1) Which of the following best expresses the benefit from international trade? a
ID: 1245799 • Letter: 1
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1) Which of the following best expresses the benefit from international trade? a. With trade, each country can concentrate on producing those goods and services that it produces most efficiently. b. With trade, a country can increase its political involvement on a global scale. c. Increased U.S. trade would improve high-tech exports but not agricultural exports. d. Increased trade would increase U.S. exports and decrease U.S. imports. 2) For which of the following nations does international trade account for the largest percentage of GDP? a. Japan b. The Netherlands c. Germany d. Great Britain 3) The two main categories of U.S. exports are a. transportation goods and fuel b. steel and fuel c. capital goods and industrial supplies and materials d. fuels and agricultural goods 4) Exports account for what percent of GDP in the United States? a. 2 percent b. 5 percent c. 11 percent d. 15 percent 5) In autarky, a. each country's consumption possibilities are the same as its production possibilities b. equilibrium is attained with the maximum gains from specialization and trade c. equilibrium is attained with the maximum amount of international trade d. a nation has such a high standard of living that there are technically no poor people 6) The basis of the benefits of specialization is a. comparative advantage b. absolute advantage c. size of country d. identical production costs between two countries 7) The basis of the benefits of specialization is a. comparative advantage b. absolute advantage c. size of country d. identical production costs between two countries 8) The basis for international trade is a. established trade patterns b. the size of gold holdings of two countries c. shipping and transportation costs d. comparative advantage 9) The rate at which two countries trade one good for another a. is known as the foreign exchange rate b. is known as the terms of trade c. is known as the export line d. equals the slope of the import line 10) Comparative advantage is determined by a. the amount of resources needed to produce a good b. the money cost of producing any good c. the opportunity cost of producing any good d. absolute advantage and production possibilities combined 11) Differences in tastes among nations a. make gains from trade possible even in the absence of differences in resource endowments b. make gains from trade possible only when there are differences in resource endowments c. negate any potential gains from trade d. are caused by differences in resource endowments 12) Domestic producers of goods that compete with imports benefit from protectionism in the short run. a. True b. False 13) Ad valorem tariffs on imports are based on a percentage of an import's value; specific tariffs are based on a lump sum per physical unit imported. a. True b. False 14) A tariff is a. a tax on financial transactions b. a tax on either imports or exports c. the result of a treaty d. a penalty imposed on importers of capital 15) As a result of a tariff on an imported good, a. domestic producers are better off because they sell more goods at the same price b. domestic producers are better off because they sell more goods at a higher price c. domestic producers are better off because they sell the same quantity of goods at a higher price d. domestic consumers are better off because there are more domestically produced goods available 16) The world price of a good is a. the price paid by consumers in all nations b. the price at which it is traded internationally c. the price paid in U.S. dollars d. the price paid in foreign currency 17) An import quota is a a. tax on imports b. legal limit on the amount of a specific good that can be imported into a particular country c. tax on import quantities above the legal limit d. way to increase tariff revenues 18) An effective import quota is one that a. reduces imports to zero b. increases exports c. reduces the price of an imported good below the world price d. limits imports to less than what would be imported under free trade 19) Under a tariff, the domestic government gains revenue, but under an import quota it does not, unless it sells the quota rights. a. True b. False 20) Which pair of groups benefits from an import quota when quota rights are given away without charge? a. domestic and foreign producers b. domestic producers and foreign consumers c. domestic government and foreign consumers d. domestic government and producers 21) The primary difference between an import tariff and an import quota is that a. tariffs cause prices to rise, but quotas do not b. quotas cause prices to rise, but tariffs do not c. tariffs result in a net welfare loss, but quotas do not d. tariff revenues go to government, but quotas benefit those with the right to sell foreign goods domestically 22) International trade between countries typically produces a winner and a loser. Generally, it is the economically more advanced country that gains at the expense of the less developed nation. a. True b. False 23) The establishment of GATT resulted in a. lower tariff rates b. increased tariff rates c. decreases in total world trade d. increased protectionism 24) Regional trading bloc agreements a. are not considered trade restrictions b. are required by World Trade Organization rules c. exist primarily in Russia, Africa, and South America d. make special trade deals between countries in that region and discriminate against countries outside the region 25) Which of the following is not an argument in favor of restricting trade? a. to preserve national security b. to prevent dumping c. to increase consumer surplus d. to protect infant industries 26) The balance of goods and services is a. the same as the merchandise trade balance, since services cannot be traded b. equivalent to the trade balance c. the value of all goods and services exported minus the value of all goods and services imported d. the value of all tangible products exported minus the value of all tangible products imported 27) In 2009, the United States largest balance of trade deficit was with a. the European Union b. Canada c. China d. Mexico 28) The current account reflects a. trade in tangible products b. trade in goods as well as services c. trade in services only d. the purchase of securities from foreigners 29) Current account transactions are records of the income and expenditures from exports and imports, plus international financial investments and borrowing. a. True b. False 30) Which of the following is true of the United States? a. It has been and continues to be a net capital exporter. b. It is today the world's largest debtor nation. c. It was, until the last decade, a net capital importer. d. It has historically been a debtor nation. 31) International reserves are a. foreign exchange held by governments only b. foreign exchange held by central banks only c. foreign exchange held by governments or central banks d. various internationally acceptable assets 32) Between 1917 and 1982, the US ran a financial account deficit. a. True b. False 33) When is a balance of payments account out of balance? a. only when exports are greater than imports b. only when imports are greater than exports c. when exports are either greater or less than imports d. never 34) The statistical discrepancy in the balance of payments a. is always positive b. is always negative c. is always zero d. is either positive, negative, or zero 35) An exchange rate is a. the rate at which goods are traded between countries b. the rate of the net difference between exports and imports c. the denomination of currency used to purchase imports d. the price of one currency in terms of another 36) If the British pound appreciates, U.S. television stations need fewer dollars to buy episodes of a Britcom from the British Broadcasting Company. a. True b. False 37) The demand curve for foreign exchange a. slopes downward b. slopes upward c. is horizontal, because no individual country can influence the price of foreign exchange d. is vertical, because no individual country can influence the price of foreign exchange 38) The demand for foreign currency in the United States a. increases as the level of imports increases b. increases as the level of exports increases c. decreases with the lowering of the inflation rate abroad d. decreases as foreign interest rates rise 39) If fewer U.S. dollars are needed to buy a Swiss franc, then a. Swiss goods become relatively more expensive to U.S. residents b. U.S. residents buy fewer francs c. U.S. goods become relatively cheaper to Swiss residents d. U.S. residents buy more Swiss goods 40) As the price of the U.S. dollar increases in terms of foreign currency, a. U.S. products become cheaper for foreigners b. foreign goods become cheaper for Americans c. dollars are worth less d. the U.S. demand for foreign exchange increases 41) In determining the exchange rate between U.S. dollars and Swiss francs, all of the following are assumed constant along the supply curve for francs except one. Which is not assumed constant? a. U.S. interest rates b. Swiss income c. expected rates of inflation in the United States d. the price of the Swiss franc 42) Under a floating rate system, exchange rates are determined by supply and demand in the foreign exchange market without government intervention. a. True b. False 43) An exchange rate is the price of one commodity (e.g., corn) measured in terms of another commodity (e.g., wheat). a. True b. False 44) When supply and demand analysis is used to study the exchange rate, foreign exchange is treated just like a. a good or a service b. debt c. fiat money d. commodity money 45) Exchange rates a. are always fixed b. fluctuate to equate the quantity of foreign exchange demanded with the quantity supplied c. fluctuate to equate imports and exports d. fluctuate to equate interest rates in various countries 46) The actions taken by arbitrageurs in the foreign exchange markets a. destabilize foreign exchange markets b. are highly risky c. have no effect on exchange rates d. help assure that exchange rates are equalized across all markets 47) The purchasing power parity theory helps explain long-run trends in exchange rates, but not short-run fluctuations. a. True b. False 48) Under a flexible exchange rate system, which one of the following would not directly affect the exchange rate? a. a change in income b. the relative inflation rates in two countries c. the salary of the president of the United States d. a change in capital flows 49) If the U.S. dollar depreciates, it becomes cheaper for U.S. residents to travel in foreign countries. a. True b. False 50) A floating exchange rate a. is determined by the national governments involved b. remains extremely stable over long periods of time c. is determined by the actions of central banks d. adjusts in response to market forcesExplanation / Answer
Each country can concentrate on producing those goods and services that it produces most efficiently and then trade for other goods---raising aggregate standard of living.
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