Economics Today and Tomorrow

Chapter 18: Trading With Other Nations

Trading With Other Nations

1
Which of the following is NOT a benefit of international trade?
A)More than 60% of the trucks and buses purchased and used in the United States are imported from foreign nations.
B)Because the availability of natural resources differs greatly among nations, international trade helps nations obtain natural resources that they lack.
C)International trade provides employment in industries that export their products overseas.
D)Without imports, the U.S. would have no coffee, chocolate, or pepper.
2
The ability of one country using the same amount of land, labor, capital, and entrepreneurship as another country to produce a particular product more efficiently is called __________
A)an absolute advantage.
B)an opportunity cost.
C)comparative advantage.
D)the combination of resources.
3
Which of the following statements about absolute advantage and comparative advantage is MOST accurate?
A)A nation has an absolute advantage only when no other nation can produce the same product.
B)A nation has an absolute advantage when it can produce a product at a lower opportunity cost than another country.
C)A nation has a comparative advantage when it can produce a product at a lower opportunity cost than another country.
D)A nation has a comparative advantage when it can produce a product at less cost when using the same amount of resources as another country.
4
The present system of currency exchange rates provides all the following EXCEPT __________
A)easier trading among nations.
B)a fixed rate of exchange.
C)a way for international firms to easily and quickly convert their currency to another.
D)a way for countries to know the value of their currency in terms of another nation's currency.
5
With flexible rates of exchange, the value of the U.S. dollar on the world market __________
A)changes daily.
B)stays the same for a period of time.
C)changes infrequently.
D)never changes.
6
If the forces of supply and demand cause the price of a currency to fall, this is called __________
A)elasticity of demand.
B)depreciation.
C)devaluation.
D)foreign exchange.
7
A positive balance of trade results when __________
A)a nation does not deal in international trade at all.
B)the value of exports equals the value of imports.
C)the value of exports exceeds the value of imports.
D)the value of imports exceeds the value of exports.
8
Which statement about the effect of exchange rates on a nation's balance of trade is TRUE?
A)If a nation's currency depreciates, the nation's exports will increase.
B)If a nation's currency increases in value, the nation's exports will increase.
C)If a nation's currency depreciates, the nation's imports will increase.
D)Exchange rates have no effect on a nation's balance of trade.
9
All of the following are major barriers to world trade EXCEPT __________
A)embargoes.
B)tariffs.
C)quotas.
D)specialization.
10
Protectionists argue that all of the following areas need to be protected by barriers to free trade EXCEPT for __________
A)foreign competition.
B)new industries.
C)economic security.
D)job security.
11
Which of the following is an argument for free trade?
A)Less American money in the world market means fewer American exports are sold.
B)Trade restrictions damage import industries.
C)Competition results in improved products.
D)Job security is threatened.
12
The most far-reaching global trade agreement in history is the __________
A)European Union (EU).
B)World Trade Organization (WTO).
C)North American Free Trade Agreement (NAFTA).
D)General Agreement on Tariffs and Trade (GATT).
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