Question # 1

Which financial instruments provide a buyer the right to purchase or sell a fixed amount of currency at a prearranged price within a few days to a coupled of years.

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Letter of credit

Foreign currency option

Cable transfer

Bill of exchange

A primary reason why nations conduct international trade is because.

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some nations prefer to produce one thing while others produce another.

Resources are not equally distributed to all trading nations

Trade enhances opportunities to accumulate profits

Interest rates are not identical in all trading nations

Current account deficits are offset by

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Merchandise trade deficits

Merchandise trade surpluses

Capital /financial account surpluses

Capital /financial account deficits

When one country provides most favored nation status for another if agrees to.

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Change that nation's product a lower tariff than any other nations

Charge that nation's products a tariff rate no higher than that on any other nation.

Charge that nation's products a higher tariff than any other nation's

Export to that nation any products that it wants to purchase

That the division of labor is limited by the size of th market best applies to which explanation of trade.

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Factor endowment theory

Product like cycle theory

Economics of scale theory

Over lapping demand theory

Anti dumping duties applied to imported goods.

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Are abolished by the world Trade Organization

Result in decreases in consumer surplus for domestic households

Are imposed by industrial countries but not developing countries.

Result in lower priced goods for domestic consumers

___________ are quotas that lead to a complete abolishment of trade.

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Nontariff barriers

Embargoes

Voluntary export restraints

Orderly marketing agreements

If export's are a constant proportion of GNP such that E = 18 GNP, find the level of imports that would represent a zero trade balance when GNP = 10,000

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180

555

1,800

5,555

The _____ analyzes the income distribution effects of trade in the short run when resources are immobile among industries.

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Stolpher Samuelson theory

Factor endowment theory.

Specific factor theory

Over lapping demand theory

Ad valorem tariffs are collected as.

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A percentage of the price of the product

A percentage of the quantity of imports

All of the above

Fixed amounts of money per unit traded

The arrangement where goods imported from trading partners in the developing world are subject to lower tariff rates than goods from other countries is referred to as.

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Normal trade relation status

Most favored nation status

Generalized system of preferences

A nation with a current account deficit will be

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Lending more money to other nations

Experiencing a surplus in exports of goods and services

Reducing its indebtedness to other nations

Going further into debt with other nations

The current account includes

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The value of trade in merchandise

Services

Unilateral transfers

All of the above

If the international terms of trade settle at a level that is between each country's opportunity cost.

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There is no basis for gainful trade for either country

Both countries gain from trade

Only one country gains from trade

One country gains and the other country loses from trade

_____________ 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

Riskless transactions to take advantage of profit opportunities due to a price differential or a yield differtial in excess of transaction costs are called.

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Differential actions

Cash transactions

Arbitrage

Forward transactions

A country that is a net international debtor initially experiences a.

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Larger savings pool available finance domestic spending

Higher interest rate which leads lower domestic investment.

Loss of funds to trading partners overseas

Decrease in tis services exports to other countire.

If import licenses are auctioned off to domestic importers in a competitive market their scarcity value accurse to.

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Foreign corporations

Foreign workers

Domestic corporations

The domestic government

__________ policies attempt to foster industrialization by establishing high barriers to import of foreign goods to promote local production.

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absolute advantage

Comparative advantage

Export led growth

Import substitution

Trade based on comparative advantage assures that.

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Only the strongest suvrive

Some people are rich and others are poor

Each item is produced using the least amount of time needed to produce it

Each item is produced at as low a cost possible in terms of other things given up

A feasible effect of international trade is that a

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Monopoly in the home market become an oligopoly in the world market

Oligopoly in the home market becomes a monopoly in the world market

Purely competitive firm in the home market becomes an oligopolistic

Purely competitive firm in the home market becomes a monopolist

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