Question 1

A firm in India sells jackets to a Canadian department store chain. Which of the following correctly identifies the effects of this transaction?
A)It increases Canadian and Indian net exports.
B)It decreases Canadian and Indian net exports.
C)It increases Canadian net exports and decreases Indian net exports.
D)It decreases Canadian net exports and increases Indian net exports.

Accepted Answer

The transaction involves Canada importing jackets from India, which decreases Canadian net exports. Conversely, India is exporting jackets to Canada, which increases Indian net exports.

Question 2

What are foreign-produced goods and services that are sold domestically called?
A)imports
B)exports
C)net imports
D)net exports

Accepted Answer

Foreign-produced goods and services that are sold domestically are called imports.

Question 3

Suppose that a country exports $200 million of goods and services and imports $80 million of goods and services. What is the value of that country's net exports?
A)$280 million
B)$200 million
C)$120 million
D)-$200 million

Accepted Answer

Net exports is the difference between the value of a country’s exports and imports. Thus, the value of the net exports in this case would be ($200 million - $80 million) = $120 million. Option C is correct.

Question 4

When Dee, a Canadian living in Canada, purchases a designer dress made in Milan, which of the following is this purchase?
A)both a Canadian and an Italian import
B)a Canadian export and an Italian import
C)a Canadian import and an Italian export
D)neither an export nor an import for either country

Accepted Answer

Since Dee is living in Canada, her purchase of the designer dress made in Milan is considered a Canadian import. At the same time, the purchase is considered an Italian export since the dress was made in Milan. Therefore, the answer is a Canadian import and an Italian export.

Question 5

Which of the following best describes how the Canadian economy has evolved over the past five decades?
A)It has become more closed.
B)It has become more open.
C)It has become less trade-oriented.
D)It has become more self-sufficient.

Accepted Answer

Over the past five decades, the Canadian economy has evolved to become more open. This is evidenced by increased trade liberalization, participation in international trade agreements, and a shift towards export-oriented industries.

Question 6

In 2005, Canada had positive net exports. Which of the following does this fact imply?
A)Canada sold more abroad than it purchased abroad and had a trade surplus.
B)Canada sold more abroad than it purchased abroad and had a trade deficit.
C)Canada bought more abroad than it sold abroad and had a trade surplus.
D)Canada bought more abroad than it sold abroad and had a trade deficit.

Accepted Answer

Positive net exports mean that the value of exports exceeds the value of imports. This implies that Canada sold more goods and services to other countries than it purchased from them, resulting in a trade surplus.

Question 7

In 2001, Denmark had net exports of $10 billion and sold $60 billion of goods and services abroad. What were Denmark's increases in the components of net exports?
A)$70 billion of exports and $50 billion of imports
B)$50 billion of exports and $70 billion of imports
C)$60 billion of exports and $50 billion of imports
D)$50 billion of exports and $60 billion of imports

Accepted Answer

Net exports are calculated as exports minus imports. Given net exports of $10 billion and exports of $60 billion, imports must have been $50 billion ($60 billion - $50 billion = $10 billion).

Question 8

Country A buys $150 of wine from country B, and B buys $30 of wool from A. Which of the following correctly indicates the two countries' net exports (in the order A, B)?
A)$180 and $0
B)$150 and $30
C)-$120 and $120
D)$120 and -$120

Accepted Answer

Country A's net exports are calculated as exports ($30) minus imports ($150), resulting in -$120. Country B's net exports are calculated as exports ($150) minus imports ($30), resulting in $120.

Question 9

How does international trade affect the standard of living?
A)It raises the standard of living in all trading countries.
B)It lowers the standard of living in all trading countries.
C)It leaves the standard of living unchanged.
D)It raises the standard of living for importing countries and lowers it for exporting countries.

Accepted Answer

International trade allows countries to specialize in producing goods that they have a comparative advantage in, and import goods that they are less efficient at producing. This leads to increased efficiency, lower costs, and ultimately higher productivity and output. As a result, it can lead to higher incomes, more job opportunities, and greater access to a wider variety of goods and services for people in all trading countries, raising the overall standard of living.

Question 10

Roger lives in Iceland and purchases a snowmobile manufactured in Canada. Which of the following is this purchase?
A)both a Canadian and an Icelandic export
B)both a Canadian and an Icelandic import
C)a Canadian import and an Icelandic export
D)a Canadian export and an Icelandic import

Accepted Answer

The purchase of a snowmobile by Roger in Iceland is considered a Canadian export because it was manufactured in Canada and sold to a consumer in another country. It is also considered an Icelandic import because it was purchased by a consumer in Iceland from another country. Therefore, the best choice is D – a Canadian export and an Icelandic import.

Question 11

Clear Brook Farms, a Canadian manufacturer of frozen vegetarian entrées, sells cases of its product to stores overseas. Which of the following correctly identifies the effects of these transactions?
A)They decrease Canadian exports but increase Canadian net exports.
B)They decrease both Canadian exports and Canadian net exports.
C)They increase both Canadian exports and Canadian net exports.
D)They increase Canadian exports but decrease Canadian net exports.

Accepted Answer

When Clear Brook Farms sells its products overseas, it increases Canadian exports because goods are being sold to foreign markets. This also increases Canadian net exports, which is the value of exports minus imports.

Question 12

Sonya, a citizen of Denmark, sells Danish boots and shoes in Canada. Which of the following correctly identifies the effects of these sales on net exports?
A)They increase Canadian net exports and have no effect on Danish net exports.
B)They decrease Canadian net exports and have no effect on Danish net exports.
C)They increase Canadian net exports and decrease Danish net exports.
D)They decrease Canadian net exports and increase Danish net exports.

Accepted Answer

When Sonya sells Danish boots and shoes in Canada, it counts as an import for Canada, decreasing Canadian net exports, and as an export for Denmark, increasing Danish net exports.

Question 13

A German company sells cameras to a retailer in Canada. Which of the following correctly identifies the effects of these transactions?
A)They have no effect on Canadian net exports, and they increase German net exports.
B)They decrease Canadian net exports and increase German net exports.
C)They increase Canadian and German net exports.
D)They increase Canadian net exports and decrease German net exports.

Accepted Answer

The sale of cameras from the German company to the Canadian retailer results in an increase in German exports as their goods are being sold abroad. At the same time, the Canadian retailer is importing cameras from Germany, resulting in a decrease in Canadian net exports.

Question 14

A country sells less to people overseas than it buys from them. Which of the following correctly reflects this situation?
A)The country has a balanced trade.
B)The country has a trade surplus.
C)The country has a trade deficit.
D)There is not enough information to answer the question.

Accepted Answer

When a country sells less to people overseas than it buys from them, it is referred to as a trade deficit. This means that the country is importing more than it is exporting, resulting in a negative balance of trade.

Question 15

Ivan, a Russian citizen, sells several hundred cases of Russian caviar to a restaurant chain in Canada. Which of the following correctly identifies the effects of this transaction?
A)It increases Canadian net exports and has no effect on Russian net exports.
B)It increases Canadian net exports and decreases Russian net exports.
C)It decreases Canadian net exports and has no effect on Russian net exports.
D)It decreases Canadian net exports and increases Russian net exports.

Accepted Answer

The transaction involves Canada importing caviar from Russia, which decreases Canadian net exports and increases Russian net exports.

Question 16

In 2001, Cote d'Ivore had $3 billion of net exports and bought $1 billion of goods from foreign countries. What were Cote d'Ivore's changes in the components of net exports?
A)an increase of $4 billion in exports and $1 billion in imports
B)an increase of $3 billion in imports and $2 billion in exports
C)an increase of $2 billion in exports and $3 billion in imports
D)an increase of $1 billion in imports and $4 billion in exports

Accepted Answer

Net exports = Exports - Imports
In 2001, Net exports = $3 billion
Therefore, exports = $3 billion + imports = $4 billion
Given that imports = $1 billion, exports = $4 billion - $1 billion = $3 billion
To find the change in each component:
Change in exports = $3 billion - $0 billion = $3 billion increase
Change in imports = $1 billion - $0 billion = $1 billion increase
Therefore, the correct answer is A: an increase of $4 billion in exports and $1 billion in imports.

Question 17

A country sells more to people overseas than it buys from them. Which of the following correctly identifies the effects of these transactions?
A)The country will have a trade surplus and positive net exports.
B)The country will have a trade surplus and negative net exports.
C)The country will have a trade deficit and positive net exports.
D)The country will have a trade deficit and negative net exports.

Accepted Answer

If a country sells more to people overseas than it buys from them, it will have a trade surplus. This means that its exports exceed its imports, resulting in a positive net export balance. Therefore, choice A (the country will have a trade surplus and positive net exports) is the correct answer.

Question 18

What is the value of Peru's exports minus the value of Peru's imports called?
A)Peru's net capital inflow
B)Peru's foreign direct investment
C)Peru's net exports
D)Peru's net imports

Accepted Answer

The value of Peru's exports minus the value of Peru's imports is called Peru's net exports. It is important to note that a positive net export value indicates that the country has exported more than it imported, while a negative net export value indicates the opposite.

Question 19

Mike, a Canadian citizen living in Canada, buys $30 of cheese from France. Which of the following correctly identifies the effects of this transaction?
A)It increases Canadian imports by $30 and increases Canadian net exports by $30.
B)It increases Canadian imports by $30 and decreases Canadian net exports by $30.
C)It increases Canadian exports by $30 and increases Canadian net exports by $30.
D)It increases Canadian exports by $30 and decreases Canadian net exports by $30.

Accepted Answer

Since Mike is a Canadian citizen living in Canada, this transaction is considered an import for Canada. Therefore, it increases Canadian imports. However, since Mike is not exporting anything in exchange, it does not increase Canadian exports. As a result, it decreases Canadian net exports.

Question 20

How are net exports of a country determined?
A)the value of goods and services imported minus the value of goods and services exported
B)the value of goods and services exported minus the value of goods and services imported
C)the value of goods exported minus the value of goods imported
D)the value of goods imported minus the value of goods exported

Accepted Answer

Net exports of a country are determined by subtracting the value of goods and services imported from the value of goods and services exported. Therefore, option B is the correct answer.

Quiz 12: Open-Economy Macroeconomics: Basic Concepts

A firm in India sells jackets to a Canadian department store chain. Which of the following correctly identifies the effects of this transaction?

What are foreign-produced goods and services that are sold domestically called?

Suppose that a country exports $200 million of goods and services and imports $80 million of goods and services. What is the value of that country's net exports?

When Dee, a Canadian living in Canada, purchases a designer dress made in Milan, which of the following is this purchase?

Which of the following best describes how the Canadian economy has evolved over the past five decades?

In 2005, Canada had positive net exports. Which of the following does this fact imply?

In 2001, Denmark had net exports of $10 billion and sold $60 billion of goods and services abroad. What were Denmark's increases in the components of net exports?

Country A buys $150 of wine from country B, and B buys $30 of wool from A. Which of the following correctly indicates the two countries' net exports (in the order A, B) ?

How does international trade affect the standard of living?

Roger lives in Iceland and purchases a snowmobile manufactured in Canada. Which of the following is this purchase?

Clear Brook Farms, a Canadian manufacturer of frozen vegetarian entrées, sells cases of its product to stores overseas. Which of the following correctly identifies the effects of these transactions?

Sonya, a citizen of Denmark, sells Danish boots and shoes in Canada. Which of the following correctly identifies the effects of these sales on net exports?

A German company sells cameras to a retailer in Canada. Which of the following correctly identifies the effects of these transactions?

A country sells less to people overseas than it buys from them. Which of the following correctly reflects this situation?

Ivan, a Russian citizen, sells several hundred cases of Russian caviar to a restaurant chain in Canada. Which of the following correctly identifies the effects of this transaction?

In 2001, Cote d'Ivore had $3 billion of net exports and bought $1 billion of goods from foreign countries. What were Cote d'Ivore's changes in the components of net exports?

A country sells more to people overseas than it buys from them. Which of the following correctly identifies the effects of these transactions?

What is the value of Peru's exports minus the value of Peru's imports called?

Mike, a Canadian citizen living in Canada, buys $30 of cheese from France. Which of the following correctly identifies the effects of this transaction?

How are net exports of a country determined?