Question # 1

Mercantilism.

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Is the philosophy of free international trade.

Was a system of export promotion and barriers to imports practiced by government .

Was praised by Adam Smith in the Wealth of Nations

Both a and c

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 depreciation of the dollar willhave its most pronounced impact on imports if the demand for imports is.

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Constant

Inelastic

Elastic

Unitary elastic

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

The Hecksher Ohlin theory explains comparative advantage as the result of difference in countries.

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Relative abundance of various resources.

Relative costs of labor

Economies of large scale production.

Research and development expenditures.

The organization that currently establishes rules of conduct for firms engaging in international trade is the.

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World Bank

International Trade commission

Department of Justice

World Trade Organization

Small nations with more than one major trading partner lend to peg the value of their currencies to.

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gold

silver

a single currency

a basket of currencies

The national security argument for protection is more likely to be valid when

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The purpose is to maintain protection for an indefinite time period.

The industry is characterized by increasing returns to scale.

the economy operates during a recession

The protected industry provides invaluable goods during periods of war

The comparative advantage model of Ricardo was based on.

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Interindustry specialization and trade

Demand conditions underlying specialization and trade

Income conditions underlying specialization and trade

Among the institutions and polices that have been created to support developing countries are.

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the World bank

The international Monetary Fund

The Generalized system of Preferences

All of the above

When the price of foreign currency exchange is above the equilibrium level.

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An excess demand for that currency exists in the foreign exchange market.

An excess supply of the currency exists in the foreign exchange market

The demadn for foreign exchange shifts outward to the right

The demand for foreign exchange shifts backward to the left.

A product will be traded only if the pre trade price difference between the two countries

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Is less than the cost of transporting it between them

is greater than the cost of transporting it between them

Equals the cost of transporting it between them

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A tariff that prohibits imports has only

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a revenue effect and redistribution effect

Revenue effect and protection effect

Consumption effect and protection effect

Redistribution effect and consumption effect

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

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Euro

Chinses yuan

British pound

U.S. Dollar

The difference between a country's balances of payments and its balance of international indebtedness.

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Is equal of official reserve transactions

Occurs because of foreign exchange fluctuations

Reflects statistical discrepancies

Reflects the difference between flow and stock concepts

International trade forces domestic firms to become more completive in terms of.

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The introduction of new products

Product design and quality

Product price

All of the above

The factor endowment theory was pioneered by

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Adam Smith

David Richardo

Wassily Leontief

Ell Heckscher and Bartill Ohlim

_____________ 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

If a small country imposes a tariff on an imported goods terms of trade will

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Improve

worsen

Not change

any of the above

According to the factor endowment model of Hackshcer and Ohlin countries heavily endowed with land will.

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Devote excessive amounts of resources to agricultural production.

Devote insufficient amounts of resources to agricultural production

Export products that are and intensive.

Import products that are land intensive

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