Question 1

The long-run effect of tariffs is:

Accepted Answer

A)   an increase in domestic employment.
B)   an increase in export businesses.
C)   a reallocation of domestic workers from export industries to protected domestic industries.
D)   a reallocation of consumer spending to imported products over domestically produced products.E) A) and B)
F) A) and C)

Question 2

The infant industry argument for tariffs is criticized:

Accepted Answer

A)   because it is difficult to determine which industries merit protection.
B)   because direct subsidies are probably a better means of stimulating such industries.
C)   because the tariffs may remain after the industry reaches maturity.
D)   for all of these reasons.E) A) and B)
F) B) and C)

Question 3

The expectations of speculators in the United States that the exchange rate for the euro will fall in the future will increase the supply of euros in the foreign exchange market and decrease the exchange rate for the euro.

Accepted Answer

A) True 
 B)False

Question 4

A protective tariff will:

Accepted Answer

A)   increase the sales of foreign exporters.
B)   increase the price and sales of domestic producers.
C)   increase the welfare of domestic consumers.
D)   create an efficiency gain in the domestic economy.E) B) and C)
F) A) and B)

Question 5

Which of the following will generate a demand for country X's currency in the foreign exchange market?

Accepted Answer

A)   Travel by citizens of country X in other countries
B)   The desire of foreigners to buy stocks and bonds of firms in country X
C)   The imports of country X
D)   Charitable contributions by country X's citizens to citizens of developing nationsE) A) and B)
F) None of the above

Question 6

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) All of the above
F) None of the above

Question 7

Depreciation of the dollar will:

Accepted Answer

A)   decrease the prices of both U.S.imports and exports.
B)   increase the prices of both U.S.imports and exports.
C)   decrease the prices of U.S.imports but increase the prices to foreigners of U.S.exports.
D)   increase the prices of U.S.imports but decrease the prices to foreigners of U.S.exports.E) B) and C)
F) A) and C)

Question 8

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. 1/5 of a ton of fish. B)  producing a ton of chips in Beta is 6 tons of fish. C)  catching a ton of fish in Alpha is 5 tons of chips. D)  catching a ton of fish in Beta is 6 tons of chips. In Beta,the ratio is 60 fish = 10 chips,or 6 fish = 1 chip." class="answers-bank-image d-inline" rel="preload" > The domestic opportunity cost of:

Accepted Answer

A)   producing a ton of chips in Alpha is 1/5 of a ton of fish.
B)   producing a ton of chips in Beta is 6 tons of fish.
C)   catching a ton of fish in Alpha is 5 tons of chips.
D)   catching a ton of fish in Beta is 6 tons of chips.In Beta,the ratio is 60 fish = 10 chips,or 6 fish = 1 chip.E) A) and C)
F) B) and C)

Question 9

The number of countries belonging to the World Trade Organization (WTO) ,as of 2011,is about:

Accepted Answer

A)   153.
B)   25.
C)   80.
D)   202.E) A) and B)
F) A) and C)

Question 10

The U.S.supply of Japanese yen is:

Accepted Answer

A)   downsloping because a lower dollar price of yen means U.S.goods are cheaper to the Japanese.
B)   upsloping because a higher dollar price of yen means U.S.goods are cheaper to the Japanese.
C)   upsloping because a lower dollar price of yen means U.S.goods are cheaper to the Japanese.
D)   downsloping because a higher dollar price of yen means U.S.goods are cheaper to the Japanese.E) A) and D)
F) B) and D)

Question 11

Countries A and B produce only rubber bands and paper clips under the production possibilities schedules shown below:  In country A the opportunity cost of 1 paper clip is:

Accepted Answer

A)   2 rubber bands
B)   1 rubber band
C)   ½ rubber band
D)   ¼ rubber bandThe opportunity cost of 1 paper clip = 40/80 = ½ rubber band.E) A) and B)
F) C) and D)

Question 12

Which nation has greatly increased its role in international trade in recent years?

Accepted Answer

A)   Zaire
B)   Iran
C)   Peru
D)   ChinaE) A) and B)
F) All of the above

Question 13

Refer to the above diagrams.Assume that prior to specialization and trade Italy and Greece preferred points I and G on their production possibilities curves.As a result of complete specialization according to comparative advantage,the resulting gains in output will be:

Accepted Answer

A)   5X and 15Y.
B)   10Y.
C)   15X and 5Y.
D)   25X.Italy should solely make product X (50 units) and Greece should solely make product Y (60 units) .Initially,Italy made 25 units of both product X and product Y and Greece made 20 units of both product X and product Y,giving a combined output of 45 units of product X and 45 units of product Y.After specialization,there will be 50 units total of product X and 60 units total of product Y.This is a gain of 5 units of product X and 15 units of product Y.E) C) and D)
F) B) and D)

Question 14

The data embodied in the above diagrams suggest that:

Accepted Answer

A)   Italy should export X and Greece should export Y.
B)   Greece should export X and Italy should export Y.
C)   Production in both countries is subject to increasing costs.
D)   Italy should import both X and Y from Greece.Italy has a comparative advantage in the production of product X because of its lower opportunity cost (1 vs.2) ,while Greece has a comparative advantage in the production of product Y because of its lower opportunity cost (½ vs.2) .Therefore,Italy should export product X and Greece should export product Y.E) None of the above
F) A) and B)

Question 15

In 2010,U.S.exports of services ______ U.S.imports of services by about ____.

Accepted Answer

A)   exceeded;$146B
B)   fell short of;$146B
C)   exceeded;$257B
D)   fell short of;$257BE) A) and D)
F) All of the above

Question 16

The best example of a land-intensive commodity is:

Accepted Answer

A)   tractors.
B)   DVD players.
C)   wheat.
D)   chemicals.E) C) and D)
F) None of the above

Question 17

When a nation has a comparative advantage in producing a product,then in comparison with any other nation it can produce that product:

Accepted Answer

A)   at a lower average total cost.
B)   at a lower domestic opportunity cost.
C)   with less capital.
D)   with less labor.E) B) and D)
F) B) and C)

Question 18

"The nation needs to prevent foreign nations from selling their excess goods in our nation at a price below cost so we can save American firms." This quotation would be most closely associated with which protectionist argument?

Accepted Answer

A)   Increase in domestic employment
B)   Protection against dumping
C)   Strategic trade policy
D)   Cheap foreign laborE) B) and D)
F) B) and C)

Question 19

Relatively high rates of U.S.inflation will increase the supply of,and decrease the demand for,dollars in foreign currency markets.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   depreciate the dollar.
B)   appreciate the dollar.
C)   reduce the equilibrium quantity of euros.
D)   depreciate the euro.E) A) and D)
F) C) and D)

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:

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The U.S.supply of Japanese yen is:

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Countries A and B produce only rubber bands and paper clips under the production possibilities schedules shown below: In country A the opportunity cost of 1 paper clip is:

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Which nation has greatly increased its role in international trade in recent years?

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The long-run effect of tariffs is:

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The number of countries belonging to the World Trade Organization (WTO) ,as of 2011,is about:

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The expectations of speculators in the United States that the exchange rate for the euro will fall in the future will increase the supply of euros in the foreign exchange market and decrease the exchange rate for the euro.

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In 2010,U.S.exports of services ______ U.S.imports of services by about ____.

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Relatively high rates of U.S.inflation will increase the supply of,and decrease the demand for,dollars in foreign currency markets.

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

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When a nation has a comparative advantage in producing a product,then in comparison with any other nation it can produce that product:

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Depreciation of the dollar will:

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Refer to the above diagrams.Assume that prior to specialization and trade Italy and Greece preferred points I and G on their production possibilities curves.As a result of complete specialization according to comparative advantage,the resulting gains in output will be:

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The best example of a land-intensive commodity is:

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"The nation needs to prevent foreign nations from selling their excess goods in our nation at a price below cost so we can save American firms." This quotation would be most closely associated with which protectionist argument?

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Which of the following will generate a demand for country X's currency in the foreign exchange market?

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The data embodied in the above diagrams suggest that:

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A protective tariff will:

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The infant industry argument for tariffs is criticized:

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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. The domestic opportunity cost of:

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In 2010,U.S.exports of services __ U.S.imports of services by about .

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