Question 1

Other things equal,economists would prefer:

Accepted Answer

A)   free trade to tariffs and tariffs to import quotas.
B)   free trade to import quotas and import quotas to tariffs.
C)   import quotas to tariffs and tariffs to voluntary export restrictions.
D)   import quotas to free trade and free trade to tariffs.E) All of the above
F) B) and D)

Question 2

If the dollar price of the yen rises,then:

Accepted Answer

A)   the yen price of dollars also rises.
B)   the dollar depreciates relative to the yen.
C)   the yen depreciates relative to the dollar.
D)   the dollar will buy fewer U.S.goods.E) C) and D)
F) B) and D)

Question 3

The following are hypothetical exchange rates: 2 euros = 1 pound;$1 = 2 pounds.We can conclude that:

Accepted Answer

A)   $1 = 4 euros.
B)   $1 = .5 euro.
C)   1 euro = $.50.
D)   1 euro = $2.Since $1 = 2 pounds,1 pound = $1/2 = $.50.Substituting into the first equation: 2 euros = $.50,so 4 euros = $1 (2 * 2 = $.50 * 2) .E) None of the above
F) All of the above

Question 4

Which is a valid counterargument to the infant industry argument for protective tariffs?

Accepted Answer

A)   It results in too many benefits for domestic firms that export goods and services.
B)   It is difficult to determine which infant industries will become mature industries with a comparative advantage.
C)   The objective would be better achieved through strategic trade policy.
D)   The objective would be better achieved by import quotas and nontariff barriers.E) A) and B)
F) A) and C)

Question 5

Nation Alpha has a comparative advantage in product X and nation Beta has a comparative advantage in product Y.Trade in the two products will only benefit the two nations if:

Accepted Answer

A)   the exchange ratio of X for Y is fixed.
B)   the terms of trade increase in both nations.
C)   there is excess capacity in both economies.
D)   the prices charged for X and Y reflect their domestic opportunity costs.E) None of the above
F) B) and D)

Question 6

Suppose the world economy is composed of just two countries: A and B.Each can produce steel or chemicals but at different levels of economic efficiency.The domestic production possibilities curves are shown in the graphs below.  Refer to the above graphs and information.The assumption made about the domestic opportunity costs in countries A and B is that they are:

Accepted Answer

A)   constant.
B)   variable.
C)   increasing.
D)   decreasing.E) A) and C)
F) All of the above

Question 7

Answer the next question on the basis of the following production possibilities data for two countries,Alpha and Beta,which have populations of equal size.  Suppose that before specialization and trade Alpha chose production alternative C and Beta chose production alternative B.After specialization and trade the gains will be:

Accepted Answer

A)   20 tons of fish.
B)   20 tons of chips.
C)   20 tons of fish and 20 tons of chips.
D)   240 tons of fish and 20 tons of chips.Before specialization,total output of fish was 220 (40 + 180) and total output of chips was 20 (10 + 10) .After specialization,Beta will produce only fish (240 tons) and Alpha will produce only chips (20 tons) .This is a net gain of 20 tons of fish and no change in the amount of chips.E) None of the above
F) C) and D)

Question 8

If a Japanese importer could buy $1000 U.S.for 122,000 yen,the rate of exchange for one dollar would be:

Accepted Answer

A)   112 yen.
B)   122 yen.
C)   1220 yen.
D)   12,200 yen.Since $1000 = 122,000 yen,$1 = 122,000/1000 = 122 yen.E) All of the above
F) C) and D)

Question 9

If there is no comparative advantage between two countries:

Accepted Answer

A)   one country must be more productive in producing all goods than the other.
B)   the benefits resulting from trade are increased.
C)   there are no gains from specialization and trade.
D)   each country should specialize in the production of a particular commodity.E) B) and D)
F) B) and C)

Question 10

The following diagram is a flexible exchange market for foreign currency:  Other things equal,a leftward shift of the demand curve would:

Accepted Answer

A)   depreciate the dollar.
B)   appreciate the euro.
C)   reduce the equilibrium quantity of euros.
D)   cause a shortage of euros.E) A) and D)
F) None of the above

Question 11

One of the causes of the trade deficits of the late 1990s has been a declining saving rate in the United States.

Accepted Answer

A) True 
 B)False

Question 12

The following diagram is a flexible exchange market for foreign currency:  At the price $.80 for one euro:

Accepted Answer

A)   the quantity of euros demanded equals the quantity supplied.
B)   the dollar-euro exchange rate is unstable.
C)   the dollar price of one euro equals the euro price of one dollar.
D)   there will be a surplus of euros in the foreign exchange market.E) B) and C)
F) B) and D)

Question 13

Comparative advantage can result from different climates,natural resource endowments,and capital stocks in various countries.

Accepted Answer

A) True 
 B)False

Question 14

If a nation has a balance of payments deficit and exchange rates are flexible,the price of that nation's currency in the foreign exchange markets will rise.

Accepted Answer

A) True 
 B)False

Question 15

Autos and chemicals are in units of one million 1/6 vs.1/3) .So,Germany should produce autos and the United States should produce chemicals.Initially,combined output is 14 autos and 60 chemicals.After specialization,output will be 20 autos (from Germany) and 60 chemicals (from the United States) .This is a net gain of 6 autos with no increase in chemicals." class="answers-bank-image d-inline" rel="preload" > Refer to the above tables.Assume that prior to specialization and trade Germany and the C.Now if each specializes according to its comparative advantage,the resulting total gains from specialization and trade will be: United States both choose production possibility

Accepted Answer

A)   8 units of autos.
B)   6 units of autos.
C)   6 units of autos and 8 units of chemicals.
D)   8 units of autos and 6 units of chemicals.Germany has the comparative advantage in autos because of the lower opportunity cost (3 vs.6) ,while the United States has the comparative advantage in chemicals because of the lower opportunity cost (1/6 vs.1/3) .So,Germany should produce autos and the United States should produce chemicals.Initially,combined output is 14 autos and 60 chemicals.After specialization,output will be 20 autos (from Germany) and 60 chemicals (from the United States) .This is a net gain of 6 autos with no increase in chemicals.E) None of the above
F) A) and D)

Question 16

The organization created to oversee the provisions of multilateral trade agreements,resolve disputes under the international trade rules,and meet periodically to consider further trade liberalization is called the:

Accepted Answer

A)   International Monetary Fund (IMF) .
B)   World Trade Organization (WTO) .
C)   Common Market Organization (CMO) .
D)   International Trade Commission (IT
C)  .E) B) and D)
F) All of the above

Question 17

In a two-country model,equilibrium world prices and equilibrium quantities of exports and imports occur where one nation's export supply curve intersects the other nation's import demand curve.

Accepted Answer

A) True 
 B)False

Question 18

If an American can purchase 40,000 British pounds for $90,000,the dollar rate of exchange for the pound is:

Accepted Answer

A)   $1.40.
B)   $2.00.
C)   $2.25.
D)   $6.00.The dollar rate of exchange is the value of a pound in terms of dollars.Since 40,000 pounds = $90,000,1 pound = $90,000/40,000 = $2.25.E) B) and C)
F) None of the above

Question 19

A major goal of the World Trade Organization is to:

Accepted Answer

A)   increase the protection of producers against foreign trade competition.
B)   encourage bilateral trade agreements between nations.
C)   liberalize international trade among nations.
D)   maximize tariff revenue for governments.E) All of the above
F) B) and C)

Question 20

Dumping is the sale of a product in a foreign market:

Accepted Answer

A)   at a price below its domestic price or cost of production.
B)   that does not meet the quality standards in the domestic market.
C)   and is the principal means used to enforce nontariff barriers.
D)   and is encouraged by voluntary export restraints.E) A) and B)
F) A) and C)

Exam 13: International Trade and Exchange Rates

The organization created to oversee the provisions of multilateral trade agreements,resolve disputes under the international trade rules,and meet periodically to consider further trade liberalization is called the:

Correct Answer
verified

Nation Alpha has a comparative advantage in product X and nation Beta has a comparative advantage in product Y.Trade in the two products will only benefit the two nations if:

Correct Answer
verified

The following diagram is a flexible exchange market for foreign currency: Other things equal,a leftward shift of the demand curve would:

Correct Answer
verified

If a Japanese importer could buy $1000 U.S.for 122,000 yen,the rate of exchange for one dollar would be:

Correct Answer
verified

In a two-country model,equilibrium world prices and equilibrium quantities of exports and imports occur where one nation's export supply curve intersects the other nation's import demand curve.

Correct Answer
verified

A major goal of the World Trade Organization is to:

Correct Answer
verified

Dumping is the sale of a product in a foreign market:

Correct Answer
verified

If an American can purchase 40,000 British pounds for $90,000,the dollar rate of exchange for the pound is:

Correct Answer
verified

If there is no comparative advantage between two countries:

Correct Answer
verified

Correct Answer
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Correct Answer
verified

If a nation has a balance of payments deficit and exchange rates are flexible,the price of that nation's currency in the foreign exchange markets will rise.

Correct Answer
verified

The following diagram is a flexible exchange market for foreign currency: At the price $.80 for one euro:

Correct Answer
verified

Other things equal,economists would prefer:

Correct Answer
verified

Comparative advantage can result from different climates,natural resource endowments,and capital stocks in various countries.

Correct Answer
verified

Which is a valid counterargument to the infant industry argument for protective tariffs?

Correct Answer
verified

The following are hypothetical exchange rates: 2 euros = 1 pound;$1 = 2 pounds.We can conclude that:

Correct Answer
verified

If the dollar price of the yen rises,then:

Correct Answer
verified

Correct Answer
verified

One of the causes of the trade deficits of the late 1990s has been a declining saving rate in the United States.

Correct Answer
verified

Exam 13: International Trade and Exchange Rates

The organization created to oversee the provisions of multilateral trade agreements,resolve disputes under the international trade rules,and meet periodically to consider further trade liberalization is called the:

Correct AnswerverifiedShow Answer

Nation Alpha has a comparative advantage in product X and nation Beta has a comparative advantage in product Y.Trade in the two products will only benefit the two nations if:

Correct AnswerverifiedShow Answer

The following diagram is a flexible exchange market for foreign currency: Other things equal,a leftward shift of the demand curve would:

Correct AnswerverifiedShow Answer

If a Japanese importer could buy $1000 U.S.for 122,000 yen,the rate of exchange for one dollar would be:

Correct AnswerverifiedShow Answer

In a two-country model,equilibrium world prices and equilibrium quantities of exports and imports occur where one nation's export supply curve intersects the other nation's import demand curve.

Correct AnswerverifiedShow Answer

A major goal of the World Trade Organization is to:

Correct AnswerverifiedShow Answer

Dumping is the sale of a product in a foreign market:

Correct AnswerverifiedShow Answer

If an American can purchase 40,000 British pounds for $90,000,the dollar rate of exchange for the pound is:

Correct AnswerverifiedShow Answer

If there is no comparative advantage between two countries:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a nation has a balance of payments deficit and exchange rates are flexible,the price of that nation's currency in the foreign exchange markets will rise.

Correct AnswerverifiedShow Answer

The following diagram is a flexible exchange market for foreign currency: At the price $.80 for one euro:

Correct AnswerverifiedShow Answer

Other things equal,economists would prefer:

Correct AnswerverifiedShow Answer

Comparative advantage can result from different climates,natural resource endowments,and capital stocks in various countries.

Correct AnswerverifiedShow Answer

Which is a valid counterargument to the infant industry argument for protective tariffs?

Correct AnswerverifiedShow Answer

The following are hypothetical exchange rates: 2 euros = 1 pound;$1 = 2 pounds.We can conclude that:

Correct AnswerverifiedShow Answer

If the dollar price of the yen rises,then:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One of the causes of the trade deficits of the late 1990s has been a declining saving rate in the United States.

Correct AnswerverifiedShow Answer

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