QUESTION 1
The term “balance of trade” refers to a nation’s:
goods exports minus imports.
current account balance.
capital account balance.
net balance of all international transactions.
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QUESTION 2
A tariff can be defined as a:
tax on imports.
tax on exports.
legal limit on imports.
legal limit on exports.
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QUESTION 3
Trade can increase the consumption possibilities of nations.
True
False
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QUESTION 4
If a box of Swiss chocolate priced at 100 francs can be
purchased for $50, the exchange rate is:
0.50 francs per dollar.
4.00 francs per dollar.
0.50 dollars per franc.
none of the above.
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QUESTION 5
A tax on an imported good is called:
an export.
dumping.
a quota.
a tariff.
free trade.
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QUESTION 6
Trade between nations A and B:
leaves the production possibilities of nation A unchanged.
leaves the production possibilities of nation B unchanged.
increases the consumption possibilities of both nations.
All of the above are true.
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QUESTION 7
If people’s incomes decrease, their demand for other
currencies shifts to the right.
True
False
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QUESTION 8
Which of the following would cause the U.S. dollar to
depreciate against the Japanese yen?
Greater popularity of U.S. exports in Japan.
A higher price level in Japan.
Higher real interest rates in the United States.
Higher incomes in the United States.
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QUESTION 9
An itemized account of a nation’s foreign economic
transactions is its:
gross domestic product.
goods exports.
goods imports.
balance of payments.
foreign exchange reserves.
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QUESTION 10
A tariff is a:
tax on an exported product.
limit on the number of goods that can be exported.
limit on the number of goods that can be imported.
tax on an imported product.
subsidy on an imported product.
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QUESTION 11
Who would benefit if the exchange rate with yen (in U.S.
dollars) increased?
c and e.
Japanese tourists.
U.S. consumers.
U.S. exporters.
Japanese exporters.
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QUESTION 12
A favorable balance of trade occurs when:
goods exports are greater than goods imports.
goods imports are greater than goods exports.
international trade is an increasing share of total output.
the balance on capital account equals the balance on current
account.
unilateral transfers are positive.
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QUESTION 13
If India has an absolute advantage in rug production when
compared to England, then:
India should export rugs to England.
England should export rugs to India.
international trade should not occur.
England uses fewer resources to produce rugs than India.
India uses fewer resources to produce rugs than England.
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QUESTION 14
If one country can produce a good with fewer resources than
another country, this is called:
specialization.
geographic advantage.
comparative advantage.
absolute advantage.
free trade.
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QUESTION 15
Which of the following would cause the supply of dollars
curve in the United States to shift to the right?
Japanese imports become less popular.
The value of the dollar falls.
The supply of dollars decreases.
Japanese imports became more popular.
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QUESTION 16
The exchange rate is the:
value of money.
quantity of dollars, yen, etc. that are traded.
amount of a foreign currency that is brought back to the
United States by tourists.
number of units of your currency that it takes to buy one
unit of a foreign currency.
number of units of a foreign currency that can be bought
with one unit of your own currency.
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QUESTION 17
Exhibit 21-3 Potatoes
and wheat output (tons per day)
Country
Potatoes
Wheat
United States
4
2
Ireland
3
1
In Exhibit 21-3, Ireland’s opportunity cost of producing one
unit of wheat is:
1/3 ton of potatoes.
3 tons of potatoes.
either a or b.
neither a nor b.
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QUESTION 18
A tariff will decrease the supply of the product.
True
False
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QUESTION 19
Exhibit 21-6 Dollars
per British pound
Quantity
Demanded
Dollars
per Pound
Quantity
Supplied
200
5
600
240
4
480
300
3
410
360
2
360
390
1
330
In Exhibit 21-6, when the exchange rate is 1 dollar per
pound,
the market is in equilibrium.
there is a surplus of 30 pounds.
there is a surplus of 60 pounds.
there is a shortage of 30 pounds.
there is a shortage of 60 pounds.
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QUESTION 20
A weaker dollar will stimulate sales of U.S. exports.
True
False