1) if a tariff and an import quota lead to equivalent increases in the domestic price of
steel, then:
a.the quota results in efficiency reductions but the tariff does not
b.the tariff results in efficiency reductions but the quota does not
c.they have different impacts on how much is produced and consumed
d.they have different impacts on how income is distributed
2) 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
3) mutually beneficial trade for two countries occurs if the equilibrium terms of trade
lies between the two countries’ domestic cost ratios.
a.true
b.false
4) given an efficient foreign exchange market, the spot rate is the rational
approximation of the markets expectation of the forward rate that will exist at the end of
the forward period.
a.true
b.false
5) an effective buy american law would tend to increase u.s. producer surplus at the
expense of u.s. consumer surplus.
a.true
b.false
6) according to the marshall-lerner condition, currency depreciation will worsen a
country’s balance of trade if the country’s elasticity of demand for imports plus the
foreign demand elasticity for the country’s exports exceeds 1.0.
a.true
b.false
7) there is widespread agreement among economists that import tariffs increase overall
employment in the levying country.
a.true
b.false
8) developing countries have often felt that it is easier to protect their manufacturers,
via import-substitution policies, against foreign competitors than to force industrial
nations to reduce trade restrictions on products exported by developing countries.
a.true
b.false
9) when exchange rates are fixed by central bankers, international reserves are
necessary for financing payments imbalances and the stabilization of exchange rates.
a.true
b.false
10) during periods of growing demand, a tariff more effectively restricts the volume of
imports than an equivalent import quota.
a.true
b.false
11) according to the j-curve effect, when the exchange value of a country’s currency
appreciates, the country’s trade balance:
a.first moves toward deficit, then later toward surplus
b.first moves toward surplus, then later toward deficit
c.moves into deficit and stays there
d.moves into surplus and stays there
12) to help developing countries expand their industrial base, some industrial countries
have reduced tariffs on designated manufactured imports from developing countries
below the levels applied to imports from industrial countries. this scheme is referred to
as:
a.generalized system of preferences
b.export-led growth
c.international commodity agreement
d.reciprocal trade agreement
13) exchange-rate overshooting is based on the notion that the supply schedule of a
currency is more elastic in the short run than in the long run.
a.true
b.false
14) according to the principle of exchange-rate overshooting, a short-run depreciation
of a currency is likely to be greater than a long-run depreciation of that currency.
a.true
b.false
15) a closed economy is one in which:
a.imports exactly equal exports, so that trade is balanced
b.domestic firms invest in industries overseas
c.the home economy is isolated from foreign trade
d.saving exactly equals investment at full employment
16) if the united states experiences an enormous wheat crop failure, it will have to
import more wheat and the dollar’s exchange value will depreciate under a system of
floating exchange rates.
a.true
b.false
17) which trade theory contends that a country that initially develops and exports a new
product may eventually become an importer of it and may no longer manufacture the
product?
a.theory of factor endowments
b.theory of overlapping demands
c.economies of scale theory
d.product life cycle theory
18) under the classical gold standard, a trade surplus nation would realize gold inflows,
an increase in its money supply, rising interest rates, and net investment inflows.
a.true
b.false
19) according to the marshall-lerner condition, currency depreciation would have a
positive effect on a country’s trade balance if the elasticity of demand for its exports
plus the elasticity of demand for its imports equals:
a.0.2
b.0.5
c.1.0
d.2.0