Question 1

Which of the following statements best describes the relationship between the capital and the current account?

Accepted Answer

A)  When the current account is in deficit, so too will be the capital account. 
B)  When the current account is in surplus, so too will be the capital account. 
C)  A current account deficit must be paid for by selling Australian assets to
Foreign interests. 
D)  A current account deficit must be paid for by selling more exports. 
A)  When the current account is in deficit, so too will be the capital account. 
B)  When the current account is in surplus, so too will be the capital account. 
C)  A current account deficit must be paid for by selling Australian assets to
Foreign interests. 
D)  A current account deficit must be paid for by selling more exports.

Question 2

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specialises and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Accepted Answer

A)  people in Portugal will not want to buy as many hats. 
B)  Spain no longer has a comparative advantage in hats. 
C)  Portugal is flooding the market with too many doormats. 
D)  some of the gains from trade shift to Portugal. 
A)  people in Portugal will not want to buy as many hats. 
B)  Spain no longer has a comparative advantage in hats. 
C)  Portugal is flooding the market with too many doormats. 
D)  some of the gains from trade shift to Portugal.

Question 3

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

Question 4

If the US experiences higher inflation relative to Australia, then in the foreign exchange market, ceteris paribus, we would expect:

Accepted Answer

A)  the demand for Australian dollars to shift to the left, causing an appreciation of the Australian dollar. 
B)  the demand for Australian dollars to shift to the left, causing a depreciation of the Australian dollar. 
C)  the supply of Australian dollars to shift to the right, causing a depreciation of the Australian dollar. 
D)  the supply of Australian dollars to shift to the left, causing an appreciation of the Australian dollar. 
A)  the demand for Australian dollars to shift to the left, causing an appreciation of the Australian dollar. 
B)  the demand for Australian dollars to shift to the left, causing a depreciation of the Australian dollar. 
C)  the supply of Australian dollars to shift to the right, causing a depreciation of the Australian dollar. 
D)  the supply of Australian dollars to shift to the left, causing an appreciation of the Australian dollar.

Question 5

Narrbegin Exhibit 18.5 Foreign exchange market for US dollars and British pounds  
-Which of the following could cause the dollar-pound exchange rate to change as shown in Exhibit 18.5?

Accepted Answer

A)  American goods become more popular in Great Britain. 
B)  British incomes rise while US incomes remain unchanged. 
C)  The US price level rises while the British price level remains unchanged. 
D)  The US real interest rate rises while the British real interest rate remains unchanged. 
A)  American goods become more popular in Great Britain. 
B)  British incomes rise while US incomes remain unchanged. 
C)  The US price level rises while the British price level remains unchanged. 
D)  The US real interest rate rises while the British real interest rate remains unchanged.

Question 6

Which of the following would be included in Australia's capital account?

Accepted Answer

A)  The sale of wheat to Britain. 
B)  The purchase of cars from Japan. 
C)  Interest repayments on a loan from a US bank. 
D)  Investors from Papua New Guinea buy a cattle station in Queensland, Australia. 
A)  The sale of wheat to Britain. 
B)  The purchase of cars from Japan. 
C)  Interest repayments on a loan from a US bank. 
D)  Investors from Papua New Guinea buy a cattle station in Queensland, Australia.

Question 7

Suppose a German bank purchases an Australian 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 8

Which of the following groups will benefit least from free trade?

Accepted Answer

A)  Consumers. 
B)  Firms importing capital equipment. 
C)  Exporters. 
D)  Employees producing tariff-protected goods. 
A)  Consumers. 
B)  Firms importing capital equipment. 
C)  Exporters. 
D)  Employees producing tariff-protected goods.

Question 9

A bilateral trade agreement involves:

Accepted Answer

A)  all countries and is overseen by the WTO. 
B)  only two goods, one from each country. 
C)  two countries agreeing to reduce trade barriers. 
D)  two companies agreeing to reduce trade barriers. 
A)  all countries and is overseen by the WTO. 
B)  only two goods, one from each country. 
C)  two countries agreeing to reduce trade barriers. 
D)  two companies agreeing to reduce trade barriers.

Question 10

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

Accepted Answer

A)  a lower standard of living. 
B)  a more expansive consumption possibilities combination. 
C)  a higher standard of living. 
D)  a lower consumption possibilities combination. 
A)  a lower standard of living. 
B)  a more expansive consumption possibilities combination. 
C)  a higher standard of living. 
D)  a lower consumption possibilities combination.

Question 11

Narrbegin Exhibit 18.1 Production possibilities curves   
-In Exhibit 18.1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Pada the cost of producing one more unit of corn is equal to:

Accepted Answer

A)  3 units of corn. 
B)  1/3 unit of wheat. 
C)  3 units of wheat. 
D)  15 units of wheat. 
A)  3 units of corn. 
B)  1/3 unit of wheat. 
C)  3 units of wheat. 
D)  15 units of wheat.

Question 12

Which of the following transactions would be recorded as a credit in the Australian current account?

Accepted Answer

A)  A Japanese bank's purchase of Coles Myer stock. 
B)  A Japanese consumer's purchase of an Australian piece of beef. 
C)  An Australian tourist's payment to a Japanese hotel. 
D)  An Australian consumer's purchase of a Toshiba VCR. 
A)  A Japanese bank's purchase of Coles Myer stock. 
B)  A Japanese consumer's purchase of an Australian piece of beef. 
C)  An Australian tourist's payment to a Japanese hotel. 
D)  An Australian consumer's purchase of a Toshiba VCR.

Question 13

Narrbegin Exhibit 18.1 Production possibilities curves   
-In Exhibit 18.1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. Suppose Nabia produces at point A on its PPF. How many units of wheat is the country able to produce?

Accepted Answer

A) 15. 
B) 60. 
C) 5. 
D)  20. 
A) 15. 
B) 60. 
C) 5. 
D)  20.

Question 14

It is argued that strategic trade may not work because:

Accepted Answer

A)  comparative advantage never changes. 
B)  the government is less successful at 'picking winners' than the private sector. 
C)  comparative advantage is dynamic over time. 
D)  the private sector is less successful at 'picking winners' than the government. 
A)  comparative advantage never changes. 
B)  the government is less successful at 'picking winners' than the private sector. 
C)  comparative advantage is dynamic over time. 
D)  the private sector is less successful at 'picking winners' than the government.

Question 15

Narrbegin Exhibit 18.4 Dollars per British pound
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { demanded }
\end{array} & \begin{array} { c } 
\text { Dollars } \
\text { per pound }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { supplied }
\end{array} \
\hline 200 & 5 & 600 \
\hline 240 & 4 & 480 \
\hline 300 & 3 & 410 \
\hline 360 & 2 & 360 \
\hline 390 & 1 & 330 \
\hline
\end{array}$$ 
-In Exhibit 18.4, when the exchange rate is one dollar per pound:

Accepted Answer

A)  the market is in equilibrium. 
B)  there is a surplus of 30 pounds. 
C)  there is a surplus of 60 pounds. 
D)  there is a shortage of 60 pounds. 
A)  the market is in equilibrium. 
B)  there is a surplus of 30 pounds. 
C)  there is a surplus of 60 pounds. 
D)  there is a shortage of 60 pounds.

Question 16

The theory of comparative advantage suggests:

Accepted Answer

A)  that an industrialised country should not import. 
B)  that a country that is not competitive should import everything. 
C)  that a country specialises according to the opportunity cost. 
D)  that a country specialises according to the absolute cost. 
A)  that an industrialised country should not import. 
B)  that a country that is not competitive should import everything. 
C)  that a country specialises according to the opportunity cost. 
D)  that a country specialises according to the absolute cost.

Question 17

Which of the following are problems with the employment argument for tariff protection?

Accepted Answer

A)  It only protects foreign jobs, not domestic jobs. 
B)  It raises costs to firms, who in turn have higher output and hence higher employment. 
C)  Developed countries can't hope to compete with low-wage nations. 
D)  It reduces demand by consumers, thereby leading to higher unemployment in particular industries. 
A)  It only protects foreign jobs, not domestic jobs. 
B)  It raises costs to firms, who in turn have higher output and hence higher employment. 
C)  Developed countries can't hope to compete with low-wage nations. 
D)  It reduces demand by consumers, thereby leading to higher unemployment in particular industries.

Question 18

Narrbegin Exhibit 18.4 Dollars per British pound
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { demanded }
\end{array} & \begin{array} { c } 
\text { Dollars } \
\text { per pound }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { supplied }
\end{array} \
\hline 200 & 5 & 600 \
\hline 240 & 4 & 480 \
\hline 300 & 3 & 410 \
\hline 360 & 2 & 360 \
\hline 390 & 1 & 330 \
\hline
\end{array}$$ 
-In Exhibit 18.4, when the exchange rate is three 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. 
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.

Question 19

If income in Australia rises while income in the UK remains unchanged, it is likely that:

Accepted Answer

A)  Australia will increase its demand for UK imports, causing a decrease in the equilibrium exchange rate. 
B)  the UK will increase its demand for Australian imports, causing the Australian dollar to depreciate. 
C)  the demand for UK pounds will rise, causing the Australian dollar to appreciate. 
D)  the demand for Australian dollars will rise, causing the Australian dollar to appreciate. 
A)  Australia will increase its demand for UK imports, causing a decrease in the equilibrium exchange rate. 
B)  the UK will increase its demand for Australian imports, causing the Australian dollar to depreciate. 
C)  the demand for UK pounds will rise, causing the Australian dollar to appreciate. 
D)  the demand for Australian dollars will rise, causing the Australian dollar to appreciate.

Question 20

Specialisation and trade can:

Accepted Answer

A)  only be useful if the nation has an absolute advantage in everything. 
B)  be detrimental for all nations. 
C)  only increase the nation's debt. 
D)  help a nation to achieve a higher standard of living. 
A)  only be useful if the nation has an absolute advantage in everything. 
B)  be detrimental for all nations. 
C)  only increase the nation's debt. 
D)  help a nation to achieve a higher standard of living.

Which of the following statements best describes the relationship between the capital and the current account?

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specialises and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Jan, 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 Jan to:

If the US experiences higher inflation relative to Australia, then in the foreign exchange market, ceteris paribus, we would expect:

Narrbegin Exhibit 18.5 Foreign exchange market for US dollars and British pounds -Which of the following could cause the dollar-pound exchange rate to change as shown in Exhibit 18.5?

Which of the following would be included in Australia's capital account?

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

Which of the following groups will benefit least from free trade?

A bilateral trade agreement involves:

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

Narrbegin Exhibit 18.1 Production possibilities curves -In Exhibit 18.1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Pada the cost of producing one more unit of corn is equal to:

Which of the following transactions would be recorded as a credit in the Australian current account?

Narrbegin Exhibit 18.1 Production possibilities curves -In Exhibit 18.1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. Suppose Nabia produces at point A on its PPF. How many units of wheat is the country able to produce?

It is argued that strategic trade may not work because:

Narrbegin Exhibit 18.4 Dollars per British pound Quantity demanded Dollars per pound Quantity supplied 200 5 600 240 4 480 300 3 410 360 2 360 390 1 330 -In Exhibit 18.4, when the exchange rate is one dollar per pound:

The theory of comparative advantage suggests:

Which of the following are problems with the employment argument for tariff protection?

Narrbegin Exhibit 18.4 Dollars per British pound Quantity demanded Dollars per pound Quantity supplied 200 5 600 240 4 480 300 3 410 360 2 360 390 1 330 -In Exhibit 18.4, when the exchange rate is three dollars per pound:

If income in Australia rises while income in the UK remains unchanged, it is likely that:

Specialisation and trade can:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

Filters

Exam 19: International Trade and Finance

Which of the following statements best describes the relationship between the capital and the current account?

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specialises and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Jan, 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 Jan to:

If the US experiences higher inflation relative to Australia, then in the foreign exchange market, ceteris paribus, we would expect:

Narrbegin Exhibit 18.5 Foreign exchange market for US dollars and British pounds -Which of the following could cause the dollar-pound exchange rate to change as shown in Exhibit 18.5?

Which of the following would be included in Australia's capital account?

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

Which of the following groups will benefit least from free trade?

A bilateral trade agreement involves:

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

Narrbegin Exhibit 18.1 Production possibilities curves -In Exhibit 18.1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. In Pada the cost of producing one more unit of corn is equal to:

Which of the following transactions would be recorded as a credit in the Australian current account?

Narrbegin Exhibit 18.1 Production possibilities curves -In Exhibit 18.1, the production possibilities curves of wheat and corn for Nabia and Pada are presented. Suppose Nabia produces at point A on its PPF. How many units of wheat is the country able to produce?

It is argued that strategic trade may not work because:

Narrbegin Exhibit 18.4 Dollars per British pound Quantity demanded Dollars per pound Quantity supplied 200 5 600 240 4 480 300 3 410 360 2 360 390 1 330 -In Exhibit 18.4, when the exchange rate is one dollar per pound:

The theory of comparative advantage suggests:

Which of the following are problems with the employment argument for tariff protection?

Narrbegin Exhibit 18.4 Dollars per British pound Quantity demanded Dollars per pound Quantity supplied 200 5 600 240 4 480 300 3 410 360 2 360 390 1 330 -In Exhibit 18.4, when the exchange rate is three dollars per pound:

If income in Australia rises while income in the UK remains unchanged, it is likely that:

Specialisation and trade can:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

Filters