1. Japan will trade electronic equipment for goods in other countries as long as
Japan’s balance of payments is in positive territory.
Other countries have absolute advantage in electronic equipment.
Japan has comparative advantage in electronic equipment.
Other countries have more desirable exchange rates.

2. Which group is MOST LIKELY to benefit if the US Dollar appreciates against the Yen?
Japanese business with contracts to buy US goods
United States banks holding Japanese currency
United States investors buying Japanese stock
Tourists traveling from Japan to the United States

3. Which group benefits the most when the US Dollar depreciates?
Foreign governments that hold US Treasury bonds
Citizens from other countries traveling to the United States
Business in the US that must repay loans to banks in other countries
US citizens traveling in other countries

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5. Why do domestic producers of a good benefit from trade barriers like embargos or quotas?
The number of goods imported is lower
They decrease the desire for other countries’ goods
Domestic producers get money from the government
They tax the foreign completion

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7. Balance of trade differs from balance of payments in that balance of trade
Is not used when calculating GDP
Measures only purely financial transactions
Is calculated by the Fed
Measures only exports minus imports

8. What is MOST LIKELY to happen if the dollar becomes stronger relative to other currencies?
Both imports and exports will decrease
Both imports and exports will increase
Imports will decrease, exports will increase
Imports will increase, exports will decrease

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10. Which statement is correct concerning NAFTA’s role in trade
NAFTA was replaced by the EU and is no longer relevant
It is an agreement that promotes more free trade
The countries that agreed to NAFTA were anti-trade before the agreement
NAFTA establishes many trade barriers between the US and Mexico

11. A US tariff is placed on all imported MP3 players
A US tariff is placed on all imported MP3 players. Which statement is true?
Domestic producers of MP3 players will be hurt because they will now have more competition.
Foreign producers of MP3 players will be hurt because their goods are more expensive now.
Domestic consumers will be helped because there will be fewer goods to choose from.
Foreign producers by MP3 players will be helped because the domestic goods are more expensive now.

12. Embargo Quota Tariff Subsidy
If a country wanted to implement a barrier to trade that would help its producers AND consumers, which option would be best?
Embargo
Quota
Tariff
Subsidy

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14. Countries X and Y both produce salt and sugar
Countries X and Y both produce salt and sugar. They have the same opportunity costs for both goods. Based on their information, which is true concerning trade between these countries?
There is no information concerning absolute advantage so a decision about trade cannot be reached.
Country X has comparative advantage in sugar and Country Y has comparative advantage in salt.
Since neither has comparative advantage, they will not benefit from trade with each other.
They should flip a coin to decide who should produce sugar and then trade to be better off.

15. If the government pays a business a subsidy, what is MOST likely to happen in that market?
The market will see an increase in supply of the good.
The market will see an increase in demand for the good.
There will be a decrease in demand for the good.
There will be a decrease in the quantity supplied.

16. Which BEST describes exchange rates?
The price of one nation’s currency in terms of another
An interest rate charged to consumers who take out a loan
An increase in the price of a market basket over a given time period
The difference between the total number of exports minus the number of imports

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18. Country X has decided that economic growth will be their primary goal for the next several years. The best way to achieve this would be to
Invest heavily in the stock market
Invest in capital and education of workers
Decrease trade with other countries and focus on more domestic production
Reduce the amount of government spending

19. Which headline would ASEAN be MOST LIKELY to oppose?
“Philippines considering subsidies to fishing industry.”
“Vietnam to remove quotas on Malaysia.”
“Canada favors trade with Mexico over the US.”
“Germany increasing tariffs on French goods.”

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21. One argument in favor of a tariff would be that it would
Help foreign producers by allowing them to ship goods to the US
Reduce competition for domestic producers
Force foreign companies to ship goods that meet certain quality standards in the US
Help domestic consumers by allowing them to pay a lower price

22. How do tariffs affect domestic consumers over time?
There is a wider variety of goods available
The consumers pay lower prices for both foreign and domestic goods
Fewer foreign goods are available and domestic producers will likely increase prices
Domestic goods are more expensive, but foreign goods are cheaper

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24. Which trade barrier is associated with laws that require certain shipping methods and proper handling of food or equipment?
Embargoes
Subsidies
Quotas
Standards

25. The United States does not allow any company to legally import goods from Cuba. This type of trade barrier is known as a/an
Subsidy
Quota
Embargo
Standard

26. The United States exports $10 million worth of farm equipment to Nicaragua. In terms of international accounting, this transaction will show up in
Only the balance of trade because it is an export
Neither the balance of trade or balance of payments because it deals with money not goods
Both the balance of trade and balance of payments
Only the balance of payments because it is an export

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28. Trade will MOST LIKELY take place when two countries
Specialize in producing goods in which they have absolute advantage
Produce essentially the same goods
Have the same opportunity costs in goods
Specialize in producing goods in which they have comparative advantage

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30. Suppose the EU removes ALL tariffs, embargoes, subsidies, and quotas
Suppose the EU removes ALL tariffs, embargoes, subsidies, and quotas. What is MOST LIKELY to happen to the international value of the Euro?
Depreciate, because Americans will want more European goods
Appreciate, because Europeans will buy more goods from other countries
Depreciate, because Europeans will buy more goods from other countries
No change because trade barriers do not affect exchange rates

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