Question # 1

_____________ represent the most widely used tool in international finance for measuring the average value of a currency relative to a number of other currencies

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Nominal exchange rates

Real exchange rates

Cross exchange rates

Exchange rate indexes

The balance of trade can only worsen if income________ relative to absorption

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Increases

Decreases

Adjustment mechanism

Currency contract period

The term of trade is given by theprices.

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Paid to all goods exported by the home country

Received for all goods exported by the home country

Received for exports and paid for imports.

Of primary products as opposed to manufactured products.

The gain from international trade are closely related to.

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the labor theory of value

How much the autarky price differs from international terms of trade change.

The fact that a country must lose from trade

All of the above

Direct investment and security purchases are classified as.

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Capital account transactions

Current account transactions

Unilateral transfer transactions

Merchandise trade transactions

Quotas are government imposed limits on the ___ of goods trade between countries.

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Prices

Quantity

Revenue

Costs

All of the following are fundamental to the world trade organization except.

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Bilateral tariff reductions to promote trade liberalization.

the use of the most favored nation clause

Nondiscrimination trading relationships

The prohibition of import quotas and export quotas

A tariff can ___________ raise a country's welfare

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Never

Sometimes

always

None of the above

In the classical model of Ricardo the direction of trade is determined by

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Absolute advantage

Comparative advantage

Physical advantage

Which way the wind blows

The most widely traded currency in the foreign exchange market is the.

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Euro

Chinses yuan

British pound

U.S. Dollar

If the home country government grants a subsidy on a domestically produced good domestic producers lend to.

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Capture the entire subsidy in the form of higher profits

Increases their level of production

Reduce wages paid to domestic workers

Consider the subsidy as an increase in production cost

The least common type of transaction in the foreign exchanges is a.

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Forward transaction

Spot transaction

Swap transaction

None of the above

A tax of 18 cents per unit of imported cheese would be an example of a.

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Compound tariff

Effective tariff

Ad valorem tariff

Specific tariff

In the calculation of gross domestic product net exports are.

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The sum of merchandise trade and services

The current account plus long term capital

The value of merchandise exports minus imports

Short term capital plus the basic balance

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