Question 1

Given that countries A and B each specialize in the production of one good and voluntarily
Trade it for the other country's good, then

Accepted Answer

A)   only country A can experience positive gains from trade.
B)   only country B can experience positive gains from trade.
C)   both countries can experience positive gains from trade.
D)   both countries experience negative gains from trade.

Question 2

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion.
Foreigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in
Its capital account?

Accepted Answer

A)   $100 billion
B)   -$100 billion
C)   $300 billion
D)   -$300 billion

Question 3

An increase in the U.S. dollar exchange rate means foreigners must pay

Accepted Answer

A)   more for dollars and more for U.S. exports.
B)   less for dollars and more for U.S. imports.
C)   more for dollars and less for U.S. exports.
D)   less for dollars and less for U.S. exports.

Question 4

Figure 15-1 1 represents A)  the quantity of U.S. dollars supplied by the Federal Reserve in foreign markets. B)  the quantity of U.S. dollars supplied and demanded by foreign nationals. C)  The quantity of U.S. dollars supplied by U.S. importers and U.S. nationals who purchased foreign assets. D)  It represents the total amount foreigners spent in the United States during a given period." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 15-1. The equilibrium quantity, Q1 represents

Accepted Answer

A)   the quantity of U.S. dollars supplied by the Federal Reserve in foreign markets.
B)   the quantity of U.S. dollars supplied and demanded by foreign nationals.
C)   The quantity of U.S. dollars supplied by U.S. importers and U.S. nationals who purchased foreign assets.
D)   It represents the total amount foreigners spent in the United States during a given period.

Question 5

Under a gold standard exchange rate system, a nation's money supply is regulated by

Accepted Answer

A)   world supply of gold.
B)   world demand for gold.
C)   the market forces of demand and supply of gold in the gold market.
D)   the quantity of gold owned by a country.

Question 6

If the U.S. exchange rate decreases relative to foreign currencies, then

Accepted Answer

A)   imports and exports of the United States will both increase.
B)   imports and exports of the United States will both decrease.
C)   imports of the United States will decrease and exports of the United States will increase.
D)   imports of the United States will increase and exports of the United States will decrease.

Question 7

Which of the following affects the quantity of U.S. dollars supplied in the currency market?

Accepted Answer

A)   Foreign purchases of U.S. goods and services
B)   Payments to U.S. owners of foreign assets
C)   Domestic purchases of U.S. goods and services
D)   U.S. purchases of foreign assets

Question 8

Which of the following statements is true about international trade?

Accepted Answer

A)   In the long-run, trade not only reduces employment in some sectors but also reduces employment in the economy as a whole.
B)   In the short-run, trade can reduce employment in some sectors and also in the economy as a whole.
C)   Owners of factors of production used in industries in which a nation lacks a comparative advantage are more likely to gain from trade than those owners of resources used in industries in which a country has a comparative advantage.
D)   Countries with relatively higher wage rates are more likely to be hurt by international trade.

Question 9

Members of the countries in the eurozone

Accepted Answer

A)   have less autonomy in conducting their monetary and fiscal policies than they did before the euro was introduced.
B)   have more autonomy in conducting their monetary and fiscal policies than they did before the euro was introduced.
C)   have less autonomy in conducting their monetary policy than they did before the euro was introduced, but more autonomy in conducting their fiscal policy.
D)   have more autonomy in conducting their monetary policy than they did before the euro was introduced, but less autonomy in conducting their fiscal policy.

Question 10

A reduction in net exports will, all other things unchanged, shift the aggregate demand
curve to the left.

Accepted Answer

A) True 
 B)False

Question 11

A lower price level in the United States.

Accepted Answer

A)   discourages U.S. exports and increases U.S. imports.
B)   encourages U.S. exports and reduces U.S. imports.
C)   discourages U.S. exports and reduces U.S. imports.
D)   encourages U.S. exports and increases U.S. imports.

Question 12

A free-floating exchange rate is only flexible if there is a deficit in the foreign exchange
market.

Accepted Answer

A) True 
 B)False

Question 13

Consider a country that has a gold standard exchange rate system. Which of the following occurs if this country expands its money supply to eliminate a surplus in its balance of payments?

Accepted Answer

A)   Aggregate demand, the price level, and real GDP all decrease and eventually, net exports will rise in response to the lower price level.
B)   The price level increases and real GDP increases as producers respond to the higher price level but aggregate demand will fall.
C)   Aggregate demand, the price level, and real GDP all increase, and eventually, net exports will fall in response to the higher price level.
D)   The price level and real GDP increase, but aggregate demand will fall.

Question 14

A deficit in the current account implies

Accepted Answer

A)   there is an excess demand in the foreign currency market.
B)   a deficit in the capital account.
C)   a surplus in the capital account.
D)   nothing about the capital account.

Question 15

In the short run, an increase in net exports causes

Accepted Answer

A)   an increase in real GDP and the price level.
B)   an increase in real GDP and a decrease in the price level.
C)   a decrease in real GDP and an increase in the price level.
D)   a decrease in real GDP and the price level.

Question 16

Which of the following is not a trade barrier?

Accepted Answer

A)   Tariffs
B)   Quota
C)   An embargo
D)   A growing sentiment in favor of "buying local"

Question 17

The U.S. and Canada are major trading partners. Suppose the Canadian dollar rises sharply in
Value against the U.S. dollar. At the same time, strong income growth in the U.S. increases the demand for Canadian exports. What happens to Canada's net exports if the effect of Canadian dollar appreciation dominates that of strong income growth in the U.S.?

Accepted Answer

A)   Net exports will rise.
B)   Net exports will fall.
C)   Net exports will remain constant.
D)   The effect on net exports is indeterminate.

Question 18

The terms "balance of payments" and "balance of trade" are synonymous.

Accepted Answer

A) True 
 B)False

Question 19

Trade between two nations is mutually beneficial if each specializes in the good in which it
has a comparative advantage.

Accepted Answer

A) True 
 B)False

Question 20

In the long run, international trade

Accepted Answer

A)   affects the economy's natural level of employment.
B)   affects the economy's real wage.
C)   does not affect the natural level of employment or the real wage.
D)   increases real wages because it increases a country's standard of living.

Exam 15: Net Exports and International Finance

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. Foreigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in Its capital account?

Correct Answer
verified

Which of the following is not a trade barrier?

Correct Answer
verified

A deficit in the current account implies

Correct Answer
verified

An increase in the U.S. dollar exchange rate means foreigners must pay

Correct Answer
verified

In the long run, international trade

Correct Answer
verified

Members of the countries in the eurozone

Correct Answer
verified

A lower price level in the United States.

Correct Answer
verified

Which of the following statements is true about international trade?

Correct Answer
verified

Given that countries A and B each specialize in the production of one good and voluntarily Trade it for the other country's good, then

Correct Answer
verified

Under a gold standard exchange rate system, a nation's money supply is regulated by

Correct Answer
verified

A reduction in net exports will, all other things unchanged, shift the aggregate demand curve to the left.

Correct Answer
verified

Correct Answer
verified

A free-floating exchange rate is only flexible if there is a deficit in the foreign exchange market.

Correct Answer
verified

The terms "balance of payments" and "balance of trade" are synonymous.

Correct Answer
verified

In the short run, an increase in net exports causes

Correct Answer
verified

Consider a country that has a gold standard exchange rate system. Which of the following occurs if this country expands its money supply to eliminate a surplus in its balance of payments?

Correct Answer
verified

Trade between two nations is mutually beneficial if each specializes in the good in which it has a comparative advantage.

Correct Answer
verified

Which of the following affects the quantity of U.S. dollars supplied in the currency market?

Correct Answer
verified

If the U.S. exchange rate decreases relative to foreign currencies, then

Correct Answer
verified

Figure 15-1 -Refer to Figure 15-1. The equilibrium quantity, Q₁ represents

Correct Answer
verified

Exam 15: Net Exports and International Finance

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. Foreigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in Its capital account?

Correct AnswerverifiedShow Answer

Which of the following is not a trade barrier?

Correct AnswerverifiedShow Answer

A deficit in the current account implies

Correct AnswerverifiedShow Answer

An increase in the U.S. dollar exchange rate means foreigners must pay

Correct AnswerverifiedShow Answer

In the long run, international trade

Correct AnswerverifiedShow Answer

Members of the countries in the eurozone

Correct AnswerverifiedShow Answer

A lower price level in the United States.

Correct AnswerverifiedShow Answer

Which of the following statements is true about international trade?

Correct AnswerverifiedShow Answer

Given that countries A and B each specialize in the production of one good and voluntarily Trade it for the other country's good, then

Correct AnswerverifiedShow Answer

Under a gold standard exchange rate system, a nation's money supply is regulated by

Correct AnswerverifiedShow Answer

A reduction in net exports will, all other things unchanged, shift the aggregate demand curve to the left.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A free-floating exchange rate is only flexible if there is a deficit in the foreign exchange market.

Correct AnswerverifiedShow Answer

The terms "balance of payments" and "balance of trade" are synonymous.

Correct AnswerverifiedShow Answer

In the short run, an increase in net exports causes

Correct AnswerverifiedShow Answer

Consider a country that has a gold standard exchange rate system. Which of the following occurs if this country expands its money supply to eliminate a surplus in its balance of payments?

Correct AnswerverifiedShow Answer

Trade between two nations is mutually beneficial if each specializes in the good in which it has a comparative advantage.

Correct AnswerverifiedShow Answer

Which of the following affects the quantity of U.S. dollars supplied in the currency market?

Correct AnswerverifiedShow Answer

If the U.S. exchange rate decreases relative to foreign currencies, then

Correct AnswerverifiedShow Answer

Figure 15-1 -Refer to Figure 15-1. The equilibrium quantity, Q1 represents

Correct AnswerverifiedShow Answer

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Figure 15-1 -Refer to Figure 15-1. The equilibrium quantity, Q₁ represents

Correct Answer
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