Question 1

Refer to the above diagrams.Which of the following is a feasible rate at which X and Y might be exchanged?

Accepted Answer

A)   1X for 3Y
B)   1X for 1.5Y
C)   1X for 2.5Y
D)   1X for .5YItaly can specialize by making 50 units of product X and Greece can specialize by making 60 units of product Y.This is a ratio of 1X to 1.2Y.Therefore,a feasible rate to exchange X and Y is 1X for 1.5Y.E) None of the above
F) A) and B)

Question 2

Numerous historical examples suggest that free trade promotes economic growth,and that trade protectionism does not.

Accepted Answer

A) True 
 B)False

Question 3

Appreciation of the Canadian dollar will:

Accepted Answer

A)   intensify an existing disequilibrium in Canada' balance of payments.
B)   make Canada's exports less expensive and its imports more expensive.
C)   make Canada's exports more expensive and its imports less expensive.
D)   make Canada's exports and imports both more expensive.E) B) and D)
F) C) and D)

Question 4

The bulk of U.S.exports and imports are with developing nations.

Accepted Answer

A) True 
 B)False  False

Question 5

Which product is a leading export of the United States?

Accepted Answer

A)   Steel
B)   Clothes
C)   Chemicals
D)   PetroleumE) None of the above
F) All of the above

Question 6

Answer the next question on the basis of the following table,which indicates the dollar price of libras,the currency used in the hypothetical nation of Libra.Assume that a system of freely floating exchange rates is in place.  The exchange rate is:

Accepted Answer

A)   4 libras for one dollar.
B)   .25 libra for one dollar.
C)   .40 libra for one dollar.
D)   3 libras for one dollar.At equilibrium,1 libra = $4,so .25 libra = $1.E) None of the above
F) A) and B) B

Question 7

There is a fall in the relative prices of Japanese goods to American goods when the:

Accepted Answer

A)   yen appreciates.
B)   dollar appreciates.
C)   inflation rate in the United States is higher than the inflation rate in Japan,and there are flexible exchange rates.
D)   inflation rate in Japan is higher than the inflation rate in the United States and there are fixed exchange rates.E) A) and D)
F) A) and C)

Question 8

Given the following production possibilities schedules,it can be seen that:

Accepted Answer

A)   Brazil has a comparative advantage in producing wine.
B)   Poland can produce more machines than Brazil.
C)   Brazil has a comparative advantage in producing machines.
D)   Poland can produce more of both goods than Brazil.Brazil has a lower opportunity cost of producing wine,1/3 vs.1,so therefore it has the comparative advantage.E) A) and D)
F) A) and C)

Question 9

The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel.In France,the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel.In this case:

Accepted Answer

A)   France has a comparative advantage in the production of chemicals.
B)   Germany has a comparative advantage in the production of chemicals.
C)   mutual gains from trade can be obtained if Germany imports chemicals from France and France imports steel from Germany.
D)   mutual gains from trade can be obtained if Germany exports steel to France and France exports chemicals to Germany.The opportunity cost of producing chemicals is 1/100 in Germany and 1/50 in France.The country with the comparative advantage,or lowest opportunity cost,is Germany.E) None of the above
F) C) and D)

Question 10

If the exchange rate changes so that more Mexican pesos are required to buy a dollar,then:

Accepted Answer

A)   the peso has appreciated in value.
B)   Americans will buy more Mexican goods and services.
C)   more U.S.goods and services will be demanded by the Mexicans.
D)   the dollar has depreciated in value.E) A) and B)
F) B) and D)

Question 11

Import quotas produce the same amount of revenue for government as protective tariffs.

Accepted Answer

A) True 
 B)False  False

Question 12

Increasing opportunity costs makes specialization among trading nations complete.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following arguments comes closest to constituting a legitimate economic exception to the case for free trade?

Accepted Answer

A)   The increase-domestic-employment argument
B)   The cheap-foreign-labor argument
C)   The diversification-for-stability argument
D)   The infant-industry argumentE) B) and C)
F) B) and D)

Question 14

Which is a likely result of imposing tariffs to increase domestic employment?

Accepted Answer

A)   A decrease in consumer prices
B)   A decrease in the tariff rates of foreign nations
C)   An increase in the number of jobs
D)   An increase in the possibility of retaliatory tariffsE) B) and C)
F) B) and D)

Question 15

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

Accepted Answer

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

Question 16

A market in which the money of one nation is exchanged for the money of another nation is a:

Accepted Answer

A)   resource market.
B)   bond market.
C)   stock market.
D)   foreign exchange market.E) A) and C)
F) A) and B)

Question 17

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

Accepted Answer

A)   They are needed to protect U.S.workers from the dumping of foreign products.
B)   Strategic trade policy calls for equal treatment of all trading nations so that they will have the same competitive conditions.
C)   U.S.firms and workers must be protected from the ruinous competition of nations where wages for workers are low.
D)   Imports may eliminate some U.S.jobs,but they create others,so they may have little or no effect on employment.E) None of the above
F) A) and B)

Question 18

Which organization meets regularly to establish rules related to international trade?

Accepted Answer

A)   The United Nations
B)   The Bank of America
C)   The World Trade Organization
D)   The Federal Reserve BoardE) None of the above
F) A) and C)

Question 19

The increased-domestic-employment argument for tariff protection holds that:

Accepted Answer

A)   domestic inflation is a desirable policy goal because it stimulates exports.
B)   domestic deflation is a desirable policy goal because it stimulates imports.
C)   an increase in tariffs will reduce net exports and stimulate domestic employment.
D)   an increase in tariffs will increase net exports and stimulate domestic employment.E) A) and B)
F) A) and C)

Question 20

What is one of the major shortcomings of using tariffs or quotas to "save American jobs"?

Accepted Answer

A)   Trade barriers protect the development of new technology,but the new technology eliminates jobs.
B)   Import restrictions alter the composition of domestic employment,but they have minimal effect on the amount of domestic employment.
C)   The volume of trade with other nations is limited to a few industries,so trade restrictions would not increase national employment.
D)   Major American firms have produced many products in other countries,and would not hire more domestic labor when trade barriers are imposed.E) A) and D)
F) None of the above

Exam 13: International Trade and Exchange Rates

Refer to the above diagrams.Which of the following is a feasible rate at which X and Y might be exchanged?

Correct AnswerverifiedShow Answer

Numerous historical examples suggest that free trade promotes economic growth,and that trade protectionism does not.

Correct AnswerverifiedShow Answer

Appreciation of the Canadian dollar will:

Correct AnswerverifiedShow Answer

The bulk of U.S.exports and imports are with developing nations.

Correct AnswerverifiedFalse

Which product is a leading export of the United States?

Correct AnswerverifiedShow Answer

Answer the next question on the basis of the following table,which indicates the dollar price of libras,the currency used in the hypothetical nation of Libra.Assume that a system of freely floating exchange rates is in place. The exchange rate is:

Correct AnswerverifiedB

There is a fall in the relative prices of Japanese goods to American goods when the:

Correct AnswerverifiedShow Answer

Given the following production possibilities schedules,it can be seen that:

Correct AnswerverifiedShow Answer

The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel.In France,the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel.In this case:

Correct AnswerverifiedShow Answer

If the exchange rate changes so that more Mexican pesos are required to buy a dollar,then:

Correct AnswerverifiedShow Answer

Import quotas produce the same amount of revenue for government as protective tariffs.

Correct AnswerverifiedFalse

Increasing opportunity costs makes specialization among trading nations complete.

Correct AnswerverifiedShow Answer

Which of the following arguments comes closest to constituting a legitimate economic exception to the case for free trade?

Correct AnswerverifiedShow Answer

Which is a likely result of imposing tariffs to increase domestic employment?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A market in which the money of one nation is exchanged for the money of another nation is a:

Correct AnswerverifiedShow Answer

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

Correct AnswerverifiedShow Answer

Which organization meets regularly to establish rules related to international trade?

Correct AnswerverifiedShow Answer

The increased-domestic-employment argument for tariff protection holds that:

Correct AnswerverifiedShow Answer

What is one of the major shortcomings of using tariffs or quotas to "save American jobs"?

Correct AnswerverifiedShow Answer

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False

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False

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