International Econ Quiz Questions (Ch. 1-5)

Front 1

What is the most important fact about U.S. international trade in the after-war period?

a. Imports exceed exports.
b. Exports exceed imports.
c. Exports and imports are a large share of U.S. GDP.
d. Both imports and exports grew significantly as a share of GDP.

Back 1

Both imports and exports grew significantly as a share of GDP.

Front 2

Which of the following is NOT true?

a. U.S. imports exceed U.S. exports.
b. Small countries depend more on trade than large countries.
c. Imports cannot exceed exports for an extended period of time.
d. Economists believe that international trade is beneficial for all countries involved in it, in most cases.

Back 2

Imports cannot exceed exports for an extended period of time.

Front 3

The term "gains from trade" describes:

a. Profits made by businessmen involved in international trade.
b. Consumer surplus.
c. Producer surplus.
d. The fact that when two countries trade, both are better off.
e. The income of middlemen in a transaction.

Back 3

The fact that when two countries trade, both are better off.

Front 4

Why do some people argue against free international trade?

a. Trade alters the distribution of income between broad groups of people.
b. Free trade threatens our country's security.
c. There is disagreement on whether or not there are gains from trade.
d. The U.S. is a large country and therefore does not gain from international trade.

Back 4

Trade alters the distribution of income between broad groups of people.

Front 5

Which of the following theories was proposed by David Ricardo?

a. Theory of random components determining the pattern of trade.
b. Theory of differences in labor productivity.
c. Theory of differences in factor endowments.
d. Theory of differences in climate and resources.

Back 5

Theory of differences in labor productivity.

Front 6

What are most trade policies driven by?

a. Disagreements regarding who should produce certain products.
b. Conflicts of interest within nations.
c. Disagreements on the prices of major commodities.
d. Conflicts of interest between nations.

Back 6

Conflicts of interest within nations.

Front 7

We cannot tell whether in general trade surplus is good or bad because:

a. It depends on economic environment in each country.
b. Economists do not agree on this issue.
c. Trade is always balanced.
d. We do not have enough evidence from the available data.

Back 7

It depends on economic environment in each country.

Front 8

Many countries were fixing the price of their currency in terms of gold:

a. Before World War I.
b. During World War I.
c. After World War II.
d. During World War II.

Back 8

Before World War I.

Front 9

How are international trade policies governed?

a. By the OECD.
b. They are not governed by anyone.
c. By the IMF.
d. By the GATT.
e. By the U.N.

Back 9

By the GATT.

Front 10

Which of the following is NOT true regarding international capital markets?

a. The volume of trade on capital markets is lower ever since the "debt crisis" of 1982.
b. Currency fluctuations add instability.
c. There are special regulations in many countries with respect to foreign investment.
d. Nations can default on their debt and may not be brought to court.

Back 10

The volume of trade on capital markets is lower ever since the "debt crisis" of 1982.

Front 11

In 2003, the US had the largest total amount of imports from and exports to

a. the United Kingdom.
b. Germany.
c. China.
d. Mexico.
e. Canada.

Back 11

Canada.

Front 12

In its most basic form, the gravity model says that the most important factors that describe the amount of trade between countries are

a. the cultural affinity between the countries and the existence or lack of a common language.
b. differences in wages and technology between countries.
c. differences in the amount of workers and physical capital between countries.
d. the tariff barriers between the countries and the costs of transportation.
e. the amount that the countries produce and the distance between them.

Back 12

the amount that the countries produce and the distance between them.

Front 13

Evidence shows that

a. the amount of trade between countries is not related to the cultural affinity between the countries.
b. the amount of trade that a country undertakes is not related to its geography.
c. countries farther apart have less trade between them on average.
d. the amount of trade that a country undertakes is not related to the number of multinational corporations in that country.
the effect of borders is not important when comparing international trade with trade between regions within a country.

Back 13

countries farther apart have less trade between them on average.

Front 14

The North American Free Trade Agreement

a. has reduced tariffs and other trade restrictions among Canada, Mexico and the US.
b. has reduced the usefulness of the gravity model.
c. has shown that international borders no longer affect the amount of trade between countries.
d. has reduced tariffs and other trade restrictions among British Columbia, Manitoba and Ontario.
e. has shown that cultural ties are more important in determining the amount of trade between countries than tariff rates.

Back 14

has reduced tariffs and other trade restrictions among Canada, Mexico and the US.

Front 15

While technologies have reduced the negative effect that distance has on trade,

a. trade was a smaller part of the US and UK economies in 1995 than it was in 1950.
b. political factors have historically been more influential in determining the amount of trade than available technologies.
c. the effects of the Internet and airplanes on trade have been negligible.
d. cultural clashes have recently reduced the amount of US trade compared to US trade in 1950.
e. the effect of international borders has not been reduced through trade agreements.

Back 15

political factors have historically been more influential in determining the amount of trade than available technologies.

Front 16

Most international trade today is classified as trade in

a. mineral products.
b. dairy products.
c. services.
d. manufactured products.
e. agricultural products.

Back 16

manufactured products.

Front 17

In contrast to 50 years ago, most exports from low and middle income countries are now classified as

a. mineral products.
b. services.
c. dairy products.
d. agricultural products.
e. manufactured products.

Back 17

manufactured products.

Front 18

Approximately what percent of US imports occur through transactions conducted by a multinational corporation?

a. 5%
b. 10%
c. 25%
d. 40%
e. 60

Back 18

40%

Front 19

Outsourcing refers to the case in which

a. a firm imports into a country rather than buying products from within a domestic country.
b. a firm moves part of its business operations out of the domestic country.
c. consumers find out the source of where production occurs.
d. a firm exports out of a country rather than selling products within a country.
e. exports are promoted through subsidies and price supports.

Back 19

a firm moves part of its business operations out of the domestic country.

Front 20

Gross domestic product measures

a. the gross weight of products that are exported from a domestic country.
b. the gross profits from all final goods and services produced in an economy.
c. the total value of all final goods and services produced within an economy.
d. the gross weight of products that are imported into a domestic country.
e. the gross profits from products that are exported from a domestic country.

Back 20

the total value of all final goods and services produced within an economy.

Front 21

In the Ricardian model:

a. Countries can run trade deficits and surpluses.
b. There is only one factor of production.
c. Trade will happen even if countries are identical.
d. Differences in factor endowments give rise to trade.
e. There is only one industry in each country.

Back 21

There is only one factor of production.

Front 22

If Country A has a comparative advantage over Country B in producing shoes, it means that:

a. Labor productivity in the shoe industry in Country A is higher than in Country B.
b. Country A is better endowed in the factors used in the production of shoes.
c. Country B will never produce shoes if free trade is allowed.
d. Country A produces shoes relatively more efficiently than Country B.

Back 22

Country A produces shoes relatively more efficiently than Country B.

Front 23

The Ricardian model exhibits gains from trade:

a. Only if countries specialize completely.
b. Only for one of the trading countries.
c. Only if each country has an absolute advantage in one of the industries.
d. For both trading countries.

Back 23

For both trading countries.

Front 24

Country A has 5000 units of labor. It takes 50 units of labor to produce one computer and 1 unit to create a Web page. What is the opportunity cost of a Web page in terms of computers?

a. 100
b. 50
c. 0.02
d. 0.0002
e. 10

Back 24

0.02

Front 25

The opportunity cost of producing computers in terms of Web pages is 50 in Country A and is 10 in Country B. Based on the Ricardian model, what can we conclude about the pattern of trade?

a. Country A will export Web pages and import computers.
b. We need to know what wages are to answer this question.
c. We need to know what the relative price of computers in terms of web pages is to answer this question.
d. Trade will not occur.
e. Country A will export computers and import Web pages.

Back 25

Country A will export Web pages and import computers.

Front 26

Which of the following is NOT an assumption in the Ricardian model?

a. Markets are perfectly competitive.
b. Labor can freely move across countries.
c. Each country has only one factor of production and its amount is fixed.
d. Labor productivity in each country is fixed.

Back 26

Labor can freely move across countries.

Front 27

Country A has 100 units of labor and Country B has 200 units of labor. Both countries produce computers and Web pages. The unit labor requirements are given in the table below:

Computers Web pages
Country A 50 1
Country B 100 1

Assume free trade exists and that the relative price is such that both countries specialize completely in the industry in which they have a comparative advantage (neither country produces both goods). The supply of computers relative to Web pages will be:

a. 0.02 (or 1/50)
b. 0.01 (or 1/100)
c. 0.013 (or 1/75)
d. Impossible to determine without knowing the relative price of computers in terms of Web pages.

Back 27

0.01 (or 1/100)

Front 28

Country A and Country B produce computers and Web sites. The unit labor requirements are given in the table below:

Computers Web pages
Country A 50 1
Country B 100 1

At which of the following relative prices (computers in terms of Web sites) will Country B produce both goods under free trade?

a. 25
b. 0.01
c. 75
d. 50
e. 100
f. Impossible to tell without the information on labor endowments in each country.

Back 28

100

Front 29

In the Ricardian model, when two countries trade freely, the relative price of the goods they are trading is determined by:

a. Relative demand and relative supply for each trading country.
b. Relative opportunity costs in the two countries.
c. Relative wages.
d. Relative demand and relative supply on the world market.

Back 29

Relative demand and relative supply on the world market.

Front 30

Which of the following is true?

a. Countries that open up for trade see their wages fall over time relative to U.S. wages.
b. wages rise over time relative to U.S. wages.
c. Trade necessarily hurts poorer countries.
d. Trade only hurts countries with lower wages.

Back 30

Countries that open up for trade see their wages rise over time relative to U.S. wages.

Front 31

Income distribution is important in trade policy because:

a. those who lose from trade are already very poor.
b. those who lose from trade are more organized that those who gain from trade.
c. those who lose from trade want to be compensated by those who gain from trade.
d. more people lose from trade than gain.
e. the welfare of those who lose from trade is more important than the welfare of those who gain from trade.

Back 31

those who lose from trade are more organized that those who gain from trade.

Front 32

Which of the following is NOT an assumption of the Heckscher-Ohlin model?

a. Technology is the same across countries.
b. Markets are competitive.
c. Factors of production can be used in different industries.
d. Trade occurs because amounts of factors of production are different in different countries.
e. The supply of factors of production grows over time.

Back 32

The supply of factors of production grows over time.

Front 33

In the Heckscher-Ohlin model, trade cannot make a country as a whole worse off because:

a. trade restrictions increase when imports increase.
b. the autarky level of production and consumption is still available.
c. of the assumption that exports exceed imports.
d. of the assumption that tariffs increase the welfare of both producers and consumers.
e. those who gain from trade can compensate those who lose from trade.

Back 33

the autarky level of production and consumption is still available.

Front 34

A good is labor intensive in the Heckscher-Ohlin model if:

a. it uses more labor than land in production.
b. it uses a relatively low land to labor ratio in production compared to that of another good.
c. it uses more land than labor in production.
d. it uses a high land to labor ratio in production compared to that of another good.
e. it uses only labor in production.

Back 34

it uses a relatively low land to labor ratio in production compared to that of another good.

Front 35

What is the main difference between the Heckscher-Ohlin model and the Ricardian model?

a. Unlike in the Ricardian model, factors are mobile across countries in the Heckscher-Ohlin model.
b. Unlike in the Ricardian model, trade is not assumed to be free in the Heckscher-Ohlin model.
c. Unlike in the Ricardian model, all factors of production gain as a result of trade in the Heckscher-Ohlin model.
d. Unlike in the Ricardian model, factors are mobile across industries in the Heckscher-Ohlin model.
e. Unlike in the Ricardian model, endowments of factors of production affect trade patterns in the Heckscher-Ohlin model.

Back 35

Unlike in the Ricardian model, endowments of factors of production affect trade patterns in the Heckscher-Ohlin model.

Front 36

If cloth production is labor intensive and food production is land intensive, what would be the result of a decrease in the price of food in the Heckscher-Ohlin model?

a. The real wage will fall in terms of both goods, and the real income of land owners will rise in terms of both goods.
b. The real wage will rise in terms of both goods, and the real income of land owners will fall in terms of both goods.
c. The real wage will rise in terms of both goods, and the real income of land owners will rise in terms of both goods.
d. The real wage will rise in terms of both goods, and the real income of land owners will fall in terms of food and rise in terms of cloth.
e. The real wage will rise in terms of both goods, and the real income of land owners will rise in terms of food and fall in terms of cloth.

Back 36

The real wage will rise in terms of both goods, and the real income of land owners will fall in terms of both goods.

Front 37

What does the Heckscher-Ohlin model predict about the pattern of trade?

a. The pattern of trade between countries depends on the size of their economies and the distance between them.
b. Each country specializes in production of goods that use available technology most efficiently.
c. Each country sells abundant factors of production.
d. The pattern of trade depends on the size of a country.
e. Each country specializes in production of goods that use its abundant resource intensively.

Back 37

Each country specializes in production of goods that use its abundant resource intensively.

Front 38

According to the Heckscher-Ohlin model, how is income redistributed as a result of trade?

a. The owners of abundant factors of production lose, and the owners of scarce factors of production gain.
b. The owners of abundant factors of production gain, but the effect on the owners of scarce factors of production is ambiguous.
c. The owners of scarce factors of production lose, and the owners of abundant factors of production gain.
d. The owners of all factors of production gain, but unemployed people lose.
e. Income distribution does not change because each member of society benefits from trade.

Back 38

The owners of scarce factors of production lose, and the owners of abundant factors of production gain.

Front 39

The Heckscher-Ohlin model predicts that prices of factors of production equalize across countries. But we do not observe factor price equalization principally because:

a. prices of goods are inconsistently measured across countries.
b. there are non-tradable goods that the Heckscher-Ohlin model does not account for.
c. the Heckscher-Ohlin model is not useful.
d. prices of factors of production are inconsistently measured across countries.
e. there are differences in technology across countries that the Heckscher-Ohlin model ignores.

Back 39

there are differences in technology across countries that the Heckscher-Ohlin model ignores.

Front 40

The Leontief paradox states that:

a. prices of factors of production are not equalized across countries.
b. countries do not engage in international trade to the extent that they should.
c. countries export goods that use available technology inefficiently.
d. owners of an abundant factor do not gain from trade.
e. US exports are less capital intensive than US imports.

Back 40

US exports are less capital intensive than US imports.

Front 41

Which of the following is NOT a common feature of the Ricardian, specific factors, and Hecksher-Ohlin models?

a. Factor prices equalize across countries.
b. Differences in production possibilities give rise to trade.
c. Factors are not mobile across countries.
d. Production can be summarized by the production possibility frontier.
e. World equilibrium is determined by the equality of relative supply and relative demand.

Back 41

Factor prices equalize across countries.

Front 42

"Terms of trade" is defined as:

a. The price of a country's imports divided by the price of its exports.
b. The tariffs imposed by other countries on a country's exports divided by the tariffs on a country's imports.
c. The price of a country's exports divided by the price of its imports.
d. The tariffs on a country's imports divided by the tariffs imposed by other countries on its exports.
e. The price of a good at which countries agree to trade.

Back 42

The price of a country's exports divided by the price of its imports.

Front 43

Which of the following is true about the biased growth?

a. Import-biased growth makes the economy worse off.
b. Export-biased growth makes the economy worse off.
c. Import-biased growth makes the economy better off.
d. All types of biased growth make the economy
e. Export-biased growth makes the economy better off.

Back 43

Import-biased growth makes the economy better off.

Front 44

What is "immiserizing growth"?

a. The specialization of low-income countries in production of low-wage products.
b. Export-biased growth that worsens terms of trade so that a country is worse off as a result.
c. Trade that hurts the poorest group of people.
d. Improvement in a country's terms of trade at the expense of other countries.

Back 44

Export-biased growth that worsens terms of trade so that a country is worse off as a result.

Front 45

What is the "transfer problem"?

a. Negative effects on a country that transfers money to others.
b. The severe indebtedness of some low-income countries.
c. The fact that international transfers affect terms of trade when they are not taken into account.
d. The inappropriate application of money by the
e. Rich countries do not transfer a sufficient amount of money to poor countries.

Back 45

The fact that international transfers affect terms of trade when they are not taken into account.

Front 46

What would be the effects of an import tariff on steel imposed by the U.S.?

a. Relative world supply of steel rises and relative world demand falls.
b. Relative world supply of and relative world demand for steel rise.
c. Relative world supply of and relative world demand for steel fall.
d. Relative world supply of steel falls and relative world demand rises.

Back 46

Relative world supply of steel falls and relative world demand rises.

Front 47

What would be the effects of an export subsidy on oil imposed by Russia?

a. Relative world supply of oil falls and relative world demand rises.
b. Relative world supply of and relative world demand for oil fall.
c. Relative world supply of and relative world demand for oil rise.
d. Relative world supply of oil rises and relative world demand falls.

Back 47

Relative world supply of oil rises and relative world demand falls.

Front 48

What is the Metzler paradox?

a. A transfer recipient might be hurt as a result of the transfer because of its terms-of-trade effect.
b. A tariff on imports can lead to a decline in the internal price of the good.
c. It is the same as immiserizing growth.
d. An export subsidy can lead to an increase in the internal price of the subsidized good.

Back 48

A tariff on imports can lead to a decline in the internal price of the good.

Front 49

Transfers will usually improve the recipient's terms of trade because:

a. The money is applied specifically to import-competing sectors.
b. The money is applied specifically to exporting sectors.
c. They are always accompanied by relevant trade restrictions.
d. Countries tend to spend more on domestically-produced goods.

Back 49

Countries tend to spend more on domestically-produced goods.

Front 50

Which of the following is NOT true?

a. In the standard trade model, some factors benefit and some factors lose from trade.
b. Improvements in the terms of trade improve a country's welfare.
c. The Metzler paradox is not likely to occur in practice.
d. An import tariff worsens terms of trade.
e. An export subsidy worsens terms of trade.

Back 50

An import tariff worsens terms of trade.