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61 Cards in this Set
- Front
- Back
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An import quota:
a. increases the domestic price of the imported commodity b. reduces domestic consumption c. increases domestic production d. all of the above |
d. all of the above
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An increase in the demand of the imported commodity subject to a given import quota:
a. reduces the domestic quantity demanded of the commodity b. increases the domestic production of the commodity c. reduces the domestic price of the commodity d. reduces the producers' surplus |
b. increases the domestic production of the commodity
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Adjustment to any shift in the domestic demand or supply of an importable commodity occurs:
a. in domestic price with an import quota b. in the quantity of imports with a tariff c. through the market mechanism with an import tariff but not with an import quota d. all of the above |
d. all of the above
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An international cartel refers to:
a. dumping b. an organization of exporters c. an international commodity agreement d. voluntary export restraints |
b. an organization of exporters
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An international cartel refers to:
a. dumping b. an organization of exporters c. an international commodity agreement d. voluntary export restraints |
b. an organization of exporters
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he temporary sale of a commodity at below cost or at a lower price abroad in order to drive foreign producers out of business is called:
a. predatory dumping b. sporadic dumping c. continuous dumping d. voluntary export restraints |
a. predatory dumping
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The type of dumping which would justify antidumping measures by the country subject to the dumping is:
a. predatory dumping b. sporadic dumping c. continuous dumping d. all of the above |
a. predatory dumping
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A fallacious argument for protection is:
a. the infant industry argument b. protection for national defense c. the scientific tariff d. to correct domestic distortions |
c. the scientific tariff
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Which of the following is true with respect to the infant-industry argument for protection?
a. It refers to temporary protection to establish a domestic industry. b. To be valid, the return to the grown-up industry must be sufficiently high also to repay for the higher prices paid by domestic consumers of the commodity during the infancy period. c. It is inferior to an equivalent production subsidy to the infant industry. d. All of the above. |
d. All of the above.
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Which of the following is false with respect to strategic trade policy?
a. it postulates that a nation can gain by an activist trade policy b. it is practiced to some extent by most industrial nations c. it can easily be carried out d. all of the above |
b. it is practiced to some extent by most industrial nations
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What gives rise to the fear of globalization in the United States?
a. outsourcing b. offshoring c. imports of skill-intensive products d. all of the above |
d. all of the above
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Industrial policy refers to:
a. an activist policy by the government of an industrial country to stimulate the development of an industry b. the granting of a subsidy to a domestic industry to stimulate the development of an industry c. the granting of a subsidy to a domestic industry to counter a foreign subsidy d. all of the above |
d. all of the above
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Trade protection in the United States is usually provided to:
a. low-wage workers b. well-organized industries with large employment c. industries producing consumer products d. all of the above |
d. all of the above
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The most-favored-nation principle refers to:
a. extension to all trade partners of any reciprocal tariff reduction negotiated by the U.S. with any of its trade partners b. multilateral trade negotiation c. the General Agreement on Tariffs and Trade d. the International Trade Organization |
a. extension to all trade partners of any reciprocal tariff reduction negotiated by the U.S. with any of its trade partners
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On which of the following principles does GATT rest?
a. nondiscrimination b. elimination of nontariff barriers c. consultation among nations in solving trade disputes d. all of the above |
d. all of the above
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Which of the following was not negotiated under the Uruguay Round?
a. reduction of tariffs on industrial goods b. replacement of quotas with tariffs c. reduction of subsidies on industrial products and on agricultural exports d. liberalization in trade in most services |
d. liberalization in trade in most services
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Game theory refers to:
a. a method of choosing the optimal strategy in conflict situations b. the granting of a subsidy to correct a domestic distortion c. the theory of tariff protection d. none of the above |
a. a method of choosing the optimal strategy in conflict situations
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Which of the following statements is correct?
a. in a customs union, member nations apply a uniform external tariff b. in a free-trade area, member nations harmonize their monetary and fiscal policies c. within a customs union there is unrestricted factor movement d. a customs union is a higher form of economic integration than a common market |
a. in a customs union, member nations apply a uniform external tariff
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A customs union that allows for the free movement of labor and capital among its member nations is called a:
a. preferential trade arrangement b. free-trade area c. common market d. all of the above |
c. common market
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A customs union creates trade when:
a. lower-cost imports from outside the customs union are replaced by higher-cost imports from a union member b. some domestic production in a member nation is replaced by lower-cost imports from another member nation c. trade among members increases but trade with nonmembers decreases d. trade among members decreases while trade with nonmembers increases |
b. some domestic production in a member nation is replaced by lower-cost imports from another member nation
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Trade diversion arises in a customs union if it:
a. increases trade among union members and with nonmember nations b. reduces trade among union members and with nonmember nations c. increases trade among members but reduces trade with non-members d. reduces trade among union members but increases it with nonmembers |
c. increases trade among members but reduces trade with non-members
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Customs union usually results in:
a. trade diversion only b. trade creation only c. both trade creation and trade diversion d. we cannot say |
c. both trade creation and trade diversion
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The formation of a customs union that leads only to trade creation and all economic resources of member nations are fully employed before and after the formation of the customs union leads to an:
a. increase in the welfare of member and nonmember nations b. increase in the welfare of member nations only c. increase in the welfare of nonmember nations only d. increase or decrease in the welfare of member and nonmember nations |
a. increase in the welfare of member and nonmember nations
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A customs union that leads to both trade creation and trade diversion:
a. increases the welfare of member and nonmember nations b. reduces the welfare of member and nonmember nations c. increases the welfare of member nations but reduces that of nonmembers d. reduces the welfare of nonmembers and may increase or reduce that of members |
d. reduces the welfare of nonmembers and may increase or reduce that of members
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A customs union is more likely to lead to trade creation:
a. the lower are the pre-union trade barriers of the member countries b. the lower are the customs union's barriers on trade with the rest of the world c. the smaller is the number of countries forming the customs union and the smaller their size d. the more complementary rather than competitive are the economies of the nations forming the customs union |
b. the lower are the customs union's barriers on trade with the rest of the world
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Which is not a dynamic benefit from the formation of a customs union?
a. increased competition b. economies of scale c. stimulus to investment d. trade creation |
d. trade creation
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The formation of the EU resulted in:
a. trade creation in industrial and agricultural products b. trade diversion in industrial and agricultural products c. trade creation in industrial products and trade diversion in agricultural products d. trade diversion in industrial products and trade creation in agricultural products |
c. trade creation in industrial products and trade diversion in agricultural products
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The benefit that the United States receives from NAFTA:
a. increasing competition in product and resource markets b. greater technical innovation c. improvements in its terms of trade d. all of the above |
a. increasing competition in product and resource markets
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The benefit that Mexico is likely to receive from NAFTA:
a. greater export-led growth b. encouraging the return of flight capital c. more rapid structural change d. all of the above |
d. all of the above
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Which is a stumbling block to successful economic integration among groups of
developing nations? a. benefits are not evenly distributed among nations b. many developing nations are not willing to relinquish part of their newly-acquired sovereignty to a supranational community body, as required for successful economic integration c. the complementary nature of their economies and competition for the same world markets for their agricultural exports d. all of the above |
d. all of the above
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The formation of a free trade area among the countries of Eastern Europe is advocated in order to:
a. restore trade trading b. retain the traditional trade links that can be justified on market principles c. reduce the need for structural change d. none of the above |
b. retain the traditional trade links that can be justified on market principles
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The Members of Mercosur are:
a. Brazil, Mexico, Argentina, and venezuela b. Argentina, Brazil, the United States and Peru c. Brazil, Argentina, Paraguay, and Uruguay d. Brazil, Chile, Peru and Canada |
c. Brazil, Argentina, Paraguay, and Uruguay
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Which of the following is false?
a. a credit transaction leads to a payment from foreigners b. a debit transaction leads to a payment to foreigners c. a credit transaction is entered with a negative sign d. double-entry bookkeeping refers to each transaction entered twice |
c. a credit transaction is entered with a negative sign
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Which of the following is a debit?
a. the export of goods b. the export of services c. unilateral transfers given to foreigners d. capital inflows |
c. unilateral transfers given to foreigners
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Capital inflows:
a. refer to an increase in foreign assets in the nation b. refer to a reduction in the nation's assets abroad c. lead to a payment from foreigners d. all of the above |
d. all of the above
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The receipt of an interest payment on a loan made by a U.S. commercial bank to a foreign resident is entered in the U.S. balance of payments as a:
a. credit in the capital account b. credit in the current account c. credit in official reserves d. debit in unilateral transfers |
b. credit in the current account
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The payment of a dividend by an American company to a foreign stockholder represents:
a. a debit in the U.S. capital account b. a credit in the U.S. capital account c. a credit in the U.S. official reserve account d. a debit in the U.S. current account |
d. a debit in the U.S. current account
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When a U.S. firm imports a good from England a pays for it by drawing on its pound sterling balances in a London Bank, the U.S. debits its current account and credits its:
a. official reserve account b. unilateral transfers account c. services in its current account d. capital account |
d. capital account
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When the U.S. ships food aid to a developing nation, the U.S. debits:
a. unilateral transfers b. services c. capital d. official reserves |
a. unilateral transfers
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When the resident of a foreign nation (1) sells a U.S. stock and (2) deposits the proceeds in a U.S. bank, the U.S.:
a. credits capital for (1) and debits capital for (2) b. credits the current account and debits capital c. debits capital and credits official reserves d. debits capital for (1) and credits capital for (2) |
d. debits capital for (1) and credits capital for (2)
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When a U.S. resident (1) purchases a foreign treasury bill and pays by (2) drawing down his
bank balances abroad: a. debits short-term capital and credits official reserves b. debits capital for (1) and credits capital for (2) c. debits official reserves and credits capital d. credits short-term capital and debits official reserves |
b. debits capital for (1) and credits capital for (2)
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From the U.S. point of view, drawing on (reducing) foreign bank balances in a New York bank represents a:
a. capital inflow b. capital outflow c. outflow of official reserves d. debit in the current account |
b. capital outflow
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The capital account of the U.S. includes:
a. the change in U.S. assets abroad and foreign assets in the U.S. b. the change in U.S. assets abroad and foreign assets in the U.S., other than official reserve assets c. all financial assets d. all but current account transactions |
b. the change in U.S. assets abroad and foreign assets in the U.S., other than official reserve assets
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Accommodating items are:
a. transactions in official reserve assets b. the items below the line c. needed to balance international transactions d. all of the above |
d. all of the above
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Which of the following is false?
a. a net debit balance in the current and capital accounts measures the surplus in the nation's balance of payments b. a balance of payments deficit must be settled by a net credit in the official reserve account c. a deficit in the balance of payments can be measured by the excess of credits over debits in the official reserve account d. a net debit balance in the official reserve account refers to a surplus |
a. a net debit balance in the current and capital accounts measures the surplus in the nation's balance of payments
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Which of the following statements is correct with regard to the United Stated becoming a net debtor nation?
a. it allowed the United States to grow faster b. it helped finance some of the U.S. budget deficits c. it created the risk that foreigners may suddenly withdraw their investments in the U.S. d. all of the above. |
d. all of the above.
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Which is not a function of the foreign exchange market?
a. to transfer funds from one nation to another b. to finance trade c. to diversify risks d. to provide the facilities for hedging |
c. to diversify risks
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An increase in the euro price of the dollar represents:
a. an appreciation of the dollar b. a depreciation of the dollar c. an appreciation of the pound d. a devaluation of the dollar |
a. an appreciation of the dollar
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A change from $1=€1 to $2=€1 represents
a. depreciation of the dollar b. an appreciation of the dollar c. a depreciation of the euro d. none of the above |
a. depreciation of the dollar
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A shortage of Euros with flexible exchange rates results in:
a. a depreciation of the euro b. a depreciation of the dollar c. an appreciation of the dollar d. no change in the exchange rate |
b. a depreciation of the dollar
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An effective exchange rate is a:
a. spot rate b. forward rate c. a flexible exchange rate d. weighted average of the exchange rates between the domestic currency and the nation’s most important trade partners |
d. weighted average of the exchange rates between the domestic currency and the nation’s most important trade partners
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The exchange rate is kept within narrow limits in different monetary centers by:
a. hedging b. exchange arbitrage c. interest arbitrage d. speculation |
b. exchange arbitrage
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If SR=$1/€1 and the three-month FR=$1.99/€1:
a. the euro is at a three-month forward discount of 1% b. the euro is at a forward discount of 1% per year c. the Euros at a three-month forward premium of 1% d. the dollar is at a three-month forward discount of 1% |
a. the euro is at a three-month forward discount of 1%
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Hedging refers to:
a. the acceptance of a foreign exchange risk b. the covering of a foreign exchange risk c. foreign exchange speculation d. foreign exchange arbitrage |
b. the covering of a foreign exchange risk
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A U.S. importer scheduled to make a payment of €100,000 in three months can hedge his foreign exchange risk by:
a. purchasing £100,000 in the forward market for delivery in three months b. selling €100,000 in the spot market for delivery in three months c. purchasing €100,000 in the forward market for delivery in three months d. selling €100,000 in the spot market for delivery in three months |
c. purchasing €100,000 in the forward market for delivery in three months
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If the three-month FR=$1/€1 and a speculator anticipates that SR=$1.03/€1 in three months, he can earn a profit by:
a. selling Euros forward b. purchasing Euros forward c. selling dollars forward d. purchasing dollars forward |
b. purchasing Euros forward
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Destabilizing speculation refers to the:
a. sale of the foreign currency when the exchange rate falls or is low b. purchase of the foreign currency when the exchange rate falls or is low c. sale of the foreign currency when the exchange rate rises or is high d. all of the above |
a. sale of the foreign currency when the exchange rate falls or is low
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A capital outflow from New York to London under covered interest arbitrage can take place if the interest differential in favor of London is:
a. smaller than the forward discount on the pound b. equal to the forward discount on the pound c. larger than the forward discount on the pound d. none of the above. |
c. larger than the forward discount on the pound
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According to the theory of covered interest arbitrage, if the interest differential in favor of the foreign country exceeds the forward discount on the foreign currency, there will be a:
a. capital inflow under covered interest arbitrage b. capital outflow under covered interest arbitrage c. no capital flow under a covered interest arbitrage d. any of the above |
b. capital outflow under covered interest arbitrage
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When the interest differential in favor of the foreign country is equal to the forward premium on the foreign currency, we:
a. are at covered interest arbitrage parity b. are not at covered interest arbitrage parity c. may or may not be at covered interest arbitrage parity d. we cannot say without additional information |
b. are not at covered interest arbitrage parity
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The currency of the nation with the higher interest rate is usually at a:
a. forward discount b. forward premium c. covered interest arbitrage parity d. any of the above |
a. forward discount
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