Introduction to International Economics: Master the Basics of Global Trade

Question 1

Which of the following is NOT included as a component of the balance of payments?

Accepted Answer

Government budget

Answer

Current account

Answer

Capital account

Answer

Financial account

Question 2

Which of the following is not a potential benefit of free trade?

Accepted Answer

Increased national security

Answer

Lower prices for consumers

Answer

Increased competition

Answer

Greater selection of goods and services

Question 3

Which measure is used to assess the cost of living?

Accepted Answer

Consumer Price Index (CPI)

Answer

Gross Domestic Product (GDP)

Answer

Unemployment rate

Answer

Inflation rate

Question 4

Which of the following is NOT a possible cause of a trade deficit?

Accepted Answer

High foreign demand

Answer

High domestic demand

Answer

Low domestic production

Answer

Strong domestic currency

Question 5

Which of the following is not a component of the balance of payments?

Accepted Answer

Statistical discrepancy

Answer

Current account

Answer

Capital account

Answer

Financial account

Question 6

According to the theory of comparative advantage, countries should specialize in:

Accepted Answer

Producing goods where they have the highest comparative advantage

Answer

Producing goods where they have the lowest absolute advantage

Answer

Producing goods where they have the highest absolute advantage

Answer

Producing all goods domestically

Question 7

Tariffs are a form of:

Accepted Answer

Import tax

Answer

Export subsidy

Answer

Exchange rate intervention

Answer

Quotas

Question 8

Which of the following is a potential benefit of international trade?

Accepted Answer

Increased economic growth

Answer

Higher consumer prices

Answer

Job losses in domestic industries

Answer

Depletion of natural resources

Question 9

The World Trade Organization's primary responsibility is:

Accepted Answer

Setting global trade rules

Answer

Providing financial assistance to developing countries

Answer

Negotiating trade agreements

Answer

Enforcing trade sanctions

Question 10

A country with a favorable balance of trade may experience:

Accepted Answer

An appreciation of its currency

Answer

A depreciation of its currency

Answer

No change in its currency value

Answer

A decrease in its exports

Question 11

According to the theory of comparative advantage, countries should focus on producing and exporting goods where they have the:

Accepted Answer

Highest comparative advantage

Answer

Lowest absolute advantage

Answer

Highest absolute advantage

Answer

Lowest comparative advantage

Question 12

Which component is NOT a part of the balance of payments?

Accepted Answer

Fiscal account

Answer

Current account

Answer

Capital account

Answer

Financial account

Question 13

How does a depreciation of the US dollar affect US exports?

Accepted Answer

Makes them less expensive

Answer

Makes them more expensive

Answer

Has no impact on their price

Answer

Makes them more profitable

Question 14

Which economic theory suggests that countries should specialize in producing and exporting goods where they have a lower opportunity cost?

Accepted Answer

Comparative advantage theory

Answer

Absolute advantage theory

Answer

Mercantilism

Answer

Laissez-faire

Question 15

Which US government agency is responsible for monitoring international trade?

Accepted Answer

US Department of Commerce

Answer

Federal Reserve

Answer

International Monetary Fund

Answer

World Bank

Question 16

Which factor does NOT influence international trade?

Accepted Answer

Weather patterns

Answer

Government policies

Answer

Transportation costs

Answer

Cultural differences

Question 17

What is the primary objective of international economic policies?

Accepted Answer

Promote economic growth

Answer

Reduce unemployment

Answer

Ensure social justice

Answer

Protect the environment

Question 18

Which is NOT an advantage of international trade?

Accepted Answer

Increased tax revenue

Answer

Wider range of consumer choices

Answer

Lower prices

Answer

Economic growth

Question 19

Which exchange rate system involves fixing the value of a currency against a specific currency or currency basket?

Accepted Answer

Fixed exchange rate

Answer

Floating exchange rate

Answer

Managed float

Answer

Crawling peg

Question 20

Which international organization advocates for free trade among member countries?

Accepted Answer

World Trade Organization

Answer

United Nations

Answer

International Monetary Fund

Answer

North American Free Trade Agreement

Question 21

Which of the following is NOT included in the balance of payments?

Accepted Answer

Financial Account

Answer

Current Account

Answer

Capital Account

Answer

Errors and Omissions

Question 22

What is the term for a country's ability to produce a good or service at a lower opportunity cost than another country?

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Economies of scale

Answer

International competitiveness

Question 23

What is the name of the theory that suggests trade between countries benefits both parties, even if one country has an absolute advantage in producing all goods?

Accepted Answer

Comparative advantage theory

Answer

Mercantilism

Answer

Free trade

Answer

Protectionism

Question 24

What is the purpose of a floating exchange rate system?

Accepted Answer

To allow the exchange rate to be determined by market forces

Answer

To keep the exchange rate fixed at a specific level

Answer

To prevent exchange rate fluctuations

Answer

To promote economic stability

Question 25

Which of the following is NOT a component of the balance of payments?

Accepted Answer

Government budget

Answer

Current account

Answer

Capital account

Answer

Financial account

Question 26

What is the term for the situation where a country can produce a good with a lower opportunity cost than another country compared to other goods it could produce?

Accepted Answer

Comparative advantage

Answer

Absolute advantage

Answer

Factor endowment advantage

Answer

Technology advantage

Question 27

What is the primary purpose of the World Trade Organization (WTO)?

Accepted Answer

To promote free trade and reduce trade barriers

Answer

To provide financial assistance to developing countries

Answer

To regulate the global financial system

Answer

To resolve international political disputes

Question 28

What is the main reason for trade protectionism?

Accepted Answer

To protect domestic industries from foreign competition

Answer

To increase government revenue

Answer

To reduce the country's trade deficit

Answer

To promote economic equality

Question 29

What is the main goal of macroeconomic policy in an open economy?

Accepted Answer

To promote economic growth, stability, and full employment

Answer

To control inflation and unemployment

Answer

To manage the exchange rate

Answer

To improve the balance of payments

Question 30

How do exchange rates impact international trade?

Accepted Answer

Exchange rates influence the relative prices of goods and services across nations.

Answer

Exchange rates are irrelevant to international trade.

Answer

International trade impacts exchange rates, but not vice versa.

Answer

Exchange rates are determined solely by currency supply and demand.

Question 31

What underpins the law of comparative advantage?

Accepted Answer

Nations should specialize in producing goods they have a comparative advantage in.

Answer

Nations should specialize in producing goods they have an absolute advantage in.

Answer

Free trade always benefits all participating nations.

Answer

Tariffs and trade barriers are always detrimental to an economy.

Question 32

What is the primary purpose of a tariff?

Accepted Answer

To safeguard domestic industries from foreign competition.

Answer

To supplement government revenue.

Answer

To promote uninhibited trade.

Answer

To discourage imports.

Question 33

Differentiate between fixed and floating exchange rates.

Accepted Answer

Fixed exchange rates are government-determined, while floating exchange rates are market-determined.

Answer

Floating exchange rates are government-determined, while fixed exchange rates are market-determined.

Answer

Fixed exchange rates are more stable than floating exchange rates.

Answer

Floating exchange rates are more stable than fixed exchange rates.

Question 34

Which trade policy is most effective in enhancing consumer well-being while preserving the competitiveness of domestic industries?

Accepted Answer

Negotiating trade agreements that include provisions for consumer protection and fair competition

Answer

Imposing high tariffs on imported goods

Answer

Providing subsidies to domestic industries

Answer

Implementing quotas on imported goods

Question 35

What economic vulnerability is unique to developing countries in the global economy?

Accepted Answer

Dependence on primary commodity exports

Answer

High levels of foreign direct investment

Answer

Strong and stable political and economic institutions

Answer

Limited access to advanced technology

Question 36

Which of the following is NOT a component of the balance of payments?

Accepted Answer

Gross domestic product (GDP)

Answer

Capital account

Answer

Current account

Answer

Financial account

Question 37

When the value of a country's currency increases relative to other currencies, it is known as:

Accepted Answer

Appreciation

Answer

Devaluation

Answer

Depreciation

Question 38

According to the theory of comparative advantage, countries should specialize in producing and exporting goods where they have a:

Accepted Answer

Lower opportunity cost

Answer

More advanced technology

Answer

Greater economies of scale

Answer

Higher production costs

Question 39

A government-imposed tax on imports is known as a:

Accepted Answer

Tariff

Answer

Subsidy

Answer

Quota

Answer

Embargo

Question 40

A potential benefit of international trade is:

Accepted Answer

Increased consumer choice

Answer

Reduced economic growth

Answer

Exacerbated income inequality

Answer

Increased unemployment

Question 41

The World Trade Organization (WTO) is an international organization that primarily:

Accepted Answer

Promotes free trade

Answer

Provides humanitarian aid

Answer

Sets exchange rates

Answer

Regulates international investment

Question 42

A challenge associated with globalization is:

Accepted Answer

Increased income inequality

Answer

Decreased economic growth

Answer

Enhanced cultural diversity

Answer

Improved environmental standards

Question 43

Which of the following is a type of non-tariff trade barrier?

Accepted Answer

Quota

Answer

Currency peg

Answer

GATT

Answer

Free trade agreement

Question 44

What is a key component of a country's balance of payments?

Accepted Answer

Current account

Answer

Inflation rate

Answer

Exchange rates

Answer

Government budget

Question 45

According to the theory of comparative advantage, countries should specialize in producing goods and services that they can produce at a:

Accepted Answer

Lower opportunity cost

Answer

Greater quantity

Answer

Higher profit margin

Answer

Lower price

Question 46

Which of the following is a potential benefit of free trade?

Accepted Answer

Lower prices for consumers

Answer

Job losses in certain industries

Answer

Increased government regulation

Answer

Reduced economic growth

Question 47

What is the primary focus of the World Trade Organization (WTO)?

Accepted Answer

Promoting free trade and reducing trade barriers

Answer

Providing humanitarian aid to developing countries

Answer

Regulating international financial markets

Answer

Negotiating peace treaties between nations

Question 48

Which of the following is NOT a common barrier to international trade?

Accepted Answer

Technological advancements

Answer

Quotas

Answer

Subsidies

Answer

Tariffs

Question 49

What is the term for the difference between the value of a country's total exports and total imports?

Accepted Answer

Trade balance

Answer

Current account

Answer

Balance of payments

Answer

Exchange rate

Question 50

A country has a comparative advantage in producing a good if it can produce that good at a lower ______ cost compared to other countries.

Accepted Answer

opportunity

Answer

monetary

Answer

labor

Answer

absolute

Question 51

Which of these is NOT a part of a country's balance of payments?

Accepted Answer

Government spending

Answer

Capital account

Answer

Current account

Answer

Financial account

Question 52

When a country's currency gets stronger, what is likely to happen to its exports?

Accepted Answer

Exports will become more expensive for foreign buyers.

Answer

Exports will remain unchanged.

Answer

Exports will become cheaper for foreign buyers.

Question 53

Which of the following is an example of a barrier to international trade?

Accepted Answer

Tariff

Answer

Free trade agreement

Answer

Comparative advantage

Answer

International Monetary Fund (IMF)

Question 54

A country has an absolute advantage in producing a good if it can produce ______ of that good than other countries using the same amount of resources.

Accepted Answer

more

Answer

a higher quality

Answer

the same amount

Answer

less

Question 55

The exchange rate between two currencies is mainly determined by the ______ of supply and demand for those currencies.

Accepted Answer

interaction

Answer

sum

Answer

ratio

Answer

difference

Question 56

What does a country's current account balance show?

Accepted Answer

The net flow of goods, services, and income into or out of the country.

Answer

The amount of foreign aid received.

Answer

The flow of capital investments.

Answer

The movement of financial assets.

Question 57

Which of the following is a reason people support free trade?

Accepted Answer

It can lead to greater economic efficiency and better outcomes for consumers.

Answer

It can lead to fewer jobs in domestic industries.

Answer

It can protect domestic industries from foreign competition.

Question 58

What is a country's exchange rate?

Accepted Answer

The value of its currency compared to another currency.

Answer

The rate at which prices are rising.

Answer

The cost of borrowing money.

Answer

The total value of goods and services produced.

Question 59

If a country imposes a tariff on imported goods, what is the likely effect on the price of those goods in the domestic market?

Accepted Answer

The price will increase.

Answer

The price will fluctuate randomly.

Answer

The price will decrease.

Answer

The price will remain unchanged.