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WorksheetsEconomic Integration and Exchange Rates
Total questions: 17
Worksheet time: 17mins
The World Trade Organization (WTO) oversees international agreements that attempt to:
lower tariffs
liberalize world trade
increase world trade
all of the above
A group of countries that agree to reduce or eliminate trade barriers but each can have its own trade policy toward other countries have established a:
monetary union
free trade area
customs union
common market
A group of countries that allow free movement of labour and capital within the group have a:
customs union
free trade area
common market
preferential trade agreement
A trading bloc may be a:
free trade area, customs union or common market
customs union or common market
common market or monetary union
customs union or monetary union
Trade creation and trade diversion may result from the creation of a trading bloc. Trade creation refers to the idea that _____________________ while trade diversion means that _____________________.
lower cost producers are replaced by higher cost producers / higher cost producers are replaced by lower cost producers
higher cost producers are replaced by lower cost producers / lower cost producers are replaced by higher cost producers
trade expands through more exports and imports / trade contracts through fewer exports and imports
imports from efficient producers are replaced by imports from inefficient producers / imports from inefficient producers are replaced by imports from efficient producers
Each of the following statements describes monetary union except:
a group of countries that adopt a common currency
a group of countries that have a common central bank
a group of countries that have a common fiscal policy
a group of countries that have a common monetary policy
The World Trade Organization (WTO) does not:
monitor national trade policies
help member countries with technology and training in relation to trade
administer trade agreements
monitor the quality of goods traded across borders
Which of the following statements is false?
An exchange rate is the price of one currency expressed in terms of another currency.
In a freely floating exchange rate system, exchange rates are freely determined by demand and supply for the currency.
In a fixed exchange rate system, a currency’s exchange rate is fixed against the value of another currency.
In a managed exchange rate system, the central bank does not intervene as the government manages the exchange rate.
Which of the following will not lead to an appreciation of the currency of country X?
an increase in demand for exports of country X
an increase in demand for imports in country X
an increase in foreign investment in country X
an increase in interest rates in country X
Which of the following will lead to a depreciation of the currency of country X?
expectations of currency appreciation in country X
a lower inflation rate in country X, which makes its exports more competitive
a fall in interest rates in country X
a decrease in demand for imports in country X
The currency of country X will appreciate if there is:
an increase in demand for the currency of country X
a decrease in demand for the currency of country X
an increase in supply of the currency of country X
all of the above
If the euro appreciates, the eurozone’s net exports will (a) because exports will become (b) to foreigners and imports will become (c) .
If the British pound appreciates, demand pull inflation in the UK (a) because net exports fall, and cost push inflation (b) because imported inputs become cheaper:
Suppose country X fixes its currency against the US dollar, and then experiences a fall in demand for its exports. It can maintain the value of its currency if its central bank:
buys the currency in foreign exchange markets
sells reserves of foreign exchange
raises interest rates
all of the above
An overvalued exchange rate:
makes exports less expensive
makes imports more expensive
reduces the trade deficit
none of the above
A country that maintains an undervalued currency:
creates a competitive advantage for itself unfairly
invites retaliation by other countries
encourages economic growth through stronger exports
all of the above
When a currency that is fixed against another currency increases in value, it (a) and when it falls in value it (b) _____________________.
