Macro-Economic Study Questions and Answers -1

Macro-Economic    Study Questions  and Answers -1

1.  The physical export of motorcycles from the United States to Mexico best illustrates a:

A)  trade flow.

B)  resource flow.

C)  financial flow.

D)  technology flow.

2.  The spending by Americans while traveling in Europe best illustrates a:

A)  trade flow.

B)  labor flow.

C)  financial flow.

D)  technology flow.

3.  The emigration of software designers from India to the United States best illustrates a(n):

A)  trade flow.

B)  resource flow.

C)  financial flow.

D)  information flow.

4.  The purchase by an American firm of the right to produce a prescription drug patented in Germany

best illustrates a:

A)  trade flow.

B)  capital flow.

C)  goods and services flow.

D)  technology flow.

5.  The business-to-business (B2B) retrieval of prices of foreign resources via the Internet best

illustrates a(n):

A)  trade flow.

B)  capital and labor flow.

C)  financial flow.

D)  information flow.

6.  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.

Page 1 Trade: volume, facilitating factors, participants

7.  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

8.  Which of the following statements is correct?

A)  The United States’ exports and imports are smaller absolutely, but larger as a percentage of

GDP, than other nations’.

B)  A number of other nations have exports and imports that are absolutely larger than those of

the United States.

C)  The United States’ exports and imports are absolutely larger than any other nation’s, but the

exports and imports of many other nations are a larger percentage of their GDPs.

D)  The United States’ exports and imports are larger absolutely and as a percentage of GDP

than any other nation’s.

9.  More than 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.

10.  The United States’ most important trading partner in terms of dollar volume is:

A)  Mexico.

B)  Canada.

C)  Germany.

D)  Japan.

11.  In terms of absolute volumes of imports and exports, the world’s leading trading nation is:

A)  France.

B)  Japan.

C)  the United States.

D)  South Korea.

12.  Which of the following statements is correct?

A)  United States exports and imports have been decreasing as a percentage of U.S. GDP but

the U.S. share of total world trade has been increasing.

B)  United States exports and imports have been decreasing as a percentage of U.S. GDP and

the U.S. share of total world trade has been declining.

C)  United States exports and imports have been expanding as a percentage of U.S. GDP and

the U.S. share of total world trade has been increasing.

D)  United States exports and imports have been expanding as a percentage of U.S. GDP but

the U.S. share of total world trade has been declining.

Page 2 13.  Since 1960, 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.

14.  In recent years the United States has:

A)  exported more goods and services than it has imported.

B)  imported more goods and services than it has exported.

C)  realized an approximate balance in its imports and exports.

D)  experienced a falling absolute dollar amount of imports and a rising absolute dollar amount of

exports.

15.  More than half of the U.S. international trade is with:

A)  the nations of Eastern Europe.

B)  the developing countries of Africa, Asia, and Latin America.

C)  other industrialized nations, for example, Canada, Japan, and the countries of Western

Europe.

D)  China.

16.  Which of the following is a true statement?

A)  The United States has the world’s largest ratio of exports to GDP.

B)  The United States is almost entirely dependent on other countries in obtaining items such as

silk, nickel, tin, and coffee.

C)  U.S. exports to China greatly exceed U.S. imports from China.

D)  Since 1947 the United States has accounted for a rising percentage of total world trade.

17.  As a percentage of GDP (total output), U.S. exports are:

A)  about 20 percent.

B)  lower than in some other industrial countries, including Germany and Canada.

C)  less today than they were in 1975.

D)  the highest in the world.

18.  The average U.S. tariff rate on imported goods is about:

A)  5 percent.

B)  12 percent.

C)  25 percent.

D)  50 percent.

19.  The major goods exports of the United States (in dollar volume) are:

A)  chemicals, semiconductors, consumer durables, and computers.

B)  petroleum, automobiles, clothing, and household appliances.

C)  iron and steel, clothing, beef, and sugar.

D)  aircraft, glassware, television sets, and furniture.

Page 3 20.  The major goods imports of the United States (in dollar volume) are:

A)  chemicals, consumer durables, aircraft, and grain.

B)  automobiles, petroleum, computers, and household appliances.

C)  iron and steel, clothing, electronic equipment, and sugar.

D)  aircraft, paper products, television sets, and furniture.

21.  Which of the following has not been a facilitating factor in world trade?

A)  dramatic improvements in communications technology

B)  general declines in tariffs

C)  import quotas

D)  improvements in transportation technology.

22.  In terms of absolute dollar volume, the world’s leading export nations are:

A)  the United States, Germany, and Japan.

B)  the United States, Japan, and Canada.

C)  Japan, China, and Great Britain.

D)  Japan, the United States, and France.

23.  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

24.  Multinational corporations:

A)  mainly are headquartered in Switzerland.

B)  are so named because of their heavy export volume.

C)  are illegal under the U.S. antitrust laws.

D)  are so named because of their sizable foreign production and distribution assets.

Specialization and comparative advantage

25.  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.

26.  The primary benefits of international trade include:

A)  the more efficient use of world resources and higher living standards.

B)  greater stability of domestic output, employment, and the price level.

C)  diminished dependence on foreign supplies of goods and materials.

D)  greater economic security for our domestic producers.

Page 4 Foreign exchange market

27.  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.

28.  If the equilibrium exchange rate changes so that it takes more dollars to buy a British pound, then:

A)  the dollar has appreciated in value.

B)  Americans will import more British goods.

C)  the British will buy fewer U.S. goods.

D)  the dollar has depreciated in value.

29.  If incomes rise rapidly in the United States and U.S. preferences for foreign goods strengthen, we

would expect:

A)  the dollar to appreciate in value.

B)  the dollar to depreciate in value.

C)  the dollar price of foreign monies to decrease.

D)  U.S. exports to increase.

30.  If the exchange rate changes from $1 = 2 euros to $1 = 3 euros:

A)  the dollar has appreciated in value.

B)  the dollar has depreciated in value.

C)  the dollar has neither appreciated nor depreciated, but the euro has appreciated in value.

D)  U.S. exports to Europe will increase.

31.  Mexican imports of U.S. goods:

A)  create a supply of pesos.

B)  create a supply of dollars.

C)  reduce the demand for dollars.

D)  have no effect on the peso-dollar exchange rate.

32.  A change in the dollar price of yen from $1 = 100 yen to $1 = 50 yen will:

A)  make U.S. goods more expensive to the Japanese.

B)  make Japanese goods less expensive to Americans

C)  increase U.S. exports and depress Japanese exports.

D)  increase Japanese exports and depress U.S. exports.

33.  Depreciation of the dollar will:

A)  increase the prices of U.S. imports, but decrease the prices of U.S. exports.

B)  decrease the prices of U.S. imports, but increase the prices of U.S. exports.

C)  increase the prices of both U.S. imports and exports.

D)  decrease the prices of both U.S. imports and exports.

Page 5 34.  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.

35.  All else equal, depreciation of the Mexican peso relative to the U.S. dollar would make a trip by:

A)  an American to Mexico more expensive.

B)  a Mexican to the United States less expensive.

C)  an American to Mexico less expensive.

D)  an Australian to the United States more expensive.

36.  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.

37.  Other things equal, Canadian imports of U.S. goods:

A)  create a supply of Canadian dollars in the foreign exchange market.

B)  create a supply of U.S. dollars in the foreign exchange market.

C)  reduce the demand for U.S. dollars.

D)  have no effect on the U.S. dollar price of Canadian dollars.

38.  If yesterday $1 would buy 800 South Korean won, but today $1 will only buy 790 won; the:

A)  dollar has appreciated in value.

B)  dollar has depreciated in value.

C)  demand for dollars in the foreign exchange market has increased relative to the supply of

won.

D)  won price of dollars has gone up.

Trade barriers

39.  Protective tariffs are:

A)  maximum limits on the quantity or total value of specific products imported to a nation.

B)  excise taxes or duties placed on imported products.

C)  licensing requirements, unreasonable quality standards, and the like designed to impede

imports.

D)  government payments to domestic producers to reduce the world prices of exported goods.

40.  Import quotas are:

A)  maximum limits on the quantity or total value of specific products imported to a nation.

B)  excise taxes or duties placed on imported products.

C)  licensing requirements, unreasonable quality standards, and the like designed to impede

imports.

D)  government payments to domestic producers to reduce the world prices of exported goods.

Page 6 41.  Export subsidies are:

A)  maximum limits on the quantity or total value of specific products imported to a nation.

B)  excise taxes or duties placed on imported products.

C)  licensing requirements, unreasonable quality standards, and the like designed to impede

imports.

D)  government payments to domestic producers to reduce the world prices of exported goods.

42.  Nontariff barriers are:

A)  maximum limits on the quantity or total value of specific products imported to a nation.

B)  excise taxes or duties placed on imported products.

C)  licensing requirements, unreasonable quality standards, and the like designed to impede

imports.

D)  government payments to domestic producers to reduce the world prices of exported goods.

43.  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.

44.  The Smoot-Hawley Act:

A)  bound the world’s nations to a gradual process of tariff reduction.

B)  established very high tariffs on goods imported to the United States.

C)  exempted American exporters from the Sherman Antitrust Act.

D)  established the reciprocal trade agreements program.

Multilateral agreements: free trade zones; implications of the global economy

45.  The Reciprocal Trade Agreements Act:

A)  exempted American exporters from the Sherman Antitrust Act.

B)  provided technological assistance to developing countries.

C)  brought about considerable reductions in American trade barriers.

D)  eliminated American subsidies to agricultural exports.

46.  The “most-favored-nation” clause of reciprocal trade agreements:

A)  outlaw tariffs on products for which an exporting nation has a comparative advantage.

B)  single out a particular nation for exemption from an import quota.

C)  means that any tariff reductions the United States negotiates with a specific nation will

automatically apply to many other nations.

D)  confers special trade privileges to nations in which the United States has military bases.

47.  The General Agreement on Tariffs and Trade (GATT) is based on the principle of:

A)  establishing a single international currency.

B)  tariff reductions through multilateral negotiations.

C)  converting tariffs to import quotas.

D)  establishing common environmental and labor standards for all member nations.

Page 7 48.  The latest, on-going international round of trade negotiations is called the:

A)  Bangkok Round.

B)  Doha Round.

C)  Seattle Round.

D)  Stockholm Round.

49.  The Uruguay Round of GATT negotiations completed in late 1993:

A)  established a free trade zone between the United States and Mexico.

B)  made the Russian ruble convertible into other currencies.

C)  created the European Union (EU).

D)  created international protections for intellectual property such as patents, copyrights, and

trademarks.

50.  An important outcome of the Uruguay Round of GATT negotiations was:

A)  a worldwide reduction of agricultural export subsidies.

B)  establishment of the European Union.

C)  the elimination of all tariffs and quotas worldwide.

D)  establishment of the World Bank.

51.  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.

52.  The World Trade Organization (WTO)

A)  sets tariffs to balance international trade among nations.

B)  is the successor to NAFTA.

C)  hears and rules on trade disputes between nations.

D)  sets exchange rates to balance international trade among nations.

53.  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.

54.  Proponents of the WTO argue that free international trade and investment will:

A)  reduce economic growth rates in the industrial economies.

B)  reduce employment in developing nations.

C)  eliminate world poverty.

D)  increase living standards of all trading nations.

Page 8 55.  A trade bloc is:

A)  a tariff or quota that impedes imports.

B)  a group of nations that allows free trade among member nations but restrict imports from

nonmember nations via tariffs and quotas.

C)  an area of a nation where manufacturers can import product components without paying

tariffs.

D)  a group of nations that advertise their common export goods abroad.

56.  Which of the following nations is not a member of the European Union?

A)  Switzerland

B)  France

C)  Germany

D)  Italy

57.  The primary economic advantage of the European Union (EU) to its members is that:

A)  the tax structures of each participating nation have been made nearly identical.

B)  each nation is free to formulate its own antitrust and agricultural policies.

C)  participating nations use a common currency.

D)  the reduction of trade barriers permits producers to achieve mass-production economies.

58.  The countries comprising NAFTA are:

A)  Canada, the United States, and Puerto Rico.

B)  the United States, Mexico, and Chile.

C)  the United States, United Kingdom, and France.

D)  Canada, Mexico, and the United States.

59.  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.

60.  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.

Answer Key

1.  A

2.  C

3.  B

4.  D

5.  D

6.  B

7.  C

8.  C

9.  A

10.  B

11.  C

12.  D

13.  C

14.  B

15.  C

16.  B

17.  B

18.  A

19.  A

20.  B

21.  C

22.  A

23.  D

24.  D

25.  C

26.  A

27.  B

28.  D

29.  B

30.  A

31.  A

32.  C

33.  A

34.  B

35.  C

36.  D

37.  A

38.  B

39.  B

40.  A

41.  D

42.  C

43.  B

44.  B

45. C

46. C

47. B

48. B

49. D

50. A

51. B

52. C

53. C

54. D

55. B

56. A

57. D

58. D

59. B

60. A