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51. Most economists:
A. focus on the costs of international trade and discount its benefits in lower consumer prices.
B. include the effects of trade on the distribution of income.
C. recognize both the costs of international trade in lost jobs and the benefits in terms of lower
prices.
D. support free trade because it raises the wages of those in countries who can hardly meet their
basic needs.
52. The fact that the United States has a trade deficit means that:
A. the United States is producing more than it is consuming.
B. foreign countries can have comparative advantages in all goods.
C. foreign countries can have comparative advantages in more goods compared to the United
States.
D. the United States is lending more to foreign countries than it is borrowing from foreign
countries.
53. If countries decide they will no longer buy U.S. assets or lend to the United States:
A. adjustments will be set in motion to equalize comparative advantages.
B. adjustments will be set in motion so that the U.S. has more comparative advantages.
C. the United States can begin to run a trade deficit.
D. There is no reason foreign countries will not want to buy more U.S. assets than the U.S. buys
of foreign assets.
54. Economists:
A. are not concerned with the distributional effects of trade.
B. cannot measure the distributional effects of trade.
C. do not generally include the distributional effects of trade in their models.
D. disagree with laypeople that the distributional effects of trade are important.
55. Which of the following puts downward pressure on U.S. manufacturing wages?
A. A declining value of the dollar.
B. Rising foreign wages.
C. Technological innovation.
D. Immigration.
56. The group that benefited the most from international trade has been people who:
A. financed international trade.
B. managed firms.
C. owners of firms.
D. No one has benefited.
57. Workers in education, health care and government sectors have:
A. seen their incomes fall just like in manufacturing.
B. been mostly hurt from globalization.
C. benefited from globalization in terms of lower consumer prices.
D. been hurt because the sector has been shrinking.
58. In the United States globalization has played:
A. a significant role in growing income disparity because some sectors have benefited and others
have not.
B. little role in growing income disparity because all Americans are consumers who have
enjoyed lower prices.
C. a significant role in growing income disparity because foreign workers’ incomes have risen.
D. little role in growing income disparity because while some jobs were lost, the gain in jobs
balanced out those that were lost.
59. On average, globalization has:
A. been insignificant.
B. left Americans no better or not worse off.
C. hurt Americans.
D. benefited Americans.
60. Why are the gains from trade often difficult to recognize?
A. The United States does not keep accurate records of employment.
B. The gains are spread out over a wide variety of goods and consumers.
C. There are no gains from trade.
D. The gains are in services, which are difficult to measure.
61. The decline in the price of American goods is due in part to:
A. agglomeration effects of firms.
B. declines in productivity.
C. trade barriers that allow domestic firms to lower prices.
D. globalization and increased trade.
62. A common economically unfounded fear held by laypeople is that:
A. globalization will result in the United States losing most jobs because wages are so much
higher in the United States.
B. globalization will result in dramatically higher prices because most services will be
outsourced.
C. the United States has a comparative advantage in the production of all goods.
D. a U.S. trade surplus will result in a dramatically lower dollar.
63. The United States imports:
A. only manufactured goods.
B. only services.
C. neither manufactured goods nor services.
D. both manufactured goods and services.
64. How are goods manufactured in other countries creating jobs in the United States?
A. People whose jobs were outsourced are now discouraged workers.
B. U.S. firms are specializing in managing the trade of these goods.
C. Foreign countries are importing U.S. natural resources.
D. People who have lost jobs have more time to shop and therefore increase demand for goods.
65. The text mentions 10 sources of U.S. comparative advantage. Which of the following is not
one of them?
A. Wealth from past production
B. The fact that English is the international language of business
C. A substantial policy to limit immigration
D. Extensive natural resources
66. The text mentions 10 sources of U.S. comparative advantage. Which of the following is not
one of them?
A. Relatively open immigration laws
B. Religious diversity
C. Skills of the U.S. labor force
D. A large stock of intellectual property rights
67. One of the 10 sources of U.S. comparative advantage mentioned in the text is:
A. religious diversity.
B. a large military.
C. a high ratio of lawyers to the population.
D. stable U.S. government institutions.
68. When people talk about U.S. intellectual property rights, what are they talking about?
A. The existence of high-quality educational institutions such as the Ivy League schools
B. Ideas and knowledge protected by patents and copyrights
C. The human capital of the U.S. labor force
D. The abstract nature of ownership in corporate organizations
69. The text calls the type of comparative advantage that is not easily changed, such as climate:
A. stable comparative advantage.
B. inherent comparative advantage.
C. equilibrium comparative advantage.
D. permanent comparative advantage.
70. The text refers to the type of comparative advantage that can be gained or lost because of
changes in skills of workers or types of capital as:
A. unstable comparative advantage.
B. transferable comparative advantage.
C. non-equilibrium comparative advantage.
D. temporary comparative advantage.
71. When comparative advantage is based on transferable factors, the law of one price tends to:
A. erode the advantage away.
B. amplify the advantage.
C. stabilize the advantage.
D. make the advantage into an inherent comparative advantage.
72. Transferable comparative advantages are:
A. based on factors that are relatively unchangeable.
B. based on factors that can change relatively easily.
C. becoming more like inherent comparative advantages with technological innovations.
D. rarely eroded over time.
73. Which of the following is eroding the U.S. comparative advantage?
A. The spread of technology.
B. The law of one price.
C. A depreciating dollar.
D. Intellectual property rights.
74. What economists call the law of one price depends on:
A. government action.
B. people seeking to exploit profit opportunities.
C. random chance.
D. the inertia effect.
75. The price of an acre of land in rural Nevada is a few hundred dollars. The price of an acre of
land in downtown New York is many millions of dollars. How does the law of one price explain
this difference?
A. It cannot; there are unexplainable exceptions to the law of one price.
B. It suggests that in the long run price of land will be equalized regardless of location.
C. The law of one price depends on the mobility of resources, but location by its very nature
cannot be mobile.
D. The law of one price applies only to resources involved in international trade.
76. Suppose that the U.S. dollar buys 100 Japanese yen, gold costs $500 per ounce in New
York, and gold costs 20,000 yen per ounce in Tokyo. What does the law of one price predict will
happen?
A. Nothing will happen.
B. Traders will avoid the U.S. market and exchange only in Tokyo, where the price of gold is
lower.
C. Traders will buy gold in the United States and sell it in Japan.
D. Traders will buy gold in Japan and sell it in the United States.
77. The foreign exchange rate is the rate at which:
A. taxes are imposed on foreign imports.
B. foreign good are traded between domestic consumers.
C. one country’s currency can be traded for another country’s currency.
D. immigrants are exchanged between countries.
78. If the euro rises in price, it becomes:
A. cheaper for Americans to buy European products and cheaper for Europeans to buy
American products.
B. cheaper for Americans to buy European products but more expensive for Europeans to buy
American products.
C. more expensive for Americans to buy European products but cheaper for Europeans to buy
American products.
D. more expensive for Americans to buy European products and more expensive for Europeans
to buy American products.
79. If 1 Canadian dollar costs 0.60 U.S. dollar, 1 U.S. dollar costs:
A. 0.40 Canadian dollar.
B. 0.60 Canadian dollar.
C. 1.40 Canadian dollars.
D. 1.67 Canadian dollars.
80. The Mexican demand for American goods leads to:
A. the demand for Mexican pesos and the supply of U.S. dollars on the foreign exchange market.
B. the demand for U.S. dollars and the demand for Mexican pesos on the foreign exchange
market.
C. the demand for U.S. dollars and the supply of Mexican pesos on the foreign exchange market.
D. the demand for U.S. dollars and the supply of U.S. dollars on the foreign exchange market.
81. In the graph below, the value of the dollar is:
A. appreciating because the dollar buys more yuan.
B. depreciating because the dollar buys more yuan.
C. appreciating because the dollar buys fewer yuan.
D. depreciating because the dollar buys fewer yuan.
82. Americans buying Japanese cars:
A. demand U.S. dollars and supply Japanese yen.
B. demand U.S. dollars and demand Japanese yen.
C. supply U.S. dollars and demand Japanese yen.
D. supply both U.S. dollars and Japanese yen.
83. The foreign exchange market is the market in which:
A. foreigners buy U.S. real estate.
B. foreign stocks and bonds are bought and sold.
