Question # 1

A country transactions with the rest of the world are recorded in the

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Balance of international indebtedness

Balance of financial transactions

Balance of payments

Income statement

Multinational corporations

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Always produce primary goods

Always produce manufactured goods

Products primary goods or manufactured goods

None of the above

The difference between a country's balances of payments and its balance of international indebtedness.

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Is equal of official reserve transactions

Occurs because of foreign exchange fluctuations

Reflects statistical discrepancies

Reflects the difference between flow and stock concepts

In developed countries tariffs on raw materials tend to be.

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Highest of all

Higher than on manufactured goods

Equal to tariffs on manufactured goods

Lower than on manufactured goods

__________ policies attempt to foster industrialization by establishing high barriers to import of foreign goods to promote local production.

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absolute advantage

Comparative advantage

Export led growth

Import substitution

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

A nation with a current account deficit will be

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Lending more money to other nations

Experiencing a surplus in exports of goods and services

Reducing its indebtedness to other nations

Going further into debt with other nations

The product cycle theory of trade is essentially a

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Static short run trade theory

Dynamic, long run trade theory

Zero sum theory of trade

Negative sum theory of trade

If the home country government grants a subsidy on a domestically produced good domestic producers lend to.

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Capture the entire subsidy in the form of higher profits

Increases their level of production

Reduce wages paid to domestic workers

Consider the subsidy as an increase in production cost

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

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 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 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

Credit (+) items in the balance of payments correspond to anything that.

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Involves receipts from foreigners

Involves payments to foreigners

Increases the domestic money supply

Decrease the demand for foreign exchange

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

___________ are quotas that lead to a complete abolishment of trade.

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Nontariff barriers

Embargoes

Voluntary export restraints

Orderly marketing agreements

In balance of payments accounting tourism and travel are classified in the

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Merchandise trade account

Services account

Unilateral transfers account

Capital account

A tax of 18 cents per unit of imported cheese would be an example of a.

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Compound tariff

Effective tariff

Ad valorem tariff

Specific tariff

When the price of foreign currency exchange is above the equilibrium level.

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An excess demand for that currency exists in the foreign exchange market.

An excess supply of the currency exists in the foreign exchange market

The demadn for foreign exchange shifts outward to the right

The demand for foreign exchange shifts backward to the left.

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

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