The international agreement signed by the United States and 22 other countries in 1947 to promote the liberalization of foreign trade is known by its initials as;
GATT
WTO
IMF
GATS
A country has a trade surplus when;
Its government spending exceeds its tax revenues.
Its exports exceed its imports.
Its exports equal its imports.
Its exports are less than its imports.
If a country has a trade surplus of $40 billion, which of the following can be true?
The country's exports are $110 billion, and its imports are $150 billion.
The country's exports are $160 billion, and its imports are $120 billion.
The country's exports are $120 billion, and its imports are $140 billion.
The country's exports are $140 billion, and its imports are $40 billion.
The theory of comparative advantage is credited to
Adam Smith
John Maynard Keynes
Milton Friedman
David Ricardo
Country A would have an absolute advantage compared to Country B in the production of corn if
Corn can be produced at lower cost in terms of other goods than it could be in Country B.
Country A uses fewer resources to produce corn than Country B does.
The demand for corn is higher in Country A than in Country B.
Corn sells for a higher price in Country A than in Country B.
China has a comparative advantage in textiles and an absolute advantage in both textiles and radios. Japan has a comparative advantage in radios. According to this scenario
China should export textiles and import radios.
Japan should import both radios and textiles.
China should export both radios and textiles.
Japan should export textiles and import radios.
According to the theory of comparative advantage, a country should
Specialize in and export goods with the highest opportunity cost.
Specialize in and export goods with the lowest average cost.
Specialize in and export goods with the lowest opportunity cost.
Specialize in and export goods with the lowest production cost.
The United States imports televisions from Japan and Japan imports computer chips from the United States. If the theory of comparative advantage guides trade between the two countries, it must be true that
The United States has comparative advantage in producing computer chips.
The opportunity cost of producing televisions in Japan is higher than that in the United States.
The opportunity cost of producing computer chips in the United States is higher than that in Japan.
The United States has comparative advantage in producing televisions.
If the slopes of the ________ involving corn and wheat in the United States and Canada are equal, specialization does not benefit either country."
Supply curves
Demand curves
Marginal revenue curves
Production possibility frontiers
The quantity and quality of labor, land, and natural resources of a country are its
Factor endowments
Capital stock
Productive capacity
Economic potential
The software industry depends on highly trained workers, who are abundantly available in Country A. The heavy equipment industry depends on the availability of a large stock of physical capital with which Country B is well endowed. According to Heckscher-Ohlin theorem
Country A should export heavy equipment
Country B should import heavy equipment
Country B should import software
Country A should import software
Which of the following phenomena cannot be explained by the simple comparative advantage theory?
A country that does not have much farmland tends to import agricultural goods.
A country imports and exports the same goods.
A country with a lot of skilled labor tends to export highly technical goods.
A country tends to export the goods that it can produce at a lower opportunity cost.
The Heckscher-Ohlin theorem looks to ________ to explain trade flows.
Acquired comparative advantage
Relative factor endowments
The existence of trade barriers
The differences in preferences among consumers
The quantity and quality of ________ of a country are its factor endowments.
Imports and exports
Deficits and surpluses
Commodity money and fiat money
Labor, land, and natural resources
The case for free trade is based on the
Theory of comparative advantage
Theory of balanced growth
Theory of absolute advantage
Argument for a diversified economy
Which country is the world's largest importer?
Russia
China
United States of America
England
Followed by ________, the United States of America is the world's second largest exporter.
Germany
Japan
Russia
China
Which of the following is not a disadvantage of international trade?
Environmental degradation
Cheaper products for consumers
More waste
Unfair working conditions
Which of the following is among the most prominent international organizations that aims to eradicate protectionism?
World Anti-Protectionism Organization
World Barter Organization
World Trade Organization
World Open Market Organization
Trade between countries is NOT dependent on...
Currency exchange rate
Demand for a country's goods
Interest rates
Social stability
Price of one currency in relation to other currencies in the international exchange market is known as:
Equilibrium rate
Exchange rate
Flexible exchange rate
Fixed exchange rate
According to adjustable peg system (or Bretton Woods system) of exchange rate
Different currencies were pegged to one currency (US dollar)
US dollar was assigned gold value at a fixed price
Parity between two currencies was determined by the quantity of gold contained in them
All of these
Under which system, gold was taken as the common unit of parity between currencies of different countries in circulation?
Managed floating system of exchange rate
Gold Standard System of exchange rate
Bretton woods system of exchange rate
Flexible exchange rate system
Out of the following, which is the most rigid exchange rate system, which does not allow any adjustment in the exchange rate?
Gold Standard System of exchange rate
Flexible exchange rate system
Bretton Woods’s system of exchange rate
None of these
The rate which is determined by the government is known as:
Flexible exchange rate
Floating exchange rate
Fixed exchange rate
None of these
The exchange rate at which demand for foreign currency becomes equal to its supply, is called:
Equilibrium exchange rate
Equal rate of exchange
Mint parity
All of the these
Forward market is that market which:
Handles current transactions
Handles transactions of foreign exchange meant for future delivery
Handles current as well as future transactions
None of these
Spot market is the market where;
Forward rate of exchange is determined
Future rate of exchange is determined
Only current transactions are handled
None of these
When the exchange rate rises due to managed floating, it is called;
Revaluation
Devaluation
Depreciation
Appreciation
Foreign Direct Investment is a source of;
Demand for foreign exchange
Supply of foreign exchange
Both a and b
None of these
Due to depreciation of foreign currency, the supply of foreign currency in domestic economy will;
Increase
Not change
Decrease
Either increase or decrease
When supply of foreign exchange increases, the equilibrium exchange rate will
Rise
Fall
Either rise or fall
Not change
What is the relationship between demand for foreign exchange and exchange rate?
Direct
Inverse
One to one
No relation
Equilibrium exchange rate occurs when:
Supply of foreign exchange > demand of foreign exchange
Supply of foreign exchange < demand of foreign exchange
Supply of foreign exchange = demand of foreign exchange
Both a and b
What was one criticism regarding the passage of the North American Free Trade Agreement (NAFTA)?
U.S. tariffs would decrease profits.
U.S. companies would move jobs abroad.
Establishment of similar treaties would hinder economic growth.
Outsourced labor would increase prices of goods.
What is the purpose of OPEC?
Encourage the use of oil throughout the Middle East
Develop new ways to extract oil from the Earth
Increase the sale of petroleum in 1st world nations
Set the price of petroleum
This is a result of a weak dollar
US exports increase
Americans start traveling abroad
Foreigners stop investing in US companies
Imports increase
When 1 country makes a product at a lower opportunity cost than another country
Trade surplus
Comparative advantage
Absolute advantage
Trade deficit
The Mexican peso depreciates relative to the Euro. Who would benefit from this?
European consumes of Mexican goods
European consumers of European goods
Mexican consumers of European goods
Mexican consumers of European goods
What results in a positive balance of trade?
Countries have similar population rates
Country’s imports are greater than their exports
Country’s exports greater than imports
Country’s exports = imports
What does absolute advantage compare?
Balance of trade between nations
1 country's productivity to another country
Nation’s trade deficit to another country's
Opportunity cost between 2 countries
Trade barriers protect who?
Domestic consumers
Foreign producers
Foreign consumers
Domestic producers
Why does a country benefit from trade?
Larger selection of goods
People specialize
Products are cheaper
All listed
Exchange rate is 25 Pesos per US dollar, what do you know
4 cents per peso
25 pesos for 1 Euro
25 dollars per peso
None listed
What do NAFTA, EU, and ASEAN have in common?
Promotes free trade with all nations of the world
Promotes protectionist policies
Decrease trade barriers among neighboring countries
Increase trade barriers among nations
What is meant by infant industries?
Industries produce children's clothing
Industries produce baby-health related products
Used by new industries for short time
New industries need to be protected until they are mature
If exchange rate goes from 10 to 15 cents in value, it has
Negated
Appreciated
Lost purchasing power
Depreciated
What is a subsidy?
Limit on amount of imports
Tax on imported goods
A law that sets a limit on goods imported
Government payments to domestic producers
A tariff on pineapples represents
Increase in domestic production
Trade barrier
Subsidy to domestic production
Balance of payment deficit
What happens with depreciation?
Domestic goods are cheaper
Foreign goods are cheaper
Foreign goods are more expensive
Domestic goods are more expensive in other countries
What is a trade surplus?
Exports are greater than value of its imports
Imports are greater than exports
Trade deficit occurs
Positive balance of payments
If a country exports more than it imports, then what exists?
Trade deficit
Balance of trade
No comparative advantage
Trade surplus
The balance of trade calculates
GDP of a country
Number of exports minus imports
Exchange rate
All the above
Turkey trades textiles to Germany in exchange for German machinery. This is possible because
Countries share comparative advantage in the same goods
Neither country has an absolute advantage in any good.
Each country has comparative advantage in different goods.
The countries are forced to trade with each other.
Which headline below is an example of using standards as a trade barrier?
Only professionally cleaned Oranges allowed in US
Limit of 1 million tons of sugar to be imported
Mexican imports completely abolished
US producers of wheat get big payday from Congress.
Someone who strongly opposes a trade barrier like a tariff would argue that the barrier
Would lead to lower government involvement in the economy.
Might cause more unemployment in domestic industries.
Will lead to higher prices and fewer imported goods.
Would completely eliminate imported goods.
Having a comparative advantage in a good means that a country can produce the good
At a lower opportunity cost
Safer
Faster
Better
What do the EU and ASEAN have in common?
The United States is a member of all three
They are all interested in promoting free trade.
Each group attempts to enforce trade barriers rigidly.
All the above
Which BEST describes exchange rates?
The price of one nation’s currency in terms of another.
An interest rate charged to consumers who take out a loan.
The difference between exports and imports
An increase in the price of a market basket.
What trade barrier is beneficial to both domestic producers AND domestic consumers of a good?
Embargo
Quota
Tariff
Subsidy
What will happen to US imports & exports if the US $ becomes stronger than other currencies?
Imports will decrease exports will increase
Imports will increase, exports will decrease
Both imports and exports will increase
Both imports and exports will decrease
Which role does money have in economic systems?
A medium of exchange
A good to consume
A measure of satisfaction
A resources for production
Which of the following is not a trade bloc?
ASEAN
EU
BANC
NAFTA
An advantage of a weak dollar is that...
Imports are cheaper for Americans
American exports increase
American income tax rates go down
Travel abroad is cheaper for Americans
What trade barrier is the most restrictive?
Standard
Embargo
Tariff
Quota
A flexible (or floating) exchange rate is altered by what forces?
Supply and Demand
Government order
The price of gold and diamonds
The World Bank
How can a country maximize the benefits of trade?
Making everything at home
Importing everything
Specializing and trading
Exporting everything
Which trade barriers is put into place to protect domestic consumers from harmful products?
Quotas
Embargoes
Subsidies
Standards
What is the balance of payments?
Accounts showing the record of all imports and exports
A record of an economy’s international financial transactions
The value of imported and exported goods
Exports – Imports
The balance of payments includes...
Current account, financial account and capital account
Current account and capital account
Current account, capital account and trade account
Trade account, credit account and capital account
The implications of a current deficit are...
Government must borrow money
Consumers will buy more imports
The economy must borrow and sell assets
Banks must sell assets
Why does the balance of payments ""balance""?
The current account equals the financial and capital account
The capital account equals imports and exports
The current account equals the financial account
Exports equals imports
The financial account records...
Flows of money relating to borrowing
Flows of money relating to foreign currency exchange
Flows of money relating to financial assets
Flows of money relating to speculation
The capital account...
Records sale/purchases of businesses
Records transfers, sale/purchases of all capital assets
Records sales and purchases of capital goods
Records all transactions of tangible capital assets
Running a current account surplus could cause...
The exchange rate to appreciate
Unemployment to rise
The economy to borrow and sell assets
A fall in aggregate demand
All of the following could help solve a current account deficit, EXCEPT...
Putting tariffs on imported goods
Lowering interest rates
Depreciating the exchange rate
Improving the competitiveness of exports
What is the forex?
Market that determines foreign exchange rates for some countries
Market that determines foreign exchange rates for every country
Market that determines foreign exchange rates for Asia and Oceania
Market that determines foreign exchange rates for every currency
One advantage to currency appreciation
Less expensive imports
Lower export levels
More expensive imports
Confidence
The BOP on the current account plus the BOP on the financial account is equal to
0
One
The trade balance
Net capital flows
A German receives rent from a property they own in the US. How does this affect the US BOP?
Financial account, credit
Current account, debit
Current account, credit
Financial account, debit
Japanese firms purchasing production plants in Thailand will be recorded in Thailand's BoP as:
A debit in its Financial Account
A credit in its Current Account
A debit in its Current Account
A credit in its Financial Account
An appreciation of the US Dollar in the FOREX market would be caused by a decrease in
US interest rates
Demand for the dollar by US residents
Inflation
A tariff on goods imported into the US
Which of these is NOT included in the current account of the Balance of Payments?
Net Primary Income from Overseas Assets
Balance of Banking Flows
Trade Balance in Services
Trade Balance in Goods
Finished Manufactured goods is included in?
Trade Balance in Services
Net Primary Income from Overseas Assets
Trade Balance in Goods
Net Secondary Income
Tourism, transport & logistics are included in?
Trade Balance in Services
Trade Balance in Goods
Net Primary Income from Overseas Assets
Net Secondary Income
Net Remittance flows from migrant workers are included in?
Trade Balance in Services
Net Primary Income from Overseas Assets
Trade Balance in Goods
Net Secondary Income
Which of these would cause poor international competitiveness and impact on the trade balance
Weakness in design, branding and product performance
Low levels of investment and research
Higher inflation than trading partners
All of the above
Which of these is unlikely to cause a deteriorating current account position?
Poor price and non-price competitiveness
A recession in one or more major trade partner countries
A falling exchange rate
Volatile global commodity prices
Which of these is a likely consequence of a current account deficit?
Loss of investor confidence if deficit is persistent
Falling currency value
Loss of Aggregate Demand as imports exceed exports
All of the above
100. Which policies can help reduce a current account deficit?
Supply side measures to improve productivity
Reduce the exchange rate
Tighten Aggregate Demand to reduce imports
All of the above
101. In the years after World War II the world economy was dominated by which region or country?
China
Western Europe
United States
Russia
102. A trading account which records all the transactions made between one country and the rest of the world
Financial Account
Capital Account
Balance of Payments
Current Account
103. One-sided transaction transfers characterized by a resident entity in one nation providing a non-resident entity with an economic value.
Current transfers
Current Account
Capital Account
Account Balance
104. Records the net flow of investment transaction and the international undertakings of assets into an economy
Current transfers
Current Account
Balance of Trade
Capital Account
105. Any one of the types in which wealth can be held
Bank account
Money
Asset
Gold
106. Operated by a nation's central bank to buy and sell foreign currencies
Bank account
Current Account
Capital Account
Reserve account
107. The difference between the value of a country's exports and the value of its imports
Balance of Payments
Balance of Trade
Balance Sheet
Account Balance
108. An arrangement among nations that typically includes the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies.
Balance of Trade
Trade Liberalization
Economic Integration
Protectionism
109. In a ……….., countries would offer tariff reductions, though perhaps not eliminations, to a set of partner countries in some product categories.
Preferential Trade Agreement
Free Trade Area
Economic Union
Common market
110. A group of countries agrees to eliminate tariffs among themselves but maintain their own external tariff on imports from the rest of the world.
Preferential Trade Agreement
Single market
Economic Union
Free Trade Area
111. The criteria needed to determine the national source of a product
Substantial transformation
Rules of Origin
Rules of etiquette
Rules of Engagement
112. A group of countries agrees to eliminate tariffs among themselves, and set a common external tariff on imports from the rest of the world.
Single Market
Economic Union
Free Trade Area
Customs Union
113. A ……….. establishes free trade in goods and services, sets common external tariffs among members, and also allows for the free mobility of capital and labor across countries.
Customs Union
Common market
Economic Union
Free Trade Area
114. A monetary union establishes a common currency among a group of countries. This involves the formation of a central monetary authority that will determine monetary policy for the entire group.
Monetary Union
Common market
Customs Union
Free Trade Area
115. Determine the maximum amount of financial resources a member is obliged to provide to the IMF
SDRs
Reserves
Quotas
Voting Power
116. An international reserve asset created by the IMF to supplement the official reserves of its member countries
SDRs
Quotas
Reserves
Voting Power
117. An accounting unit for IMF transactions with member countries – and a stable asset in countries’ international reserves
Quotas
Reserves
Voting Power
SDRs
118. One of its functions to provide loans to member countries experiencing actual or potential balance of payments problems
IMF
World Bank
EU
WTO
119. Monitors the international monetary system and global economic developments to identify risks and recommend policies for growth and financial stability
World Bank
EU
IMF
WTO
120. An overall term for ownership of creative works
Intellectual property
Intellectual property rights
Intellectual property law
Intellectual property infringement
121. Original works of authorship, including books, movies, artwork, photos, web content
Trademarks
Patents
Copyrights
Trade secrets
122. Unique identifiers for a business products or services “names, symbols, words, devices, etc.
Patents
Copyrights
Trademarks
Trade secrets
123. Inventions, and the discovery of new and useful processes, industrial designs, computer code
Trademarks
Patents
Trade secrets
Copyrights
124. Confidential information owned exclusively by someone that can be sold or licensed
Patents
Trademarks
Trade secrets
Copyrights
125. The global forum for intellectual property (IP) services, policy, information and cooperation
WTO
WIPO
WHO
CIA
126. Aims to lead the development of a balanced and effective international IP system that enables innovation and creativity for the benefit of all.
WTO
WHO
CIA
WIPO
127. The most comprehensive multilateral agreement on intellectual property (IP).
WIPO
TRIPS
WTO
WHO
128. The movement of the able-bodied population from one country to another for more than a year for economic and other reasons.
International capital migration
International people migration
International migration
International labor migration
129. The international migration of highly qualified professionals.
Brain drain
International labor migration
International people migration
Emigration
130. A company that has business operations in two or more countries
Corporation
Holding Company
Enterprise
Multinational Corporation
131. This type of Multinational Corporation maintains a strong presence in its home country but without a central headquarters
Decentralized Corporation
International Division
Global Centralized Corporation
Transnational Corporation
132. A company that is owned by another, larger company, which is commonly called the parent or holding company
Holding company
Multinational Corporation
Subsidiary company
Transnational Corporation
133. Occurs when more units of a good or service can be produced on a larger scale with (on average) fewer input costs
Economies of scope
Diseconomies of scale
Diseconomies of scope
Economies of scale
134. Reasons for Protectionism
Protecting Domestic Employment
Protecting Consumers
Protecting Infant Industries
All the above
135. A deliberate attempt by a country to lower its currency value.
Currency manipulation
Currency appreciation
Voluntary Export Restraints (VER)
Embargoes
136. a sovereign state that has a high quality of life, developed economy and advanced technological infrastructure relative to other less industrialized nations.
Developing country
Newly industrialized country
Developed country
Emerging market
137. In which country the service sector provides more wealth than the industrial sector
Developing country
Developed country
Least developed country
Newly industrialized country
138. Tax to be paid on imports or exports
Tariff
Barter
Income Tax
Consumption
139. Level of wealth, comfort, material goods available to a certain class or a geographic area
Human Resources
Quality of Life
Standard of Living
Natural Resources
140. Materials like minerals, forests, water that occur in nature & can be used for economic gain
Natural Resources
Human Resources
Standard of Living
Scarcity
141. World-wide economic activities of countries that can affect other countries for good or bad
Communism
Economics
Command Economy
Global Economy
142. Which economic sector makes up 80% of the US economy?
Manufacturing
Natural Resources
Service
Government
143. International trade is made possible by
The Fed
Specialization
The United Nations
Self-sufficient countries
144. Occurs when a country sells more than it buys
Trade deficit
Budget surplus
Budget deficit
Trade surplus
145. All of the following where reasons for the Great Depression of 1929 except _________?
Lack of technology
Hyper Inflation
Simultaneous price rise
World War
146. Investment in a portfolio of foreign securities such as stocks and bonds
Foreign Investment
Foreign Direct Investment
Foreign Indirect Investment
International Trade
147. A firm duplicates its home country-based activities at the same value chain. "McDonald’s opening restaurants in Japan"
Horizontal FDI
Vertical FDI
Direct FDL
Government Investment
148. Amount of FDI moving in a given period (usually a year) in a certain direction
FDI Flow
FDI Inflow
FDI Outflow
FDI Stock
149. Disadvantage(s) of joint venture:
Reputation of the firm is tied to the partner’s reputation
The local partner often hires local staff
Control issues may take precedence over getting the job done
All answers are correct
150. What does the green in a Greenfield investment stand for?
Agriculture
High potential to make money
In a transaction economy
Something totally new
151. Total accumulation of FDI in/from a country
Inbound FDI
Outbound FDI
FDI Stock
FDI Flow
152. Knowledge diffused from one firm to others among closely located firms
Market Failure
Trading
Knowledge Spillover
Firm Trade
153. Advantage(s) of Greenfield investment:
The company has 100% control over what it does
There is reduced risk of attendant or unknown liabilities
The company can build a corporate culture
All answers are correct
154. Resources that cannot be transferred abroad
Location-Bound Resources
Inflow
Outbound
FDI Flow
155. Firm that engages in foreign direct investment and operates in multiple countries
Enterprise Investment
Countries
Multinational Enterprise (MNE)
Direct Investment
156. Imperfection of the market mechanism that make some transactions prohibitively costly
Intra-Trade
Market Disclosed
Market Failure
Market Good
157. Ability to extract a favorable outcome from negotiations due to one party's strengths
Bargaining Power
Sunk Cost
Knowledge Calling
Negotiations
158. An operation with shared ownership by several domestic or foreign companies
Brownfield
Joint-Venture
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