Macro Economics Question and Answers

Answer the next question(s) on the basis of the following production possibilities tables for countries Alpha and Beta:
1. Refer to the above tables. The domestic opportunity cost of one unit of X in Alpha is:
A. 2 units of Y.
B. 4 units of Y.
C. 1 unit of Y.
D. 3 units of Y.
2. Refer to the above data. If Alpha and Omega each were producing at alternatives B before trade, the gain from specialization and
trade would be:
A. 30 tons of wheat.
B. 15 tons of steel.
C. 30 tons of steel and 30 tons of wheat.
D. 60 tons of wheat and 60 tons of steel.
3. The physical import of DVD players to the United States from Japan best illustrates a:
A. resource flow.
B. financial flow.
C. trade flow.
D. technology flow.
4. Which of these groups of nations are all members of the Euro Zone?
A. Great Britain, France, and Switzerland
B. Denmark, Sweden, and Norway
C. France, Germany, and Italy
D. Russia, Poland, and Hungary
5. (Consider This) If the price of tickets for fair rides increases from $.50 to $1 and the same number of tickets are required for each
ride as before:
A. the dollar has appreciated relative to fair tickets.
B. the dollar price of the fair rides has declined.
C. the dollar has depreciated relative to fair tickets.
D. dollar ticket exchange rate has changed from $1 equals ½ ticket to $1 equals 1 ticket.
6. Refer to the above data. On the basis of the above information:
A. Alpha should export both steel and wheat to Omega.
B. Omega should export both steel and wheat to Alpha.
C. Omega should export steel to Alpha and Alpha should export wheat to Omega.
D. Alpha should export steel to Omega and Omega should export wheat to Alpha.
7. Which of the following concepts provides the basic rationale for international trade?
A. increasing opportunity costs.
B. consumer sovereignty.
C. comparative advantage.
D. the law of supply.
8. If the Japanese yen appreciates relative to the Swedish krona, then the krona:
A. will be more expensive to the Japanese.
B. may either appreciate or depreciate relative to the yen.
C. will appreciate relative to the yen.
D. will depreciate relative to the yen.
9. Appreciation of the Mexican peso will:
A. make Mexico’s exports and imports both more expensive.
B. make Mexico’s exports more expensive and its imports less expensive.
C. make Mexico’s exports less expensive and its imports more expensive.
D. increase Mexican exports.
10. Since 1975, United States exports and imports have:
A. grown absolutely, but remained a constant proportion of GDP.
B. grown absolutely, but declined as a proportion of GDP.
C. grown both absolutely and as a percentage of GDP.
D. declined both absolutely and as a percentage of GDP.
11. About half of United States international trade is with:
A. other industrially advanced capitalist countries.
B. the OPEC countries.
C. developing countries.
D. Russia and China.
12. The building of a production plant in China by an American firm best illustrates a(n):
A. trade flow.
B. resource flow.
C. financial flow.
D. information flow.
13. Exchange rates are particularly important because:
A. they present a challenge to financial speculators.
B. they link the price levels of various nations to one another.
C. they represent exceptions to the laws of demand and supply.
D. equilibrium is never achieved in such markets.
14. Which of the following countries has recently emerged as one of the world’s top trading nations in terms of total trade volume?
A. Chile
B. India
C. Ireland
D. China
15. American exports and imports of goods and services each are about what percentage of GDP?
A. 4-6 percent
B. 25-28 percent
C. 11-16 percent
D. 30-32 percent
16. Refer to the above data. The domestic opportunity cost of producing 1 ton of steel in Alpha is:
A. ½ ton of wheat.
B. 1 ton of wheat.
C. 15 tons of wheat.
D. 30 tons of wheat.
17. NAFTA refers to the:
A. National Association of Free Trade Agencies.
B. National Alliance for Foreign Trade and Assistance.
C. North American Free Trade Agreement.
D. Northern Alliance For Tariff Adjustment.
18. The World Trade Organization (WTO):
A. sets tariffs to balance international trade among nations.
B. is the successor to GATT.
C. is better known as the European Union.
D. sets exchange rates to balance international trade among nations.
19. All else equal, U.S. exports to Germany create a:
A. demand for German marks.
B. supply of German marks.
C. supply of American dollars.
D. shortage of German marks.
Answer the next question(s) on the basis of the following table which indicates the dollar price of luta, the currency used in the
hypothetical economy of Luteland:
20. Refer to the above table. The exchange rate in this market is:
A. 8 luta for one dollar.
B. .60 luta for one dollar.
C. 6 luta for one dollar.
D. .125 luta for one dollar.

Answer the next question(s) on the basis of the following production possibilities data for Landia and Scandia:

21. Refer to the above data. The domestic opportunity cost of 1 fish in Landia is:
A. 10 chips.
B. 2 chips.
C. 4 chips.
D. 5 chips.
22. American critics of the WTO argue that free international trade and investment will:
A. reduce U.S. imports.
B. reduce employment in developing nations.
C. undermine environmental and labor protections in the United States.
D. increase immigration from low-income to high-income nations.
23. Refer to the above table. The equilibrium dollar price of luta is:
A. $10.
B. $8.
C. $6.
D. $2.
24. The North American Free Trade Agreement (NAFTA):
A. resulted from GATT negotiations at the Uruguay Round.
B. established a free trade zone encompassing Canada, Mexico, and the United States.
C. is also known as the Reciprocal Trade Act.
D. permits the former republics of the Soviet Union to export goods duty free to North America.
25. Global competition:
A. forces domestic producers to become more efficient and to improve product quality.
B. drives up prices worldwide.
C. reduces employment worldwide.
D. creates higher flows of international migration than without trade.
26. Which of the following nations is not a member of the European Union?
A. Switzerland
B. France
C. Germany
D. Italy
27. The introduction and use of the euro is expected to:
A. increase the rate of inflation slightly in the Euro zone nations.
B. increase poverty substantially in Euro zone nations.
C. increase international trade among the Euro zone nations.
D. increase income inequality within the Euro zone nations.

28. Refer to the above data. On the basis of the production possibilities data shown:
A. Landia has a comparative advantage in chips while Scandia has a comparative advantage in fish.
B. Landia has a comparative advantage in fish while Scandia has a comparative advantage in chips.
C. both Landia and Scandia have a comparative advantage in fish.
D. both Landia and Scandia have a comparative advantage in chips.
29. Refer to the above tables. Assume that before specialization both nations chose to produce alternative B. The gains from
specialization and trade would be:
A. 2 units of X and 2 units of Y.
B. 4 units of X.
C. 4 units of Y.
D. 6 units of X and 3 units of Y.
30. A nation’s true gain from international trade is:
A. increased employment in export industries.
B. an overall increase in output obtained through specialization and exchange.
C. added technological knowledge.
D. the tariff revenue that goes to the national treasury.

Pre-Test Key
1. B
2. A
3. C
4. B
5. C
6. D
7. C
8. D
9. B
10. C
11. A
12. B
13. B
14. D
15. C
16. B
17. C
18. B
19. B
20. D
21. D
22. C
23. B
24. B
25. A
26. A
27. C
28. A
29. C
30. B