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WorksheetsInternational economic Quiz
Total questions: 96
Worksheet time: 48mins
International economics can be divided into two broad sub-fields, including
macro and micro.
developed and less developed.
monetary and barter.
international trade and international finance.
Which of the following is not a major concern of international economic theory?
Protectionism.
Financial crisis.
The balance of payment.
Exchange rate determination.
International economics deals with
the flow of goods, services, and payments among nations.
policies directed at regulating the flow of goods, services, and payments.
the effects of policies on the welfare of the nation.
(a), (b) and (c).
Which of the following statements with regard to international economics is TRUE?
It is a relatively old field.
It is a relatively new field.
It is a branch of microeconomics.
Most of its contributions were not economics.
Which of the following terms refers to the exporting of goods or services to consumers in another country?
Foreign investment.
International resource movement.
International trade.
Cross-national barter.
International trade is narrowly defined as the exchange of
labor across national borders.
capital across national borders.
money across national borders.
goods and services across national borders.
Who sells what to whom
has been a major concern of international economics.
is not a valid concern of international economics.
is determined by political rather than economic forces.
is not considered important for government foreign trade policy since such decisions are made in the private competitive market.
Attempts to explain the pattern of international trade
have been a major focus of international economists.
have proven to be hopeless.
have proven to be a trivial exercise.
have been the preoccupation of economic development theorists.
Which of the following is NOT the subject matter of international finance?
Foreign exchange markets.
The balance of payments.
The basis and the gains from trade.
Policies to adjust balance of payments disequilibria.
According to the traditional gravity model, a characteristic that tends to affect the probability of trade existing between any two countries is
their cultural affinity.
the average value of their traded goods.
their colonial-historical ties.
the distance between them.
What are the two main variables in the gravity model?
Tariff and distance.
Amount of occupied space and population.
GDP and exchange rate.
Distance and size of the economies.
The two neighbors of the United States (Mexico and Canada) do a lot more trade with the United States than European economies of equal size.
This contradicts predictions from the gravity model.
This is consistent with predictions from the gravity model.
This is relevant to any inferences that may be drawn from the gravity model.
This is because these neighboring countries have exceptionally large GDPs.
Economists often define or measure the degree of a nation's openness to international trade as
the amount of undeveloped land within a nation.
the ratio of a nation's exports and imports of goods and services to its GDP.
the level of a nation's trade barriers.
the extent to which a nation has unprotected coastline.
A country’s openness to international trade can be measured by the following formula
Exports + Imports + GDP
Exports – Imports – GDP
(Exports + Imports)/GDP
(Exports + Imports) x GDP
The rough measure of the economic relationship among nations, or their interdependence is given by
the ratio of their import and export of goods and services to their GDP.
the ratio of their foreign capital inflows to their GDP.
the ratio of their foreign capital outflows to their GDP.
the ratio of their trade and foreign investment to their GDP.
In the period between 2010 and 2019, the average openness ratios of the world stay between
31% - 40%
41% - 50%
51% - 60%
61% - 70%
In ASEAN countries, which country has the highest openness ratio in the period 2000 - 2019?
Vietnam
Singapore
Philippines
Thailand
A country with a low ratio of exports and imports to gross domestic product (GDP) is ______ vulnerable to changes in the world market than a country with a higher one.
less
more
equally
None of the above
Over time, generally, the economic interdependence of a nation
has increased.
has diminished.
has remained unchanged.
cannot be determined.
In an opened economy, a nation
allows private ownership of capital.
has flexible exchange rates.
has fixed exchange rates.
conducts trade and investment with other countries.
A closed economy is one in which
imports exactly equal exports, so that trade is balanced.
domestic firms invest in industries oversea.
the home economy is isolated from foreign trade and investment.
saving exactly equals investment at full employment.
Autarky means that
a country’s consumption possibilities are the same as its production possibilities.
equilibrium has been reached with the maximum gains from specialization and trade.
equilibrium has been reached with the maximum amount of international trade.
the nation has such a high standard of living that there are technically no poor people.
The trend from distinct national economic units and toward one huge global market is commonly referred to as
market standardization.
cross-border integration.
globalization.
internationalization.
Which are the two macro factors that seem to underlie the trend toward greater globalization?
The increase in global economic stability, and the slowdown in technological change.
Reduced export of goods, and global economic stability.
Increased tariffs on import of manufactured goods, and protection of domestic industries from foreign competition.
The decline in barriers to the free flows of goods, services, and capital that has occurred, and increased technological change.
Which of the following is NOT a reason for international specialization?
some countries have educated, trained workers, while other countries have unskilled workers.
tastes and preferences tend to be different in different countries.
economies of scale can allow larger, specialized producers to operate at lower average cost.
the world price of a good is determined by the world supply and demand for it.
Mercantilists believed that
trade can only benefit a country at the expense of another country.
maintaining a balance of trade deficit was best.
government should have no control over trade.
accumulating large quantities of gold and silver were damaging to the health of a country.
Based on Mercantilist thinking, governments should
subsidize and encourage imports.
subsidize and encourage exports.
allow for free trade unencumbered by government regulations and restrictions.
Both a and b.
Which of the following is NOT consistent with the central beliefs of Mercantilism?
Government should intervene to achieve a surplus in the balance of trade.
Policies should be put in place to minimize exports and maximize imports.
Imports should be limited by tariffs and quotas.
Exports should be subsidized.
The Mercantilists believed in
running trade surplus.
balanced trade.
the logic of Adam Smith.
promoting imports.
Which of the following statements most accurately captures the main tenet of Mercantilism?
It is in a country's best interests to not export products to less developed countries.
It is in a country's best interests to import products that are most efficiently produced at home.
It is in a country's best interests to import less specialized goods rather than to attempt to make them at home.
It is in a country's best interests to maintain a trade surplus, or to export more than it imports.
Which of the following is NOT true about Mercantilism?
Under mercantilism, exports were encouraged and imports were discouraged.
Mercantilists believed that one country’s gains from trade came at the expense of another country or countries’ well-being.
Domestic producers were often hurt by mercantilism.
Mercantilism focused on the accumulation of gold and silver bullion.
The Mercantilists did not advocate
free trade.
stimulating the nation’s exports.
restricting the nation’s imports.
the accumulation of gold by the nation.
The Mercantilists would have objected to
export promotion policies initiated by the government.
the use of tariff and quotas to restrict imports.
trade policy designed to accumulate gold and precious metals.
international trade based on open markets.
The flaw with Mercantilism was that it viewed trade as a zero-sum game.
zero-sum game
mutually beneficial activity
nonessential economic activity
threat to a government's independence
Mercantilism viewed trade as a zero-sum activity, which means that
there was nothing to be gained from international trade so there was no reason to trade.
once a country's trade is established, it cannot be increased or decreased.
one country's gains in international trade come at the expense of other countries.
every country that engages in international trade gains from that trade because as trade activity increases, the amount of goods traded increases.
Trade is a zero-sum game. This is mostly in line with __________?
absolute advantage theory
the mercantilists’ view on trade
comparative advantage theory
factor endowment theory
The neo-mercantilists did NOT advocate
free trade
stimulating the nation’s exports
restricting the nation’s imports
increasing the level of foreign reserves by the nation
According to Adam Smith, international trade was based on
absolute advantage
comparative advantage
both absolute and comparative advantage
neither absolute nor comparative advantage
Absolute advantage is determined by
actual differences in labor productivity between countries
relative differences in labor productivity between countries
actual differences in opportunity cost between countries
relative differences in factor abundance between countries
The concept of absolute advantage is based on
the law of diminishing returns
differences in labor costs across countries
differences in relative costs across countries
differences in labor endowment across countries
When Adam Smith presented his theory of absolute advantage, he thought that all value was measured in terms of the amount of __________ used in the production of the good.
land
labor
capital
money
Adam Smith's economic theories focused on
labor because he thought all value was determined by and measured in hours of labor
gold and silver as the only measure of a country's success in international trade
all aspects of the costs of producing goods for export
balancing imports and exports so that a country does not gain or lose from international trade
__________holds that nations can increase their economic well-being by specializing in the production of goods they produce more efficiently than anyone else.
The factor endowment theory
The opportunity cost theory
The theory of absolute advantage
The theory of comparative advantage
If Britain’s labor productivity in the production of umbrellas is greater than Vietnam’s labor productivity in umbrellas, we would say that Britain has a(n) __________ in the production of umbrellas.
comparative advantage
absolute advantage
opportunity cost
superiority
_______________________means that the labor productivity for a particular product in a particular country is higher than the rest of the world's labor productivity of that product.
Comparative advantage
Absolute advantage
Labor efficiency
Ability to export
In Adam Smith’s absolute advantage theory of trade,
a country with the absolute advantage in all products eventually will be the powerful nation
a country with the absolute advantage will have a larger trade surplus
a country will lose its absolute advantage if it does not protect its industry with tariff barriers
both countries will gain from trade if each exports the product for which it has lower labor cost
Adam Smith said that trade freely transacted between countries
is dangerous since there are no controls on what is exported and what is imported
generally leads to gains for all countries, so international trade is a positive - sum activity
only benefits a country if that country has an absolute advantage in all products
only benefits a country if that country has a comparative advantage in a specific product
Unlike Mercantilists, Adam Smith maintained that
trade benefits one nation only at the expense of another nation
government controls of trade leads to maximum economic welfare
the world’s output of goods must remain constant over time
all nations can gain from free trade
The author of the Wealth of Nations was
David Ricardo
Paul Samuelson
Adam Smith
Karl Marx
Having an absolute disadvantage in all products means that a country
cannot profitably engage in international trade
is less productive than other countries
is able to negotiate below-market prices for imports
can import products but cannot export products
One limitation of Adam Smith’s theory of absolute advantage is that the theory cannot explain trade pattern
in a case that if one country has absolute advantage in both products
in a case that if one country has comparative advantage in both products
between developing countries and developed countries
between countries with different production conditions
What proportion of international trade is explained by absolute advantage theory?
All
Most
Some
None
The common assumption in Adam Smith’s theory of absolute advantage, David Ricardo’s theory of comparative advantage and opportunity cost theory is
increasing return to scale
two factors of production
no barrier to trade
labor is mobility across the nations
Basis for trade is comparative advantage in the following theories:
Mercantilism, Adam Smith’s theory of absolute advantage and Opportunity cost theory
Neo-mercantilism, Opportunity cost theory and David Ricardo’s theory of comparative advantage
David Ricardo’s theory of comparative advantage, Opportunity cost theory and the Heckscher - Ohlin theory
Mercantilism, Neo-mercantilism and the Heckscher - Ohlin theory
Explanation of basis for trade in Adam Smith’s theory of absolute advantage and David Ricardo’s theory of comparative advantage is based on
opportunity cost
labor theory of value
economies of scale
different factor endowment
The basis for international trade according to David Ricardo’s theory is
comparative advantage
established trade patterns
the size of gold holdings of two countries
shipping and transportation costs
The person credited with the first systematic expression of the principle of comparative advantage was
Ricky Ricardo
Adam Smith
Heckscher and Ohlin
David Ricardo
The earliest statement of the principle of comparative advantage is associated with
Adam Smith
David Ricardo
Eli Heckscher
Bertil Ohlin
Which theory holds that nations should produce those goods for which it can produce most efficiently?
The factor endowment theory
Mercantilism
The theory of absolute advantage
The theory of comparative advantage
__________that nations should produce those goods for which they have the greatest absolute advantage.
The factor endowment theory
Mercantilism
The theory of absolute advantage
The theory of comparative advantage
Comparative advantage is determined by
actual differences in labor productivity between countries
relative differences in labor productivity between countries
relative differences in opportunity cost between countries
relative differences in factor abundance between countries
The concept of comparative advantage is based on
differences in labor endowment across countries
differences in relative labor costs across countries
the barter terms of trade
the law of diminishing returns
The commodity in which the nation has the smallest absolute disadvantage is the commodity of its
absolute advantage
absolute disadvantage
comparative advantage
comparative disadvantage
When David Ricardo presented his theory of comparative advantage, he thought that all value was measured in terms of the relative amount of __________ used in the production of the good.
land
labor
capital
money
A country can have a(n) _________________ even if they do not have any _________________
comparative advantage, absolute advantage
absolute advantage, production possibility curve
absolute advantage, labor efficiency
comparative advantage, labor efficiency
If in a two-nation (A and B), two-commodity (X and Y) world, it is established that nation A has a comparative advantage in commodity X, then nation B must have
an absolute advantage in commodity Y
an absolute disadvantage in commodity Y
a comparative disadvantage in commodity Y
a comparative advantage in commodity
A nation must have
an absolute advantage in commodity Y.
an absolute disadvantage in commodity Y.
a comparative disadvantage in commodity Y.
a comparative advantage in commodity Y.
Unlike Adam Smith, David Ricardo’s trading principle emphasizes the
demand side of the market.
supply side of the market.
role of comparative cost.
role of absolute cost.
The source of beneficial free trade in the Ricardian world is
comparative advantage based on different factor endowments.
comparative advantage based on different labor productivities.
economies of scale in production.
comparative advantage based on increasing returns to scale technology.
Each country can benefit from trade by
balancing its imports and exports so that it does not send its financial resources to other countries.
controlling imports so that imported products do not compete with domestically produced products.
exporting products in which it has the greatest relative advantage and importing products in which it has the least relative advantage.
importing only products for which it has excessive domestic demand.
The comparative advantage model of Ricardo was based on
intra-industry specialization and trade.
inter-industry specialization and trade.
demand conditions underlying specialization and trade.
income conditions underlying specialization and trade.
According to the principle of comparative advantage
each country should specialize in the good it can produce most efficiently compared with its trading partner.
buyers should compare goods before signing a contract.
wealthier countries have significant advantages compared to poorer countries.
each country should produce at least some quantity of every important consumer good.
If a country exports the good that it can produce at a low opportunity cost and imports those goods that it would otherwise produce at a high opportunity cost, we say that such trade is based upon
absolute advantage.
arbitrage.
labor productivity differences.
comparative advantage.
In a world of two nations and two commodities, if a nation has a comparative advantage in the production of a certain good, it means that this nation
also has an absolute advantage in the production of this good.
will start importing this good.
can produce this good at a lower opportunity cost.
can produce this good at higher productivity.
In New Zealand one worker can produce 40 walking sticks or 10 boomerangs each hour. What is the opportunity cost of producing one walking stick?
40 boomerangs.
10 boomerangs
4 boomerangs
1/4 boomerangs
Country A has 5000 units of labor. It takes 50 units of labor to produce one computer and 1 unit to create a Web page. What is the opportunity cost of a Web page in terms of computers?
0.01
0.02
50
100
Country A can produce 10,000 roses or 1,000 computers with its total labors of 5000. What is the opportunity cost of a rose in terms of computer?
0.10
0.20
0.50
10.0
In the presence of trade and constant opportunity cost, a nation’s production will move towards
the goods that the nation has absolute advantage.
incomplete specialization.
maximization of the goods that the nation can produce most efficiently.
Both a and c.
A nation that gains from trade will find its consumption point being located
inside its production possibility frontier.
along its production possibility frontier.
outside production possibility frontier.
None of the above
If a country has a linear (downward sloping) production possibilities frontier (PPF), then production is said to be subject to
constant opportunity costs.
decreasing opportunity costs.
first increasing and then decreasing opportunity costs.
increasing opportunity costs.
In the absence of trade, the optimum consumption points available to a nation
are above the production possibilities curve.
are on or inside the production possibilities curve.
lie on the production possibilities curve.
cannot be identified.
In the absence of trade, the optimum production points available to a nation
are above the production possibilities curve.
are on or inside the production possibilities curve.
lie on the production possibilities curve.
cannot be identified.
If the international rate of exchange (international price) stays at a level that is between two countries’ opportunity costs,
there is no basic for gainful trade for either country.
both countries gain from trade.
one country gains and the other country gains nothing from trade
one country gains and the other country loses from trade.
In a world of two countries, mutually beneficial trade will be conducted at
whatever price set by the country with absolute advantage.
whatever price set by the country with comparative advantage.
whatever price that stays between two countries' opportunity costs.
the price set by government regulations in the importing country.
Mutually beneficial trade
allows both countries to consume a larger bundle of goods than before trade occurred.
allows only the more productive country to consume a larger bundle of goods than before trade occurred.
allows only the less productive country to consume a larger bundle of goods than before trade occurred.
causes changes only in production, not consumption.
In a world of two countries and two commodities, which of the followings is TRUE?
As a result of trade, at least one country is better off and that country’s gain does not reduce the economic welfare of the other country.
Both countries can gain from trade by dividing the benefits of the enhanced global production.
Both a and b.
Neither a nor b.
An important insight of international trade theory is that when a country exchanges goods and services with another,
it is not beneficial to both countries.
it is usually beneficial to both countries.
it is typically beneficial only to the developed countries.
it is typically harmful to the technologically lagging country.
If there is no trade, each country will have to produce all products demanded in that country. When trade is established, countries can
increase domestic production for domestic consumption and avoid the necessity of imports.
decrease dependency on foreign imports and export domestically produced products.
increase exports of products that it is not very efficient at producing.
shift labor resources toward producing goods in which it has a comparative advantage.
The factor endowment model of international trade was developed by
Adam Smith
David Ricardo
John Stuart Mill
Eli Heckscher and Bertil Ohlin
The Heckscher-Ohlin theory of trade differs from the Ricardian model by assuming that
the market is perfectly competitive.
there are two factors of production.
there are only two goods.
factors are mobile across sectors.
The Heckscher-Ohlin theory differs from the Adam Smith’s theory of absolute advantage and David Ricardo’s theory of comparative advantage by assuming
the market is perfectly competitive.
two factors of production.
no barrier to trade.
labor is mobile across the nations.
If a country has a bowed out (concave to the origin) production possibility frontier, then production is said to be subject to
constant opportunity costs.
decreasing opportunity costs.
increasing opportunity costs.
first increasing and then decreasing opportunity costs.
In the Heckscher-Ohlin model, when wheat is labor intensive with respect to automobiles,
more capital is used in the production of automobiles than wheat.
more labor is used in the production of automobiles than wheat.
a lower capital-labor ratio and less labor is used in the production of automobiles than wheat.
a higher capital-labor ratio is used in the production of automobiles than wheat.
In the Heckscher-Ohlin model, when a computer is capital intensive with respect to a shirt,
a lower labor-capital ratio is used in the production of a shirt than a computer.
less capital is used in the production of a computer than a shirt.
more capital is used in the production of shirt than a computer.
a higher capital-labor ratio is used in the production of a computer than a shirt.
A good is labor intensive in the Heckscher-Ohlin model if
it uses a relatively low land to labor ratio in production compared to that of another good.
it uses a high land to labor ratio in production compared to that of another good.
it uses more labor than land in production.
it uses only labor in production.
A higher ratio of labor to other factors than is present in other countries indicates that a country is relatively ______________.
a. labor-abundant
b. labor-intensive
c. labor-resistant
d. labor-efficient
