TOP: Arguments for Protection KEY: Bloom’s: Comprehension
109. The argument that foreign trade should be restricted to protect domestic employment and output is
based on the idea that:
a.
consumers are willing to pay higher prices for domestic goods.
b.
producers will not exploit reduced foreign competition by charging higher prices.
c.
foreign companies are more costly to deal with than domestic companies.
d.
sales of imports come at the expense of domestic goods and jobs.
110. “More productive workers receive higher wages than less productive workers.” This observation is a
major flaw in which of the following arguments for protectionism?
a.
The infant industry argument.
c.
The employment argument.
b.
The national security argument.
d.
The cheap foreign labor argument.
111. The main explanation for why the cheap foreign labor argument is a poor reason for restricting
international trade is that:
a.
workers who get paid less tend to have lower productivity than those who get paid more.
b.
all firms and workers gain when there are no restrictions on international trade.
c.
infant industries such as steel and automobiles need to be protected.
d.
specialization and free trade usually raise the prices of all the traded goods, so that the
workers can get paid more.
e.
labor costs tend to be the same worldwide in the long run because of worker mobility.
112. The North American Free Trade Agreement affects trade between:
a.
the United States, Cuba, and Brazil.
b.
the United States, Canada, and Mexico.
c.
the United States, Puerto Rico, and Cuba.
d.
Brazil, Bolivia, Peru, and Columbia.
e.
China and the United States.
113. The term “balance of payments” refers to a nation’s:
a.
goods exports minus imports.
c.
capital inflows minus outflows.
b.
record of all international transactions.
d.
official reserves inflows minus outflows.
114. Which of the following statements is true?
a.
A tariff is a physical limit on the quantity of a good allowed to enter a country.
b.
An embargo is a tax on an imported good.
c.
A quota is a law that bars trade with another country.
d.
When a nation exports more than it imports it is running a balance of trade surplus.
115. The account which records a nation’s foreign economic transactions is called the:
a.
Trade Account.
c.
Exchange Market.
b.
T account.
d.
Balance of Payments.
116. The balance of payments ____.
a.
b and e
b.
is always zero
c.
is positive when the nation runs a trade surplus
d.
is negative when the nation runs a trade deficit
e.
is an itemized account of a nation’s foreign economic transactions
117. The balance of payments ____.
a.
b and e
b.
is always zero
c.
with some nations is different than it is with others
d.
is negative when the nation runs a trade deficit
e.
can only be expanded when the government has foreign exchange reserves
118. An itemized account of a nation’s foreign economic transactions is its:
a.
gross domestic product.
b.
goods exports.
c.
goods imports.
d.
balance of payments.
e.
foreign exchange reserves.
119. The term “balance of trade” refers to a nation’s:
a.
goods exports minus imports.
b.
current account balance.
c.
capital account balance.
d.
net balance of all international transactions.
120. If U.S. buyers purchased $500 billion of foreign goods and foreign buyers purchased $400 billion of
U.S. goods, the U.S. balance of trade would be:
a.
−$100 billion.
c.
$400 billion.
b.
$100 billion.
d.
none of these.
121. The term “balance of trade” refers to the:
a.
importing and exporting of goods.
b.
importing and exporting of goods and services.
c.
current account trade balance.
d.
capital outflows minus inflows.
122. A favorable balance of trade occurs when:
a.
exports equal imports.
b.
the balance of payments balances.
c.
the current and capital account in the BOP are equal.
d.
the value of the exports of goods exceeds the value of the imports of goods.
e.
the value of the exports of goods is less than the value of the imports of goods .
123. An unfavorable balance of trade occurs when:
a.
exports equal imports.
b.
the balance of payments balances.
c.
the current and capital account in the BOP are equal.
d.
the value of the exports of goods exceeds the value of the imports of goods.
e.
the value of the exports of goods is less than the value of the imports of goods .
124. If goods imports are greater than goods exports, the nation is experiencing a:
a.
negative balance on current account.
b.
goods trade deficit.
c.
capital account imbalance.
d.
weakening of its currency.
e.
growth in foreign reserves.
125. When the value of our goods exports is less than the value of our goods imports,
a.
d and e.
b.
the value of the dollar must fall.
c.
there will be domestic unemployment.
d.
there will be an unfavorable balance of trade.
e.
foreign currency reserves must fall.
126. The balance of trade is measured by which of the following expressions?
a.
The value of exported goods and services minus the value of imported goods and services
b.
The value of income receipts on investments minus income payments on investments
c.
The value of goods exports minus the value of goods imports
d.
The value of government spending minus the value of all taxes received
e.
The balance on capital account plus the balance on current account
127. A favorable balance of trade occurs when:
a.
goods exports are greater than goods imports.
b.
goods imports are greater than goods exports.
c.
international trade is an increasing share of total output.
d.
the balance on capital account equals the balance on current account.
e.
unilateral transfers are positive.
128. If a country’s goods exports are less than its goods imports, then it experiences a:
a.
balance of payments surplus.
c.
balance of trade surplus.
b.
balance of payments deficit.
d.
balance of trade deficit.
129. Which of the following would be recorded in the U.S. goods export account?
a.
Harry, an American citizen, spends 1,000 francs on vacation in the south of France.
b.
A machine shop in Ohio purchases a grinder made in Italy.
c.
Martha receives a $50 dividend check on stock she owns in a business in Germany.
d.
The U.S. government subsidizes American farmers for planting corn for export.
e.
France purchases a new jet fighter aircraft from the Boeing Company in the United States.
130. Which of the following is not included in the current account?
a.
Exports of goods.
c.
U.S. capital inflow and outflow.
b.
Imports of goods.
d.
Unilateral transfers.
131. Expenditures for services such as tourism, income for foreign investment, and foreign gifts are
tabulated in the:
a.
current account.
c.
official reserve account.
b.
capital account.
d.
goods account.
132. A U.S. citizen’s gift for famine relief in Somalia would be considered a:
a.
capital inflow.
c.
current account transaction.
b.
capital outflow.
d.
service trade transaction.
133. Which of the following is excluded in the current account?
a.
Goods exports.
c.
Capital inflow and outflow.
b.
Goods imports.
d.
Net unilateral transfers.
134. Which of the following transactions would be recorded as a credit in the U.S. current account?
a.
A Japanese bank’s purchase of IBM stock.
b.
A Japanese consumer’s purchase of an Apple computer.
c.
An American tourist’s payment to a Japanese hotel.
d.
An American consumer’s purchase of a Toshiba VCR.
135. If Japan has a current account surplus, then it must:
a.
have an offsetting capital account deficit.
c.
import more goods than it exports.
b.
also have a surplus in its capital account.
d.
have a positive balance of payments.
136. Which of the following is included in the current account?
a.
Net unilateral transfers.
c.
Goods exports.
b.
Goods imports.
d.
All are included in the current account.
137. In the U.S. balance of payments, purchases of foreign assets by U.S. residents are tabulated as a:
a.
unilateral transfer.
c.
current account outflow.
b.
capital outflow.
d.
capital inflow.
138. The current account in the BOP records:
a.
all money flowing between countries.
b.
a nation’s yearly exports and imports of goods and services.
c.
only the transactions involving capital goods in international trade.
d.
only the transactions involving consumer goods in international trade.
e.
only those goods and services purchased on credit in international transactions.
139. Which of the following would not be counted in the U.S. BOP current account?
a.
Helen, an American oil engineer, is a paid adviser to Middle Eastern countries in the area
of petroleum extraction.
b.
General Motors Corporation owns buildings that are situated in Mexico.
c.
France purchases a new jet fighter aircraft from the Boeing Company in the U.S.
d.
Martha receives a $50 dividend check on stock she owns in a business in Germany.
e.
A wealthy Italian purchases numerous antiques in the United States for his villa.
140. The balance on the current account ____.
a.
d and e
b.
c and d
c.
will show a trade deficit or surplus, if one exists
d.
must always be zero
e.
multiplied by −1 becomes the capital account
141. Persistent negative current account balances will lead to ____.
a.
c and d
b.
d and e
c.
budget deficits
d.
appreciation of foreign currency
e.
depreciation of domestic currency
142. Which of the following transactions would be excluded in the capital account?
a.
A Japanese citizen purchases a U.S. Treasury bill.
b.
A Japanese citizen purchases an office building in Manhattan.
c.
A U.S. citizen purchases a share of stock from a Japanese company.
d.
An American purchases a Toyota.
143. Suppose a German bank purchases a U.S. Treasury bond. This transaction would be recorded in the:
a.
capital account.
c.
goods trade balance.
b.
current account.
d.
unilateral transfers.
144. Capital accounts are a measure of how much ____ have invested ____.
a.
c and d
b.
d and e
c.
U.S. stockholders; in the market
d.
foreign stockholders; in foreign firms
e.
U.S. firms; in foreign nations
145. The purchase of U.S. assets by foreigners is a:
a.
capital inflow.
c.
current account deficit.
b.
capital outflow.
d.
unilateral transfer.
146. Purchases of foreign assets by U.S. residents are tabulated in the U.S. balance of payments as a:
a.
capital inflow.
c.
current account outflow.
b.
capital outflow.
d.
unilateral transfer.
147. An exchange rate is the number of units of:
a.
a nation’s money that is equal to one unit of another nation’s money.
b.
a nation’s output that is equal to one unit of another nation’s output.
c.
gold backing a nation’s money.
d.
none of these.
148. If a hotel room priced at 120,000 Venezuela bolivar per night can be purchased for 80 U.S. dollars, the
exchange rate is:
a.
9,600 bolivar per dollar.
c.
1,500 bolivar per dollar.
b.
1,500 dollars per lira.
d.
.00066 bolivar per dollar.
149. If a box of Swiss chocolate priced at 100 francs can be purchased for $50, the exchange rate is:
a.
0.50 francs per dollar.
c.
0.50 dollars per franc.
b.
4.00 francs per dollar.
d.
none of these.
150. A fixed exchange rate is:
a.
determined by the forces of supply and demand.
b.
the value of a nation’s money in gold.
c.
the value of a nation’s money determined by the World Bank.
d.
none of these.
151. Flexible, or floating, exchange rate is determined by the:
a.
World Bank.
c.
price of gold.
b.
forces of supply and demand.
d.
Federal Reserve.
152. The Japanese demand curve for dollars is downward-sloping because a:
a.
higher number of yen per dollar means U.S. goods are cheaper in Japan.
b.
lower number of yen per dollar means U.S. goods are cheaper in Japan.
c.
lower number of yen per dollar means U.S. goods are more expensive in Japan.
d.
lower number of yen per dollar means U.S. goods are less expensive in the U.S.
153. The U.S. supply curve of dollars is upward-sloping because a:
a.
higher number of yen per dollar means Japanese goods are cheaper in Japan.
b.
higher number of yen per dollar means Japanese goods are cheaper in the U.S.
c.
lower number of yen per dollar means Japanese goods are cheaper in the U.S.
d.
none of these.
154. If one U.S. dollar can be exchanged for 5 Swiss francs, then 1 franc can be exchanged for:
a.
5 cents.
c.
50 cents.
b.
20 cents.
d.
2 dollars.
155. If a Japanese stereo priced at 1,000,000 yen can be purchased for $1,000, the exchange rate is:
a.
1,000 yen per dollar.
c.
0.001 dollars per yen.
b.
1,000 dollars per yen.
d.
none of these.
156. The exchange rate is:
a.
the rate at which goods will exchange for each other in the international market.
b.
the number of units of one currency required in exchange for one unit of another currency.
c.
set by the International Trade Commission.
d.
established by the ratio of the values of gold to silver.
e.
set by each individual country.
157. If one dollar exchanges for 20 Thailand baht, then:
a.
a baht is worth $20.
b.
$20 will exchange for one baht.
c.
a baht is worth $2.
d.
the United States and Thailand would not engage in trade.
e.
a baht is worth a nickel.
158. If the exchange rate of yen for dollars increases from 100 yen = $1 to 110 yen = $1, then:
a.
Japanese-produced goods would become more expensive.
b.
the dollar has depreciated.
c.
the yen has appreciated.
d.
U.S.-produced goods would become more expensive.
e.
U.S. exports would increase.
Exhibit 18-5 International currency markets
159. Exhibit 18-5 displays the international currency market for yen in terms of dollars and dollars in terms
of yen. The demand curve in graph 18-5(A) is determined by:
a.
U.S. citizens attempting to purchase Japanese-made goods.
b.
Japanese attempting to purchase U.S.-made goods.
c.
U.S. businesses attempting to sell to the Japanese.
d.
Japanese businesses attempting to sell to the U.S.
e.
the U.S. government attempting to unload dollars to the international market.
160. Exhibit 18-5 displays the international currency market for yen in terms of dollars and dollars in terms
of yen. The supply curve in graph 18-5(A) is determined by:
a.
U.S. citizens attempting to purchase Japanese-made goods.
b.
Japanese attempting to purchase U.S.-made goods.
c.
U.S. businesses attempting to sell to the Japanese.
d.
Japanese businesses attempting to sell to the U.S.
e.
the U.S. government attempting to unload dollars to the international market.
161. Exhibit 18-5 displays the international currency market for yen in terms of dollars and dollars in terms
of yen. The demand curve in graph 18-5(B) is determined by:
a.
U.S. citizens attempting to purchase Japanese-made goods.
b.
Japanese attempting to purchase U.S.-made goods.
c.
U.S. businesses attempting to sell to the Japanese.
d.
Japanese businesses attempting to sell to the U.S.
e.
the U.S. government attempting to unload dollars to the international market.
162. Exhibit 18-5 displays the international currency market for yen in terms of dollars and dollars in terms
of yen. The supply curve in graph 18-5(B) is determined by:
a.
U.S. citizens attempting to purchase Japanese-made goods.
b.
Japanese attempting to purchase U.S.-made goods.
c.
U.S. businesses attempting to sell to the Japanese.
d.
Japanese businesses attempting to sell to the U.S.
e.
the U.S. government attempting to unload dollars to the international market.
163. If the exchange rate between the yen and the dollar changes from 100 yen = $1 to 110 yen = $1, then:
a.
the dollar has depreciated in value.
b.
U.S.-made goods will become less expensive to Japanese citizens.
c.
the dollar has appreciated in value.
d.
Japanese-made goods will become more expensive to U.S. citizens.
e.
there will be an increase in the demand for dollars in the foreign exchange market.
164. If the exchange rate between the yen and the dollar changes from 110 yen = $1 to 100 yen = $1, then:
a.
the dollar has depreciated in value.
b.
U.S.-made goods will become more expensive to Japanese citizens.
c.
the dollar has appreciated in value.
d.
Japanese-made goods will become less expensive to U.S. citizens.
e.
there will be a decrease in the demand for dollars in the foreign exchange market.
165. Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. A Japanese citizen
purchasing this machine would pay:
a.
100 yen.
b.
500 yen.
c.
5,000 yen.
d.
10,000 yen.
e.
50,000 yen.
166. Suppose a U.S.-made machine costs $500 and the exchange rate is 100 yen = $1. Now the exchange
rate changes to 90 yen = $1. Then the:
a.
machine would now cost more dollars.
b.
machine would now cost the Japanese citizen less yen.
c.
machine would now cost less dollars.
d.
machine would now cost the Japanese citizen more yen.
e.
yen has depreciated in value.
167. If foreign exchange rates are determined by the interaction of supply and demand forces for the various
currencies, then the exchange rate is:
a.
fixed.
b.
government-determined.
c.
set by the value of gold.
d.
floating.
e.
improper.
168. If you were told that the exchange rate between the U.S. dollar and the Canadian dollar was 1.2, that
would mean that Canadians would have to spend ____ to buy a $12 watch in New York City.
a.
c and e
b.
10 U.S. dollars
c.
12 U.S. dollars
d.
14.4 U.S. dollars
e.
14.4 Canadian dollars
169. The exchange rate is the:
a.
value of money.
b.
quantity of dollars, yen, etc. that are traded.
c.
amount of a foreign currency that is brought back to the United States by tourists.
d.
number of units of your currency that it takes to buy one unit of a foreign currency.
e.
number of units of a foreign currency that can be bought with one unit of your own
currency.
170. Suppose you are traveling from the United States to Djibouti on vacation. You would be better off on
your vacation if:
a.
exchange rates did not change after you bought Djiboutian francs.
b.
you had purchased Djiboutian francs in Djibouti and not in New York.
c.
the Djiboutian franc became more powerful with respect to the U.S. dollar.
d.
the exchange rate increased.
e.
the exchange rate decreased.
171. Which of the following does not result in a change in the demand for foreign currency?
a.
c and d.
b.
changes in income.
c.
changes in foreign currency supply.
d.
changes in the foreign exchange rate.
e.
changes in the interest rate.
172. Suppose there are two countries, X and Y. If the exchange rate, as measured in X‘s currency, is
currently 9, what do citizens of the nation of Y see when they read their newspapers?
a.
The exchange rate for X’s currency is 9.
b.
The exchange rate for X’s currency is more than 9.
c.
The exchange rate for X’s currency is 3.
d.
The exchange rate for X’s currency is 0.11.
e.
Knowing one exchange rate does not mean we can tell the other exchange rate.