Question # 1

Investors engage in ____ when they move funds into foreign currencies in order to take advantage of interest rates abroad the are higher than domestic interest rates.

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Currency arbitrage

Interest arbitrage

Short positions

Long positions

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

According to the cost based definition of dumping occurs when a firm sells a product abroad at a price that is less than

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Average total cost

Average variable cost

Average fixed cost

Marginal cost

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 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

International trade in goods and services tends to

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Increase all domestic costs and prices

Keep all domestic costs and prices at the same level

Lessen the amount of competition facing home manufactures.

Increase the amount of competition facing home manufacturers

International trade is based o the notion that.

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Different currencies are an obstacle to international trade

Goods are more mobile internationally than are resources

Resources are more mobile internationally that are goods

A country's exports should always exceeds its imports

When imports from a higher cost supplier with in customs union replace imports from a lower cost supplier outside the custom union, there exists.

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Trade creation

Trade diversion

Dynamic welfare effects

Comprehensive welfare efffects

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

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

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

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Increases

Decreases

Adjustment mechanism

Currency contract period

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

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

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

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

Should international transpiration costs decrease the effect on international trade would include a.

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Increases in the volume of trade

Smaller gain from trade

Decline in the income of home producers

Decrease in the level of specialization in production.

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

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

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

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Adam Smith

David Ricardo

E . Heckscher

Bertil Ohlin

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

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