A US car dealer agrees an import price of US$25 000 for a Japanese car at the current rate of exchange. The US dollar then strengthens by 10% against the Japanese yen. What will be the new import price paid for the Japanese car?

A US$20 000

B US$22 500

C US$25 000

D US$27 500

Which method of protection always reduces the supply of an imported good to zero?

A embargo

B quota

C subsidy

D tariff

What is a disadvantage of increasing international specialisation?

A Consumers pay higher prices for goods and services reducing their welfare.

B Domestic firms may be uncompetitive leading to structural unemployment.

C Domestic firms may experience rising costs as they pay more for imports.

D Resources may be used less efficiently as domestic firms face less competition.

What is an immediate effect for a country of a fall in its foreign exchange rate?

A a fall in the money supply

B an increase in purchasing power

C cheaper imports

D more competitive exports

The US imposed tariffs on cars and motorcycles from Germany. What is the effect of these tariffs?

A decrease in inflation in the US

B decrease in trade between the US and Germany

C increase in profits of car and motorcycle producers from Germany

D increase in standards of living in the US and in Germany

The diagram shows China’s trade with Brazil for two years.

What happened to China’s trade balance with Brazil between year 1 and year 2?

A It experienced a falling surplus.

B It experienced a rising deficit.

C It moved from deficit to surplus.

D It moved from surplus to deficit.

A country specialises in the production of steel, toys and textiles. What is a disadvantage of specialisation for the country’s workers?

A They cannot afford to buy products from other countries.

B They could become structurally unemployed if global demand changes.

C They have to learn a variety of skills.

D They have too much choice which wastes their time.

A large clothing manufacturer has factories in more than one country. What is not a reason why a company might decide to produce internationally?

A the availability of raw materials

B the high costs of transporting finished products

C to ensure that wage rates are equal in all factories

D to serve the local markets more easily

A newspaper reported that exports from Sweden remained low for five months as changes in the rate of exchange meant that Swedish goods became more expensive to buy abroad. What else would be likely to happen?

A Imported goods would become cheaper in Sweden.

B Swedish people would switch to buying home-produced goods.

C The Swedish balance of payments would improve.

D The Swedish balance of trade would improve.

The recent world recession has resulted in a decrease in spending by tourists visiting the US. How would this be recorded in the current account of the US balance of payments?

A a decrease in services exported

B a decrease in services imported

C an increase in services exported

D an increase in services imported

What is an advantage of specialisation at a national level?

A an increase in economies of scale

B an increase in social cost

C an increase in unemployment

D an over-exploitation of resources

A Japanese car manufacturer decided to produce its cars in a factory in Europe. What would not be a reason why they might have chosen to do this?

A cheaper wage costs in Europe

B the availability of raw materials

C to gain external economies from skilled labour in Europe

D to increase Japanese self-sufficiency

A government removed the quota on goods imported into the country. What is the most likely result of this?

A a decrease in demand for domestic production

B a decrease in domestic unemployment

C a decrease in exports

D a decrease in the balance of trade deficit

The table shows components of Japan’s current account balance in trillion Yen for 2011 and 2012. Which balance improved between 2011 and 2012?

A balance of current transfers

B balance of goods

C balance of income

D balance of services

What encourages international specialisation?

A a foreign exchange shortage

B diseconomies of scale

C free trade

D quotas

The US currently trades in oil with the UK. The discovery of new oil and gas deposits in the US will mean that its oil imports decrease and its oil exports increase. From the initial equilibrium point of X, which letter indicates the new equilibrium point for the US exchange rate?

A country says that it wishes to increase its trade protection policies. What might that involve?

A conservation of resources and taxes on external costs

B eliminating waste in the use of resources and grants to multinational companies

C increased self sufficiency and increased tariffs

D price controls and increased regulations on domestic monopoly industries

What might cause the balance on the current account of Mauritius to improve?

A increased purchases of coffee from Kenya

B increased transport of Mauritian goods in Greek ships

C increased spending by Mauritians on holidays in South Africa

D increased spending by tourists in Mauritian hotels

What is a benefit of tariffs?

A increased choice

B increased government revenue

C more competition

D more trade

Which name is given to the external value of a currency in terms of another currency?

A the balance of trade

B the exchange rate

C the relative inflation rate

D the supply of money

It was reported in 2011 that the United States (US) needed to achieve a lower current account deficit. What would help this in the short run?

A a protectionist policy

B a strong exchange rate

C increased private sector spending

D investment in the US by multinational firms

The table shows the number of units of foreign currency that the UK pound (UK£) could buy in August 2012 and August 2013.

What can be concluded from the table about the change in currency values between 2012 and 2013?

A The Argentine peso appreciated against the UK pound.

B The Argentine peso depreciated against the euro.

C The euro depreciated against the UK pound.

D The South African rand appreciated against the euro

Which government policy is most likely to increase the volume of exports?

A devaluation

B embargoes

C quotas

D tariffs

In 2010, Vietnam experienced a deficit in the value of its trade in goods (visible) despite exporting a greater number of goods than it imported. What could explain this?

A The average price of its goods imported exceeded the average price of its goods exported.

B The average value of its goods exported exceeded the average value of its goods imported.

C The country had a deficit on its trade in services.

D The country’s government imposed tariffs on imports.

In recent years, the US has experienced a deficit on its overall current account of the balance of payments. What could have led to an increase in the size of the deficit?

A increased competitiveness of goods made in the US

B increased earnings by US investors in foreign companies

C increased numbers of overseas visitors to the US

D increased spending on US military bases abroad

In 2015, China was the world’s largest exporter of manufactured goods and a major importer of oil and minerals. China devalued the yuan (renminbi) by 2%. According to economic theory, what would have been a consequence of this devaluation?

A China paid less in foreign currencies for imports.

B China reduced its demand for oil and minerals.

C China’s exports became less competitive.

D China’s trading partners improved their balance of trade with China.

What is necessarily involved in international free trade?

A the absence of transport costs

B the gift of foreign aid from charities

C the supply of zero interest rate government loans

D the unrestricted exchange of goods and services

Skin creams preventing sunburn made in the European Union (EU) are more effective than those made in the United States (US). US tourists stock up on the creams when visiting Europe. Such creams are banned from production in the US because of the chemicals in them. In 2013, negotiations began to remove this ban in order to allow production in the US. How is this freer trade likely to affect manufacturers of skin creams in the US and the EU?

The table shows the trade in goods balance and the current account balance of the balance of payments for four countries during a year. Which country had the largest surplus on its trade in services, assuming no other transfers or income flows?