201. A trade-creating customs union is one where:
A. lower-cost imports from outside the customs union are replaced by higher-cost imports from a union member
B. some domestic production in a member nation is replaced by lower-cost imports from another member nation
C. trade among members increases but trade with nonmembers decreases
D. trade among members decreases while trade with nonmembers increases
Answer
D. trade among members decreases while trade with nonmembers increases
202. A trade-diverting customs union:
A. increases trade among union members and with nonmember nations
B. reduces trade among union members and with nonmember nations
C. increases trade among members but reduces trade with non-members
D. reduces trade among union members but increases it with nonmembers
Answer
B. reduces trade among union members and with nonmember nations
203. A trade-diverting customs union results in:
A. trade diversion only
B. trade creation only
C. both trade creation and trade diversion
D. we cannot say
Answer
C. both trade creation and trade diversion
204. A trade-diverting customs union:
A. increases the welfare of member and nonmember nations
B. reduces the welfare of member and nonmember nations
C. increases the welfare of member nations but reduces that of nonmembers
D. reduces the welfare of nonmembers and may increase or reduce that of members
Answer
D. reduces the welfare of nonmembers and may increase or reduce that of members
205. A tariff:
A. Increases the volume of trade
B. Reduces the volume of trade
C. Has no effect on volume of trade
D. (a) and (c) of above
Answer
C. Has no effect on volume of trade
206. A tariff is:
A. A restriction on the number of export firms
B. Limit on the amount of imported goods
C. Tax and imports
D. (b) and (c) of above
Answer
C. Tax and imports
207. What would encourage trade between two countries:
A. Different tax system
B. Frontier checks
C. National currencies
D. Reduced tariffs
Answer
D. Reduced tariffs
208. In a free trade world in which no restrictions exist, international trade will lead to:
A. Reduced real living standard
B. Decreased efficiency
C. Increased efficiency
D. Reduced real GDP
Answer
C. Increased efficiency
209. Govt. policy about exports and imports is called:
A. Monetary policy
B. Fiscal policy
C. Commercial policy
D. Finance policy
Answer
D. Finance policy
210. International trade and domestic trade differ because of:
A. Trade restrictions
B. Immobility of factors
C. Different government policies
D. All of the above
Answer
B. Immobility of factors
211. What would encourage trade between two countries?
A. Different tax system
B. Quality control
C. Reduced tariffs
D. Fixing import quota
Answer
A. Different tax system
212. In the European Union:
A. All member countries have a single exchange rate
B. All members set their own tariffs
C. There is a common tariff against non-members
D. All taxes are set the same
Answer
C. There is a common tariff against non-members
213. On the 1st January 1958, six countries signed the treaty establishing the European Economic Community (EEC), in turn establishing the foundations for the European Union. In which European capital was it signed in from which it also takes its name?
A. Athens
B. Brussels
C. Rome
D. Amsterdam
Answer
C. Rome
214. The European Union has grown to be one of the world’s largest trading blocs and markets. What is the approximate size of the population of the EU?
A. 500 million people
B. 292 million people
C. 1.3 billion people
D. 127 million people
Answer
A. 500 million people
215. Which two institutions decide the Union’s budget?
A. The Council of Ministers and the European Commission
B. The European Parliament and the European Central Bank
C. The Council of Ministers and the European Parliament
D. The European Central Bank and the European Commission
Answer
C. The Council of Ministers and the European Parliament
216. The European Union is one powerful global economic bloc. ASEAN is best described as being:
A. A free trade zone
B. A confederation of states
C. A customs union
D. A monetary union
Answer
A. A free trade zone
217. Which of the following EU countries are sometimes referred to as the PIGS countries?
A. Portugal, Ireland. Greece, Spain
B. Poland, Italy, Germany, Slovenia
C. Poland, Ireland, Greece, Switzerland
D. Portugal, Italy, Greece, Slovenia
Answer
A. Portugal, Ireland. Greece, Spain
218. What is the main reason behind the introduction of the euro?
A. It promotes economic sovereignty
B. It can protect business trading from currency fluctuations
C. To allow the free movement of people
D. It was a branding exercise
Answer
B. It can protect business trading from currency fluctuations
219. Which of the following are exclusive EU competencies in relation to Member States?
A. Conservation of marine biological resources (common fisheries policies), common market policies, the customs union and monetary policy for Member States belonging to the Eurozone.
B. The customs union, the environment, agriculture and consumer protection.
C. Monetary policy for Member states belonging to the Eurozone, tourism, transport and industrial policy, EU regional Policy.
D. The customs union, common commercial (trade) policies, education and culture.
Answer
A. Conservation of marine biological resources (common fisheries policies), common market policies, the customs union and monetary policy for Member States belonging to the Eurozone.
220. A common or single market will have all of the following features except:
A. No internal trade barriers
B. Common external tariff
C. Factor and Asset mobility
D. A common currency
Answer
D. A common currency
221. Which of the options below is the only characteristic of a free trade area?
A. A common currency
B. Common economic policy
C. No internal trade barriers
D. Common external tariff
Answer
C. No internal trade barriers
222. On the balance-of-payments statements, merchandise imports are classified in the:
A. Current account
B. Capital account
C. Unilateral transfer account
D. Official settlements account
Answer
A. Current account
223. The balance of international indebtedness is a record of a country’s international:
A. Investment position over a period of time
B. Investment position at a fixed point in time
C. Trade position over a period of time
D. Trade position at a fixed point in time
Answer
B. Investment position at a fixed point in time
224. Which balance-of-payments item does not directly enter into the calculation of the U.S.gross domestic product?
A. Merchandise imports
B. Shipping and transportation receipts
C. Direct foreign investment
D. Service exports
Answer
C. Direct foreign investment
225. Which of the following is considered a capital inflow?
A. A sale of U.S. financial assets to a foreign buyer
B. A loan from a U.S. bank to a foreign borrower
C. A purchase of foreign financial assets by a U.S. buyer
D. A U.S. citizen’s repayment of a loan from a foreign bank
Answer
A. A sale of U.S. financial assets to a foreign buyer
226. Which of the following would call for inpayments to the United States?
A. American imports of German steel
B. Gold flowing out of the United States
C. American unilateral transfers to less-developed countries
D. American firms selling insurance to British shipping companies
Answer
D. American firms selling insurance to British shipping companies
227. In a country’s balance of payments, which of the following transactions are debits?
A. Domestic bank balances owned by foreigners are decreased
B. Foreign bank balances owned by domestic residents are decreased
C. Assets owned by domestic residents are sold to nonresidents
D. Securities are sold by domestic residents to nonresidents
Answer
A. Domestic bank balances owned by foreigners are decreased
228. Which of the following is classified as a credit in the U.S. balance of payments?
A. U.S. exports
B. U.S. gifts to other countries
C. A flow of gold out of the U.S.
D. Foreign loans made by U.S. companies
Answer
A. U.S. exports
229. What is “immiserizing growth”?
A. Export-biased growth that worsens terms of trade so that a country is worse off as a result.
B. The specialization of low-income countries in production of low-wage products.
C. Trade that hurts the poorest group of people.
D. Improvement in a country’s terms of trade at the expense of other countries.
Answer
A. Export-biased growth that worsens terms of trade so that a country is worse off as a result.
230. What is the “transfer problem”?
A. The fact that international transfers affect terms of trade when they are not taken into account.
B. Rich countries do not transfer a sufficient amount of money to poor countries.
C. Negative effects on a country that transfers money to others.
D. The severe indebtedness of some low-income countries.
Answer
A. The fact that international transfers affect terms of trade when they are not taken into account.
231. Unlike the balance of payments, the balance of international indebtedness indicates the international:
A. Investment position of a country at a given moment in time
B. Investment position of a country over a one-year period
C. Trade position of a country at a given moment in time
D. Trade position of a country over a one-year period
Answer
A. Investment position of a country at a given moment in time
232. Which of the following indicates the international investment position of a country at a given moment in time?
A. The balance of payments
B. The capital account of the balance of payments
C. The current account of the balance of payments
D. The balance of international indebtedness
Answer
D. The balance of international indebtedness
233. Concerning the U.S. balance of payments, which account is defined in essentially the same way as the net export of goods and services, which comprises part of the country’s gross domestic product?
A. Merchandise trade account
B. Goods and services account
C. Current account
D. Capital account
Answer
B. Goods and services account
234. If an American receives dividends from the shares of stock she or he owns in Toyota, Inc., a Japanese firm, the transaction would be recorded on the U.S. balance of payments as a:
A. Capital account debit
B. Capital account credit
C. Current account debit
D. Current account credit
Answer
D. Current account credit
235. If the United States government sells military hardware to Saudi Arabia, the transactionwould be recorded on the U.S. balance of payments as a:
A. Current account debit
B. Current account credit
C. Capital account debit
D. Capital account credit
Answer
B. Current account credit
236. The U.S. balance of trade is determined by:
A. Exchange rates
B. Growth of economies overseas
C. Relative prices in world markets
D. All of the above
Answer
D. All of the above
237. U.S. military aid granted to foreign countries is entered in the:
A. Merchandise trade account
B. Capital account
C. Current account
D. Official settlements account
Answer
C. Current account
238. If the U.S. faces a balance-of-payments deficit on the current account, it must run a surplus on:
A. The official settlements account
B. The capital account
C. Either the official settlements account or the capital account
D. Both the official settlements account and the capital account
Answer
C. Either the official settlements account or the capital account
239. The current account of the U.S. balance of payments does not include:
A. Investment income
B. Merchandise exports and imports
C. The sale of securities to foreigners
D. Unilateral transfers
Answer
C. The sale of securities to foreigners
240. The U.S. has a balance of trade deficit when its:
A. Merchandise exports exceed its merchandise imports
B. Merchandise imports exceed its merchandise exports
C. Goods and services exports exceed its goods and services imports
D. Goods and services imports exceed its goods and services exports
Answer
B. Merchandise imports exceed its merchandise exports
