MacAP VII- Open Economy: International Trade and Finance

Front

Which of the following is likely to occur following the depreciation of the United States dollar? United States imports will increase. United States exports will increase. Demand for the United States dollar will decrease. United States demand for foreign currencies will increase. United States goods will become more expensive in foreign markets.

Back

United States exports will increase.

Front

The table below shows the production alternatives of Country A and Country B for producing computers and cars with equal amounts of resources that are fully and efficiently employed.
Country ......Computers.........Cars
A----------------->24----------------->12
B-----------------> 45-----------------> 15
What can be inferred about the advantages of the countries in producing computers?

Back

Country B has an absolute and comparative advantage in the production of computers.

Front

If Country Alpha has been experiencing a higher
inflation rate than Country Beta over the past
decade, which of the following is true?

Back

Alpha’s currency will have depreciated
relative to Beta’s currency.

Front

A country can have an increased surplus in its balance of trade as a result of declining imports and rising exports.

Back

declining imports and rising exports

Front

Under a flexible exchange-rate system, the Indian rupee will appreciate against the Japanese yen when real interest rates in India increase relative to those in Japan.

Back

real interest rates in India increase relative to those in Japan

Front

If two nations specialize according to the law of comparative advantage and then trade with each other, which of the following would be true?

Back

Each nation would increase its consumption possibilities.

Front

Tariffs are different from assigned import quotas in that tariffs will

Back

generate additional revenue for the domestic government

Front

Assume that there is an increase in United States consumers’ preference for European cars. Which of the following changes will most likely take place in the market for dollars? Options: It will take more Euros to purchase the same amount of dollars. The demand for dollars will increase. The supply of dollars will increase. Both the demand for and the supply of dollars will decrease. There will be no change in the foreign exchange market.

Back

The supply of dollars will increase.

Front

Which of the following transactions would increase the current account surplus in Japan’s balance of payments accounts? A Japan-based company sells automobiles to Canada. Marta, a Japanese investor, buys stocks in a Japanese company. Dana, a Canadian, buys stocks in a Japanese company. A Japan-based company buys a piece of equipment from Germany. Leah, a French citizen, works at a Japanese company in Paris.

Back

A Japan-based company sells automobiles to Canada.

Front

An exchange rate is

Back

the price of one currency in terms of another currency