1) copyrights, trademarks, and patents are used to protect the intellectual property of a
nation from foreign imitators.
a.true
b.false
2) world welfare under a customs union
a.increases due to a trade creation effect
b.decreases due to a trade diversion effect
c.depends on the relative strength of the trade creation effect and the trade diversion
effect
d.all of the above
3) refer to table 2.1. if trade opens up between the united states and the united kingdom,
american firms should specialize in producing:
a.steel
b.televisions
c.both steel and televisions
d.neither steel nor televisions
4) suppose the president lowers tariffs on radios as the result of negotiations under the
trade agreements program. radio producers in the united states can appeal under the:
a.escape clause if rising imports substantially injure the u.s. radio industry
b.escape clause if rising unemployment occurs even though imports remain unchanged
c.infant industry clause if rising imports cause unemployment to rise among u.s. radio
workers
d.infant industry clause if rising imports result in losses for u.s. radio companies
5) as an economy opens up to international trade, domestic prices:
a.become lower
b.become more aligned with international prices
c.stabilize
d.none of the above; what will happen cannot be predicted
6) the heckscher-ohlin theory emphasizes the role that demand plays in the creation of
comparative advantage.
a.true
b.false
7) a forward premium on the british pound serves as a rough benchmark of the expected
rate of appreciation in the pound’s spot rate.
a.true
b.false
8) the supply of francs is derived from the desire of the swiss to purchase german
goods, make investments in germany, repay debts to german lenders, and extend
transfer payments to german residents.
a.true
b.false
9) the u.s. has a balance of trade deficit when its:
a.merchandise exports exceed its merchandise imports
b.merchandise imports exceed its merchandise exports
c.goods and services exports exceed its goods and services imports
d.goods and services imports exceed its goods and services exports
10) for the united states, suppose the annual interest rate on government securities
equals 12 percent while the annual inflation rate equals 8 percent. for japan, suppose the
annual interest rate equals 5 percent. these variables would cause investment funds to
flow from:
a.the united states to japan, causing the dollar to depreciate
b.the united states to japan, causing the dollar to appreciate
c.japan to the united states, causing the yen to depreciate
d.japan to the united states, causing the yen to appreciate
11) figure 3.1china – us trade possibilities
considering figure 3.1 prior to trade both chinas and the us production of textiles and
aircraft is 19 and 9.which of the following represents the pre-trade situation?
a.china has a comparative advantage in the production of textiles and the us has a
comparative advantage in the production of aircraft.
b.china has a comparative advantage in the production of aircraft and the us has a
comparative advantage in the production of textiles.
c.china has an absolute advantage in the production of both textiles and aircraft.
d.the us has an absolute advantage in the production of both textiles and aircraft.
12) the leontief paradox was the first major challenge to the product-life-cycle theory of
trade.
a.true
b.false
13) in a closed economy, which of the following will cause the economy’s aggregate
demand curve to shift to the right?
a.decreases and wages and salaries paid to employees
b.increases in the prices of oil and natural gas
c.decreases in income taxes for households
d.decreases in the productivity of labor
14) figure 13.2. australian economy under a fixed exchange rate system
refer to figure 13.2. starting at equilibrium income $50 billion, where (s-i)0 intersects
(x-m)0, suppose that changing preferences lead to an autonomous decrease in australian
imports of $5 billion. australian income thus ____ which leads to australia’s trade
account moving to a ____.
a.rises to $60 billion, surplus of $2.5 billion
b.rises to $60 billion, surplus of $5 billion
c.falls to $40 billion, deficit of $2.5 billion
d.falls to $40 billion, deficit of $5 billion
15) economists have generally found that economic growth rates have a close relation
to:
a.openness to trade
b.education
c.communications infrastructure
d.all of these
16) a nation experiences internal balance if it achieves:
a.full employment
b.price stability
c.full employment and price stability
d.unemployment and price instability
17) concerning the balance of payments, a current-account deficit results in a worsening
of a country’s net foreign investment position.
a.true
b.false
18) 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. with free trade, mexican consumers purchase ____ calculators,
mexican firms produce ____ calculators, and ____ calculators are imported.
a.10, 4, 6
b.10, 6, 4
c.10, 8, 2
d.10, 2, 8
19) a product will be internationally traded as long as the pretrade price differential
between the trading partners is:
a.greater than the cost of transporting it between them
b.equal to the cost of transporting it between them
c.less than the cost of transporting it between them
d.none of the above
20) fears about the downward pressure that cheap foreign workers place on u.s. wages
have led u.s. labor unions to lobby for import restrictions such as tariffs and quotas.
a.true
b.false