Deck 9: International Economics

Question 1

Which of the following does not make international trade distinct from domestic trade?

A) political considerations play a vital role in international trade
B) each country has its own currency
C) different languages and customs play a role in international trade
D) the distances for goods to travel is greater in situations of international trade

Answer 1

the distances for goods to travel is greater in situations of international trade

Question 2

Canada's leading export in dollar terms is:

A) wheat.
B) passenger autos and chassis.
C) lumber and sawmill products.
D) crude petroleum.

Answer 2

passenger autos and chassis.

Question 3

Canada's leading import in dollar terms is:

A) industrial and agricultural machinery.
B) chemicals and plastics.
C) motor vehicles parts.
D) crude petroleum.

Answer 3

motor vehicles parts.

Question 4

The United States is Canada's major trading partner. Canada's second-largest trading partner is:

A) China.
B) Japan.
C) Mexico.
D) United Kingdom.

Question 5

Canada's exports to the United States represents approximately what percentage of Canada's total exports?

A) 54 percent
B) 74 percent
C) 64 percent
D) 84 percent

Question 6

Canada's imports from Japan represent approximately what proportion of all imports?

A) 6 percent
B) 5 percent
C) 3 percent
D) 4 percent

Question 7

David Ricardo was responsible for an economic theory of international trade referred to as:

A) the law of comparative advantage.
B) the law of diminishing returns.
C) the law of increasing costs.
D) the law of the foreign-trade multiplier.

Question 8

If Canada required only two-thirds of the resources necessary to produce each good and service compared to the amounts necessary in France:

A) Canada would sell goods to France but import nothing.
B) Canada would not find it advantageous to trade with France.
C) France would sell more to Canada than Canada would sell to France.
D) Canada would sell more to France than France would sell to Canada.

Question 9

The law of comparative advantage proves that:

A) all countries can benefit from international trade as long as their relative efficiencies in production differ.
B) all countries can benefit from international trade as long as each has an absolute advantage in the production of a good or service.
C) countries with larger GDPs will not find it advantageous to trade with smaller countries.
D) because of transportation costs, very little international trade is profitable.

Question 10

A country can benefit from international trade if:

A) it is less efficient than other countries in the production of goods.
B) it is more efficient than other countries in the production of goods.
C) its production efficiencies differ from those in other countries.
D) it can produce at least one good cheaper than it can be produced in other countries.

Question 11

If Sheila Jones is the best doctor in town and also the best typist, she should:

A) share her medical practice with another doctor in order to split her time between the two jobs.
B) hire a typist and concentrate on her medical practice.
C) fire her present typist and do both jobs herself.
D) not enough information provided in order to answer the question

Question 12

The terms of trade:

A) refer to the amount of one product that must be given in order to get a certain amount of another product.
B) do not depend on foreign-exchange rates nor on transportation costs.
C) are usually more favorable to the more efficient country.
D) are usually more favorable to the importing country.

Question 13

In the example in the text, Canada specialized in the production of wheat and Mexico specialized in the production of radios. As a result of specialization:

A) wages increased in Mexico.
B) land was in greater demand in Mexico.
C) land prices fell in Canada.
D) wages increased in Canada.

Question 14

As a result of specialization in trade:

A) land values tend to fall.
B) workers' wages everywhere increase.
C) product prices in both countries fall.
D) the total output of goods and services produced in the two countries involved increases.

Question 15

To say that Mexico has a comparative advantage in the production of radios means:

A) that Mexico can produce radios with fewer workers than in Canada.
B) that radios can be produced more cheaply in Mexico than in Canada.
C) that Mexico does not necessarily have to export radios to Canada.
D) that Mexico produces radios relatively more cheaply.

Question 16

If Canada specializes in wheat production and Mexico specializes in the production of radios, then:

A) radio prices will rise in Canada and fall in Mexico.
B) radio prices will fall in both Canada and Mexico.
C) radio prices will fall in Canada and rise in Mexico.
D) radio prices will rise in both Canada and Mexico.

Question 17

If Canada specializes in wheat production and Mexico specializes in the production of radios, then:

A) wheat prices will rise in Canada and fall in Mexico.
B) wheat prices will fall in Canada and rise in Mexico.
C) wheat prices will rise in both Canada and Mexico.
D) wheat prices will fall in both Canada and Mexico.

Question 18

In the textbook example involving Canada and Mexico, Canada:

A) specialized in the product that could not be produced in Mexico.
B) specialized in the product for which it had the highest opportunity cost.
C) specialized in the product for which it had the highest price.
D) specialized in the product for which it had the lowest opportunity cost.

Question 19

In international trade situations, countries tend to specialize in products:

A) that cost the most, so as to minimize opportunity cost.
B) that can be produced with a relatively abundant resource.
C) that can be produced with a relatively scarce resource.
D) that can be produced more cheaply than in other countries.

Question 20

If Canada restricts the entry of certain products into the country:

A) consumers benefit; however, producers do not benefit.
B) our GDP increases because the money stays in Canada.
C) consumers pay higher prices.
D) None of the above is necessarily correct.

Question 21

Which of the following cannot be considered a barrier to international trade?

A) different countries have different currencies
B) countervailing duties
C) tariffs
D) quotas

Question 22

Which of the following is least likely to be classified as a non-tariff barrier?

A) countervailing duties
B) government procurement practices
C) technical barriers to trade
D) customs valuations

Question 23

If Canada removed all the barriers on imported products coming into the country:

A) the prices of these products would decline in Canada and Canada's exports to other countries would increase.
B) the prices of these products would increase in Canada and Canada's exports to other countries would increase.
C) the prices of these products would decline in Canada and Canada's exports to other countries would also decline.
D) the prices of these products would increase in Canada and Canada's exports to other countries would decrease.

Question 24

If Canada increased its tariff on imported automobiles, those most likely to benefit would be:

A) Canadian automobile producers.
B) Canadian consumers.
C) Canadian importers of automobiles.
D) foreign exporters of automobiles.

Question 25

If Canada increased its tariff on imported automobiles, those most likely to benefit would be:

A) foreign automobile workers.
B) Canadian workers other than those in the automobile industry.
C) Canadian consumers.
D) Canadian automobile workers.

Question 26

From the arguments for tariff protection discussed in the textbook, which is the most substantial From an economic point of view?

A) unequal benefits from trade
B) infant industry
C) diffusion of technology
D) protection of domestic living standards

Question 27

The infant-industry argument for tariff protection assumes:

A) that parents of infants in most cases cannot afford higher prices for clothing.
B) that the protected industry is an essential industry to the country.
C) that the protected industry will eventually achieve economies of scale.
D) that wages in the protected industry are too high already.

Question 28

Dumping occurs when:

A) products are sold in large quantities at a low price.
B) there is a surplus of the product on the market.
C) in the market with the more inelastic demand, prices are lowered.
D) a product is sold for a lower price in one country than in the exporting country.

Question 29

When Canada imposes a tariff on imported shoes:

A) the supply of shoes increases in Canada.
B) the demand for shoes increases in Canada.
C) the demand for shoes decreases in Canada.
D) the supply of shoes decreases in Canada.

Question 30

Which of the following is not a characteristic of the General Agreement on Tariffs and Trade?

A) the reciprocal reductions of tariffs by negotiation
B) the establishment of a world customs union
C) the non-discriminatory treatment of all trading nations
D) the elimination of quotas

Question 31

Which of the following rounds of trade negotiations is not associated with GATT?

A) the Kennedy Round
B) the Uruguay Round
C) the Washington Round
D) the Tokyo Round

Question 32

As a result of Canada's free-trade arrangement with the United States and Mexico:

A) the prices of all products sold in Canada will rise.
B) Canadians will earn higher incomes.
C) production of goods and services in each country will increase.
D) Canada will have to adopt a similar monetary policy to the American policy.

Question 33

Which of the following list of items appears in Canada's current account?

A) exports, imports, interest, and short-term investment
B) travel interest, dividends, freight, and shipping
C) travel long-term investment, dividends, and immigrants' funds
D) exports, imports, long-term investment, and travel

Question 34

If there is a surplus on Canada's combined current and capital accounts, then:

A) there is a greater supply of Canadian dollars than the demand for Canadian dollars on foreign-exchange markets.
B) there is a greater demand for Canadian dollars than supply of Canadian dollars on foreign-exchange markets.
C) there is definitely a surplus on the current account.
D) there is definitely a surplus on the capital account.

Question 35

The international balance of payments is an accounting statement of Canada's:

A) exports and imports.
B) international trade in precious metals such as gold.
C) financial transactions between residents of Canada and residents of other countries.
D) none of the above

Question 36

Under which of the following situations would Canadian dollars not be supplied to foreign markets?

A) increased food aid being given by the Canadian government to Africa
B) Canadians depositing their money in banks in the United States
C) Canadians travelling to the southern United States for a holiday
D) a Japanese automobile manufacturer investing in Canada

Question 37

If the demand for Canadian dollars on foreign-exchange markets equals the supply of Canadian dollars on these markets, and if Canada has a surplus on its capital account, then:

A) the balance of payments must have a surplus.
B) the balance of payments must have a deficit.
C) the current account must have a deficit.
D) the current account must have a surplus.

Question 38

More Canadian dollars will be supplied to foreign-exchange markets if:

A) Canada increases the size of its peace-keeping forces around the globe.
B) Canada imposes a tariff on the importation of computer parts.
C) the foreign-exchange value of the Canadian dollar declines.
D) more Americans decide to travel in Canada this summer.

Question 39

The demand for Canadian dollars on foreign-exchange markets will increase if:

A) the prices of Canadian resources fall in relation to the prices of resources in other countries.
B) more Canadians decide to travel to the United States for a holiday.
C) Canada increases the size of its peace-keeping forces around the globe.
D) the foreign-exchange value of the Canadian-dollar increases.

Question 40

The value of the Canadian dollar on foreign-exchange markets increases whenever:

A) the supply of Canadian dollars exceeds the demand.
B) more Canadians go to Europe for a holiday.
C) the Bank of Canada sells Canadian dollars on the foreign-exchange market.
D) Japanese manufacturers make direct investments in Canada.

Question 41

If wine drinkers around the world switched from drinking California wine to drinking Canadian wine:

A) the value of both the Canadian dollar and U.S. dollar would increase.
B) the value of both the Canadian dollar and the U.S. dollar would decrease.
C) the value of the Canadian dollar would decrease and the value of the U.S. dollar would increase.
D) the value of the Canadian dollar would increase and the value of the U.S. dollar would decrease.

Question 42

The value of the Canadian dollar relative to the British pound will increase whenever:

A) Canada increases its sales of lumber to Britain.
B) more Canadians travel to Britain for a holiday.
C) Canadians increase their purchases of British linen.
D) the Toronto-Dominion Bank lends money to a British firm.

Question 43

In order to increase the foreign-exchange value of the Canadian dollar, the Bank of Canada could:

A) increase the money supply in Canada.
B) lower interest rates.
C) reduce the tariffs on imports.
D) purchase Canadian dollars on foreign-exchange markets.

Question 44

If interest rates in Canada fall in relation to interest rates in other countries:

A) there will be a flow of investment dollars out of Canada.
B) money supply in Canada will decrease.
C) Canadians will be forced to borrow abroad.
D) the foreign-exchange value of the Canadian dollar will increase.

Question 45

An appreciation of the Canadian dollar would:

A) encourage Canadians to purchase more foreign products.
B) increase Canada's exports to other countries.
C) increase the number of Canadian dollars that could be purchased with a British pound.
D) mean that the supply of Canadian dollars on foreign-exchange markets exceeds the demand.

Question 46

Which of the following would not result in a depreciation of the Canadian dollar?

A) Canadian banks lend more to investors in Europe
B) foreigners decrease their purchases of Canadian wheat
C) more Canadians vacation in Florida
D) the demand for Canadian dollars on foreign-exchange markets exceeds the supply

Question 47

If Canada were on a fixed exchange-rate system and were experiencing a balance-of-payments surplus:

A) the government would impose greater restrictions on imports.
B) the Bank of Canada would increase interest rates in Canada.
C) the Bank of Canada would sell Canadian dollars on foreign-exchange markets.
D) None of the above is necessarily correct.

Question 48

If last year one Canadian dollar was worth 75 cents in U.S. currency and this year one Canadian dollar is worth 80 cents in U.S. currency, then it can be said that the Canadian dollar has:

A) depreciated.
B) appreciated.
C) been revalued.
D) been devalued.

Question 49

The opponents of adopting the U.S. dollar for Canada argue that:

A) lower interest rates would have hampered the increase in economic activity.
B) Canadian interest rates would have decreased in recent years to maintain the fixed exchange rate.
C) Canadian monetary policy would be based on the rate of inflation in the U.S.
D) Canadian exports were aided by the increase in the foreign-exchange value of the Canadian dollar during the Asian crisis.

Question 50

Which of the following statements from the opponents of adopting the U.S. dollar for Canada is false?

A) Canadian exports were aided by the decline in the foreign-exchange value of the Canadian dollar during the Asian crisis
B) Canadians would not be free to cross the border to accept employment
C) Canadian interest rates would have decreased in recent years to maintain the fixed exchange rate
D) higher interest rates would have hampered the increase in economic activity

Question 51

The proponents of a single currency claim that:

A) the cheap Canadian dollar makes Canadian exporters lazy.
B) common currency will help reduce foreign investment in Canada.
C) the high value of the Canadian dollar makes Canadian companies easy takeover targets.
D) common currency will help to raise the interest rates.

Question 52

Which of the following statements from the proponents of a single currency is false?

A) the cheap Canadian dollar makes Canadian exporters lazy
B) common currency will help to reduce the interest rates
C) the low value of the Canadian dollar makes Canadian companies easy takeover targets
D) common currency will help reduce foreign investment in Canada