Unit 10

If investors from Sweden see that interest rates have increased in Britain, which of the following will happen to the British pound?

• the British Pound will depreciate relative to the Swedish Krona

• the Pound will appreciate relative to the Krona

• the Krona will remain at a constant exchange rate to the Pound

• the Krona will appreciate relative to the US dollar

Which trade advantage is the ability to produce more goods using fewer (or the same amount) of resources than another producer?

• absolute advantage

• comparative advantage

• specialization of trade

• regular trade

Which one is a type of trade barrier (s)?

• tariffs

• import quotas

• export subsidies

• all of the above

Country A currently imports pineapples from Country B under free trade conditions. Country A's trade balance is currently in a balanced state. If Country A"s government enacts a tariff on imported pineapples, which of the following will happen in Country A?

• the number of imported pineapples will increase

• domestic producers of pineapples will see a decrease in their sales

• the trade balance will move to a trade surplus

• net exports will decrease

Last week the exchange rate was $1 US dollar for .90 Euros. The exchange rate is now $1 US dollar for 1.10 Euros. In respect of the dollar this is called

• appreciation

• depreciation

• devaluation

• conservation

The Costa Rican dollar has appreciated in relation to the Chinese Yuan. How will this affect Costa Rican exports to China?

• exports will decrease because the CR dollar has LESS value in relation to the Yuan

• exports will increase because the CR dollar has MORE value in relation to the Yuan

• exports will decrease because the CR dollar has MORE value in relation to the Yuan

• exports will increase because the CR dollar has LESS value in relation to the Yuan

Which of the following situations best describes an import quota?

• New Zealand charges a 10% tax on goods imported from Australia

• Ecuador refuses to sell goods to Mexico

• North Korea illegalizes all trade with the USA

• Canada places a maximum cap on the number of goods bought from Norway

According to the theory of comparative advantage, a country

• imports the goods in which it has a CA

• exports the goods in which it has a CA

• exports goods in which it has an absolute advantage

• imports goods in which it has an AA

Which of the following is not one of the determinants of foreign exchange?

• inflation rate

• speculation

• real interest rate

• related goods

Colombia has absolute advantage in both chocolate and coffee production. Ecuador has comparative advantage in chocolate. Colombia has comparative advantage in coffee. What should be the trade agreement?

• Colombia produces both coffee and chocolate on their own

• Colombia produces coffee and exports to Ecuador while Ecuador produces chocolate and exports to Colombia

• Ecuador produces coffee and exports to Colombia while Colombia produces chocolate and exports to Ecuador

• Ecuador produces both coffee and chocolate on their own