1) if the united states government sells military hardware to saudi arabia, the transaction
would be recorded on the u.s. balance of payments as a:
a.current account debit
b.current account credit
c.capital account debit
d.capital account credit
2) the main purpose of the international monetary fund is to grant long-term loans to
developing nations to help them finance the development of infrastructure such as
roads, dams, and bridges.
a.true
b.false
3) when a country’s current account moves into disequilibrium, automatic adjustments
in tariffs and quotas occur which move the current account back into equilibrium.
a.true
b.false
4) rather than constructing their own currency baskets, many nations peg the value of
their currencies to a currency basket defined by the international monetary fund. which
of the following illustrates this basket?
a.imf tranche
b.special drawing rights
c.primary reserve asset
d.swap facility
5) currency devaluation is initiated by governmental policy rather than the free-market
forces of supply and demand.
a.true
b.false
6) international trade is based on the idea that:
a.exports should exceed imports
b.imports should exceed exports
c.resources are more mobile internationally than are goods
d.resources are less mobile internationally than are goods
7) the specific-factors theory analyzes the income distribution effects of trade in the
short run when resources are immobile among industries.
a.true
b.false
8) when a group of countries establish a free-trade area, they achieve the highest stage
of economic integration.
a.true
b.false
9) a subsidy granted to an import-competing producer shifts its supply schedule
outward to the right.
a.true
b.false
10) international trade is based on the notion that:
a.different currencies are an obstacle to international trade
b.goods are more mobile internationally than are resources
c.resources are more mobile internationally than are goods
d.a country’s exports should always exceed its imports
11) figure 6.2 illustrates the calculator market for mexico, assumed to be a small nation
that is unable influence the south korean (world) price. assume the south korean price to
be $60 per calculator.
figure 6.2. effects of an export subsidy
consider figure 6.2. for mexico’s producers and consumers as a whole, the south korean
subsidy leads to a:
a.$120 welfare gain
b.$320 welfare gain
c.$120 welfare loss
d.$320 welfare loss
12) economic interdependence occurs through
a.trade
b.labor migratin
c.capital flows
d.all of these
13) a firm granting lifetime employment to its workers has the incentive to engage in
international dumping during periods of business recession and excess production
capacity.
a.true
b.false
14) it is widely recognized that the economic sanctions levied against iraq in 1990 were
a major factor causing iraq to withdraw its military forces from kuwait.
a.true
b.false
15) the benefits of international trade accrue in the forms of lower domestic prices,
development of more efficient methods and new products, and a greater range of
consumption choices.
a.true
b.false
16) at the maastricht summit of 1991, members of the european union expressed the
goal of achieving the common market stage of economic integration.
a.true
b.false
17) if the u.s. faces a balance-of-payments deficit on the current account, it must run a
surplus on:
a.the official settlements account
b.the capital account
c.either the official settlements account or the capital account
d.both the official settlements account and the capital account
18) industrial policy attempts to fulfill all of the following objectives except:
a.improving the infrastructure for an industry
b.easing transitions for workers in declining industries
c.supporting troubled industries if the difficulty is temporary
d.fostering industries which offer long-run comparative disadvantage
19) according to the principle of comparative advantage, specialization and trade
increase a nation’s total output since:
a.resources are directed to their highest productivity
b.the output of the nation’s trading partner declines
c.the nation can produce outside of its production possibilities curve
d.the problem of unemployment is eliminated
20) a limitation of a specific tariff is that it provides a constant level of protection for
domestic commodities regardless of fluctuations in their prices over time.
a.true
b.false