International Trade and Balance of Payments

In 2010, a small country imported goods worth $500 billion and exported goods worth $443 billion. It exported services worth $248 billion and imported services worth $330 billion. Payments on investments abroad totaled $199 billion, while returns paid on foreign investments were $125 billion. Unilateral transfers from the country to other nations amounted to $94 billion. What was the country's merchandise trade deficit for 2010? a. $70 billion b. $154 billion c. $57 billion d. $65 billion

$500-$443 c. $57 billion

In 2010, a country imported goods worth $500 billion and exported goods worth $443 billion. It exported services worth $248 billion and imported services worth $330 billion. Payments on investments abroad totaled $199 billion, while returns paid on foreign investments were $125 billion. Unilateral transfers from the country to other nations amounted to $94 billion. What was the country's current account balance for 2010? a. $70 billion b. $159 billion c. $142 billion d. $65 billion

-500+443+248-330+199-125-94 b. $159 billion

Goods and services produced in one country that are then sold in other countries are called _____. A. exports B. tradeable items C. surplus items D. economic stimulants

A. exports

From a macroeconomic perspective, a payment made by a foreign firm to a U.S. investor looks just like an: a. import of a service. b. import of a good. c. export of a service. d. export of a good.

c. export of a service.

In 2010, the country of Vesey exported goods worth $312 billion and services worth $198 billion. It imported goods worth $525 billion and services worth $255 billion. It sent $1.2 billion in famine relief to Africa, and received $3 billion to support its first democratic election efforts. What was the merchandise trade deficit in Vesey in 2010? a. $213 billion b. $270 billion c. $57 billion d. $1.8 billion

312-525 a. $213 billion

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are: a. 0.25 apples; 0.5 apples. b. 9 apples; 4 apples. c. 0.5 apples; 0.25 apples. d. 2 apples; 4 apples

Alpha: 1 orange - 1/2 apple Beta: 1 orange - 1/4 apple Alpha: 1 apple - 2 orange Beta: 1 apple - 4 orange c. 0.5 apples; 0.25 apples.

The membership of the WTO includes about_____ nations A. 15 B. 160 C. 700 D. 1500

B. 160

_____ means selling goods below their cost of production. A. Protectionism B. Dumping C. Import quotas D. Non-tariff barriers

B. Dumping

The acronym GATT stands for: A. General Association for Trade and Tariffs. B. General Agreement on Tariffs and Trade. C. General Accounting for Tariff and Trade. D. General Association on Technology and Trade.

B. General Agreement on Tariffs and Trade.

_______ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products. A. Tariffs B. Nontariff barriers C. Quotas D. Import ceilings

B. Nontariff barriers

_____ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry. A. Protectionism B. The infant industry argument C. Dumping D. Import quotas

B. The infant industry argument

An import quota does which of the following? A. decreases the price of the imported goods to consumers B. increases the price of the domestic goods to consumers C. redistributes income away from domestic producers of those products toward domestic producers of exports D. both a) and c)

B. increases the price of the domestic goods to consumers

In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true? a. India has a comparative advantage in the production of rice. b. China has a comparative advantage in the production of rice. c. China has both an absolute and comparative advantage in the production of rice. d. India has an absolute advantage in the production of rice.

India: 1 rice - 1/3 shirt China: 1 rice- 1/2 shirt India: 1 shirt - 3 rice China: 1 shirt - 2 rice a. India has a comparative advantage in the production of rice.

economics

The study of how people seek to satisfy their needs and wants by making choices

An import quota or tariff on French wine that raises the prices for wine will probably: a. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices. b. hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a reduction in driving fatalities. c. hurt both domestic wine drinkers and domestic wine producers because of a reduction in competition. d. hurt domestic wineries, which will lose business as a result of the higher prices.

a. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices.

Which of the following represents a financial inflow into the U.S. economy? a. South Korean car imports b. Canadian investors buying real estate in Arizona c. foreign aid from the U.S. to Haiti d. oil imports from Iraq

b. Canadian investors buying real estate in Arizona

_____ are numerical limitations on the quantity of products that can be imported. a. Tariffs b. Import quotas c. Taxes d. Nontariff barriers

b. Import quotas

When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________in producing that product. a. relative advantage b. absolute advantage c. economy of scale d. production efficiency

b. absolute advantage

The idea behind comparative advantage reflects the possibility that one party: a. may be able to produce everything relatively more efficiently than another party b. may be able to produce something at a lower dollar cost than another party. c. with an absolute advantage in producing two different may export goods both of those goods to the other party. d. may be able to produce something at a lower opportunity cost than another party.

d. may be able to produce something at a lower opportunity cost than another party.

Which of the following would most likely be included in the positive side of the U.S. current account balance? a. U.S. foreign aid sent to as disaster relief to Haiti b. interest payments to foreign investors invested in the U.S. c. money spent by U.S. tourists in Europe d. money earned by U.S. firms in Europe

d. money earned by U.S. firms in Europe

The term ______ describes circumstances where a country's imports exceed its exports. a. trade imbalance b. trade balance c. trade surplus d. trade deficit

d. trade deficit

A new U.S. import quota on imported steel would be likely to a. raise the cost of production for steel-using American firms. b. generate tax revenue to the government. c. decrease U.S. production of steel. d. increase the production of steel-using American firms. e. do all of the above.

a. raise the cost of production for steel-using American firms.

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is: a. 1 yard of textiles. b. 3 yards of textiles. c. 4 yards of textiles. d. 12 yards of textiles.

c. 4 yards of textiles.

Which of the following would be expected if the tariff on foreign-produced automobiles were increased? a. The domestic price of automobiles would fall. b. The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise. c. The number of unemployed workers in the domestic automobile industry would rise. d. The demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations.

b. The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.

Only one of the following statements about trade surplus and capital flow is correct. Which one is it? a. a trade surplus means that there is a net inflow of capital b. a trade surplus means that there is a net outflow of capital c. a trade surplus exists if there is a net inflow of capital excluding foreign borrowing and lending d. a trade surplus exists if there is a net outflow of capital excluding foreign borrowing and lending

b. a trade surplus means that there is a net outflow of capital

Protectionist legislation is often passed because a. employers in the affected industry lobby more effectively than the workers in that industry. b. both employers and workers in the affected industry lobby for protectionist policies. c. trade restrictions often benefit domestic consumers in the long run, even though they must pay more in the short run. d. none of the above

b. both employers and workers in the affected industry lobby for protectionist policies.

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that: a. firms will be protected from subsidized foreign competition. b. domestic producers can attain the economies of scale to allow them to compete in world markets. c. there will be adequate supplies of crucial resources in case they are needed for national defence. d. it will not be subjected to a takeover from a foreign competitor.

b. domestic producers can attain the economies of scale to allow them to compete in world markets.

At the outset of the 21st century, most global trade took the form of: a. services, rather than goods. b. goods, rather than services. c. equal trade in goods and services. d. trade surpluses in the service sector.

b. goods, rather than services.

Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA: a. has an absolute advantage over India in the production of textiles. b. has an absolute advantage over India in the production of wheat. c. has a comparative advantage in the production of textiles. d. should export textiles to India.

b. has an absolute advantage over India in the production of wheat.

The term ____ is used to describe what those in one country buy from those in other countries. a. exports b. imports c. trade d. surplus

b. imports

A new American import quota on imported steel would be likely to: a. increase the production of steel-using American firms. b. increase American production of steel. c. generate tax revenue to the government. d. reduce the cost of production to steel-using American firms.

b. increase American production of steel.

The term "merchandise trade balance" is used to describe: a. the balance of trade in services. b. the balance of trade in goods. c. the level of trade in goods. d. the level of trade in services.

b. the balance of trade in goods.

Which of the following represents a financial outflow from the U.S. economy? a. U.S. computer exports to Poland b. returns paid on U.S. financial investment in Hong Kong c. U.S. investors buying foreign assets in Germany d. British investors buying real estate in Kentucky

c. U.S. investors buying foreign assets in Germany

If exports and imports: a. are imbalanced, then a trade surplus exists. b. are imbalanced, then a trade deficit exits. c. are equal, then trade is balanced. d. are equal, then the economy is unhealthy.

c. are equal, then trade is balanced.

A country's current account balance refers to a broad measure of the balance of trade that includes: a. merchandise, services, and foreign capital investments. b. goods, foreign capital investments, exported domestic services. c. goods and services, international flows of income, and foreign aid. d. merchandise, foreign aid and imported domestic services.

c. goods and services, international flows of income, and foreign aid.

To a macroeconomist, a trade deficit is synonymous with which of the following? a. outflow of financial capital b. outflow of goods and services c. inflow of financial capital d. inflow of goods and services

c. inflow of financial capital

Why would an analyst include, among other things, airplane parts, legal services and software, in an analysis of international economic trade? a. to determine the merchandise trade balance b. to determine the balance of trade in services c. to determine the current account balance d. to determine the international flow of income

c. to determine the current account balance

The term __________ describes circumstances where a country's exports exceed its imports. a. trade deficit b. trade imbalance c. trade surplus d. trade balance

c. trade surplus

In 2010, the country of Vesey exported goods worth $312 billion and services worth $198 billion. It imported goods worth $525 billion and services worth $255 billion. It sent $3 billion in famine relief to Africa, and received $1.2 billion to support its first democratic election efforts. What was the current account balance in Vesey for 2010? a. $251.2 billion b. $270.6 billion c. $213.3 billion d. $271.8 billion

d. $271.8 billion

A tariff differs from a quota in that a tariff is: a. levied on imports, whereas a quota is imposed on exports. b. levied on exports, whereas a quota is imposed on imports. c. a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. d. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

d. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: a. a comparative advantage in coffee production. b. both a comparative and absolute advantage in coffee production. c. an absolute advantage and comparative disadvantage in coffee production. d. an absolute advantage in coffee production

d. an absolute advantage in coffee production