Expert Answers

1. (TCO 8) Countries engaged in international trade specialize in production based on

relative levels of GDP.
comparative advantage.
relative exchange rates.
relative inflation rates.

2. (TCO 8) The organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules, and meet periodically to consider further trade liberalization is called the

International Monetary Fund (IMF).
World Trade Organization (WTO).
Common Market Organization (CMO).
International Trade Commission (ITC).

3. (TCO 9) Which of the following is not included in the current account of a nation’s balance of payments?

Its goods exports
Its goods imports
Its net investment income
Its purchases of real assets abroad

4. (TCO 9) If the dollar price of the yen rises, then

the yen price of dollars also rises.
the dollar depreciates relative to the yen.
the yen depreciates relative to the dollar.
the dollar will buy fewer U.S. goods.

5. (TCO 9) In terms of individual nations, the largest U.S. trade deficit is with


6. (TCO 9) When the U.S. dollar decreases in value relative to foreign currencies the:

Demand for U.S. exports will decrease
Supply of U.S. exports will decrease
Demand for U.S. exports will increase
Supply of U.S. exports will remain constant

7. (TCO 8) Other things equal, economists would prefer

free trade to tariffs and tariffs to import quotas.
free trade to import quotas and import quotas to tariffs.
import quotas to tariffs and tariffs to voluntary export restrictions.
import quotas to free trade and free trade to tariffs.


8. (TCO 8) Refer to the graphs below.  Terryville has a comparative advantage in producing

Product A.
Product B.
both Product A and B.
neither Product A nor B.


9. (TCO 9) The Group of Eight (G8) Nations which periodically have jointly intervened to influence the value of the dollar include

Canada, U.S., France, Britain, Russia, Mexico, Germany, and Brazil.
Canada, U.S., France, Japan, Italy, Germany, Russia, and Great Britain.
Canada, U.S., Mexico, Brazil, Argentina, Peru, Uruguay, and Chile.
Italy, France, Britain, Germany, Netherlands, Norway, Russia, and Sweden.

10. (TCO 8) In recent years the United States has

exported more services abroad than it has imported.
had a small goods trade surplus with Japan.
had a large goods trade surplus with the rest of the world.
maintained an overall trade surplus (goods and services combined) with the rest of the world.

11. (TCO 8 and 10) Evaluate the statement: “Restricting imports from other nations will save U.S. jobs.” Include both advantages and disadvantages in you argument.

12. (TCO 9) What are the economic effects of a depreciation of the US dollar on US trade balances?