1) if i purchase a stereo from south korea, i obtain the stereo and south korea obtains the
dollars. but if i purchase a stereo produced in the united states, i obtain the stereo and
the dollars remain in america. this line of reasoning is:
a.valid for stereos, but not for most products imported by the united states
b.valid for most products imported by the united states, but not for stereos
c.deceptive since koreans eventually spend the dollars on u.s. goods
d.deceptive since the dollars spent on a stereo built in the united states eventually wind
up overseas
2) concerning a country’s business cycle, ____ is commonly associated with large or
growing current account deficits:
a.rapid growth rates of production and employment
b.slow growth rates of production and employment
c.falling interest rates on government securities
d.falling interest rates on corporate securities
3) developing nations overwhelmingly acknowledge that they have benefited from
international trade according to the principle of comparative advantage.
a.true
b.false
4) in the interbank market for foreign exchange, the ____ refers to the difference
between the offer rate and the bid rate.
a.cross rate
b.option
c.arbitrage
d.spread
5) the current account of the u.s. balance of payments does not include:
a.investment income
b.merchandise exports and imports
c.the sale of securities to foreigners
d.unilateral transfers
6) figure 6.4japanese market for jetliners
consider the japanese market for jetliners as depicted in figure 6.4.suppose lone
producer of jetliners in the world is boeing and boeing faces a constant marginal cost of
$20 million per jetliner.how much profit will boeing make?
a.0
b.$150 million
c.$230 million
d.$250 million
7) in the long run, competitiveness depends on an industry’s natural resources, its stock
of machinery and equipment, and the skill of its workers in creating goods that people
want to buy.
a.true
b.false
8) the fast-track provision of u.s. trade law has the affect of speeding up the timetable
during which the president negotiates trade agreements with foreign governments.
a.true
b.false
9) during the last century, the relative importance of international trade for the u.s. has:
a.significantly increased
b.slightly increased
c.significantly decreased
d.slightly decreased
10) in 1989 canada and the united states agreed to implement a (an) ____ over a ten
year period.
a.customs union
b.common market
c.free trade area
d.economic union
11) with globalization and import competition, u.s. prices have generally:
a.increased
b.decreased
c.remained stable
d.all of these at various times
12) import-substitution policies are supported by the fact that many developing
countries have small domestic markets and thus their producers enjoy the benefits of
diseconomies of small-scale production.
a.true
b.false
13) concerning the hypothesis that there has occurred a long-run deterioration in the
developing countries’ terms of trade, empirical studies provide:
a.mixed evidence that does not substantiate the deterioration hypothesis
b.overwhelming support for the deterioration hypothesis
c.overwhelming opposition to the deterioration hypothesis
d.none of the above
14) assume that ford motor company obtains some of its inputs in mexico (foreign
sourcing). as the peso becomes a larger portion of ford’s total costs, a dollar
appreciation leads to a ____ in the peso cost of a ford vehicle and a ____ in the dollar
cost of a ford compared to the cost changes that occur when all input costs are dollar
denominated.
a.smaller increase, larger decrease
b.smaller increase, smaller decrease
c.larger increase, smaller decrease
d.larger increase, larger decrease
15) foreign ownership of u.s. financial assets
a.has decreased since the 1960’s
b.has increased since the 1960’s
c.has made the u.s. a net borrower since the late 1980’s
d.both a and c
16) the factor endowment theory assumes
a.same tastes and preferences
b.factor inputs of uniform quality
c.same technology
d.all of the above
17) assume that canada has a comparative advantage in wheat and a comparative
disadvantage in autos. as the canadian demand for wheat increases, canada’s
equilibrium terms of trade improves.
a.true
b.false
18) that the division of labor is limited by the size of the market best applies to which
explanation of trade?
a.factor endowment theory
b.product life cycle theory
c.economies of scale theory
d.overlapping demand theory
19) the united states exports a larger percentage of its gross domestic product than
japan, germany, and canada.
a.true
b.false