Question # 1

A _________ is a regional trading block in which member countries eliminate intercanal trade barriers but maintain existing barriers against countries that are not members.

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Free trade area

Customs union

Common market

Monetary union

All of the following are debit items in the balance of payment eexcept.

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Capital outflows

merchandise exports

Private gifts to foreigners

Foreign and granted to other nations

Those who argue in favor of import protection generally give the impression that such restricted trade will.

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Decrease the level of national security

Provide benefits to some particular industry

Provide benefits to the entire nation

Not yield welfare losses for the nation

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

A specification of a maximum amount of a foreign produced good that will be allowed to enter the country over a given time period is referred to as a

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Domestic subsidy

Export subsidy

Import quota

Export quota

Import quotas tend to result in all of the following except.

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Domestic producers of the imported good being harmed

Domestic consumers of the imported good being harmed

Prices increasing in the importing country

Price failing in the exporting country.

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

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Increases

Decreases

Does not change

None of the above

If a country has a bowed out production possibility frontier then production is said to be subject to.

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Constant opportunity costs

Decreasing opportunity costs

First increasing and than decreasing opportunity costs

Increasing opportunity costs

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

The effect of the most favored nation clause is to.

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Eliminate all tariffs between countries

Increase all tariff rates between countries.

Maintain a nondiscriminatory structure of tariffs

Maintain a discriminatory structure of tariffs

The trade model of the Swedish economists Hackscher and Ohlin maintains that.

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Absolute advantage determines the distribution of the gain from trade

Comparative advantage determines the distribution of the gains from trade.

The division of labor is limited by the size of the world market

A country exports goods for which its resource endowment are most suited.

currency speculation is__________ if speculators bet against market forces that cause exchange fluctuations, thus moderating such fluctuations.

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Destabilizing

Stabilizing

Inflationary

Deflationary

When all of the debit or credit items in the balance of payments are combined

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Merchandise imports equal merchandise exports

Capital imports equal capital exports

Services exports equal service imports

the total surplus or deficit equals zero

The supply of foreign currency tends to be

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Upward sloping

Down ward sloping

Vertical

Any of the above

All of the following are credit items in the balance of payments except.

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Investment inflows

Merchandise exports

Payment for American service's to foreigners

Private give to foreign residents

The reduction or covering of foreign exchange risk is called.

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Hedging

Speculation

Intervention

Arbitrage

Specific tariffs are collected as

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Fixed amount of money per unit traded

a percentage of the price of the product

A percentage of the quantity of imports

All of the above

Developing countries that concentrate production in agricultural products or raw materials may face a long run decline in their international terms of trade because of.

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Inelastic demand for these products in advanced countries.

Large increase in the supplies of these products on world markets because of export expansion polices

sluggish demand for these products in advanced countries

All of the above

Most tariffs have

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Only revenue effects

Only protective effects

Both protective ad revenue effects

Neither protective or revenue effects

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

Wassily Leontief used an input output table in order to test the.

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Richardian theory of comparative advantage

Heckscher Ohlin theory of comparative advantage.

Linder theory of overlapping demand

All of the above

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