Osiecki IB International Economics

D

. Refer to the above data. What are the limits of the terms of trade between Gamma and Sigma? A. 1 tea = 2 pots to 1 tea = 6 pots B. 1 tea = 3 pots to 1 tea = 6 pots C. 1 tea = 2 pots to 1 tea = 3.5 pots D. 1 tea = 1 pot to 1 tea = 3 pots

C

. Suppose interest rates fall sharply in the United States but are unchanged in Great Britain. Other things equal, under a system of freely floating exchange rates we can expect the demand for pounds in the United States to: A. decrease, the supply of pounds to increase, and the dollar to appreciate relative to the pound. B. increase, the supply of pounds to increase, and the dollar may either appreciate or depreciate relative to the pound. C. increase, the supply of pounds to decrease, and the dollar to depreciate relative to the pound. D. decrease, the supply of pounds to increase, and the dollar to depreciate relative to the pound.

A

A deficit on the current account: A. normally causes a surplus on the capital and financial account. B. normally causes a deficit on the capital and financial account. C. has no relationship to the capital and financial account. D. means that a nation is making international transfers.

C

A nation's capital and financial account: A. contains inpayment items, but not outpayment items. B. includes service exports and service imports. C. includes both inpayments and outpayments. D. includes net investment income and net transfers.

A

A nation's official reserves: A. compensates for differences in the current and capital and financial accounts. B. consist of all domestic and foreign currency held by a nation's central bank. C. is always zero. D. is always negative.

A

A tariff can best be described as: A. an excise tax on an imported good. B. a government payment to domestic producers to enable them to sell competitively in world markets. C. an excise tax on an exported good. D. a law that sets a limit on the amount of a good that can be imported.

C

Appreciation of the Canadian dollar will: A. intensify an existing disequilibrium in Canada's 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.

B

As it relates to international trade, dumping: A. is a form of price discrimination illegal under U.S. antitrust laws. B. is the practice of selling goods in a foreign market at less than cost. C. constitutes a general case for permanent tariffs. D. is defined as selling more goods than allowed by an import quota.

B

Assume that Brazil and Mexico have floating exchange rates. Other things unchanged, if the price level is stable in Mexico but Brazil experiences rapid inflation: A. gold bullion will flow into Brazil. B. the Brazilian real will depreciate. C. the Mexican peso will depreciate. D. the Brazilian real will appreciate.

B

Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that: A. the terms of trade will be 3X equals 1Y. B. Alpha should specialize in Y and Beta in X. C. Alpha should specialize in X and Beta in Y. D. there is no basis for mutually beneficial specialization and trade.

C

Assume that, under a system of floating exchange rates, Mexicans decide to increase their investments in the United States. As a result: A. the peso and the dollar will both depreciate. B. the peso and the dollar will both appreciate. C. the peso will depreciate and the dollar will appreciate. D. the peso will appreciate and the dollar will depreciate.

C

Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n): A. protective tariff. B. export subsidy. C. import quota. D. voluntary export restriction.

D

Depreciation of the dollar will: 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.

D

Free trade based on comparative advantage is economically beneficial because: A. it promotes an efficient allocation of world resources. B. it increases competition. C. it provides consumers with a wider range of products. D. of all of these reasons.

B

If a U.S. importer can purchase 10,000 pounds for $20,000, the rate of exchange is: A. $1 = 2 pounds in the United States. B. $2 = 1 pound in the United States. C. $1 = 2 pounds in Great Britain. D. $.5 = 1 pound in Great Britain.

A

If a nation has a current account deficit and it does not have to make any inpayments or outpayments of official reserves, it must have a: A. surplus in its capital and financial account. B. balance of payments deficit. C. balance of payments surplus. D. deficit in its capital and financial account.

A

If a nation's goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with certainty that this nation has a: A. balance of trade (goods) surplus. B. balance of payments surplus. C. positive balance on current account. D. positive balance on goods and services

C

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

B

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

D

In a nation's balance of payments, which one of the following items is always recorded as a positive entry? A. goods imports B. changes in foreign currency reserves C. U.S. purchases of assets abroad D. exports of services

D

In saying that the present system of floating exchange rates is managed we mean that: A. countries that allow their exchange rate to move freely will lose their borrowing privileges with the IMF. B. the value of any IMF member's currency can only vary 2 percent from its par value. C. IMF officials determine exchange rates on a day-to-day basis. D. the central banks of various countries sometimes buy and sell foreign exchange to alter undesirable trends in exchange rates.

A

In the U.S. balance of payments, U.S. purchases of assets abroad are a(n): A. U.S. dollar outflow. B. U.S. dollar inflow. C. current account item. D. inpayment.

B

In the U.S. balance of payments, foreign purchases of assets in the United States are a: A. foreign currency outflow. B. foreign currency inflow. C. current account item. D. debit, or outpayment.

C

In the balance of payments of the United States, U.S. goods imports are recorded as a: A. positive entry. B. capital account entry. C. current account entry. D. official reserves entry.

C

In the past, Canada has agreed to set an upper limit on the total amount of softwood lumber sold to the United States. This is an example of a(n): A. import quota. B. export subsidy. C. voluntary export restriction. D. protective tariff.

B

In the theory of comparative advantage, a good should be produced in that nation where: A. the production possibilities line lies further to the right than the trading possibilities line. B. its cost is least in terms of alternative goods that might otherwise be produced. C. its absolute cost in terms of real resources used is least. D. its absolute money cost of production is least.

C

On the basis of the above information: A. Gamma should export both tea and pots to Sigma. B. Sigma should export tea to Gamma and Gamma should export pots to Sigma. C. Gamma should export tea to Sigma and Sigma should export pots to Gamma. D. Gamma should export tea to Sigma, but it will not be profitable for the two nations to exchange pots.

D

Purchases of land in the United States by people from Canada create a: A. supply of U.S. dollars and a demand for Canadian dollars. B. both a supply of U.S. dollars and a demand for U.S. dollars. C. demand for Canadian dollars and a demand for U.S. dollars. D. demand for U.S. dollars and a supply of Canadian dollars.

B

The terms of trade reflect the: A. rate at which gold exchanges internationally for any domestic currency. B. ratio at which nations will exchange two goods. C. fact that the gains from trade will be equally divided. D. cost conditions embodied in a single country's production possibilities curve.

D

Refer to the above diagram where D and S are the United States' demand for and supply of Swiss francs. At the equilibrium exchange rate, E, the United States' balance of payments is in equilibrium. Under a system of flexible exchange rates, the shift in demand from D to D' will: A. ultimately reduce U.S. exports and raise U.S. imports. B. cause the dollar to appreciate. C. cause the Swiss franc to depreciate. D. cause the dollar to depreciate.

D

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. If the economy is opened to free trade, the price and quantity sold of this product would be: A. Pc and v. B. Pa and z. C. Pt and y. D. Pc and z.

B

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. If this economy was entirely closed to international trade, equilibrium price and quantity would be: A. Pa and z. B. Pa and x. C. Pc and z. D. Pc and v.

C

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per unit tariff in the amount PcPt, price and total quantity sold will be: A. Pt and x. B. Pc and z. C. Pt and y. D. Pa and x.

C

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per unit tariff of PcPt, the total amount of tariff revenue collected on this product will be: A. PaPt times wy. B. PcPa times x. C. PcPt times wy. D. PcPt times z.

A

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers respectively would be: A. v and vz. B. w and wy. C. w and wz. D. vx and xz.

C

Refer to the above diagram. Other things equal, a leftward shift of the demand curve would: A. depreciate the dollar. B. appreciate the euro. C. reduce the equilibrium quantity of euros. D. cause a surplus of euros.

A

Refer to the above diagram. Other things equal, a leftward shift of the supply curve would: A. appreciate the euro. B. cause a shortage of euros. C. increase the equilibrium quantity of euros. D. appreciate the dollar.

A

Refer to the above diagram. Other things equal, a rightward shift of the demand curve would: A. depreciate the dollar. B. appreciate the dollar. C. reduce the equilibrium quantity of euros. D. depreciate the euro.

C

Singsong: 1F = 2C Harmony: 1F = 4C Refer to the above information. If these two nations specialize based on comparative advantage: A. Singsong will both produce chicken and catch fish. B. Harmony will both produce chicken and catch fish. C. Harmony will produce chicken and Singsong will catch fish. D. Singsong will produce chicken and Harmony will catch fish.

C

The World Trade Organization: A. is also known as the International Monetary Fund (IMF). B. is also known as NAFTA. C. was established to resolve disputes arising under world trade rules. D. enhances world trade by providing interest rate subsidies to foreign borrowers who buy exports on credit.

A

The current account in a nation's balance of payments includes: A. its goods exports and imports, and its services exports and imports. B. foreign purchases of domestic assets. C. purchases of foreign assets. D. all of these.

C

The financial account balance is a nation's: A. net investment income minus its net transfers. B. exports of goods and services minus its imports of goods and services. C. sale of real and financial assets to people living abroad minus its purchases of real and financial assets from foreigners. D. domestic investment spending minus domestic saving.

D

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

D

The infant industry argument for tariffs is criticized: 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.

B

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: A. International Monetary Fund (IMF). B. World Trade Organization (WTO). C. Common Market Organization (CMO). D. International Trade Commission (ITC).

A

Travel by U.S. citizens within Europe creates a: A. demand for euros and a supply of dollars. B. both a supply of dollars and a demand for dollars. C. demand for dollars and a supply of euros. D. supply of euros and a demand for dollars.

D

Under a system of fixed exchange rates, a nation that has chronic balance of payments deficits may: A. initiate protectionist trade policies. B. run short of international monetary reserves. C. be forced to invoke contractionary monetary and fiscal policies. D. do all of these.

D

Under a system of freely floating exchange rates, an increase in the international value of a nation's currency will: A. cause an international surplus of its currency. B. contribute to disequilibrium in its balance of payments. C. cause gold to flow into that country. D. cause its imports to rise.

C

Which is an example of a nontariff barrier (NTB)? A. an export subsidy B. an excise tax on the physical volume of imported goods C. box-by-box inspection requirements for imported fruit D. an excise tax on the dollar value of imported goods

B

Which of the following combinations is plausible, as it relates to a nation's balance of payments? A. current account = $+40 billion; capital account = $+20 billion; financial account = $ 50 billion. B. current account = $ 50 billion; capital account = $+20 billion; financial account = $+30 billion. C. current account = $+10 billion; capital account = $+40 billion; financial account = $+50 billion. D. current account = $+30 billion; capital account = $ 20 billion; financial account = $ 50 billion.

B

Which of the following creates a supply of Canadian dollars in foreign exchange markets? A. a Frenchman redeems a bond issued by a Canadian manufacturer B. a Canadian exporter buys insurance from a U.S. firm C. an American student takes a summer trip to Canada D. a U.S. importer buys 500 cases of Canadian maple syrup

B

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

B

Which of the following would call for inpayments to the United States? A. gold flows into the United States B. U.S. firms sell insurance to Brazilian shippers C. U.S. sends foreign aid to developing countries D. U.S. imports German automobiles

B

Which of the following would call for outpayments from the United States? A. U.S. exports computer software B. U.S. purchases assets abroad C. foreigners purchase assets in the United States D. foreign tourists spend money in the United States

B

Which of the following would contribute to a United States balance of payments deficit? A. Kawasaki builds a motorcycle manufacturing plant in Kansas City B. United States tourists travel in large numbers to Europe C. a wealthy Mexican citizen builds a mansion in Beverly Hills D. Zaire pays interest on its debt to the United States

C

Which one of the following will not directly affect the U.S. balance on current account? A. an increase in U.S. goods imports B. a decrease in U.S. net investment income C. an increase in U.S. purchases of assets abroad D. an increase in U.S. imports of services

B

Which one of the following, other things equal, will directly alter the United States balance of trade? A. an increase in the balance on capital account B. a decrease in U.S. goods exports C. an increase in net transfers D. a decrease in U.S. purchases of assets abroad

A

With which of the following countries does the United States have its largest goods and services deficit? A. Canada. B. Germany. C. Japan. D. China.

D

With which of the following countries does the United States have its largest goods and services deficit? A. Canada. B. Germany. C. Japan. D. China.