of another nation's output. 
C)  gold backing a nation's money. 
D)  none of the above.

Question 12

Exhibit 21-1 Production possibilities curves
  
-In Exhibit 21-1,the production possibilities curves of wheat and corn for Nabia and Pada are presented.Suppose Pada produces at point B on its PPC.How much corn is the country able to produce?

Accepted Answer

A)  2. 
B)  15. 
C)  10. 
D)  6. 
E)  13. 
A)  2. 
B)  15. 
C)  10. 
D)  6. 
E)  13.

Question 13

Suppose a German bank purchases a U.S.Treasury bond.This transaction would be recorded in the:

Accepted Answer

A)  capital account. 
B)  current account. 
C)  goods trade balance. 
D)  unilateral transfers. 
A)  capital account. 
B)  current account. 
C)  goods trade balance. 
D)  unilateral transfers.

Question 14

Exhibit 21-6 Dollars per British pound
  
-In Exhibit 21-6,when the exchange rate is 3 dollars per pound,

Accepted Answer

A)  there is an excess supply of 110 pounds. 
B)  there is an excess demand of 110 pounds. 
C)  there is an excess supply of 110 dollars. 
D)  there is an excess demand of 110 dollars. 
E)  the market is in equilibrium. 
A)  there is an excess supply of 110 pounds. 
B)  there is an excess demand of 110 pounds. 
C)  there is an excess supply of 110 dollars. 
D)  there is an excess demand of 110 dollars. 
E)  the market is in equilibrium.

Question 15

The nice thing about foreign exchange markets is that the goods are money,and they are paid for with money.This means that if the U.S.dollar ____ the Japanese yen ____.

Accepted Answer

A)  goes down; goes down 
B)  goes up; goes up 
C)  buys more yen; buys more dollars 
D)  buys fewer yen; buys fewer dollars 
E)  buys more yen; buys fewer dollars 
A)  goes down; goes down 
B)  goes up; goes up 
C)  buys more yen; buys more dollars 
D)  buys fewer yen; buys fewer dollars 
E)  buys more yen; buys fewer dollars

Question 16

Which of the following is excluded in the current account?

Accepted Answer

A)  Goods exports. 
B)  Goods imports. 
C)  Capital inflow and outflow. 
D)  Net unilateral transfers. 
A)  Goods exports. 
B)  Goods imports. 
C)  Capital inflow and outflow. 
D)  Net unilateral transfers.

Question 17

Protective tariffs help a nation reach which of the following goals?

Accepted Answer

A)  Decreased domestic consumer prices. 
B)  Increased domestic employment. 
C)  Increased amount of goods for consumers to purchase. 
D)  Increased competition among domestic and foreign producers. 
E)  None of the above. 
A)  Decreased domestic consumer prices. 
B)  Increased domestic employment. 
C)  Increased amount of goods for consumers to purchase. 
D)  Increased competition among domestic and foreign producers. 
E)  None of the above.

Question 18

Exhibit 21-3 Potatoes and wheat output (tons per day)
  
-In Exhibit 21-3,Ireland's opportunity cost of producing one unit of wheat is:

Accepted Answer

A) 1/3 ton of potatoes. 
B) 3 tons of potatoes. 
C) either a or b. 
D) neither a nor b. 
A) 1/3 ton of potatoes. 
B) 3 tons of potatoes. 
C) either a or b. 
D) neither a nor b.

Question 19

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(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 20

With the benefits of international trade:

Accepted Answer

A)  there can be increased consumption for all. 
B)  global production will be increased. 
C)  world resources will be used more efficiently. 
D)  all of the above are true. 
A)  there can be increased consumption for all. 
B)  global production will be increased. 
C)  world resources will be used more efficiently. 
D)  all of the above are true.

Exam 21: International Trade and Finance

The theory of comparative advantage suggests that a(n):

Who would benefit if the exchange rate with yen (in U.S.dollars)increased?

Absolute advantage occurs when one nation can produce a good ____ its trading partners.

Flexible,or floating,exchange rate is determined by the:

Comparative advantage is the ability of a country to produce a good at a(n)____ opportunity cost relative to other countries.

In terms of production possibilities curves,the benefits of trade between two nations are that each nation moves to a higher:

Which of the following is not included in the current account?

If a box of Swiss chocolate priced at 100 francs can be purchased for $50,the exchange rate is:

The argument that import restrictions save jobs and promote prosperity fails to recognize that:

A tax levied on imported goods is called a(n):

An exchange rate is the number of units of:

Exhibit 21-1 Production possibilities curves -In Exhibit 21-1,the production possibilities curves of wheat and corn for Nabia and Pada are presented.Suppose Pada produces at point B on its PPC.How much corn is the country able to produce?

Suppose a German bank purchases a U.S.Treasury bond.This transaction would be recorded in the:

Exhibit 21-6 Dollars per British pound -In Exhibit 21-6,when the exchange rate is 3 dollars per pound,

The nice thing about foreign exchange markets is that the goods are money,and they are paid for with money.This means that if the U.S.dollar ____ the Japanese yen ____.

Which of the following is excluded in the current account?

Protective tariffs help a nation reach which of the following goals?

Exhibit 21-3 Potatoes and wheat output (tons per day) -In Exhibit 21-3,Ireland's opportunity cost of producing one unit of wheat is:

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(B)is determined by:

With the benefits of international trade:

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

The nice thing about foreign exchange markets is that the goods are money,and they are paid for with money.This means that if the U.S.dollar the Japanese yen .