ECON Test 5

As foreign currency becomes less expensive in terms of the U.S. dollar,

foreign goods become cheaper to U.S. citizens

foreign goods become more expensive to U.S. citizens

the U.S. demand curve for foreign currency shifts to the left

the U.S. demand curve for foreign currency shifts to the right

Question 24
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When Japanese investors who own hotels in Hawaii receive profits from their hotel operations, the receipt of such profits is recorded in the balance of payments as a

current account item

capital account item

settlement account item

unilateral transfer

Question 25
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The International Monetary Fund was established to stabilize exchange rates and to provide temporary assistance to nations with deficit balance of payments.

True

False

Question 26
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A nation on the gold standard would convert its currency into gold on demand.

True

False

Question 27
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Under the gold standard, a country that is experiencing a gold outflow

has a balance of payments deficit

has a shrinking money supply

is experiencing a fall in output

all of the above

Question 28
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If the World Bank lends $10 million to the government of Fiji to develop new sugar cane fields, that would be seen on Fiji’s international balance of payments as a

unilateral transfer

settlement account entry

capital account entry

service transaction in the current account

Question 29
2 points
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In recent years, the IMF has altered its mission from one of providing long-term loans to developing nations to one of providing short-run financial support for dealing with balance-of-payments problems.

True

False

Question 30
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When U.S. citizens travel on United Airlines to Japan, this constitutes a debit in the U.S. balance of payments.

True

False

Question 31
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One factor that definitely did not contribute to the deficit in the U.S. balance of payments during 2005 was

the war in Iraq

sales of military equipment to foreign nations

the large federal government deficit in the United States

investments abroad by U.S. companies

Question 32
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The balance of payments and the balance of trade are

exactly the same thing

not exactly the same thing but are always equal

two different and unrelated things

two different things, but one is a part of the other

Question 33
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The United States devalued the dollar twice in the 1970s to alleviate the world’s dollar shortage.

True

False

Question 34
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The 1992 plan of the European Union calls for

the complete mobility of economic resources across EU borders

establishing the British pound as the common currency

a central banking system in Zurich

a federal tax system similar to that of the United States

Question 35
2 points
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The United States exports more to the Economic Union than it imports.

True

False

Question 36
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Tariff protection

encourages the optimum use of scarce resources

has no impact on use of scarce resources

prevents the optimum use of scarce resources

eliminates the scarcity of resources

Question 37
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In a large and diversified economy like the United States, international trade usually hurts more people domestically than it helps.

True

False

Question 38
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Dumping refers to the practice of

flooding a foreign market with large quantities of a good

selling a product abroad at a price below cost or below the domestic price

exporting inexpensive products to foreign countries

selling surplus goods abroad with counterfeit brand names

Question 39
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The only factor determining whether a country can develop a comparative advantage in production is the degree to which it has a highly skilled labor force.

True

False

Question 40
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In dollar value, the United States is the largest importer in the world.

True

False

Question 41
2 points
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Which of the following countries is not a member of the European Union?

Switzerland

Portugal

Sweden

Ireland

Question 42
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During times of recession, retaining the domestic economy’s money at home is a valid argument for restricting imports.

True

False

Question 43
2 points
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Since the Civil War, the international trade policies of the United States have been generally

for free trade

against free trade

in favor of free trade since the 1930s

increasingly against free trade since the 1930s

Question 44
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The largest trading partner of the United states is

Mexico

Canada

European Union

Japan

Question 45
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If a tariff is used to protect U.S. jobs,

income is transferred from consumers to protected producers

national production and income increase

national production rises but income decreases

the effect is neutral since imports are replaced by domestic goods

Question 46
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The most-favored-nation clause was created in the

Trade Expansion Act of 1962

Marshall Plan

Reciprocal Trade Agreements Act of 1934

Canadian-American Trade Act

Question 47
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Consider a country that initially does not interfere with imports of a given good. If the government then imposes a tariff on that good, the supply curve

shifts downward

remains unchanged

slopes upward less steeply

shifts upward

Question 48
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Only in developing nations would one expect the value of either exports or imports to exceed 200 percent of gross national product.

True

False

Question 49
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The revenue and protective purposes of a tariff are largely incompatible.

True

False

Question 50
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The North American Free Trade Agreement is likely to lead to

decreased employment in some U.S. industries

decreased employment in all U.S. industries

increased employment in all U.S. industries

no changes in U.S. employment