Question 1

Since World War II, tariff reductions have occurred in large part because of negotiations under the:

Accepted Answer

A)  Industry and Trade Administration Act.
B)  Employment Act.
C)  Monetary Control Act.
D)  General Agreement on Tariffs and Trade.E) A) and B)
F) None of the above

Question 2

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 these.E) A) and B)
F) A) and D)

Question 3

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.E) A) and B)
F) All of the above

Question 4

Exhibit 15-5 International currency markets  Exhibit 15-5 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The demand curve in graph 15-5(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.F) C) and D)
G) B) and E)

Question 5

Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds  Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 15-7?

Accepted Answer

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

Question 6

A weaker dollar will stimulate sales of U.S. exports.

Accepted Answer

A) True 
 B)False

Question 7

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.F) All of the above
G) A) and C)

Question 8

Without trade, the consumption possibilities for two nations are:

Accepted Answer

A)  outside their production possibilities curve.
B)  inside their production possibilities curve.
C)  along their production possibilities curve.
D)  at a point equal to the world production possibilities curve.E) B) and C)
F) None of the above

Question 9

Exhibit 15-3 Potatoes and wheat output (tons per day)   In Exhibit 15-3, the United States has a comparative advantage in producing:

Accepted Answer

A)  potatoes.
B)  wheat.
C)  both.
D)  neither.E) A) and C)
F) None of the above

Question 10

An increase in the price level in Japan relative to the price level in the United States will shift the demand curve for dollars leftward and the dollar depreciates or becomes weaker.

Accepted Answer

A) True 
 B)False

Question 11

A favorable balance of trade occurs when:

Accepted Answer

A)  goods exports are greater than goods imports.
B)  goods imports are greater than goods exports.
C)  international trade is an increasing share of total output.
D)  the balance on capital account equals the balance on current account.
E)  unilateral transfers are positive.F) D) and E)
G) None of the above

Question 12

The average National Basketball Association player is over 6 feet tall. The average horse jockey is shorter than 5 1\2 feet tall. This is because height provides NBA players with:

Accepted Answer

A)  d and e.
B)  an absolute advantage for horse racing.
C)  an absolute disadvantage for other sports in general.
D)  a comparative disadvantage in horse racing.
E)  a comparative advantage in basketball.F) A) and D)
G) All of the above

Question 13

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.E) All of the above
F) C) and D)

Question 14

An unfavorable 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 .F) A) and E)
G) B) and E)

Question 15

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.F) C) and D)
G) A) and D)

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 = $10E) C) and D)
F) B) and C)

Question 17

When Brazil can generate a product using fewer labor hours and resources than the United States, an economist would say that Brazil had:

Accepted Answer

A)  a comparative advantage in production of the product.
B)  an absolute advantage in production of the product.
C)  a higher opportunity cost of producing the product.
D)  no incentive to import the product, regardless of the cost-price conditions for other products.E) B) and C)
F) All of the above

Question 18

If it costs the DuPont Chemical Company more to make the chemical flaxinate in the United States than it does to make it in Formosa, the Formosans must have:

Accepted Answer

A)  lower demand for flaxinate.
B)  tariffs on flaxinate.
C)  inefficient markets.
D)  a more favorable political environment.
E)  an absolute advantage in flaxinate production.F) B) and C)
G) D) and E)

Question 19

What are the different types of trade barriers? What are the arguments for trade barriers? What are the consequences of trade barriers?

Accepted Answer

Trade barriers include the use of embarg...

Question 20

Persistent negative current account balances will lead to ____.

Accepted Answer

A)  c and d
B)  d and e
C)  budget deficits
D)  appreciation of foreign currency
E)  depreciation of domestic currencyF) A) and B)
G) A) and C)

Exam 18: International Trade and Finance

When Brazil can generate a product using fewer labor hours and resources than the United States, an economist would say that Brazil had:

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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:

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Exhibit 15-7 Foreign exchange market for U.S. dollars and British pounds Which of the following could cause the dollar-pound exchange rates to change as shown in Exhibit 15-7?

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A favorable balance of trade occurs when:

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Persistent negative current account balances will lead to ____.

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A weaker dollar will stimulate sales of U.S. exports.

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Without trade, the consumption possibilities for two nations are:

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Tariff rates on products imported into the United States:

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If it costs the DuPont Chemical Company more to make the chemical flaxinate in the United States than it does to make it in Formosa, the Formosans must have:

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What are the different types of trade barriers? What are the arguments for trade barriers? What are the consequences of trade barriers?

Correct AnswerverifiedTrade barriers include the use of embarg...View AnswerShow Answer

Since World War II, tariff reductions have occurred in large part because of negotiations under the:

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Exhibit 15-5 International currency markets Exhibit 15-5 displays the international currency market for yen in terms of dollars and dollars in terms of yen. The demand curve in graph 15-5(A) is determined by:

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Exhibit 15-3 Potatoes and wheat output (tons per day) In Exhibit 15-3, the United States has a comparative advantage in producing:

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

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The average National Basketball Association player is over 6 feet tall. The average horse jockey is shorter than 5 1\2 feet tall. This is because height provides NBA players with:

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An increase in the price level in Japan relative to the price level in the United States will shift the demand curve for dollars leftward and the dollar depreciates or becomes weaker.

Correct AnswerverifiedShow Answer

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

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How is a tariff different from a quota?

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The exchange rate is:

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An unfavorable balance of trade occurs when:

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Trade barriers include the use of embarg...
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