International Trade Econ
C
"Duty-free" shops in airports and on international boats sell merchandise that can be brought into the country without which of the following? (A) Restrictions on resale (B) Political embargoes (C) Import tariffs (D) Restrictions on quantity
Trade war.
A cycle of increasing trade restrictions:
Import.
A good that is brought in from another country for sale:
Export.
A good that is sent to another country for sale:
Import quota.
A limit on the amount of a good that can be imported:
Trade barrier.
A means of preventing a foreign product or service from freely entering a nation's territory:
Infant industry.
A new industry:
Free-trade zone.
A region where a group of countries has agreed to reduce or eliminate trade barriers:
World trade organization.
A worldwide organization whose goal is freer global trade and lower tariffs:
International free trade agreement.
Agreement that results from cooperation between at least two countries to reduce trade barriers and tariffs and to trade with each other:
NAFTA.
Agreement that will eliminate all tariffs and other trade barriers between Canada, Mexico, and the United States:
Appreciation.
An increase in the value of a currency:
Foreign exchange market.
Banks and other financial institutions that facilitate the buying and selling of foreign currencies:
Fixed exchange-rate system.
Currency system in which governments try to keep the values of their currencies constant against one another:
Flexible exchange-rate system.
Currency system that allows the exchange rate to be determined by supply and demand:
A
Ecuador has a comparative advantage in the production of bananas over the United States. Which of the following statements is true? (A) Ecuador can produce bananas at a lower opportunity cost than the United States. (B) Ecuador also has an absolute advantage in the production of bananas. (C) The United States has an absolute advantage in the production of bananas. (D) The United States cannot produce bananas.
A
Ed and Wendy decide to make extra money working by painting names on coffee mugs and making sketches. Ed can paint 6 mugs or draw 2 sketches per hour. Wendy can paint 8 mugs or make 3 sketches per hour. Wendy has _____. (A) An absolute advantage over Ed. (B) Greater natural resources than Ed. (C) More specialized production than Ed. (D) A comparative advantage over Ed.
D
For trade to work out properly, _____. (A) Both parties should have an absolute advantage. (B) Both parties should have a comparative advantage. (C) One party should have an absolute advantage while the other should have a comparative advantage. (D) Both parties should be making about the same profit from the exchange.
A
How do countries protect their domestic economy from excessive influence by multinational corporations? (A) By requiring the multinationals to export a certain percentage of their products. (B) By raising the price of goods and services provided by the multinationals. (C) By limiting the supplies of the multinational corporations. (D) By developing their internal economies.
A
How do economists sometimes measure physical capital in a country? (A) The amount of roads and bridges per capita. (B) The number of computers that are available to businesses. (C) The amount of savings that the citizens have in the bank. (D) The number of telephones it has in relation to its population.
D
How does specialization affect employment patterns? (A) By making sure that each person produces the goods for which he or she has a comparative advantage. (B) By using the absolute advantage that many people have in production work. (C) By creating specialized work for a few people. (D) By changing job availability in a country or region.
D
If Elizabeth can make 3 pies or bake 6 cakes per hour and Benjamin can make 2 pies or bake 8 cakes per hour, _____. (A) Benjamin has the comparative advantage in making pies. (B) Elizabeth has the comparative advantage in baking cakes. (C) Benjamin should specialize in making pies. (D) Elizabeth should specialize in making pies.
B
If a couple plans to stay at a hotel for a week on the beaches of Tulum, Mexico, and it costs 7,000 pesos, _____. (A) With an exchange rate of 9.5 pesos per dollar, the hotel stay will cost $777.77. (B) With an exchange rate of 11 pesos per dollar, the hotel stay will cost $636.36. (C) With an exchange rate of 9 pesos per dollar, the hotel stay will cost $823.53. (D) With an exchange rate of 12 pesos per dollar, the hotel stay will cost $608.70.
A
If an owner of a copy center is interested in knowing which of her employees can make the most copies in one hour, she wants to understand _____. (A) Which employee has the absolute advantage in making copies. (B) The opportunity cost of employees making copies . (C) Which employee has the comparative advantage in making copies. (D) The resource distribution of her copy center.
B
If land is suitable for producing crops, it is _____. (A) Malnutrition (B) Arable (C) Arid (D) A marsh
C
Many nations have formed customs unions that ended tariffs and trade restrictions among its members, and adopted uniform tariffs for nonmember countries. Which of the following is a successful example of such a customs union? (A) Asia-Pacific Economic Cooperation (APEC) (B) World Trade Organization (WTO) (C) European Union (EU) (D) North American Free Trade Agreement (NAFTA).
C
Most members of the European Union _____. (A) Only import and export goods using a flexible exchange rate system. (B) Imposed high tariffs on all exports beginning in 1986. (C) Have switched their currencies to the euro. (D) Only trade goods with neighboring countries.
A
Nations specialize when they _____. (A) Produce certain goods and services more efficiently than other nations. (B) Export more than they import. (C) Have few natural resources and are required to endure a trade deficit. (D) Import more than they export.
A
Protectionism is used for all of the following reasons except _____. (A) Keeping out immigrants. (B) Keeping jobs. (C) Taking care of an infant industry. (D) Safeguarding national security.
D
Recent trends toward trade restrictions have been to _____. (A) Increase trade barriers. (B) Lower only those trade barriers related to technology. (C) Shield a country's automobile industry. (D) Decrease trade barriers.
European union.
Regional trade organization made up of European nations:
Voluntary export restraint.
Self-imposed limitation on the number of products shipped to a particular country:
They can relocate or retrain.
Specialization and trade can result in shifting employment patterns. What possibilities are available to people who lose their jobs due to changes in employment patterns?
D
Suppose that there is a balance of trade in both the United States and Canada. Then, the U.S. dollar appreciates against the Canadian dollar. What would the likely outcome be? (A) A trade deficit in both countries. (B) A trade surplus in the United States. (C) A trade deficit in Canada. (D) A trade surplus in Canada.
Customs duty.
Tax on certain items purchased abroad:
Tariff.
Tax on imported goods:
A
The Bretton Woods Conference accomplished all of the following except _____. (A) Establishing the World Bank. (B) Making financial arrangements for the post-World War II world. (C) An agreement to "peg" foreign currencies to the U.S. dollar. (D) Establishing the International Monetary Fund.
D
The United States places a limit on the number of cars that can be brought into the country for sale. What is this an example of? (A) A voluntary export restraint (B) A customs duty (C) A tariff (D) An import quota
Comparative advantage.
The ability to produce a product most efficiently given all the other products that could be produced:
Absolute advantage.
The ability to produce more of a given product using a given amount of resources:
Law of comparative advantage.
The idea that a nation is better off when it produces goods and services for which it has a comparative advantage:
Depreciation.
The loss of the value of capital equipment that results from normal wear and tear; also, a decrease in the value of a currency:
Balance of trade.
The relationship between a nation's imports and exports:
Trade deficit.
The result of a country importing more than it exports:
Trade surplus.
The result of a nation exporting more than it imports:
B
The use of technology such as telephones and computers means that money exchanges and other financial transactions can be _____. (A) Based on U.S. dollars all over the world. (B) Made instantaneously. (C) Converted to prices in any currency. (D) Sensitive to variations in any currency.
Protectionism.
The use of trade barriers to protect a nation's industries from foreign competition:
Exchange rate.
The value of a foreign nation's currency in terms of the home nation's currency:
C
To convert U.S. dollars into another currency, _____. (A) Divide the number of dollars by the number of units of the other currency. (B) Divide the rate of exchange by the number of units of the other currency. (C) Multiply the number of dollars by the number of units of the other currency per dollar. (D) Multiply the number of units of the other currency by the number of dollars.
A
To measure the amount of human capital available in a country, it would be best to determine _____. (A) The literacy rate of that country. (B) The trading partners of that country. (C) If the nation is rich in natural resources. (D) The comparative advantage of the most profitable exported goods.
B
U.S. industries like steel, computers, and energy need to be protected from foreign competition to ensure which of the following? (A) The protection of these industries as they develop. (B) The presence of these industries during a crisis. (C) The incentive for these industries to become more efficient. (D) The economic advantages caused by their production.
An import quota is a limit on the amount of a good that can be imported. A voluntary export restraint (VER) is a self-imposed limitation on the quantity of products a country ships to another country. A tariff is a tax on an imported good.
What are the differences between import quotas, voluntary export restraints (VERs), and tariffs?
Trade barriers often make imported goods more expensive for consumers. They aid domestic manufacturers and workers, but they harm foreign manufacturers and workers. If retaliatory trade barriers are established, domestic industries can be harmed.
What are the effects of trade barriers on manufacturers, workers, and consumers?
A
What are the five economic activities? (A) Producing, exchanging, consuming, saving, and investing. (B) Developing, exchanging, purchasing, saving, and investing. (C) Manufacturing, trading, consuming, saving, and investing. (D) Farming, trading, purchasing, saving, and investing.
C
What causes a country to specialize in certain products? (A) The ability to trade with other nations. (B) The interests of the citizens. (C) The resources of the nation. (D) The money it can earn from producing particular products.
B
What country is the world's largest exporter of services? (A) Germany (B) United States (C) Great Britain (D) Japan
B
What do the European Union (EU) and the World Trade Organization (WTO) have in common? (A) The EU and the WTO both enforce the General Agreement on Tariffs and Trade (GATT). (B) The EU and WTO are both organizations that represent member nations in international policy. (C) The EU and the WTO both began in the 1950s. (D) The EU and the WTO both have a parliament.
C
What does it mean when an economist says that a currency has become stronger? (A) Services, unlike goods, can be exported freely. (B) There are very few things that the currency cannot buy in a foreign market. (C) The currency can be exchanged for more of a foreign currency. (D) The currency will buy less of foreign goods.
B
What does it mean when an economist says that an area specializes in producing certain products? (A) They use their resources to produce a limited range of goods. (B) They produce only certain goods rather than everything they need. (C) They use the money from their exports to buy food and fuel. (D) They produce only goods for which they have an export market.
A
What does specialization in a nation lead to? (A) International trade (B) Comparative advantage (C) Self-sufficiency (D) Absolute advantage
A
What happens when a nation's currency depreciates? (A) Its products become cheaper to other nations. (B) Its trade increases. (C) Its trade decreases. (D) Its products become more expensive to other nations.
D
What is a currency system called in which each country tries to keep the value of its currency constant against one another? (A) A flexible exchange-rate system. (B) A floating currency exchange. (C) A constant pricing system. (D) A fixed exchange-rate system.
B
What is a major disadvantage in the use of import barriers to make domestic goods cheaper? (A) The line between imported and domestic goods becomes harder and harder to draw. (B) Domestic manufacturers may lose the economic incentive to produce their cars less expensively. (C) Import manufacturers stop trying to send their goods to the country that has import barriers. (D) Domestic manufacturers create more jobs for both citizens and immigrants.
A trade deficit occurs when a nation imports more than it exports. The United States has been experiencing a trade deficit for several decades.
What is a trade deficit and how would you describe America's current balance of trade?
D
What is an infant industry? (A) An industry that has tariff protection. (B) An inefficient but necessary industry. (C) An industry making products for infants and children. (D) A young or developing industry.
D
What is the law of comparative advantage? (A) A country's greatest advantage is in the import of goods that it cannot produce. (B) A country has a comparative advantage if it produces goods for export. (C) A country that supplies things for other nations has a comparative advantage in trade. (D) A country is better off producing the goods and services that they have a comparative advantage supplying.
A
What was the result of the Bretton Woods Conference? (A) The creation of a fixed exchange-rate system for the United States and much of Western Europe. (B) The creation of NAFTA. (C) The creation of a flexible exchange-rate system for the United States and much of Western Europe. (D) The creation of the euro.
C
What would an increase in U.S. trade barriers result in? (A) Lower prices for consumers. (B) An increase in trade for the United States. (C) A decrease in trade for the United State. (D) Increased efficiency in U.S. production.
A
Where does the United States stand as a participant in international trade? (A) It is the largest exporter and importer. (B) It is the largest exporter but not the largest importer. (C) It is the largest importer but not the largest exporter. (D) It is the second largest importer and exporter.
B
Which are the main trading partners of the United States? (A) Germany, Great Britain, China, and France. (B) Canada, Mexico, China, and Japan. (C) The Middle Eastern countries. (D) The Central American countries.
B
Which of the following is a treaty to eliminate all trade barriers between Canada, Mexico, and the United States? (A) MERCOSUR (B) NAFTA (C) CARICOM (D) APEC
D
Which of the following is an advantage for the host country of a multinational corporation? (A) Greater political power. (B) Greater income from tariffs. (C) Greater protective tariffs. (D) Greater employment opportunities.
A
Which of the following is an example of an import quota? (A) 621,780 kilograms limit of an imported good. (B) 5 percent of the value of an imported good. (C) $220 per ton of an imported good. (D) 7 percent of the potential profits from an imported good.
B
Which of the following resulted in a retaliation by the United States of increased tariffs on cheeses and meats from Europe? (A) Steel Tariff of 2002 (B) Beef War of 1999 (C) Smoot-Hawley Tariff of 1930 (D) Chicken Tariff of 1963
A
With a flexible exchange-rate system, what determines the exchange rate between two countries? (A) Supply and demand. (B) The day-to-day changes in one currency. (C) Inflation and interest rates. (D) The value of gold.
