Question # 1

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

Ad valorem tariffs are collected as.

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Fixed amounts of money per unit traded

A percentage of the price of the product

A percentage of the quantity of imports

All of the above

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

The exchange rate system that best characterizes the present international monetary arrangement used by industrialized countries is.

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Freely fluctuating exchange rates

Adjustable pegged exchange rates

Managed floating exchange rate.

Pegged or fixed exchange rates

increase foreign competition tend to.

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Intensify inflationary pressure at home

Induce falling output per worker hour for domestic workers

Place constraints on the wages of domestic workers

Increase profits of domestic import competing industries.

The difference between what consumers have to pay for a particular and what they are willing to pay is known as.

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Consumer surplus

Producer surplus

Dead weight costs

Dead weight surplus

A tax of 17 percent per imported item would be an example of a

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Ad valorem tariff

Specific tariff

effective tariff

Compound tariff

According to the factor price equalization theorem, the ______ factor should oppose free trade policies in any given country.

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Abundant

scarce

Neither

Can't tell without more information

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

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

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 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

The exchange rate is kept the same across geographically separate markets by

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Hedging

Speculation

Government regulation

Arbitrage

Tariff levels in advanced countries tend to be ___ tariff levels in developing countries.

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Higher than

Equal to

Lower than

There is no general pattern

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