1) to be considered a good candidate for an export cartel, a commodity should:
a.be a manufactured good
b.be a primary product
c.have a low price elasticity of supply
d.have a high price elasticity of demand
2) all of the following are factors mitigating against global trade liberalization except:
a.regional trading arrangements may limit trade liberalization with outsiders
b.a small nation might do better entering into a pact with a larger nation, rather than
competing globally
c.trading bloc members may not realize economies of scale through global
liberalization
d.trading bloc members prefer competing globally rather than locally
3) services transactions on canada’s balance-of-payments statement would include
canadian ships transporting lumber to japan, foreign tourists spending money in canada,
and canadian engineers designing bridges in china.
a.true
b.false
4) free traders maintain that an open economy is advantageous in that it provides all of
the following except:
a.increased competition for world producers
b.a wider selection of products for consumers
c.the utilization of the most efficient production methods
d.relatively high wage levels for all domestic workers
5) the basic idea of mercantilism was that wealth consisted of the goods and services
produced by a nation.
a.true
b.false
6) figure 5.1 illustrates the steel market for mexico, assumed to be a ‘small” country that
is unable to affect the world price. suppose the world price of steel is given and constant
at $200 per ton. now suppose the mexican steel industry is able to obtain trade
protection.
figure 5.1. alternative nontariff trade barriers levied by a ‘small” country
consider figure 5.1. suppose instead that the mexican government provides a subsidy of
$200 per ton to its steel producers, as indicated by the supply schedule sm (with
subsidy).
as a result of the subsidy, the welfare loss to mexico due to inefficient domestic
production equals:
a.$200
b.$400
c.$600
d.$800
7) international commodity agreements do not:
a.consist of consuming and producing nations who desire market stability
b.levy export cutbacks so as to offset rising commodity prices
c.utilize buffer stocks to generate commodity price stability
d.increase the supply of commodities to prevent rising prices
8) the ricardian model of comparative advantage is based on all of the following
assumptions except:
a.only two nations and two products
b.product quality varies among nations
c.labor is the only factor of production
d.labor can move freely within a nation
9) concerning international lending risk of commercial banks, ____ is associated with
possible changes in the exchange value of a nation’s currency.
a.political risk
b.country risk
c.credit risk
d.currency risk
10) unlike floating exchange rates, fixed exchange rates are not characterized by par
values and central bank intervention in the foreign exchange market.
a.true
b.false
11) which of the following would not induce the u.s. demand curve for foreign
exchange to shift backward to the left?
a.worsening american tastes for goods produced overseas
b.decreasing interest rates in the u.s. compared to those overseas
c.a fall in the level of u.s. income
d.a depreciation in the u.s. dollar against foreign currencies
12) if an american receives dividends from the shares of stock she or he owns in toyota,
inc., a japanese firm, the transaction would be recorded on the u.s. balance of payments
as a:
a.capital account debit
b.capital account credit
c.current account debit
d.current account credit
13) studies have shown that there is an inverse relationship between
a.local competition and regional competition
b.regional competition and global competition
c.level of trade barriers and economic growth
d.level of education and communications infrastructure
14) with floating exchange rates, easy credit and low short term interest rates lead to
a.exchange rate depreciation in the short run
b.exchange rate appreciation in the short run
c.exchange rate depreciation in the long run
d.exchange rate appreciation in the long run
15) a common market
a.allows the imposition of common external trade barriers against non-members
b.represents less economic integration than a free trade area
c.does not permit free movement of goods among member nations
d.does not allow free movement of factors of production among nations
16) the formulation of the so-called income adjustment mechanism is associated with:
a.adam smith
b.david ricardo
c.david hume
d.john maynard keynes
17) in the balance of payments, the statistical discrepancy is used to:
a.ensure that the sum of all debits matches the sum of all credits
b.ensure that trade imports equal the value of trade exports
c.obtain an accurate account of a balance-of-payments deficit
d.obtain an accurate account of a balance-of-payments surplus