1.

A field in international economics which focuses on

real transactions that involve a physical movement of
goods or a tangible commitment of economic revenues
is:
a) International Finance c) Production economics
b) International Trade d) Marketing economics

2. A multilateral agreement on tariffs and rules

governing international trade and is considered a
paradigm shift from restricted and protectionism into a
freer and more liberalized trade is:
a) GATT b) UR
c) WTO d) QRs
 3. The World Trade Organization or W TO is an
organization which has the power to do the following
except one:
a) Enforce GATT rules and discipline among member‐
countries
b) Take responsibility for trade negotiations and
settlement of trade disputes among contracting
countries;
c) Review trade policies and global policy coherence
d) Look for market for the trading nations

4. The Philippines became one of the original members

of WTO in:
a) 1994 b) 1996
c) 1995 d) 199
5. The signing of the Final Act of the Uruguay Round
took place in:
a) Tokyo, Japan b) Marrakesh, Morocco
c) Jakarta, Indonesia d) Manila, Philippines

6. The economic framework which has been defined by

GATT‐WTO calls for the expansion and stabilization of
world trade through the following except one:
a) Tariffication of quantitative restrictions
b) Reduction of domestic price and export subsidies
c) Increase tariffs on all agricultural products
d) Market access commitments and harmonization of
sanitary and phyto‐sanitary measures
7. The Uruguay Round which is the most ambitious
round of GATT negotiations seeks to expand world
trade based on:
a) Absolute Advantage theory
b) Comparative advantage
c) Revealed Absolute Advantage
d) None of the above

8. Tariffs are duties /taxes levied on :

a) imported goods b) export goods
c) Locally made goods c) Manufactured goods
9. The following are reasons why governments impose
tariffs except one:
a) as a source of government revenue
b) to protect the local industries/sectors against
import competition from the rest of the world
c) to protect domestic producers from dumping by
foreign companies;
d) to encourage local industries not to do business in
the imposing country
10. The type of tariff which is levied as a fixed charge for
each unit of goods imported regardless of the value
(i.e.$5/barrel of oil) is:
a) Import tariff b) Export tariff
c) Specific tariff d) Ad Valorem tariff
11. These are taxes imposed as a fraction of the
value of the imported goods(i.e. 20% of the
import value).
a) import tariffs b) Ad Valorem tariffs
c) Export tariff d) all of the above

12. What is most likely the effect of a tariff

imposed on the importing country for a
particular good?
a) raises the price of the good
b) lowers the price of the good
c) the price remains the same
d) tb d t i d
13. On the other hand, the most likely effect of
a tariff imposed on the exporting country will
be:

a) increase the price of the good

b) lowers the price of the good
c) cannot be determined, depends on the
size of the importing country
d) a or b is possible
14. The following can be considered to define
the concept of “producer surplus” except one:

a) the area below the supply curve and

above the equilibrium price
b) the area above the supply curve and
below the equilibrium price
c) the gains derived by the producer when
he receives more than what he expects
d) the revenue producers receive above the
minimum amount required to induce
them to produce a good.
15. The consumer surplus on the other hand
can have the following definitions except one:

a) the area below the demand curve and

below the equilibrium price
b) the gains derived by the consumer when
he pays less than what he expects
c) the area below the demand curve and
above the equilibrium price
d) the difference between what the
consumer is willing to pay and what
he actually pays.
16. As a result of tariff imposition, the
imposing country suffers from efficiency
losses which include the following:

a)Production distortion losses

b) Consumption distortion losses
c) a and b
d) any of the above may be true
17. Production distortion losses result from the fact
that the tariff imposed leads to:

a) domestic producers producing too much of a good

which can be purchased at a higher price
abroad;
b) domestic producers producing too much of a good
which can be purchased more cheaply abroad;

c) domestic producers producing less of a good which

can be purchased at higher prices abroad;
d) domestic producers producing less of a good which
can be purchased more cheaply abroad
18. Consumption distortion losses, on the other hand, result from
the fact that the tariff imposed leads to:
a) domestic consumers to consume too little of a good
due to high domestic prices;
b) domestic consumers consuming too little of a good
due to high prices abroad;
c) domestic consumers consuming too much due to
high domestic prices;
d) domestic consumers consuming too much due to
low prices abroad.

19. The only benefit derived from tariff imposition is:

a) government revenue b) good foreign relation
c) high quality imported goods d) b or c will do
20. With trade liberalization, tariffs are reduced or even
eliminated. What do you think will be the effect of tariff
reduction on prices in the importing country:
a) the domestic price will increase
b) the domestic price will decrease
c) the domestic price will remain the same
d) cannot be determined
21. With your answer in number 20 above, the:
a) consumer and producer surplus will increase
b) consumer surplus increases but producer surplus
declines
c) producer surplus increases but consumer surplus
declines
d) both the consumer and producer surplus decrease
22. With tariff reduction, the following will most likely
happen in the domestic economy except one:
a) domestic prices will increase
b) domestic prices will decrease
c) production and consumption distortion losses will
be eliminated
d) domestic prices will approximate the world prices

23. Trade liberalization is the result of the following

except one:
a) tariff reduction
b) elimination of production subsidies
c) elimination of export subsidies
d) limited flow of goods from abroad
24. The following are implications of trade liberalization to
agriculture except one:

a) it will make easier for the farmers to compete in

trade regimes that relies less on unfair
protectionist measures but more on
comparative advantage;
b) there will be expanded market for agricultural
products
c) Agricultural exports will expand
d) there will be more unemployment due to free trade.
25. “Dumping” is a trade practice where:
a) the exporter charges lower prices in the foreign
market than in the domestic market;
b) the exporter charges higher prices in the foreign
market than in the domestic market;
c) the exporter charges the same prices in the foreign
and in the domestic market;
d) None of the above is correct

26. The following are forms of trade restrictions except

one:
a) tariff b) Quota
c) Import licenses d) Subsidy
27. Embargoes prohibit trade with other
countries. It means that:
a) a country can ban a foreign nation’s imports;
b) a country can ban exports to other nations;
c) a country cannot trade with other countries
d) All of the above is correct

28. Globalization refers to the implementation of

free trade on a global scale which is carried out
through:
a) trade restriction b) trade
liberalization
)t d t ti d) N f th b
29. How do you call the record that keeps track of the
nation’s payments to the foreigners and its receipts
from the rest of the world?
a) Balance Sheet b) Trial Balance
c) Balance of Payment c) Transactions record

30. The expenditures of foreigners on domestically

produced goods:
a) imports b) exports
c) investment income d) transfer payments
31. The expenditures of the domestic
economy on imported goods is called:
a) imports b) exports
c) investment income d) transfer
payments

32. The following are components of current

accounts except one:
a) merchandise trade b) Investment
income
c) Transfer payments d) Assets
33. The country is said to have a BOP equilibrium if:
a) the nation’s total receipts from the rest of the
world is equal to the total payments it made to
the foreigners.
b) the nation’s total receipts from the rest of the
world is greater than the total payments it
made to the foreigners.
c) the nation’s total receipts from the rest of the
world is lesser than the total payments it made
to the foreigners
d) the nation’s total receipts from the rest of the
world is either lesser or greater than the total
payments it made to the foreigners.
34. BOP deficit occurs when:
a) the nation’s total receipts from the rest of the
world is equal to the total payments it made to
the foreigners.
b) the nation’s total receipts from the rest of the
world is greater than the total payments it
made to the foreigners.
c) the nation’s total receipts from the rest of the
world is lesser than the total payments it made
to the foreigners
d) the nation’s total receipts from the rest of the
world is either lesser or greater than the total
payments it made to the foreigners.
35. BOP surplus on the other hand occurs when:
a) the nation’s total receipts from the rest of the
world is equal to the total payments it made to
the foreigners.
b) the nation’s total receipts from the rest of the
world is greater than the total payments it
made to the foreigners.
c) the nation’s total receipts from the rest of the
world is lesser than the total payments it made
to the foreigners
d) the nation’s total receipts from the rest of the
world is either lesser or greater than the total
payments it made to the foreigners.
36. When a country engages in international
transactions, it always involve at least two kinds
of currencies. The value of domestic currency
relative to the foreign currency is called:
a) foreign exchange rate b) domestic
exchange rate
c) foreign exchange d) none of the above

37. It refers to the currency of countries other

than one’s own used to make international
payments.
a) foreign exchange rate b) foreign
exchange
38. The market where international
currencies are traded?
a) Foreign exchange market
b) The New York Foreign Exchange Market
c) Tokyo Foreign Exchange Market
d) All of the above
39. Payments to international transactions
can be carried out through the use of the
following instruments except one:
a) Cable or telegraphic transfers
b) Bank drafts
c) Letter of credit
40. The floating exchange rate is determined by:
a) free forces of demand and supply through foreign
exchange dealers;
b) the demand for a particular currency alone
c) the supply of a particular currency alone
d) the government

41. The fixed exchange rate, on the other hand is

determined by:
a) forces of supply and demand for foreign exchange
b) the demand for a particular currency alone
c) the supply for a particular currency alone
d) the government through the Central Bank
42. When the Central Bank of the Philippines
devaluates its currency against the US dollar, it means
that:
a) the value of the peso increases against the dollar
b) the value of the peso declines relative to the dollar
c) the value of the peso remains the same
d) none of the above is correct

43. The opposite of devaluation is called:

a) evaluation b) revaluation
c) depreciation d) appreciation
44. When the Philippine currency depreciates against
the US dollar due to forces of supply and demand, it
means that:
a) the value of the peso increases against the dollar
b) the value of the peso declines relative to the dollar
c) the value of the peso remains the same
d) none of the above is correct

45. The opposite of depreciation is called:

a) evaluation b) revaluation
c)apprehension d) appreciation
46. When devaluation or depreciation occurs, it means
that:
a) the foreigners have to pay more for the devalued
currency
b) the foreigners have to pay less for the devalued
currency
c) the foreigners have to pay the same for the
devalued currency
d) the foreigners cannot determine how much to pay
for the devalued currency
47. Depreciation or devaluation therefore will:
a) encourage exports due to cheaper price
b) discourage imports due to higher price
c) the devaluing country will pay more for imported
goods
d) All of the above must be true

48. When the domestic currency devaluates or

depreciates, the exchange rate between the two
currencies:
a) increases b) decreases
c) may increase or decrease d) remains the same
49. When the peso devaluates or depreciates relative to
the US dollar, the domestic economy has to pay:
a) more pesos for a dollar worth of imported goods
b) less pesos for a dollar worth of imported goods
c) the same number of pesos for a dollar worth of
goods
d) None of the above is correct

50. When the exchange rate(P/$) increases, the value of

the peso relative to the dollar becomes:
a) stronger b) weaker
c) remains the same d) cannot be determined
51. When the exchange rate(P/$) decreases, importers
will have to pay:
a) more pesos for the same quantity of goods from
abroad
b) less pesos for the same quantity of goods from
abroad
c) the same number of pesos for the same quantity of
goods from abroad
d) None of the above is correct
52. For a country experiencing a serious Balance of
Payment Deficit or ‐BOP, one remedy to correct the
deficit is for the government to:
a) devaluate its currency b) appreciate its currency
c) depreciate its currency d) do nothing policy
53. Devaluation is a result of the Central Bank’s action
under the:
a) floating exchange rate regime
b) Fixed exchange rate regime
c) Pegged exchange rate regime
d) b and c

54. Depreciation on the other hand is a result of the:

a) interaction of the market forces of supply and
demand for foreign exchange
b) deliberate action of the monetary authority or
Central Bank’s action
c) Commercial Banks’ action
d) none of the above is correct
55. Devaluation and depreciation have basically:
a) the same meaning
b) different meaning
c) the same meaning but differs as to its
determination
d) different meaning but the same as to its
determination

56. The Philippines is presently adopting the:

a) Fixed Exchange Rate System
b) Floating Exchange Rate System
c) Combination of the Fixed and Floating Exchange
Rate Systems
d) None of the above is correct
57. Under flexible exchange rate regime, the
equilibrium exchange rate means that:

a) the demand for and supply of foreign currency are

equal
b) the demand for foreign currency is less than the
supply
c) the demand for foreign currency is more than the
supply
d) the demand for and supply of foreign currency are
difficult to determine
58. Still under the flexible exchange rate system,
exchange rate higher than the equilibrium level will
mean that:

a) there is excess supply of foreign currency

b) there is higher supply of foreign currency relative
to the demand
c) the exchange rate will move down towards the
equilibrium level
d) all of the above must be possible
59. If the exchange rate(P/$) is below and is not allowed
to rise to the equilibrium level (in the case of fixed
exchange rate regime), this means that the value of the
domestic currency is not allowed to decrease and
therefore, the Central Bank should:

a) fill the excess demand by selling foreign exchange

through the foreign exchange market
b) impose restrictions on the demand for foreign
currency
c) do nothing about the situation
d) a and b
60. On the other hand, if the exchange rate(P/$) is above and is
not allowed to go down to the equilibrium level(case of fixed ER
regime), this means that:
a) the value of the domestic currency is not allowed
to increase
b) hence, the CB should buy the excess supply of
foreign exchange
c) impose restrictions on the supply of foreign
currency
c) all of the above must be true
61. The most immediate effect of devaluation/ depreciation is:
a) deflation b) inflation
c) stagnation d) none of the above is correct
62. International reserves are foreign assets held by the
Central Bank to finance BOP deficits or whenever there
is a need for the CB to intervene in the foreign exchange
market. However, if the CB runs out of foreign exchange
reserves and cannot continue its intervention and
therefore cannot maintain its exchange rate at a fixed
level then, it has to:

a) revalue its currency b) devalue its currency

c) depreciate its currency d) appreciate its currency