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WorksheetsCam Econ unit 6
Total questions: 65
Worksheet time: 3hrs 15mins
Name
Class
Date
1.
What is absolute advantage?
a)
A country produces all goods more efficiently
b)
A country produces a good with fewer resources than others
c)
A country has lower labor costs
d)
A country imports more than it exports
2.
Comparative advantage considers:
a)
Absolute production costs
b)
Relative efficiency (opportunity cost)
c)
Transport costs
d)
Government subsidies
3.
In Figure 6.1, Country 1 has a comparative advantage in:
a)
Agricultural goods
b)
Manufactured goods
c)
Both goods equally
d)
Neither good
4.
Bilateral trade involves:
a)
Trade between two countries
b)
Trade within a free trade area
c)
Global trade networks
d)
Trade regulated by the WTO
5.
Multilateral trade is enabled by:
a)
Protectionism
b)
Globalization
c)
Import quotas
d)
Embargoes
6.
The WTO primarily promotes:
a)
Trade barriers
b)
Free trade
c)
Subsidies
d)
Bilateral agreements
7.
A trading possibility curve shows:
a)
Production limits
b)
Consumption possibilities with trade
c)
Tariff effects
d)
Exchange rate fluctuations
8.
Terms of trade formula is:
a)
(Export prices/Import prices) × 100
b)
(Imports/Exports) × 100
c)
(GDP/Exports) × 100
d)
(Trade surplus/GDP) × 100
9.
If export price index=110 and import price index=105, terms of trade are:
a)
95.5
b)
104.8
c)
105
d)
115
10.
Unfavorable terms of trade occur when:
a)
Export prices rise faster than imports
b)
Import prices rise faster than exports
c)
Trade balance is zero
d)
GDP increases
11.
A limitation of comparative advantage theory is:
a)
It ignores transport costs
b)
It assumes perfect competition
c)
It requires free trade
d)
All of the above
12.
Competitive advantage focuses on:
a)
Opportunity cost
b)
Absolute cost differences
c)
Labor productivity
d)
Actual production costs
13.
Factor endowment theory emphasizes:
a)
Government policies
b)
Quality/quantity of resources
c)
Exchange rates
d)
Consumer preferences
14.
Protectionism aims to:
a)
Expand free trade
b)
Shield domestic industries
c)
Increase world output
d)
Lower consumer prices
15.
A tariff is:
a)
A tax on imports
b)
A limit on import quantity
c)
A subsidy for exports
d)
A ban on trade
16.
An import quota restricts:
a)
Export volumes
b)
Import volumes
c)
Exchange rates
d)
Foreign investment
17.
An export subsidy:
a)
Raises import costs
b)
Lowers export production costs
c)
Bans foreign goods
d)
Taxes domestic sales
18.
Dumping occurs when exports are sold:
a)
At production cost
b)
Below production cost
c)
With high tariffs
d)
Through quotas
19.
The infant industry argument justifies protection for:
a)
Declining industries
b)
New industries
c)
Monopolies
d)
Service sectors
20.
A sunset industry is:
a)
A growing tech sector
b)
A declining industry
c)
A protected monopoly
d)
An agricultural sector
21.
Trade creation results from:
a)
Higher tariffs
b)
Reduced trade barriers
c)
Import quotas
d)
Export embargoes
22.
The current account includes:
a)
Trade in goods/services
b)
Foreign direct investment
c)
Capital flows
d)
Currency reserves
23.
Visible trade refers to:
a)
Goods
b)
Services
c)
Income flows
d)
Transfers
24.
Primary income includes:
a)
Dividends from abroad
b)
Import payments
c)
Government aid
d)
Tourist spending
25.
A current account deficit means:
a)
Imports > Exports
b)
Exports > Imports
c)
Capital inflows > Outflows
d)
GDP is falling
26.
A trade surplus in services could offset a:
a)
Goods deficit
b)
Capital account surplus
c)
Inflationary gap
d)
Budget deficit
27.
High marginal propensity to import worsens:
a)
Trade surplus
b)
Trade deficit
c)
Inflation
d)
Unemployment
28.
A persistent current account deficit may cause:
a)
Currency appreciation
b)
Higher unemployment
c)
Lower inflation
d)
Increased FDI
29.
A floating exchange rate is determined by:
a)
Central banks
b)
Demand/supply forces
c)
Fixed parity rates
d)
Trade quotas
30.
Currency depreciation means:
a)
Higher value in forex markets
b)
Lower value in forex markets
c)
Fixed exchange rate
d)
Reduced money supply
31.
An appreciation makes imports:
a)
More expensive
b)
Cheaper
c)
Unaffected
d)
Banned
32.
Hot money flows are driven by:
a)
Interest rate differentials
b)
Trade balances
c)
Inflation rates
d)
All of the above
33.
The Marshall-Lerner condition states depreciation improves trade balance if:
a)
PEDx + PEDm > 1
b)
PEDx + PEDm < 1
c)
PEDx = PEDm
d)
Exports are price inelastic
34.
AD/AS analysis shows currency depreciation shifts:
a)
SRAS left
b)
AD right
c)
LRAS left
d)
All curves equally
35.
A tariff diagram shows:
a)
Higher consumer surplus
b)
Deadweight loss
c)
Increased world output
d)
Lower producer surplus
36.
Trade diversion occurs when:
a)
Imports shift to higher-cost producers
b)
New trade is created
c)
Exports become cheaper
d)
Quotas are removed
37.
VERs are:
a)
Mandatory export limits
b)
Voluntary export limits
c)
Import taxes
d)
Subsidy agreements
38.
Exchange controls restrict:
a)
Currency conversion
b)
Domestic spending
c)
Export volumes
d)
Inflation rates
39.
Strategic industries protected include:
a)
Textiles
b)
Defense
c)
Tourism
d)
Agriculture
40.
The J-curve effect explains:
a)
Immediate trade balance improvement
b)
Short-term trade balance worsening
c)
Long-term GDP growth
d)
Inflation trends
41.
Globalization increases:
a)
Bilateral trade
b)
Multilateral trade
c)
Protectionism
d)
Trade barriers
42.
GATT was replaced by:
a)
IMF
b)
WTO
c)
World Bank
d)
UNCTAD
43.
The Doha Round focuses on:
a)
Agricultural subsidies
b)
Space exploration
c)
Military alliances
d)
Tax harmonization
44.
Secondary income includes:
a)
Foreign aid
b)
Dividend payments
c)
Export revenues
d)
Import costs
45.
A trade embargo is a:
a)
Partial import restriction
b)
Complete import ban
c)
Export subsidy
d)
Tariff reduction
46.
Price elasticity of demand for exports depends on:
a)
Availability of substitutes
b)
Income levels
c)
Domestic inflation
d)
All of the above
47.
The "invisible trade balance" refers to:
a)
Services trade
b)
Capital flows
c)
Foreign aid
d)
Remittances
48.
Persistent surpluses may lead to:
a)
Currency reserves accumulation
b)
Foreign asset purchases
c)
Trade partner deficits
d)
All of the above
49.
The balance of payments must always:
a)
Be in equilibrium
b)
Show zero current account
c)
Balance overall
d)
Favor exports
50.
A managed exchange rate system combines:
a)
Fixed and floating elements
b)
Tariffs and quotas
c)
Bilateral/multilateral trade
d)
Import/export subsidies
51.
A government's objective for current account stability aims to:
a)
Eliminate all trade deficits
b)
Balance deficits and surpluses over time
c)
Maximize export revenues
d)
Minimize foreign debt
52.
Deflationary fiscal policy reduces a current account deficit by:
a)
Increasing government spending
b)
Raising taxes to lower aggregate demand
c)
Subsidizing exports
d)
Printing more currency
53.
Higher interest rates (monetary policy) can improve the current account by:
a)
Encouraging imports
b)
Reducing domestic consumption/imports
c)
Depreciating the currency
d)
Increasing foreign aid
54.
A currency depreciation helps correct a deficit by:
a)
Making exports cheaper and imports dearer
b)
Increasing foreign reserves
c)
Reducing inflation
d)
Encouraging capital outflows
55.
Supply-side policies to reduce a deficit focus on:
a)
Short-term demand management
b)
Improving product quality/cost competitiveness
c)
Imposing import quotas
d)
Expanding fiscal deficits
56.
Privatization and deregulation are examples of:
a)
Fiscal policies
b)
Supply-side policies
c)
Protectionist policies
d)
Monetary policies
57.
A tariff reduces a current account deficit by:
a)
Taxing imports to raise their price
b)
Banning foreign goods
c)
Subsidizing domestic producers
d)
Fixing exchange rates
58.
The WTO generally opposes protectionist policies because they:
a)
Reduce trade barriers
b)
Distort free trade
c)
Stabilize exchange rates
d)
Promote economic growth
59.
An import quota directly restricts:
a)
Export volumes
b)
Import quantities
c)
Interest rates
d)
Government spending
60.
Export subsidies aim to:
a)
Tax foreign competitors
b)
Lower production costs for domestic exporters
c)
Ban cheap imports
d)
Fix currency values
61.
The J-curve effect suggests a currency depreciation may:
a)
Immediately improve the trade balance
b)
Worsen the trade balance before improving it
c)
Have no impact on exports
d)
Only affect services trade
62.
Training/education investments help reduce deficits by:
a)
Increasing short-term consumption
b)
Enhancing long-term productivity/competitiveness
c)
Raising import demand
d)
Reducing export capacity
63.
"Red tape" as a protectionist tool refers to:
a)
Transparent trade rules
b)
Excessive bureaucratic hurdles
c)
Export promotion
d)
Currency manipulation
64.
A current account surplus could be corrected by:
a)
Fiscal stimulus to boost imports
b)
Raising tariffs
c)
Imposing export quotas
d)
Cutting education spending
65.
The Marshall-Lerner condition must hold for depreciation to:
a)
Increase inflation
b)
Improve the trade balance
c)
Reduce GDP growth
d)
Stabilize currency reserves
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