1
The final act of GATT was to
(A)
replace itself with the World Trade Organization
(B)
establish the IMF and the World Bank
(C)
replace itself with NAFTA
(D)
establish the European Monetary Union
2
India’s exports of telecommunications services and imports of management consulting
services would be included in the ___________ part of India’s current account.
(A)
(B)
(C)
(D)
3
Remittances from Mexicans working abroad, philanthropic donations to Mexican charities,
and aid money donated by foreign countries would be included in the ___________ part of
Mexico’s current account.
(A)
(B)
(C)
(D)
4
Russia’s Treasury bills, certificates of deposit, and foreign exchange reserves would be
included in the __________ account.
(A)
capital
(B)
current
(C)
portfolio
(D)
longevity
5
An American mutual fund purchases German government bonds. This is an example of
_______________ and it would be included in Germany’s _____________.
(A)
foreign direct investment; capital account
(B)
foreign direct investment; current account
(C)
portfolio investment; capital account
(D)
portfolio investment; current account
6
A Canadian company acquires 100 percent ownership of a Mexican company through a
stock purchase. This is an example of _________ and it would be included in Mexico’s
____________.
(A)
foreign direct investment; capital account
(B)
foreign direct investment; current account
(C)
portfolio investment; capital account
(D)
portfolio investment; current account
7
Denise is taking her first international trip. She travels from the United States to France.
She gives the bank located at the French airport US$100. They give her back €82.69. When
she asks why, the bank teller informs her, “It’s because of the _________.”
(A)
capital account
(B)
current account
(C)
exchange rate
(D)
credit ratio
8
On December 23, one U.S. dollar was worth 0.76 euros (exchange rate 1:0.76). One year
later, the U.S. dollar was worth 0.70 euros (exchange rate 1:0.70). The U.S. dollar
_________ .
(A)
appreciated
(B)
depreciated
(C)
remained constant
(D)
None of the above
9
On December 23, one U.S. dollar was worth 0.76 euros (exchange rate 1:0.76). One year
later, the U.S. dollar was worth 0.70 euros (exchange rate 1:0.70). The euro _________
that year.
(A)
appreciated
(B)
depreciated
(C)
remained constant
(D)
None of the above
10
Egypt’s exports of cotton and imports of computers would be included in the ________ part
of Egypt’s current account.
(A)
(B)
(C)
(D)
11
In the Japanese skincare industry, there are several strong local competitors, like Shiseido.
When it comes to skincare products, Japanese consumers are some of the most
sophisticated, knowledgeable, and demanding. There are cutting-edge research and
development facilities and supplier companies geared toward the skincare industry in
Japan. Japan has a(n) ______________ advantage in skincare products.
(A)
absolute
(B)
comparative
(C)
competitive
(D)
leontif
12
The General Agreement on Tariffs and Trade was the precursor to
(A)
the IMF
(B)
the European Union
(C)
the WTO
(D)
NAFTA
13
One of the challenges faced by the WTO is
(A)
movement towards a global currency
(B)
the spread of regional trade agreements
(C)
controlling inflation in developing countries
(D)
None of the above
14
A group of nations that agrees to drop trade barriers but permits members to maintain
independent trade relations with non-group nations, is called
(A)
a customs union
(B)
a common market
(C)
a free-trade area
(D)
monetary unions
15
Common markets
(A)
have all the characteristics of customs unions plus free flow of resources between members
(B)
have all the characteristics of free-trade regions and free flow of resources between members
(C)
export and import from the same countries
(D)
have the same currency
16
A substantial proportion of India’s _____ consists of information technology consulting,
customer service, financial, and telecommunication services and remittances from Indians
living abroad.
(A)
invisible exports
(B)
portfolio exports
(C)
foreign direct imports
(D)
unilateral imports
17
Country X specializes in producing the goods it produces most efficiently, and Country Y
buys the products it produces less efficiently from other countries, even if it could produce
the good more efficiently itself. The behavior of these countries can be explained by
_______________ advantage theory.
(A)
complete
(B)
probable
(C)
comparative
(D)
absolute
18
The average worker in Ghana can produce either 500 tons of rice or 4,000 tons of cocoa in
one year. Over the same time period, the average South Korean worker can produce either
3,000 tons of rice or 150 tons of cocoa. In terms of cocoa production, Ghana has a(n)
_____________ advantage relative to South Korea
(A)
complete
(B)
probable
(C)
absolute
(D)
comparative
19
The average Vietnamese worker can produce either 200 machines or 800 tons of tomatoes
each year, whereas the average German worker can produce either 500 machines or 1,000
tons of tomatoes. Germany has a(n) _____________ advantage in both machines and
tomatoes.
(A)
absolute
(B)
complete
(C)
pseudo
(D)
comparative
20
The Albanian lek, Costa Rican colon, and Malawi kwacha are currencies that attract little
global demand. These are examples of ___________ currencies.
(A)
basket
(B)
situational
(C)
pegged
(D)
soft
21
Exchange rates for the Bolivian currencyare determined by the market forces of supply and
demand. Therefore, the Bolivian currency is an example of a _______currency.
(A)
basket linked
(B)
pegged
(C)
situational
(D)
freely floating
22
Country X maintains a managed currency. Its currency is most likely pegged to the
currency of the country that County X __________.
(A)
owes the most money
(B)
trades the most with
(C)
is closest to geographically
(D)
None of the above
23
Country X and Country Y sign an agreement to drop trade barriers among themselves. But
both countries agree that each country should be allowed to maintain independent trade
relations with other countries. This is an example of a(n) ________________.
(A)
orderly marketing arrangement
(B)
customs union
(C)
free trade area
(D)
common market
24
Turkey signed an agreement with the European Union (EU). In this agreement, Turkey and
the EU agreed to drop trade barriers among themselves. They also agreed that Turkey and
the EU would employ the same trade barriers to countries outside of Turkey and the EU.
This is an example of a(n) _____________.
(A)
orderly marketing arrangement
(B)
customs union
(C)
free trade area
(D)
common market
25
Mexico’s president, Vincente Fox, argued that the North America Free Trade Association
(NAFTA) should be expanded. He believed that Canada, the U.S., and Mexico should
establish common external trade barriers to non-NAFTA countries and allow for the free
flow of labor and capital within NAFTA countries. He was proposing a(n) _____________.
(A)
orderly marketing arrangement
(B)
customs union
(C)
free trade area
(D)
common market
26
A U.S. multinational would likely evaluate the performance of its Mexican subsidiary in
terms of
(A)
the Mexican peso
(B)
the Mexican peso and the U.S. dollar
(C)
the euro
(D)
a basket of currencies
27
^___^ are physical limits on the amount of goods that can be imported into a country.
28
The ^___^ is an accounting record of the transactions between the residents of one
country and the residents of the rest of the world over a given period of time.
29
A ratio that measures the value of one currency in terms of another currency is called a(n)
^___^.
30
When a currency falls in value, it is said to ^___^.
31
Skiwell is a world-famous, high-performance, quality snow ski export manufacturer.
Skiwell’s snow skis have been thoroughly and successfully tested in numerous snow
situations in Europe. Skiwell decides to enter the Japanese market. The Japanese
government requires the company to conduct numerous lengthy performance and safety
tests of their skis on Japanese snow before the export shipment can be sent. They claim
that Japanese snow may somehow be different than European snow. Mo
(A)
local content rule
(B)
import tariff
(C)
nontariff trade barrier
(D)
quota
32
Despite complaints from the United States, the European Union continues to pay subsidies
to Airbus, the European aircraft producer. This is called a(n) ___________.
(A)
local content rule
(B)
orderly marketing arrangement
(C)
export tariff
(D)
nontariff trade barrier
33
Since the introduction of the Bhutanese currency, the ngultrum, in 1974, it has been fixed
by the Bhutan government to the Indian rupee. Therefore, the ngultrum is an example of a
_______ currency.
(A)
basket linked
(B)
pegged
(C)
situational
(D)
freely floating
34
On December 23, one U.S. dollar was worth 0.76 euros (exchange rate 1:0.76). One year
later, the U.S. dollar was worth 0.70 euros (exchange rate 1:0.70). In the United States,
exporters who send their goods to the European Union were probably _________ because
the U.S. currency had ____________.
(A)
unhappy; appreciated
(B)
happy; appreciated
(C)
unhappy; depreciated
(D)
happy; depreciated
35
On December 23, one U.S. dollar was worth 0.76 euros (exchange rate 1:0.76). One year
later, the U.S. dollar was worth 0.70 euros (exchange rate 1:0.70). In the United States,
importers who receive goods from the European Union were probably _________ because
the U.S. currency had ____________.
(A)
unhappy; appreciated
(B)
happy; appreciated
(C)
unhappy; depreciated
(D)
happy; depreciated
36
The _______’s original goals were to promote orderly and stable foreign exchange
markets, restore free convertibility of member nations’ currencies, reduce international
trade impediments, and provide assistance to countries that experienced temporary
balance-of-payments deficits.
(A)
International Monetary Fund
(B)
European Union
(C)
World Bank
(D)
None of the above
37
In Thailand, the ______ guaranteed government bonds for the Electricity Generating
Authority. The guarantee attracted investors and spawned interest in similar programs in
South Korea and the Philippines.
(A)
International Monetary Fund
(B)
Mexican government
(C)
World Bank
(D)
None of the above
38
A shipment of Dell laptop computers is sent from the United States to a Brazilian airport
and is sitting at customs. In order to bring the laptops into the country, Dell
representatives must pay the Brazilian government a tax. This is called a(n) ___________.
(A)
quota
(B)
orderly marketing arrangement
(C)
tariff
(D)
local content rule
39
Until 2005, the United States government set a limit on how many t-shirts Turkey could
export to the United States. This is called a(n)______.
(A)
quota
(B)
orderly marketing arrangement
(C)
tariff
(D)
local content rule
40
The U.S. Commerce Department reaches a deal with the Russian government. The Russian
government agrees to only export 750,000 tons of steel from Russia to the United States.
This is called a(n) ____________.
(A)
quota
(B)
orderly marketing arrangement
(C)
tariff
(D)
local content rule
Answer:
(B)
orderly marketing arrangement
41
^___^ are taxes on goods moving across economic or political boundaries.
Answer:
Tariffs
42
NAFTA is an example of a customs union.
(A)
True
(B)
False
(B)
False
43
As a member of NAFTA, Mexico must coordinate its domestic tax rate with Canada and
United States.
(A)
True
(B)
False
Answer:
(B)
False
44
The absolute advantage of a nation refers to
(A)
being strategically located near large markets
(B)
producing and selling what it is best at
Answer:
(C)
tariff
(C)
producing and selling profitably even if competitors are better
(D)
All of the above
45
If Spanish workers can produce 100 cars or 50 elevators and a Russian worker can produce
60 cars or 20 elevators, the theory of comparative advantage would suggest that
(A)
Russia and Spain will not trade in cars or elevators
(B)
Russia should trade elevators for cars made in Spain
(C)
Spain should trade elevators for cars made in Russia
(D)
None of the above
46
The theory of __________ focuses on the importance of country factors such as domestic
demand and domestic rivalry in explaining a nation’s dominance in the production and
export of particular products.
(A)
new trade
(B)
absolute advantage
(C)
comparative advantage
(D)
competitive advantage
47
A country will have significant impact on the competitive advantage of an industry
depending on the
(A)
elements of production in the country
(B)
nature of domestic demand
(C)
presence of appropriate supplier or related industries
(D)
All of the above
48
A good example of a country that enjoys a competitive advantage in digital products is
(A)
Spain
(B)
South Korea
(C)
Russia
(D)
Poland
49
An accounting record of the transactions between the residents of one country and the
residents of the rest of the world is called the
(A)
international transactions record
(B)
balance of payments
(C)
global trade account
(D)
foreign accounts record
50
Transactions in which domestic residents purchase assets from abroad are considered
(A)
inflows of funds
(B)
outflows of funds
(C)
asset depreciation
(D)
asset appreciation
51
Custom unions possess the characteristics of free trade areas but with the added feature of
a common external/tariff barrier for member countries.
(A)
True
(B)
False
52
Nearly all WTO members belong to at least one regional trading pact.
(A)
True
(B)
False
53
Free-trade areas possess the characteristics of custom unions but with the added feature of
a common currency.
(A)
True
(B)
False
54
In customs unions, a supranational policymaking committee decides common tariffs for
member countries.
(A)
True
(B)
False
55
Currency fluctuations can cause marketers to leave a foreign market.
(A)
True
(B)
False
56
Pegged currencies are not affected by supply and demand.
(A)
True
(B)
False
57
If the Mexican peso depreciates ten percent against the U.S. dollar, U.S. exporters must
raise their prices in pesos.
(A)
True
(B)
False
58
Most favored nation (MFN) status occurs when two countries agree bilaterally to give each
other preferred trading rights.
(A)
True
(B)
False
59
Most favored nation status was outlawed under GATT.
(A)
True
(B)
False
60
China never joined the WTO because it wanted to remain a communist country.
(A)
True
(B)
False
61
Unilateral transfers may include which of the following?
(A)
Royalties
(B)
Payments for services
(C)
Payments for imports
(D)
Remittances
62
Which of the following is not a principal part of the balance of payments statement?
(A)
Current account
(B)
Official transactions account
(C)
Savings account
(D)
Capital account
63
A stock purchase in a foreign company that entailed substantial control over that foreign
company would be designated a
(A)
portfolio investment
(B)
direct investment
(C)
remittance
(D)
unilateral transfer
64
A tax levied on imports is known as a ___________.
(A)
Quota
(B)
Voluntary export restriction
(C)
Nontarrif barrier
(D)
Tariff
65
The World Bank acts as an intermediary between
(A)
developed and developing countries
(B)
private capital markets and developing nations
(C)
the WTO and developing nations
(D)
private capital markets and developed nations
66
Which is constitutionally prohibited in the United States?
(A)
Orderly marketing arrangements
(B)
Export tariffs
(C)
Import tariffs
(D)
Nontariff barriers
67
The main objective behind imposing tariffs on imported goods is to
(A)
improve trade relations with other nations
(B)
generate foreign exchange
(C)
protect local industries
(D)
control inflation rates
68
Quotas are
(A)
taxes on imported goods
(B)
taxes on exported goods
(C)
subsidies for exported goods
(D)
physical limits on the amount of goods that can be imported into a country
69
GATT was a
(A)
custom union
(B)
free-trade association
(C)
monetary union
(D)
None of the above
70
Which was not a founding principal of GATT?
(A)
Reciprocity
(B)
Transparency
(C)
Orderly marketing arrangements
(D)
Nondiscrimination
71
Transparency was a founding principle of
(A)
OPIC
(B)
GATT
(C)
EuroDisney
(D)
the United States
72
Another name for the World Bank is ____________.
(A)
World Trade Organization
(B)
International Bank for Reconstruction and Development
(C)
International Monetary Fund
(D)
Group of Seven
73
Which country is most likely to have a soft currency?
(A)
United States
(B)
France
(C)
Japan
(D)
Chad
74
The ratio that measures the value of one currency in terms of another is called the
(A)
currency ratio
(B)
exchange ratio
(C)
exchange rate
(D)
balance of payments
75
The strengthening of the U.S. dollar against the Japanese yen has a negative effect on
(A)
U.S. exporters
(B)
U.S. importers
(C)
Japanese exporters
(D)
German exporters
76
For a free floating currency, the exchange rate is affected by
(A)
the forces of supply and demand
(B)
WTO regulations
(C)
the IMF that determines exchange rates
(D)
None of the above
77
A currency for which no effective international market exists is called a ___________
currency.
(A)
depreciating
(B)
devaluating
(C)
G7
(D)
soft
78
Low oil prices caused the Venezuelan bolivar to ________.
(A)
appreciate
(B)
depreciate
(C)
freely float
(D)
peg
79
China’s successful export model is threatened by _______.
(A)
its depreciating currency
(B)
increasing labor costs
(C)
export quotas
(D)
All of the above.
80
Private remmittances and foreign aid are included in which BOP account?
(A)
Capital account
(B)
Current account
(C)
Unilateral transfers
(D)
None of the above.
81
The focus of IMF activities has shifted from exchange rate relations among industrialized
countries to ______________.
(A)
the prevention of economic instability in developing countries.
(B)
reducing quota and tariff barriers in developed countries.
(C)
promoting exports from former Soviet Union states.
(D)
promoting investment into sub-Saharan Africa.
82
Transparency refers to
(A)
the free trade of goods and services
(B)
reciprocity in trade agreements
(C)
when trade restrictions are overt
(D)
when trade restrictions are limited to nontariff barriers