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1. | Which of the following is NOT a benefit of international trade?
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| a) Without imports, the U.S. would have no coffee, chocolate, or pepper.
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| b) International trade provides employment in industries that export their products overseas.
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| c) Because the availability of natural resources differs greatly among nations, international trade helps nations obtain natural resources that they lack.
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| d) More than 60% of the trucks and buses purchased and used in the United States are imported from foreign nations.
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2. | The ability of one country using the same amount of land, labor, capital, and entrepreneurship as another country to produce a particular product at less cost is called __________
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| a) an absolute advantage.
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| b) an opportunity cost.
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| c) comparative advantage.
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| d) the combination of resources.
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3. | Which of the following statements about absolute advantage and comparative advantage is MOST accurate?
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| a) A nation has a comparative advantage when it can produce a product at less cost when using the same amount of resources as another country.
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| b) A nation has a comparative advantage when it can produce a product at a lower opportunity cost than another country.
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| c) A nation has an absolute advantage when it can produce a product at a lower opportunity cost than another country.
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| d) A nation has an absolute advantage only when no other nation can produce the same product.
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4. | The present system of currency exchange rates provides all the following EXCEPT __________
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| a) a way for countries to know the value of their currency in terms of another nation's currency.
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| b) a way for international firms to easily and quickly convert their currency to another.
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| c) a fixed rate of exchange.
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| d) easier trading among nations.
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5. | With flexible rates of exchange, the value of the U.S. dollar on the world market __________
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| a) changes daily.
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| b) stays the same for a period of time.
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| c) changes infrequently.
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| d) never changes.
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6. | If the forces of supply and demand cause the price of a currency to fall, this is called __________
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| a) foreign exchange.
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| b) devaluation.
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| c) depreciation.
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| d) elasticity of demand.
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7. | A positive balance of trade results when __________
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| a) the value of imports exceeds the value of exports.
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| b) the value of exports exceeds the value of imports.
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| c) the value of exports equals the value of imports.
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| d) a nation does not deal in international trade at all.
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8. | Which statement about the effect of exchange rates on a nation's balance of trade is TRUE?
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| a) Exchange rates have no effect on a nation's balance of trade.
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| b) If a nation's currency depreciates, the nation's imports will increase.
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| c) If a nation's currency increases in value, the nation's exports will increase.
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| d) If a nation's currency depreciates, the nation's exports will increase.
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9. | All of the following are major barriers to world trade EXCEPT __________
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| a) specialization.
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| b) quotas.
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| c) tariffs.
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| d) embargoes.
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10. | Protectionists argue that all of the following areas need to be protected by barriers to free trade EXCEPT for __________
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| a) job security.
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| b) economic security.
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| c) new industries.
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| d) foreign competition.
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11. | Which of the following is an argument for free trade?
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| a) Job security is threatened.
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| b) Competition results in improved products.
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| c) Trade restrictions damage import industries.
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| d) Less American money in the world market means fewer American exports are sold.
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12. | The most far-reaching global trade agreement in history is the __________
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| a) General Agreement on Tariffs and Trade (GATT).
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| b) North American Free Trade Agreement (NAFTA).
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| c) World Trade Organization (WTO).
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| d) European Union (EU).
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