Question 1

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

Accepted Answer

A)   U.S.firms and workers must be protected from the weak labor laws in nations where wages are low.
B)   All nations cannot simultaneously succeed in restricting imports while maintaining exports.
C)   Strategic trade policy calls for unequal treatment of all trading nations so that they have incentive to compete.
D)   They are needed to protect U.S.workers from unemployment and underemployment.E) All of the above
F) A) and B)

Question 2

If the U.S.dollar appreciates relative to the British pound,then:

Accepted Answer

A)   the pound will appreciate relative to the U.S.dollar.
B)   the pound will depreciate relative to the U.S.dollar.
C)   British goods will be more expensive for Americans.
D)   American goods will be less expensive for the British.E) None of the above
F) B) and D)

Question 3

A trade surplus implies that:

Accepted Answer

A)   exports of goods exceed imports of goods.
B)   imports of goods exceed exports of goods.
C)   exports of services exceed imports of services.
D)   imports of services exceed exports of services.E) B) and C)
F) A) and B)

Question 4

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when:

Accepted Answer

A)   tariffs are eliminated.
B)   transportation costs are almost zero.
C)   relative costs of production differ between nations.
D)   a country can produce more of some product than other nations can.E) A) and B)
F) A) and C)

Question 5

According to the principle of comparative advantage,worldwide output and consumption levels will be highest when goods are produced in nations where:

Accepted Answer

A)   domestic opportunity costs are lowest.
B)   inflation rates are low.
C)   the balance of trade is in a surplus position.
D)   the exchange rate is falling.E) A) and B)
F) B) and C)

Question 6

The principle of comparative advantage is that total output will be greatest when each good is produced by that nation that has the lowest domestic opportunity cost.

Accepted Answer

A) True 
 B)False

Question 7

The U.S.demand for euros is:

Accepted Answer

A)   downsloping because,at lower dollar prices for euros,Americans will want to buy more European goods and services.
B)   downsloping because,at higher dollar prices for euros,Americans will want to buy more European goods and services.
C)   downsloping because the dollar price of euros and the euro price of dollars are directly related.
D)   upsloping because a higher dollar price of euros makes European goods and services more attractive to Americans.E) C) and D)
F) A) and B)

Question 8

China,Singapore,South Korea,and Taiwan account for over 60 percent of the volume of international trade.

Accepted Answer

A) True 
 B)False

Question 9

Which nation has significantly increased its international trade in recent years to become an important trading nation?

Accepted Answer

A)   Algeria
B)   Argentina
C)   China
D)   ColombiaE) A) and C)
F) B) and C)

Question 10

The trade deficits of the United States from 1997-2007 were caused by more rapid economic growth in the United States than economic growth in its trading partners.

Accepted Answer

A) True 
 B)False

Question 11

Consider two countries that trade with each other.The degree of specialization according to their respective comparative advantages will be greater if the countries face:

Accepted Answer

A)   constant costs.
B)   high tariffs.
C)   low unemployment rates.
D)   increasing costs.E) C) and D)
F) None of the above

Question 12

The production possibilities table given below shows how many bushels of either wheat or rice can be produced in India and Canada with 1 unit of input.To achieve gains from specialization:

Accepted Answer

A)   India should export rice to Canada and import Canadian wheat.
B)   India should export wheat to Canada and import Canadian rice.
C)   Canada should produce both wheat and rice and not trade with India.
D)   India should produce both wheat and rice and not trade with Canada.India has a comparative advantage in producing rice (an opportunity cost of 1 vs.2) while Canada has a comparative advantage in producing wheat (an opportunity cost of ½ vs.1) .Therefore,India should export rice and Canada should export wheat.E) A) and B)
F) A) and C)

Question 13

If the equilibrium exchange rate changes so that fewer dollars are needed to buy a South Korean won,then:

Accepted Answer

A)   Americans will buy fewer Korean goods and services.
B)   the won has appreciated in value.
C)   fewer U.S.goods and services will be demanded by the South Koreans.
D)   the dollar has depreciated in value.E) A) and B)
F) All of the above

Question 14

Dumping of goods abroad:

Accepted Answer

A)   constitutes a general case for permanent tariffs.
B)   may be part of a firm's price discrimination strategy.
C)   may be part of a nation's strategy to rectify its trade deficit.
D)   drives up prices of the dumped goods.E) A) and B)
F) All of the above

Question 15

The U.S.demand for British pounds is:

Accepted Answer

A)   downsloping because a higher dollar price of pounds means British goods are cheaper to Americans.
B)   downsloping because a lower dollar price of pounds means British goods are more expensive to Americans.
C)   upsloping because a lower dollar price of pounds means British goods are cheaper to Americans.
D)   downsloping because a lower dollar price of pounds means British goods are cheaper to Americans.E) A) and B)
F) A) and C)

Question 16

In 2010,the trade deficit in goods for the United States was about:

Accepted Answer

A)   $55 billion.
B)   $107 billion.
C)   $455 billion.
D)   $646 billion.E) C) and D)
F) B) and C)

Question 17

A trade deficit refers to an excess of:

Accepted Answer

A)   imports of goods over exports of goods.
B)   Exports of services over imports of services.
C)   total debits over total credits in the capital account.
D)   total payments over total revenues in the current account.E) A) and D)
F) B) and D)

Question 18

The domestic opportunity cost of producing a television in the United States is 20 bushels of wheat.In Korea,the domestic opportunity cost of producing a television is 10 bushels of wheat.In this case:

Accepted Answer

A)   Korea has a comparative advantage in the production of wheat.
B)   the United States has a comparative advantage in the production of televisions.
C)   mutual gains from trade can be obtained if the United States imports televisions from Korea and Korea imports wheat from the United States.
D)   mutual gains from trade can be obtained if the United States imports wheat from Korea and Korea imports televisions from the United States.The United States has a comparative advantage in producing wheat because of its lower opportunity cost (1/20 vs.Korea's opportunity cost of 1/10) ,so Korea should import wheat from the United States.E) A) and C)
F) A) and B)

Question 19

A factor that serves as the economic basis for world trade is the uneven distribution of resources among nations.

Accepted Answer

A) True 
 B)False

Question 20

The terms of trade will favor a larger nation over a smaller nation.

Accepted Answer

A) True 
 B)False

Exam 13: International Trade and Exchange Rates

The terms of trade will favor a larger nation over a smaller nation.

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According to the principle of comparative advantage,worldwide output and consumption levels will be highest when goods are produced in nations where:

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If the equilibrium exchange rate changes so that fewer dollars are needed to buy a South Korean won,then:

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The principle of comparative advantage is that total output will be greatest when each good is produced by that nation that has the lowest domestic opportunity cost.

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Which nation has significantly increased its international trade in recent years to become an important trading nation?

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A trade surplus implies that:

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The principle of comparative advantage indicates that mutually beneficial international trade can take place only when:

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If the U.S.dollar appreciates relative to the British pound,then:

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In 2010,the trade deficit in goods for the United States was about:

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

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China,Singapore,South Korea,and Taiwan account for over 60 percent of the volume of international trade.

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The U.S.demand for British pounds is:

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The trade deficits of the United States from 1997-2007 were caused by more rapid economic growth in the United States than economic growth in its trading partners.

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The production possibilities table given below shows how many bushels of either wheat or rice can be produced in India and Canada with 1 unit of input.To achieve gains from specialization:

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The U.S.demand for euros is:

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A trade deficit refers to an excess of:

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A factor that serves as the economic basis for world trade is the uneven distribution of resources among nations.

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Consider two countries that trade with each other.The degree of specialization according to their respective comparative advantages will be greater if the countries face:

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The domestic opportunity cost of producing a television in the United States is 20 bushels of wheat.In Korea,the domestic opportunity cost of producing a television is 10 bushels of wheat.In this case:

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Dumping of goods abroad:

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