International Trade 2

What would be one consequence of a prolonged decline in the value of the euro relative to the U.S. dollar?

• European exports to the United States would become less expensive.
• U.S. exports to Europe would become cheaper.
• European imports from the United States would increase.
• U.S. imports from Europe would become more expensive.U.S. imports from Europe would become more expensive.

How does this agreement negatively affect the U.S. economy?  Use the information below to answer the question. 
Under the North American Free Trade Agreement (NAFTA), the last restrictions on U.S.–Mexican agricultural trade were removed in 2008. Between 2007 and 2008, the value of agricultural exports to Mexico increased by 23%, and the value of imports from Mexico increased by 26% for the main commodities that had been subject to those restrictions.

• U.S. consumers will pay higher prices for Mexican products.
• U.S. farmers will experience more competition
• U.S. agricultural production will become less efficient.
• U.S. foreign relations with Mexico will suffer.

Which of the following is more closely related to opportunity cost?

• absolute advantage
• comparative advantage

Which factor is the basis for the theory of comparative advantage?

• capital 
• investment 
• rationing
• specialization

What is one advantage of establishing trade barriers rather than allowing free trade?

• an increase in local regulations
• the improvement of foreign relations
• the protection of domestic industries
• a reduction in foreign product prices

Which term is defined as a tax on imported goods?

• embargo
• quota
• subsidy
• tariff

How would inexpensive lumber from Canada affect the U.S. market for new homes?

• Prices of new homes would increase.
• Credit available for new homes would increase
• Prices of new homes would decrease
• Transaction costs for new homes would decrease.

Which action would be best for a country seeking a comparative advantage in global trade?

• buy from countries that specialize in needed products
• develop new technologies to make production more efficient
• join economic unions with a single currency and reduced tariffs
• make products with the highest opportunity costs

What is the most likely effect of a U.S. import quota on foreign cars?

• The price of domestic cars would decrease because of improved production methods.
• Foreign automobile manufacturers would be allowed to sell more cars in the United States
• Domestic automobile manufacturers would sell more cars in markets in the United States
• The price of cars would increase in foreign countries because of the trade restrictions

A U.S. auto manufacturer plans to relocate plant operations to Mexico as a result of the North American Free Trade Agreement (NAFTA). Which criticism of free trade agreements would be based on this relocation?

• The demand for U.S. automobiles will decrease.
• The cost for producing U.S. automobiles will increase.
• U.S. automotive designers will have to create more efficient cars.
• U.S. automotive factory workers will have to compete with foreign workers.