1) the nominal tariff rate signifies the total increase in domestic productive activities
compared to what would occur under free-trade conditions.
a.true
b.false
2) sporadic (distress) dumping would occur if domestic orange producers dispose of an
excess quantity of oranges, resulting from an abnormally large harvest, by selling them
at lower prices abroad than at home.
a.true
b.false
3) if a nation has an open economy, it means that the nation:
a.allows private ownership of capital
b.has flexible exchange rates
c.has fixed exchange rates
d.conducts trade with other countries
4) although free trade provides benefits for consumers, it is often argued that import
protection should be provided to domestic producers of strategic goods and materials
vital to the nation’s security.
a.true
b.false
5) exhibit 16.1
at the plaza accord of 1985, the group-of-five nations agreed to drive the value of the
dollar downward (i.e., depreciation) so as to help reduce the u.s. trade deficit. answer
the following question(s) on the basis of this information.
refer to exhibit 16.1. to help drive the dollar’s exchange value downward, the federal
reserve would:
a.reduce taxes
b.increase taxes
c.decrease the money supply
d.increase the money supply
6) the figure below depicts the steel market for portugal, a small nation that is unable to
affect the world price. assume that germany and france can supply steel to portugal at a
price of $200 and $300 respectively.
figure 8.2. portugal’s steel market
consider figure 8.2. if portugal forms a customs union with france, the resulting
trade-creation effect equals $500.
a.true
b.false
7) if japan and france have identical production possibilities curves and identical
community indifference curves:
a.japan will enjoy all the gains from trade
b.france will enjoy all the gains from trade
c.japan and france share equally in the gains from trade
d.gainful specialization and trade are not possible
8) most u.s. direct investment abroad occurs in:
a.communications
b.petroleum
c.finance and insurance
d.manufacturing
9) if a citibank dealer expects the swiss franc to appreciate against the u.s. dollar, she
will attempt to lower both bid and offer rates for the franc, attempting to persuade other
dealers to buy francs from citibank and dissuade other dealers from selling francs to
citibank.
a.true
b.false
10) that german investors collect interest income on their holdings of u.s. treasury bills
constitutes a credit transaction on the u.s. balance of payments.
a.true
b.false
11) what are the essential arguments in favor of free trade?
12) what is the essential idea behind strategic trade policy?
13) what is the most important factor which contributes to competitiveness?
14) what is the most important factor which contributes to competitiveness?
15) what is the difference between the crawling peg and adjustable pegged exchange
rates?
16) why do countries hold international reserves?
17) how do we measure the international investment position of the united states at any
point in time? how did the u.s. become a net debtor nation so rapidly?
18) which nations use multiple exchange rates the most and why?