Chapter 3 PRACTICE Quiz

What is the term used to describe the opportunity of giving up the second-best choice when making a decision?

• Opportunity cost

• Absolute advantage

• Comparative advantage

• Economic trade-off

What is the term for a country's ability to produce more of a good than other nations using the same amount of resources?

• Absolute advantage

• Comparative advantage

• Opportunity cost

• Economic efficiency

What is the term for a country's ability to produce a product at a lower opportunity cost than other countries?

• Comparative advantage

• Absolute advantage

• Opportunity cost

• Economic efficiency

What is the balance of trade?

• The difference between a nation's exports and imports.

• The total value of money into or out of a country.

• The value of one nation's currency relative to the currency of other nations.

• The total value of foreign investments.

What occurs when the total value of a nation's exports is higher than the total value of its imports?

• Trade deficit

• Trade surplus

• Balance of payments deficit

• Exchange rate

What is a trade deficit?

• When the total value of a nation's exports is higher than the total value of its imports.

• When the total value of a nation's imports is higher than the total value of its exports.

• The total value of money into or out of a country.

• The value of one nation's currency relative to the currency of other nations.

What does the balance of payments include besides the balance of trade?

• Only foreign investments

• Only foreign borrowing and lending

• Foreign borrowing and lending, foreign aid payments and receipts, and foreign investments

• Only foreign aid payments and receipts

What is the balance of payments?

• The difference between a nation's exports and imports.

• A measure of the total flow of money into or out of a country.

• The value of one nation's currency relative to the currency of other nations.

• The total value of foreign investments.

What is an exchange rate?

• The difference between a nation's exports and imports.

• The total value of money into or out of a country.

• A measure of the value of one nation's currency relative to the currency of other nations.

• The total value of foreign investments.

What is countertrade?

• Trade that involves the barter of products for products rather than for currency

• Trade that involves only currency exchanges

• Trade that involves only digital transactions

• Trade that involves only services