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Multiple ChoiceEdit

1. International trade

  • a. raises the standard of living in all trading countries.
  • b. lowers the standard of living in all trading countries.
  • c. leaves the standard of living unchanged.
  • d. raises the standard of living for importing countries and lowers it for exporting countries.
  • e. raises the standard of living for exporting countries and lowers it for importing countries.

2. Net exports of a country are the value of

  • a. goods and services imported minus the value of goods and services exported.
  • b. goods and services exported minus the value of goods and services imported.
  • c. goods exported minus the value of goods imported.
  • d. goods imported minus the value of goods exported.
  • e. goods exported minus services exported.

3. A country sells more to foreign countries than it buys from them. It has

  • a. a trade surplus and positive net exports.
  • b. a trade surplus and negative net exports.
  • c. a trade deficit and positive net exports.
  • d. a trade deficit and negative net exports.
  • e. a trade balance but negative net exports.
Table 31-1
Goods Goods Services Services
Purchased Abroad $40 billion Purchased Abroad $20 billion
Sold Abroad $10 billion Sold Abroad $25 billion

4. Refer to Table 31-1. What are Argentina’s exports?

  • a. $60 billion
  • b. $40 billion
  • c. $35 billion
  • d. $25 billion
  • e. $10 billion

5. Refer to Table 31-1. What are Argentina’s imports?

  • a. $60 billion
  • b. $40 billion
  • c. $35 billion
  • d. $25 billion
  • e. $10 billion

6. Refer to Table 31-1. What are Argentina’s net exports?

  • a. $30 billion
  • b. $5 billion
  • c. -$5 billion
  • d. -$25 billion
  • e. -$60 billion

7. Net capital outflow is defined as the purchase of

  • a. foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
  • b. foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
  • c. domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
  • d. domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.
  • e. domestic and foreign assets by domestic residents minus the purchase of domestic and foreign assets by foreign residents.

8. Bob, a Greek citizen, opens a restaurant in Chicago. His expenditures

  • a. increase U.S. net capital outflow and have no impact on Greek net capital outflow.
  • b. increase U.S. net capital outflow and increase Greek net capital outflow.
  • c. increase U.S. net capital outflow, but decrease Greek net capital outflow.
  • d. decrease U.S. net capital outflow, but increase Greek net capital outflow.
  • e. decrease U.S. net capital outflow and have no impact on Greek net capital outflow.

9. If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

  • a. appreciated. Other things the same, the appreciation would make Americans less likely to travel to Mexico.
  • b. appreciated. Other things the same, the appreciation would make Americans more likely to travel to Mexico.
  • c. depreciated. Other things the same, the depreciation would make Americans less likely to travel to Mexico.
  • d. depreciated. Other things the same, the depreciation would make Americans more likely to travel to Mexico.
  • e. devalued. Other things the same, this would have no effect on travel to Mexico.

10. You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciates relative to the British pound, then other things the same,

  • a. the dollar would buy more pounds. The depreciation would discourage you from buying as many British goods and services.
  • b. the dollar would buy more pounds. The depreciation would encourage you to buy more British goods and services.
  • c. the dollar would buy fewer pounds. The depreciation would discourage you from buying as many British goods and services.
  • d. the dollar would buy fewer pounds. The depreciation would encourage you to buy more British goods and services.
  • e. the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services.

11. If the exchange rate were 0.8 Canadian dollars per U.S. dollar, a watch that costs 8 U.S. dollars would cost

  • a. 6.4 Canadian dollars.
  • b. 10 Canadian dollars.
  • c. 12.50 Canadian dollars.
  • d. 8 Canadian dollars.
  • e. 16 Canadian dollars.

12. If the dollar buys fewer bananas in Guatemala than in Honduras, then traders could make a profit by

  • a. buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Honduras.
  • b. buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Guatemala.
  • c. buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Guatemala.
  • d. buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Honduras.
  • e. buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in both countries.

AnswersEdit

  1. A
  2. B
  3. A
  4. C
  5. A
  6. D
  7. A
  8. D
  9. B
  10. C
  11. A
  12. A

Free ResponseEdit

1. Define an exchange rate. What would happen to exports from a country that experienced a decline in its exchange rate? 2. In a world with two countries, Upper Sparta and Lower Sparta, and with flexible exchange rates, how would each of the following influence the value of the Upper Sparta Peso?

  • a. In Upper Sparta, goods from Lower Sparta become less popular with consumers.
  • b. The real interest rate in Lower Sparta increases, but not in Upper Sparta.

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