1. International Trade Unit 5
Review

2. 1. An economy is said to have a comparative advantage if it:
can produce more of all goods than another economy. B.
can produce less of all goods than another economy. C.
has the highest opportunity cost for producing a particular good. D.
has the lowest opportunity cost for producing a particular good. E.
has more economic resources than another country.

3. 2. In a single day, George can bake 10 cakes while Greta can
bake 5 cakes. We then know that: A.
George has a comparative advantage in baking cakes. B.
George has an absolute advantage in baking cakes. C.
Greta has a comparative advantage in baking cakes. D.
Greta has an absolute advantage in baking cakes. E.
Greta should bake cakes while George performs other tasks.

4. When the United States gives foreign aid to developing nations
in Africa, which of the following balance of payments
account is affected? A.
central bank B.
capital financial account C.
reserve account D.
foreign exchange account E.
current account

5. 4. When a Japanese investor buys stock in General Motors,
which of the following balance of payments accounts is affected? A.
current account B.
capital financial account C.
reserve account D.
foreign exchange account E.
balance of trade account

6. 5. If the United States exports $100 billion of goods and services
and imports $150 billion of goods and services and there is no other
factor income or transfers, the balance on the current account is: A.
$250 billion. B.
–$250 billion. C.
$50 billion. D.
–$50 billion. E.
$350 billion.

7. 6. If a country has a current account deficit, it must have a:
balanced financial account. B.
balance of payment surplus. C.
financial account deficit. D.
balance of payments deficit. E.
financial account surplus.

8. Which of the following would be included in the U.S.
capital financial account? A.
a computer made in the U.S. exported to Britain B.
a computer made in Britain imported into the United States C.
interest on a U.S. company's bond sold to someone living overseas D.
the value of a bond of a company in the United States sold to someone living in Britain E.
wages paid by a company in the United States to an employee living in Britain.

9. A. current; decrease B. current; increase C. financial; decrease D.
8. An American buys a new Volvo, a car built in Sweden.
In the U.S. balance of payments, this transaction would cause
the balance on the _____ account to _____. A.
current; decrease B.
current; increase C.
financial; decrease D.
financial; increase E.
net export; increase

10. capital financial; decrease D. capital financial; increase E.
9. A Brazilian bank buys shares of stock in Intel,
an American high-tech company. In the U.S. balance of payments,
this transaction would cause the balance on the _____ account to _____. A.
current; decrease B.
current; increase C.
capital financial; decrease D.
capital financial; increase E.
import/export account; decrease

11. 10. If the U.S. dollar appreciates relative to currencies in other countries,
then U.S. imports: A.
and exports will both increase. B.
and exports will both decrease. C.
will decrease and exports will increase. D.
will increase and exports will decrease. E.
will be unchanged, while exports will decrease.

12. 11. When a country's currency depreciates:
that country’s trade balance begins to decline. B.
the country's exports will fall. C.
the country's imports will rise. D.
foreign goods become cheaper. E.
foreigners find this country's goods to be relatively cheaper.

13. 12. Overall, trade between China and the US will:
benefit the US more than China. B.
benefit China more than the US. C.
neither help, nor hurt, these nations. D.
hurt both countries. E.
benefit both countries.

14. 1. An economy is said to have a comparative advantage if it:
can produce more of all goods than another economy. B.
can produce less of all goods than another economy. C.
has the highest opportunity cost for producing a particular good. D.
has the lowest opportunity cost for producing a particular good. E.
has more economic resources than another country.

15. 2. In a single day, George can bake 10 cakes while
Greta can bake 5 cakes. We then know that: A.
George has a comparative advantage in baking cakes. B.
George has an absolute advantage in baking cakes. C.
Greta has a comparative advantage in baking cakes. D.
Greta has an absolute advantage in baking cakes. E.
Greta should bake cakes while George performs other tasks.

16. 3. When the United States gives foreign aid to developing nations in
Africa, which of the following balance of payments account is affected? A.
central bank B.
capital financial account C.
reserve account D.
foreign exchange account E.
current account

17. 4. When a Japanese investor buys stock in General Motors,
which of the following balance of payments accounts is affected? A.
current account B.
capital financial account C.
reserve account D.
foreign exchange account E.
balance of trade account

18. A. $250 billion. B. –$250 billion. C. $50 billion. D. –$50 billion. E.
5. If the United States exports $100 billion of goods and services
and imports $150 billion of goods and services and there is no other factor
income or transfers, the balance on the current account is: A.
$250 billion. B.
–$250 billion. C.
$50 billion. D.
–$50 billion. E.
$350 billion.

19. 6. If a country has a current account deficit, it must have a:
balanced financial account. B.
balance of payment surplus. C.
financial account deficit. D.
balance of payments deficit. E.
capital financial account surplus.

20. Which of the following would be included in the U.S.
capital financial account? A.
a computer made in the U.S. exported to Britain B.
a computer made in Britain imported into the United States C.
interest on a U.S. company's bond sold to someone living overseas D.
the value of a bond of a company in the United States sold to someone living in Britain E.
wages paid by a company in the United States to an employee living in Britain.

21. A. current; decrease B. current; increase C. financial; decrease D.
8. An American buys a new Volvo, a car built in Sweden.
In the U.S. balance of payments, this transaction would cause
the balance on the _____ account to _____. A.
current; decrease B.
current; increase C.
financial; decrease D.
financial; increase E.
net export; increase

22. capital financial; decrease D. capital financial; increase E.
9. A Brazilian bank buys shares of stock in Intel,
an American high-tech company. In the U.S. balance of payments,
this transaction would cause the balance on the _____ account to _____. A.
current; decrease B.
current; increase C.
capital financial; decrease D.
capital financial; increase E.
import/export account; decrease

23. If the U.S. dollar appreciates relative to currencies in other
countries, then U.S. imports: A.
and exports will both increase. B.
and exports will both decrease. C.
will decrease and exports will increase. D.
will increase and exports will decrease. E.
will be unchanged, while exports will decrease.

24. 11. When a country's currency depreciates:
that country’s trade balance begins to decline. B.
the country's exports will fall. C.
the country's imports will rise. D.
foreign goods become cheaper. E.
foreigners find this country's goods to be relatively cheaper.

25. 12. Overall, trade between China and the US will:
benefit the US more than China. B.
benefit China more than the US. C.
neither help, nor hurt, these nations. D.
hurt both countries. E.
benefit both countries.