International Economic Relations review

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

• START

• SALT

• IMF

A country has a trade surplus when

• its exports exceed its imports.

• its exports equal its imports.

• its government spending exceeds its tax revenues.

• 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 $160 billion, and its imports are $120 billion.

• The country's exports are $110 billion, and its imports are $150 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

• David Ricardo

• John Maynard Keynes

• Milton Friedman

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

• Japan should import both radios and textiles.

• China should export both radios and textiles.

• China should export textiles and import radios.

• 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 production cost.

• specialize in and export goods with the lowest opportunity cost.

• specialize in and export goods with the lowest average 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 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 computer chips.

• 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

• production possibility frontiers

• marginal revenue curves

The ratio at which a country can exchange domestic products for imported products is called the terms of trade.

• TRUE

• FALSE