AP Macro Unit 6: International Trade and Finance Quiz

Which of the following best describes the function of the foreign exchange market?

• It determines the price of goods in international trade.

• It facilitates the conversion of one currency into another.

• It regulates international trade agreements.

• It sets interest rates for international loans.

• It manages the global supply of money.

What is the primary component of the current account in the balance of payments?

• Foreign direct investment

• Portfolio investment

• Trade balance

• Official reserves

• Capital transfers

How do tariffs generally affect domestic consumers?

• They decrease the price of imported goods.

• They increase the variety of goods available.

• They increase the price of imported goods.

• They have no effect on domestic prices.

• They decrease domestic production costs.

Which of the following is a likely consequence of a country experiencing a depreciation of its currency?

• Exports become more expensive for foreign buyers.

• Imports become cheaper for domestic consumers.

• The trade deficit is likely to increase.

• Exports become cheaper for foreign buyers.

• Domestic inflation decreases.

Which of the following best explains the impact of quotas on international trade?

• Quotas increase the supply of foreign goods in the domestic market.

• Quotas limit the quantity of foreign goods that can be imported.

• Quotas reduce the cost of foreign goods.

• Quotas have no impact on domestic producers.

• Quotas increase the demand for foreign goods.

What is the effect of an increase in interest rates on the foreign exchange market?

• It leads to a depreciation of the domestic currency.

• It has no effect on currency value.

• It leads to an appreciation of the domestic currency.

• It decreases foreign investment in the domestic market.

• It increases the supply of foreign currency.

Which of the following is a component of the capital account in the balance of payments?

• Trade in goods and services

• Income from investments

• Foreign direct investment

• Remittances

• Official development assistance

If a country imposes a tariff on imported steel, what is the likely impact on domestic steel producers?

• They will face increased competition from foreign producers.

• They will experience a decrease in production costs.

• They will benefit from reduced competition and higher prices.

• They will have to lower their prices to compete.

• They will see no change in their market share.

What is the likely impact on a country's balance of payments if it experiences a significant increase in exports?

• The current account deficit will increase.

• The capital account will show a deficit.

• The current account surplus will increase.

• The financial account will show a surplus.

• There will be no impact on the balance of payments.

Which of the following scenarios would likely lead to a depreciation of a country's currency?

• An increase in foreign investment in the country

• A decrease in the country's interest rates

• A trade surplus

• An increase in the country's exports

• A decrease in the money supply