Deck 18: International Trade

Question 1

As with new technology,trade can be viewed as a way for:

A)an economy to increase its production possibilities and welfare.
B)an economy to specialize to the detriment of everyone.
C)exporters to benefit at the expense of everyone else.
D)an economy to reduce its aggregate production.
E)none of the above

Answer 1

A

Question 2

Explanations of why trade has increased worldwide,particularly since the early 1970s,include:

A)the reduction in shipping and production costs.
B)the decline in trade barriers.
C)growing global incomes.
D)all of the above
E)a and b

Answer 2

D

Question 3

The example demonstrating how corn can be "turned into" cars illustrates how trade can be viewed as:

A)bad for farmers.
B)good for certain industries.
C)an alternative technology for producing goods.
D)undermining America's ability to produce both corn and cars.
E)turning the United States into a low value-added economy.

Answer 3

C

Question 4

By the year 2000,the average worldwide tariff was about:

A)0 percent.
B)4 percent.
C)10 percent.
D)14 percent.
E)8 percent.

Question 5

Which of the following country(ies)has (have)export and import shares that exceed 20 percent of their respective GDP?

A)Brazil
B)Japan
C)India
D)Argentina
E)none of the above

Question 6

U.S.imports' share of GDP is about __________percent,while exports' share is about __________ percent.

A)10;15
B)15;10
C)5;10
D)15;15
E)20;40

Question 7

Economists call an economy in which each person produces all of the goods that he or she consumes a(n)__________ economy.

A)simple
B)Robinson Crusoe
C)two-good
D)island
E)benevolent planner

Question 8

In the 1970s,farmers were able to "transform" __________ into __________.

A)steel;cars
B)corn;ethanol
C)corn;cars
D)beets;sugar
E)soy;sushi

Question 9

Which of the following country(ies)has (have)export and import shares that exceed 20 percent of their respective GDP?

A)China
B)Canada
C)France
D)Germany
E)all of the above

Question 10

Imports' share of GDP is about __________ percent.

A)5
B)10
C)15
D)20
E)40

Question 11

Worldwide,the trade balance must be:

A)unsure.
B)negative.
C)positive.
D)zero.
E)dependent on the country.

Question 12

The difference between exports and imports is called:

A)the trade balance.
B)net exports.
C)the capital account.
D)the statistical discrepancy.
E)a and b

Question 13

Which of the following had a trade surplus in 2000?

A)France
B)Japan
C)the United States
D)the United Kingdom
E)a and b

Question 14

The basic motivation for international trade is that:

A)an economy values goods other economies produce more than they value their own excess production.
B)people like to consume a limited basket of goods.
C)people like to consume an extended basket of goods.
D)economies value goods that other economies produces less than they value what they produce.
E)economies value goods that other economies produce more than they value what they themselves produce.

Question 15

If Country A runs a trade deficit against Country B for one year,then:

A)it must compensate Country B during that year with a promissory note.
B)it must compensate Country B by exporting its excess production in the future.
C)it may continue to run a deficit for all time.
D)none of the above
E)a and b are correct.

Question 16

Over time,the "economic distance" between countries has:

A)remained unchanged.
B)fallen as costs have stayed constant.
C)fallen as costs have fallen.
D)increased with more countries actively engaging in trade.
E)none of the above

Question 17

With trade,

A)an economy can realize higher welfare.
B)an economy can specialize in the production of fewer goods.
C)an economy moves to a higher production possibilities frontier.
D)members of an economy can consume more of all goods.
E)All of the above are correct.

Question 18

Prior to 1975,the United States had:

A)balanced trade.
B)a trade deficit.
C)a trade surplus.
D)a balanced budget.
E)zero rates of inflation.

Question 19

About __________ percent of the U.S.GDP is exported.

A)5
B)15
C)10
D)20
E)40

Question 20

Over time,international trade enables an economy to:

A)run a trade deficit forever.
B)smooth consumption.
C)run a trade surplus forever.
D)experience variations in consumption.
E)none of the above

Question 21

Consider Table 18.1.With free trade,the price of fish in terms of chips must be:

A)2.
B)about 0.42.
C)2.4.
D)3.
E)Not enough information is given.

Question 22

If the United States is running persistent trade deficits now,

A)it must make loans to the rest of world.
B)it is expected to run trade surpluses at some point in the future.
C)it is expected to run trade surpluses now.
D)it must increase its money supply to buy imports.
E)it must run a government budget deficit.

Question 23

Intertemporal trade deficits and surpluses reflect:

A)international borrowing.
B)international lending and borrowing.
C)movements in money across borders.
D)differences in interest rates.
E)differences in preferences.

Question 24

Consider Table 18.1.In the East,with autarky,total fish production is __________ and total chip production is __________,assuming people spend half their income on each good.

A)30;10
B)10,000;5,000
C)12,000;4,000
D)200;200
E)Not enough information is given.

Question 25

Intertemporal trade allows economies to:

A)smooth risk over time.
B)reduce consumption over time.
C)run trade deficits in any given period.
D)run trade deficits for all periods.
E)a and c are correct.

Question 26

Consider Table 18.1.In autarky,the price of fish in terms of chips is __________ in the West;in the East the price is __________.

A)3;2
B)1/2;1/3
C)1;1
D)2;10
E)None of the above is correct.

Question 27

If the United States is running a trade deficit this year,it also must __________ now,and in the long run,__________.

A)lend to China;run balanced trade with China
B)borrow from China;run a trade deficit
C)lend to China;run balanced trade with China
D)lend to China;run a trade deficit
E)Not enough information is given.

Question 28

If a country is better at producing all goods,it has a(n):

A)trade deficit.
B)comparative advantage.
C)absolute advantage.
D)trade surplus.
E)none of the above

Question 29

In a two-period example of intertemporal trade,if NX > 0 in period 1,then for trade to balance in period 2,

A)C + I + G < Y.
B)NX < 0.
C)C + I + G > Y.
D)a and b are correct.
E)Not enough information is given.

Question 30

Consider Table 18.1.In the West,with autarky,total fish production is __________ and per person fish consumption is __________,assuming people spend half their income on each good.

A)22,500;75
B)10,000;5,000
C)10,000;100
D)5,000;2,250
E)Not enough information is given.

Question 31

Consider Table 18.1.With free trade,the West has a comparative advantage in __________ production and dedicates __________ percent of its labor to fish.

A)fish;75
B)fish;100
C)chips;50
D)chips;0
E)Not enough information is given.

Question 32

Consider Table 18.1.In autarky,the price of fish in terms of chips is __________ in the West,and in the East the price is __________;therefore,the West has a comparative advantage in __________.

A)2;3;fish
B)3;2;chips
C)2;3;chips
D)1/2;1/3;fish
E)Not enough information is given.

Question 33

Consider Table 18.1.In autarky,the price of fish in terms of chips is __________ in the West,and in the East the price is __________.

A)1;1
B)1/2;1/3
C)2;3
D)2;10
E)Not enough information is given.

Question 34

Consider Table 18.1.Which of the following statements is true?

A)The West has an absolute advantage in the production of both fish and chips and has a comparative advantage in the production of chips.
B)The East has an absolute advantage in the production of both fish and chips and has a comparative advantage in the production of fish.
C)The West has an absolute advantage in the production of chips and the East has an absolute advantage in the production of chips.
D)The East has a comparative advantage in chip production and the West has a comparative advantage in the production of fish.
E)Not enough information is given.

Question 35

From the national income identity,

A)if .
B)if .
C)if .
D)if .
E)a and b are correct.

Question 36

Consider Table 18.1.In the West,with autarky,per person fish consumption is __________ and per person chip consumption is __________,assuming people spend half their income on each good.

A)75;7.5
B)50;100
C)100;50
D)200;100
E)Not enough information is given.

Question 37

From the national income identity,

A)if .
B)if .
C)if .
D)if .
E)if .

Question 38

With intertemporal trade,trade imbalances move in tandem with:

A)budget deficits.
B)financial flows.
C)changes in consumption.
D)money flows.
E)changes in inflation.

Question 39

Consider Table 18.1.With free trade,the price of fish in terms of chips must be:

A)2.
B)some value between 1/2 and 1/3.
C)some value between 2 and 3.
D)3.
E)Not enough information is given.

Question 40

Consider Table 18.1.In the East,with autarky,per person consumption of fish is __________ and per person chip consumption is __________,assuming people spend half their income on each good.

A)10;30
B)100;50
C)12,000;4,000
D)30;10
E)Not enough information is given.

Question 41

If a country is running a trade deficit this year,it must pay for these goods by __________.

A)selling financial assets
B)running a trade surplus in the future
C)selling government debt to foreign institutions
D)all of the above
E)a and b

Question 42

Consider Table 18.1.With free trade in the East,fish consumption _________ and potato consumption __________,compared to autarky.

A)rises;falls
B)rises;stays the same
C)stays the same;rises
D)stays the same;stays the same
E)rises;rises

Question 43

According to the model of free trade,if the United States were to open its borders to Mexican migrants,

A)both American and Mexican wages would fall.
B)American wages would be permanently higher than Mexican wages.
C)Mexican wages would remain well below American wages.
D)Mexican wages would rise above American wages.
E)wages of Americans and Mexicans would equalize.

Question 44

From the national income identity we can derive the following relationship for the trade balance (net exports):

A)NX = I
B)NX = I - S
C)NX = S - I
D)NX = Y - C - I
E)NX = C

Question 45

An impact of free trade is:

A)workers in the sector in which an economy has a comparative disadvantage lose their work.
B)on aggregate,the economy is better off.
C)workers in each sector see an improvement in their welfare.
D)capital moves seamlessly across borders.
E)a and b

Question 46

From the national income identity,

A)the trade balance is equal to the net capital outflow.
B)the trade balance is always greater than the net capital inflow.
C)if there is a trade surplus,there is a net capital inflow.
D)the trade balance equals the federal government's budget balance.
E)None of the above is correct.

Question 47

Consider Table 18.1.With free trade in the West,fish consumption __________ and potato consumption __________ ,compared to autarky.

A)rises;falls
B)stays the same;rises
C)rises;stays the same
D)stays the same;stays the same
E)rises;rises

Question 48

According to economic theory,fast-growing countries should be running __________;but the evidence is that in fast-growing countries,__________.

A)trade deficits;the permanent income hypothesis holds
B)trade surpluses;the permanent income hypothesis is wrong
C)trade deficits;the causality is from exports to growth
D)balanced trade;people want to smooth their consumption
E)balanced trade;people do not think about the future

Question 49

According to Matthew Slaughter of Dartmouth College,in a study of multinational corporations,he found that:

A)for every one job outsourced,about two jobs were created domestically.
B)for every one job outsourced,about one-half job was created domestically.
C)for every job outsourced,another was created domestically.
D)for every two jobs outsourced,about one job was created domestically.
E)None of the above is correct.

Question 50

Given the choice,the world is most efficient under

A)autarky.
B)free trade.
C)free migration.
D)protected trade.
E)monopoly.

Question 51

According to the model of free trade and free factor migration,given the choice,Americans would prefer __________ because __________.

A)free trade over free migration;additional benefits would accrue to the migrant population
B)free migration over free trade;the benefits are shared across both populations
C)free migration over free trade;additional benefits would accrue to Americans
D)free trade over free migration;all benefits would accrue to Americans
E)none of the above

Question 52

Suppose,in the North,one unit of labor produces
Units of fish or
Units of chips.In the South,one unit of labor produces
Units of fish and
Units of chips.For the South to specialize in fish,which of the following must be true?

A)
B)
C)
D)
E)

Question 53

Because free trade __________,it is incumbent on an economy __________.

A)creates losses for specific sectors;to redistribute the gains
B)generates gains for all sectors;to raise taxes
C)generates gains for specific sectors only;to tax them less heavily
D)creates losses for specific sectors;to hasten their decline to better take advantage of comparative advantage.
E)None of the above is correct.

Question 54

Under free trade,

A)losses generally are concentrated in specific industries but benefits are felt economywide.
B)losses generally are concentrated in all industries but benefits are felt economywide.
C)losses generally are concentrated in specific industries and are felt economywide.
D)winners are concentrated within a specific sector.
E)no one loses,and there are only gains to the economy.

Question 55

In addition to the migration of __________ jobs to lower-cost countries,recently we have seen __________ jobs migrate abroad as well.

A)financial;automobile
B)blue collar;white collar
C)white collar;blue collar
D)automobile;construction
E)cement manufacturing;ship building

Question 56

According to the President's Council of Economic Advisors,"The gains from trade that takes place __________ are no different than the gains from trade __________.When a good or service is produced at lower cost in another country,it makes sense to import it rather than to produce it domestically."

A)over the Internet or telephone lines;in physical goods transported by ship or plane
B)over the Internet or telephone lines;due to the movement of real assets
C)due to the movement of real assets;over the Internet or telephone lines
D)due to the movement of financial assets;in physical goods transported by ship or plane
E)due to the movement of financial assets;over the Internet or telephone lines

Question 57

Generally,the losses due to free trade are __________ and the benefits are __________.

A)concentrated within particular groups;spread thinly across the rest of the economy
B)spread thinly across the rest of the economy;concentrated within particular groups
C)concentrated within particular groups;also concentrated within particular groups
D)spread thinly across the rest of the economy;also spread thinly across the rest of the economy
E)zero;infinite

Question 58

Free labor migration is more effective at improving welfare in low-income countries than moving capital because:

A)it moves the labor to the place where productivity is high.
B)low-income countries do not have much capital per person.
C)it moves labor to the place where there is a lot of capital per person.
D)it moves labor to the place where there is not much capital per person.
E)it is cheaper to move labor than capital.

Question 59

Consider Table 18.1.With free trade,the __________ specializes in chips,producing 100 percent of the world supply,or __________ kilos.

A)East;8,000
B)West;10,000
C)West;20,000
D)West;10,000
E)East;24,000

Question 60

There is discussion of expanding the North American Free Trade Agreement (NAFTA)to include other Latin American countries,called the Free Trade Agreement of the Americas (FTAA).If you are a union member,you might object to the signing of a free trade agreement:

A)only if members of your labor pool will be adversely affected,because free trade means gains for the economy as a whole.
B)only if members of your labor pool will be adversely affected.
C)only if members of your labor pool will be adversely affected,because free trade means losses for the economy as a whole.
D)if all labor will be adversely affected,because free trade means losses for the economy as a whole.
E)None of the above is correct.

Question 61

Over time,international trade enables an economy to smooth consumption.

Question 62

Worldwide,the trade balance must be negative.

Question 63

Economists call an economy in which each person produces all the goods he or she consumes a Robinson Crusoe economy.

Question 64

The national income identity can be rearranged to yield the relationship between:

A)the international flow of goods and services to the international flow of capital.
B)the national flow of goods and services to the national flow of capital.
C)the international flow of goods and services to the government's budget constraint.
D)savings to the international flow of capital.
E)the money supply to the exchange rate.

Question 65

Running trade deficits in some periods and trade surpluses in others allows a country to:

A)run budget deficits.
B)increase consumption in every period.
C)smooth consumption.
D)increase interest rates.
E)increase the value of its currency vis-à-vis other currencies.

Question 66

An explanation of the growth of international trade in the early 1970s is the reduction of institutional trade barriers.

Question 67

Which appears to be true for many fast growing economies?

A)Growth Exports

B)Exports Inflation

C)Exports Trade deficit

D)Exports Growth

E)Imports Exports

Question 68

When the U.S.economy runs a trade __________,it is implicitly asking the rest of the world to __________.

A)deficit;finance some of its savings
B)surplus;finance some of its investment
C)deficit;finance some of its investment
D)balance;finance some of its investment
E)surplus;buy more U.S.-made goods and services

Question 69

With free trade,there are no costs,only benefits.

Question 70

Which of the following can be used to finance a trade deficit?

A)stocks
B)money
C)bonds
D)all of the above
E)none of the above

Question 71

In China,total saving __________ investment;therefore,China __________.

A)equals;imports more and invests abroad
B)is less than;exports its excess production and invests abroad
C)is greater than;imports more,because Chinese consumers would prefer to consume more rather than save
D)equals;exports its excess production and invests abroad
E)is greater than;exports its excess production and invests abroad

Question 72

When the central government runs a budget deficit,the economy runs the risk of __________;this phenomenon is called __________.

A)balanced trade;protectionism
B)running a trade deficit;the twin deficits
C)running a financial account deficit;the J-curve
D)running a financial account deficit;the yield curve
E)an exchange rate depreciation;purchasing power parity

Question 73

As with new technology,trade can be viewed as a way for an economy to increase its production possibilities and welfare.

Question 74

Over time,the "economic distance" between countries has stayed constant.

Question 75

If Country A runs a trade deficit against Country B one year,then it may continue to run a deficit for all time.

Question 76

In __________,the United States became a net debtor to the rest of the world.

A)2001
B)1986
C)1995
D)1976
E)1980

Question 77

With intertemporal trade,a country running a trade deficit is in a bad position.

Question 78

From the national income identity in the United States,if NX < 0,this must equal:

A)the additional borrowing the United States does to finance the gap between investment and domestic savings.
B)the additional lending the United States does to finance the gap between investment and domestic savings.
C)the additional lending the United States does to earn a return on its excess savings.
D)the federal government's budget surplus.
E)the additional borrowing the U.S.federal government does to finance its budget deficit.

Question 79

If private saving equals private investment and there is a trade deficit,there must be __________;this is called __________.

A)a net outflow of savings;the J-curve
B)a government budget deficit;the twin deficits
C)a government budget surplus;balanced trade
D)an excess supply of private savings;a budget surplus
E)an excess supply of private savings;the investment deficit

Question 80

Since the end of World War II,the United States has had trade deficits.