Question # 1

If a nation has an open economy it means that the nation.

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Allows private ownership of capital

Has flexible exchange rates

Has fixed exchange rates

Conducts trade with other countries

Absolute advantage is determined by

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Actual difference in labor productivity between countries.

Relative difference in labor productivity between countries.

Both a and b

Neither a nor b

The relationship between the exchange rate ad the prices of tradable goods is known as the.

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Purchasing power parity theory

Asset markets theory

Monetary theory

Balance of payments theory

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

Similar to import tariffs import quotas tend to result in.

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Higher prices ad reduced imports

Increased government revenue

Increases consumer surplus

Decreased producer surplus

The current account includes

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The value of trade in merchandise

Services

Unilateral transfers

All of the above

The earliest statement of the principle of comparative advantage in associated with

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Adam Smith

David Ricardo

E . Heckscher

Bertil Ohlin

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

__________ is a said to exist when the formation of a regional trading group leads to the reduction of trade with nonmember countries infavor of member countries.

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Trade creation

Trade diversion

Trade exclusion

Trade distortion

International trade is based on the idea that

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Exports should exceed imports

Imports should exceed exports

Resources are more mobile internationally than are goods

Resources are less mobile internationally than are goods

The role of _________ is to direct one nation's savings into investments of another nation

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Merchandise trade flows

Service flows

Current account flows

Capital flows

A widely used indicator to differentiate developed countries from developing countries is.

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International trade per captia

Real income per capita

Unemployment per capita

Calories per capita

Small nations whose trade and financial relationships are mainly with a single partner tend to utilize.

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Pegged exchange rates

Freely floating exchanged rates

Managed floating exchange rates

Crewing exchange rates.

The world trade organization is sometimes criticized for all of the following reasons except.

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If reduces the sovereignty of member countries.

Favors free trade over the quality of the environment

It has no way to solve trade disputes among member countries.

It is a "puppet" of multinational corporations

Direct investment and security purchases are classified as.

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Capital account transactions

Current account transactions

Unilateral transfer transactions

Merchandise trade transactions

Nontariff trade barriers could include all of the following except.

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Domestic content laws

Government procurement polices

Health , safety, and environmental standards

Antidumping counter/vialling duties applied to imports.

If a country has a linear production possibilities frontier then production is said to be subject to.

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Constant opportunity costs

Decreasing opportunity costs

First increasing and then decreasing opportunity costs

Increasing opportunity costs

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

An important feature of a___ is that the holder has the right , but not the obligation, to buy or sell currency

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Swap

Foreign exchange arbitrage

Foreign exchange option

Futures market contract

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

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