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Contents
1 INTERNATIONAL ECONOMICS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 INTERNATIONAL ECONOMICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. INTERNATIONAL ECONOMICS
NARAYAN CHANGDER
1.1 INTERNATIONAL ECONOMICS
1. The most vocal political pressure for tariffs B. Association of Southeast Asian Na-
is generally made by tions
A. consumers lobbying for export tariffs. C. Association of Southwestern Authori-
B. consumers lobbying for import tariffs. tarian Nations
C. producers lobbying for export tariffs. D. Autonomous Southern Asian Nations
D. producers lobbying for import tariffs. 5. According to the Heckscher-Ohlin model
2. The deadweight loss of a tariff: A. everyone automatically gains from
A. Is a social loss since it promotes inef- trade
ficient production B. the gainers from trade outnumber the
B. Is a social loss since it reduces the rev- losers from trade
enue for the government C. the scarce factor necessarily gains
C. Is not a social loss because society as from trade
a whole doesn’t pay for the loss D. none of the above
D. Is not a social loss since only business
firms suffer revenue losses 6. Limit of the amount of a good that can be
imported
3. “International trade can be substitute for A. Subsidy
economic growth” is the statement
true? B. Quota
A. Yes C. Exports
B. No D. Appreciation
4. What is ASEAN? 7. Which of the following is NOT a benefit of

A. Amplification of Southern Asian Na- international trade
tions A. Lower prices for consumers
1. D 2. A 3. A 4. B 5. B 6. B 7. C
1.1 INTERNATIONAL ECONOMICS 3
B. Larger market, so more sales for pro- C. can lead to a rise in the value of the
ducers £over time

C. higher average costs due to D. none of above
economies of scale
12. The figure illustrates the international
D. More consumer choice movement of capital. When there is no
8. The calculation of a country’s balance of international movement of capital in both
trade involves the value of its Nations, the yield for Nation 1’s owners
of noncapital factors is
A. exports and imports
A. CNEG
B. net exports and gross domestic prod-
uct B. NEF
C. foreign exchange rate and discount C. O1FGA

rate D. CFG
D. foreign investments and investments
13. Absolute advantage is when country A
by foreigners
makes than country B.
9. A tariff-rate quota is essentially a A. more
A. two-tier tariff applied to a country’s im- B. less
ports
C. equal
B. three-tier tariff applied to a country’s
D. fewer
imports
C. two-tier tariff applied to a country’s ex- 14. With free trade, local production will
ports
D. three-tier tariff applied to a country’s
imports
10. Which theory hold that two countries

would trade even when one country has
absolute advantage in all products or an-
other country does not have absolute ad-
vantage in any product-
A. Adam Smith absolute advantage the- A. Decrease from QE to Q1
ory B. Decrease from Q2 to Q1
B. Factor proportion theory C. Increase from QE to Q2
C. Comparative advantage theory. D. Not change
D. none of above
15. When an exchange rate of a currency de-
11. A current account deficit preciates it means that:
A. means uk goods and services are less A. one unit of it buys more of a foreign
competitive on international markets currency than before
B. reflects rising demand for Uk made B. the price level in that country has
goods and services fallen
8. A 9. A 10. C 11. A 12. D 13. A 14. A 15. C

C. one unit of it buys less of a foreign cur- 21. International economics studies the eco-
rency than before nomic interactions between countries, in-
D. the country’s exports will become cluding trade, investment, and financial
more expensive transactions.
A. True
16. Increasing per capita output becomes very
difficult for a developing country when: B. False
A. government monetary policies make 22. International trade only refers to the ex-
NARAYAN CHANGDER
more credit available. change in goods between countries.
B. too much foreign aid is available. A. True
C. continued population growth occurs. B. False
D. economic reforms make more funds
23. Which of the following is NOT an argument
available for development.
in favor of protectionism?
17. A strong dollar leads to A. Protectionism shields infant industries
A. cheaper imports. from competition
B. more expensive imports. B. Protectionism safeguards workers’
jobs
C. no change in international prices.
C. Protectionism promotes industries
D. cheaper exports.
that are essential to national security
18. Exchange rate is the D. Protectionism makes domestic firms
A. makes travel more expensive for more competitive in the long run
Americans
24. Each month, Ima Newhere, who recently
B. makes travel cheaper for Americans arrived in the United States, sends half her
C. value of a country’s currency com- paycheck to her sister in Poland.
pared to another country’s A. credit
D. will increase imports to Americans B. debit
19. An increase in the exchange value of one 25. The U.S. only allows 1 million oranges to
nation’s currency in terms of currency of be imported from other countries.
another nation’s is called
A. Tariff
A. Depreciation of currency
B. Import Quota
B. Appreciation of currency
C. Embargo
20. If wages were to double in Home, then D. None of them
Home should
A. export cloth. 26. ‘Transactional activities involving export
and import of goods and services between
B. export widgets. one country with another’. This statement
C. export both and import nothing. describes about
D. export and import nothing. A. international trade
E. All of the above. B. macroeconomic problem
16. C 17. A 18. C 19. B 20. D 21. A 22. B 23. D 24. B 25. B 26. A
C. public finance 31. If the value of a country’s imports exceeds

the value of its exports.
D. none of above

A. Balance of trade
27. The US and Canada have been experienc- B. Trade Surplus
ing a conflict over the US quota on im-
ported softwood lumber. Which of the fol- C. Trade fails
lowing groups would be MOST LIKELY to D. Trade barriers
support the US restrictions?
32. Which of the following is NOT a criticism
A. Canadian lumber firms of international institutions?
B. U.S. new home buyers A. They ignore potentially large adjust-
ment costs for developing countries.
C. U.S. lumber importers
B. They fail to understand the effect of
D. U.S. lumber firms their policies on vulnerable nations.
28. requirements a good must meet before it C. They violate national sovereignty by
can enter the country as an import imposing unwanted domestic policies.
A. standards D. Their decision making is biased in

favour of developing countries.
B. quotas
33. A person or organization that uses a prod-
C. subsidies uct or service is a(n):
D. none of above A. consumer
29. refers to the ability of a country in B. economist

producing a particular goods and services C. loan shark
at lower opportunity cost as compared to D. debtor
other countries
34. What should each country do according to
A. Absolute advantage
the law of comparative advantage?
B. Comparative advantages A. Keeping the production costs of goods
C. Mutual advantages or services high.
D. Different advantage B. Keeping the opportunity costs of pro-
ducing goods or services high.
30. Which result would you expect from a U.S. C. Keeping the costs of producing goods
import quota on automobiles? or services low.
A. lower automobile prices for US con- D. Keeping the opportunity costs of pro-
sumers ducing goods or services low.
B. higher automobile prices for US con- E. Maintain the production costs of all
sumers types of goods or services the same as
those of trading partners.
C. fewer domestic jobs in the automobile
industry 35. Calculate who has the comparative advan-
D. more foreign automobiles flowing into tage in producing clothing.
the US A. U.S.:0.5
27. D 28. A 29. B 30. B 31. C 32. D 33. A 34. D 35. A 35. D
B. Germany:1.75 A. Adam Smith absolute advantage the-

C. U.S.:2 ory
B. Factor proportion theory
D. Germany:0.57
C. Comparative advantage theory
36. A system in which the currency of one na-
D. Internation product life cycle
tion
A. Trade Wars 41. A quota is
NARAYAN CHANGDER
B. Foreign Exchange Market A. an official ban on trade.
C. Foreign Exchange Rate B. a limit on or a specific number of im-
ports allowed.
D. Fixed Rate of Exchange
C. a law that promotes safety.
37. International trade and domestic trade dif- D. a tax on imports.
fer because of
A. Different government policies 42. Each country has new infant industry to
promote. The reason for the infant indus-
B. Immobility of factors try argument is to
C. Trade restrictions A. control money supply in the economy.
D. All of the above B. protect new industries from the estab-
lishment of foreign competitors.
38. The components of Balance of payment ac-
count are C. avoid structural unemployment.
A. Capital account D. reduce the inflation problem.
B. current account 43. Under a tariff-rate quota:

C. both a and b A. the within-quota tariff rate exceeds
D. none of the above the over-quota tariff rate
B. the over-quota tariff rate exceeds the
39. House:Goods or Service? within-quota tariff rate
C. the within-quota tariff rate equals the
over-quota tariff rate
D. the within-quota tariff rate plus over-
quota tariff rate equal 100 percent
44. What is an embargo?

A. A government order to stop trade.
A. Goods B. A limit placed on imports.
B. Service C. A tax placed on imports.
40. Which theory hold the that two countries D. none of above
would trade even when one country has
absolute advantage in all products or an- 45. Which of the following is/are major con-
other country does not have absolute ad- cern/s of international economic theory?
vantage in any product A. exchange rate determination
36. D 37. D 38. C 39. A 40. C 41. B 42. B 43. B 44. A 45. A 45. B 45. D 45. E
B. protectionism 50. If Japan and the United States can both

C. bilateral trade relations with China produce cars, but Japan can produce cars
of a higher quality at a faster rate, then it

D. the international capital market is said to have an in the auto industry
E. the balance of payments
A. Comparative Advantage
46. What was the name of the roadmap RBI B. Absolute Advantage
called?
C. Opportunity Cost
A. Financial Sector Computing Vision Doc-
ument (2005) D. Specialization
B. Financial Sector Science Vision Docu- 51. Which of these four are *NOT* the most
ment (2005) important trading partners for the United
C. Financial Sector Technology Vision States
Document (2005) A. Canada
D. Financial Sector Telecommunications
B. Mexico
Vision Document (2005)
C. China
47. If a country has a deficit in its current ac-
count, there will be a D. Russia
A. Surplus in the financial account (for- 52. terms of trade promote rapid economic
merly called capital account) development of an underdeveloped coun-
B. surplus in the trade balance try.
C. surplus in the balance of payments A. favorable
D. deficit in the financial account(formerly B. unfavorable
called capital account)
E. deficit in the balance of payments 53. A is a group of countries that have re-
duced or even eliminated tariffs, allowing
48. Exchange rate fluctuations will cause for the free flow of goods among the mem-
A. an increase in the domestic price ber nations.
which leads to inflation. A. exchange rates
B. a decrease in the international price B. subsidy
which lead to employment.
C. trading bloc
C. imported goods and services to face
heavy profit. D. balance of trade
D. none of the above. 54. Compound interest rates are applied once,
49. Which of the following is the gain to na- while simple interest rates are taken
tions from international trade? monthly and added to the principal to be
accounted for in the next month.
A. The world output will increase
A. Simple, Term
B. Greater advancement in technology.
B. Compound, Term
C. Widened choices to the domestic
trade. C. Simple, Compound
D. All the above. D. Compound, Simple
46. C 47. A 48. A 49. D 50. B 51. D 52. A 53. C 54. B

55. With free trade, the total value of imports

would equal
NARAYAN CHANGDER
A. Country A makes all of the cars and
trucks
A. $100, 000 B. Country A should specialise in making
B. $400, 000 cars and Country B should specialise in
making trucks
C. $600, 000
C. Country A should specialise in making
D. $800, 000 trucks and Country B should specialise in
Explanation:Import quantity = 40Price = making cars
10 (Sw line)= value = 400
D. Country B makes all of the cars and
trucks
56. If the Malaysia ringgit (RM) is said to be
depreciated relative to the U.S dollar, then 59. Country A exports 10% more goods than
the dollar it imports. By contrast, country B imports
A. will be less expensive to Malaysians. 15% more than it exports. Which state-
ment is TRUE?
B. will appreciate relative to Malaysian
A. Country A has a favorable balance of
ringgit.
trade, but country B has an unfavorable
C. will depreciate relative to Malaysian balance of trade.
ringgit.
B. Country B has a favorable balance of
D. either will appreciate or depreciate rel- trade, but country A has an unfavorable
ative to Malaysian ringgit. balance of trade.
C. Country A has a comparative advan-
57. What country has the COMPARATIVE ad- tage over country B.
vantage for Water Bottles?
D. Country B must rely on foreign aid
from country A.
60. The lowering or elimination of protective

tariffs and other trade barriers between
A. USA two or more nations.
B. CANADA A. Free Trade
B. Embargoes
58. Based on this table, if these two countries
C. Trade Barriers
trade with each other, what should each
country make? D. Foreign Exchange Rate
55. B 56. B 57. B 58. B 59. A 60. A 61. B

61. Given the same amount of resources, if C. Yosemite

a country can produce more of particular
D. none of above
commodities compared to another country,

that country is said to have
66. Ancient theories of international eco-
A. productive advantage. nomics from the 18th and 19th Centuries
B. an absolute advantage. are:
C. a comparative advantage. A. not relevant to current policy analysis.
D. ratio of export price index to import
B. are only of moderate relevance in to-
price index.
day’s modern international economy.
62. What are the disadvanteges of long last- C. are highly relevant in today’s modern
ing trade deficits from the deficit country’s international economy.
point of view?(Several answers may be
correct.) D. are the only theories that actually rel-
A. The workers in the deficit country have evant to modern international economy.
a higher workload than those in surplus E. are not well understood by modern
countries. mathematically oriented theorists.
B. The deficit country might face an ap-
preciation of its currency in the end. 67. The use of trade barriers between nations
C. The deficit country might face an over- to protect domestic industries.
shooting depreciation of its currency in A. Proctoratism
the end.
B. Trade Wars
D. The deficit country loses jobs.
C. Embargo
63. A ban on trade with a particular country.
D. Protective Tariff
A. Subsidy
B. Embargo 68. When a currency loses value, we say it has
C. Tariff
A. depreciated
D. Quota
B. appreciated
64. The ability of one trading nation to make a
product more efficiently than another trad- C. exchanged
ing nation. D. gotten stronger
A. Absolute Advantage
B. Comparative Advantage 69. Specifications that products may have to
meet for various purposes such as health,
C. Law of Comparative Advantage safety or compatibility are called?
D. Absolute Disadvantage
A. embargo
65. The name of the highest waterfall in the
B. tariff
world?
A. Angle C. standards
B. Victoria D. quota
62. C 62. D 63. B 64. A 65. A 66. B 67. A 68. A 69. C 70. D
70. a payment from the government to busi- A. Exchange of export and import be-
nesses. They redistribute income from tween the people of two countries.
the general taxpaying public to non- B. Exchange of goods and services be-
competitive firms, thereby helping the tween the people of two countries.
firms to compete with wealthier foreign
producers. C. Exchange of export and import within
the political boundaries of a country.
A. Market advantages
D. Exchange of goods and services within
B. floating exchange rate
NARAYAN CHANGDER
the political boundaries of a country.
C. European Union or EU
76. A payment from the government to encour-
D. subsidies age or protect a certain economic activity
is called a?
71. What do you need to produce other goods
and services? A. subsidy
A. consumer goods B. tariff
B. capital goods C. quota
C. nondurable goods D. advantage
D. Gross Domestic Product (GDP) 77. Which of the following is NOT a major
themes of International Economics?
72. In a economy, families, clans, or tribes
make economic decisions based on genera- A. Gains from Trade
tional customs and beliefs. B. Pattern of Trade
A. Mixed C. Exchange Rate Determination
B. Market D. Public Finance
C. Traditional
78. If wages were to double in Home, then
D. Command Home should:
73. BMW pays $1 million to a U.S. shipper A. export cloth.
for transporting cars from Germany to the B. export widgets.
United States.
C. export both and import nothing.
A. credit
D. export and import nothing.
B. debit
E. All of the above.
74. Completely bans trade with a country, usu-
79. An agreement effective July 1, 2020, be-
ally due to political disputes.
tween American and its immediate neigh-
A. Tariff bors to the north and south that in-
B. Quota creases environmental and labor regula-
tions, protects intellectual property, and
C. Embargo incentivizes more domestic production of
D. Subsidy cars and trucks.
75. Which of the following is referring to In- A. USMCA

ternational Trade? B. NAFTA
71. B 72. C 73. A 74. C 75. B 76. A 77. D 78. D 79. A

C. reached 84. Choose the best argument of the protec-

D. ANAC tionism in international trade.

A. Protect foreigner profit
80. What are the main functions of import tar- B. Protect young industries
iffs in the modern trade relations?
C. Fix profit firm account
A. retaliatory and protective
D. Fix the balance of payment
B. fiscal and retaliatory
85. Andre Prenoor, U.S. entrepreneur, invests
C. protective and fiscal $50 million to develop a theme park in
D. all above Malaysia.
A. credit
81. An increase in the international value of
United States dollar will tend to cause B. debit
A. United States exports to fall 86. An embargo is

B. the national income of the United A. a tax on imports.
States to increase B. a cash grant or loan from the govern-
C. employment in the manufacturing sec- ment to support the business.
tor of the United States to increase C. an official ban on trade.
D. the inflation rate in the United States D. a specific number of imports allowed.
to increase
87. One reason country’s choose to under-
E. the growth rate of the United States value their currency is:
economy to increase A. Downward pressure on inflation
82. During periods of growing domestic de- B. Greater employment in export indus-
mand, an import quota tries
A. is less restrictive on a country’s im- C. More imports can be bought
ports than a tariff D. none of above
B. is more restrictive on a country’s im- 88. The gravity model of international trade
ports than a tariff predicts that trade between two nations
C. has the same restrictive effect on a is larger when
country’s imports as a tariff A. the larger of two nations
D. will always generate increased tax rev- B. the closer the nations
enue for the government C. the more open are the two nations
83. Which of the following protectionist mea- D. all of above
sures will not raise the price for con-
89. Which of the following is not included in
sumers?
the current account balance?
A. Tariff A. Net income.
B. Subsidies B. Current transfer.
C. Quotas C. Financial account.
D. Administrative Barriers D. Balance of goods and services
80. C 81. A 82. B 83. B 84. B 84. D 85. B 86. C 87. B 88. D 89. A 90. A
90. A tariff like to increase the value of the dollar.

A. Encourages people to buy goods made Which is the BEST argument for or against
from their country. whether the value of the dollar should be
increased?
B. Increases trade between other coun-
tries. A. Yes, boosting the dollar will increase
US exports
C. Stops trade completely.
B. Yes, boosting the dollar will decrease
D. Only placed to encourage democracy. US imports
NARAYAN CHANGDER
91. Which of the following is an example of C. No, boosting the dollar will anger for-
an institution whose primary concern is eign consumers and start a trade war
global economic stability? D. No, boosting the dollar will increase
A. WTO US imports and decrease US exports
B. OPEC 95. means that a country can produce a prod-
C. The World Bank uct using fewer resources than another
country
D. IMF
A. appreciate
92. 3) The Ricardian model demonstrates that
B. comparative advantage
A. trade between two countries may ben-
C. absolute advantage
efit both if each exports the product in
which it has a comparative advantage. D. balance of trade
B. trade between two countries always 96. Which of the following statements is true?
benefits the country with a larger labor
force.
C. trade between two countries will ben-
efit both countries.
D. trade between two countries may ben-
efit one but harm the other. A. William has an absolute advantage in
making both cakes and pies.
93. A country currently produces coffee and B. William has an absolute advantage in
bread. If new technology was discovered making both goods.
that increased the production of coffee,
how would the opportunity cost of bread C. For every 1 cake William makes, he
be affected? gives up the chance to make 3 pies.
A. It would decrease because more cof- D. David has an absolute advantage in

fee could be produced instead. making pies.
B. It would not be affected. 97. The value of a country’s exports minus the
C. It would increase because more cof- value of its imports during a specific time.
fee could be produced instead. A. Balance of trade
D. none of above B. Trade Surplus
94. Many in the US are concerned about the C. Import

depreciation of the US dollar. They would D. Export
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98. Which of the following is not a type of ex- C. An increase in a nation’s import tariffs
change rate? D. A decrease in a nation’s standard of liv-

A. Fixed Exchange Rates ing
B. Floating Exchange Rates
104. Which element can not move across
C. Secure Exchange Rates bounder in international economic?
D. Managed Exchange Rates A. Labor
99. Which party does NPCI cooperate with? B. Capital
A. Discover Financial Services C. Technology
B. Japan Credit Bureau D. Raw material and natural resources
C. China UnionPay International
105. What is absolute advantage?
D. All of the above.
100. What is America’s opportunity cost for

producing cotton?
A. 2 pounds of sugar
B. 0.5 (1/2) pound of sugar
C. 2 pounds of cotton A. ability to produce more of a good with
D. 0.5 (1/2) pounds of sugar less input, using available FOP, than an-
other country
101. is the ability to produce goods at a
B. ability to produce more or better
lower price than another manufacturer.
goods and services than another country
A. Absolute superiority
C. ability to produce a good or service
B. Comparative advantage more efficiently than your competitors.
102. decrease in value of one currency relative D. All of the above
to the other E. None of the above
A. depreciation
106. A situation where a government does not
B. appreciation
attempt to influence through quotas or du-
C. quota ties what its citizens can buy from another
D. none of above country or what they can produce and sell
to another country.
103. International trade and specialization
A. New trade
most often lead to which of the following?
B. Free trade
A. An increase in a nation’s productivity
B. A decrease in a nation’s economic C. International trade
growth in the long term D. none of above

107. With free trade, the total quantity of im- 110. Exports = rupees 1000 lakh imports = 16
ports would equal 50 lakh, balance of trade shows
A. Surplus of rupees 650 lakh
B. Deficit of rupees 650 lakh
C. Balance of rupees 2650 lakh
D. None of these
111. A specific tariff provides home producers
NARAYAN CHANGDER
more protection when
A. the home market buys cheaper prod-
A. 10, 000 units ucts rather than expensive products.
B. 40, 000 units B. it is applied to a commodity with many
grade variations.
C. 42, 000 units
C. the home demand for a good is elastic
D. 50, 000 units with respect to price changes.
108. One-sided international trade means:(Several D. it is levied on manufactured goods

answers may be correct.) rather than primary products.
A. Some countries face huge trade 112. Why does the US have restricted trade to
deficits in some years and huge surpluses Cuba
in other years. A. Cuba’s communist government
B. Some countries have trade deficits for B. failed protection of human rights
a long time. C. all the above
C. Some countries accumulate foreign as- D. none of above
sets for a long time.
D. Some countries trade only a special movement of capital. When there is inter-
range of goods. national movement of capital in both Na-
tions, what is the repatriation to Nation
109. Is there a country who has a absolute ad- 1?
vantage in the production of shoes?
A. O2JERA
B. BUT
C. ERM
D. ERG
114. A situation that occurs when individuals
or businesses produce a narrow range of
products.
A. Yes, China.
A. Economic Interdependence
B. Yes, India. B. Specialization
C. No C. Imports
D. none of above D. Exports

115. What does “BOP” stand for? 121. Which of the following is most likely to
benefit from an appreciation in the United
A. Balance Of Paypal
States dollar in the short run?

B. Balance Of Paying
A. United States investors holding Euro-
C. Balance Of Payoff pean bonds
D. Balance Of Payments B. Importers in foreign countries seeking
raw inputs at a lower price
116. Under a system of flexible exchange rate,
C. United States exporters selling capital
the adjustment in the balance of payments
equipment
are smooth, painless and continuous
D. United States tourists traveling to for-
A. true
eign countries
B. false
E. European consumers buying United
117. Globalisation means States goods.
A. no trade restriction in the entire globe 122. The benefits of international trade are de-
rived from trade in
B. trade between India and USA
A. anything of value
C. Multinational Company
B. services but not goods
D. Foreign Aid
C. tangible goods only
118. The Panamanian balboa (currency) al- D. goods but not services
ways exchanges at a rate of 1 balboa =
1 US dollar. The balboa has a(n) E. intangible goods only
A. floating exchange rate 123. the amount by which the cost of a coun-
B. appreciating exchange rate try’s imports exceeds the value of its ex-
ports.
C. depreciating exchange rate
A. the trade fails
D. fixed exchange rate
B. balance of trade
119. According to factor proportions theory, C. trade surplus
factors that were in great supply relative D. trade account
to demand would be cheaper.
A. YES 124. is the ability of an individual or group
to carry out a particular economic activity
B. NO more efficiently than another individual or
group.
120. What is the impact of a quota on im-
ported goods? A. depreciation
A. Government tariff revenues will in- B. absolute advantage
crease C. comparative advantage
B. Prices will decrease D. appreciation
C. Employment will increase
125. A(n) is a process of prohibiting com-
D. There will be efficiency gains merce and trade with another country.

A. Absolute Advantage 128. Which of these does *NOT* impact the in-
ternational trade for every nation
B. Embargo
A. Exports on Price and Quantity
C. Tariff
B. Imports on Price and Quantity
D. Comparative Advantage
C. Trade Affecting Employment
126. The countries shown on the map are part D. Trade Affecting International Affairs
of which trade agreement?
NARAYAN CHANGDER
129. What is a quota?
A. A government order to stop trade.
B. A limit placed on imports.
C. A tax placed on imports.
D. none of above
130. International trade in goods and services

tends to
A. increase all domestic costs and prices.
B. keep all domestic costs and prices at
A. ASEAN the same level.
B. NAFTA C. lessen the amount of competition fac-
ing home manufactures.
C. The EU
D. increase the amount of competition
D. none of above
facing home manufacturers.
127. A tariff of would be prohibitive, caus- E. None of the above.
ing imports to fall to zero.
131. The following table shows how many
cars or computers can be produced by
Japan and the United States in a month
(in millions). Use this table to answer the
question below. Which statement is true
concerning absolute advantage?
A. $10 A. Japan has an absolute advantage in

B. $15 the production of computers.
C. $20 B. Japan has an absolute advantage in
the production of both goods.
D. $25
Explanation:Because the price at equilib- C. Japan has no absolute advantage in
rium is 25, import will be 0 = Pw = 10 this scenario.
and tariff = 15 will make P at equilibrium D. Japan has absolute advantage in the
= 25. production of cars.

132. limits on the amount of a product that can 137. International economics is an applied
be imported. branch of economics

A. Quota A. Micro
B. Dumping B. Macro
C. Trade Barrier C. Behavioural
D. Embargo
D. Financial
133. Goods sent for sale to another country
138. Refers to the extent to which a country
A. Import is endowed with such resources as land,
B. Export labor, and capital.
C. Transit A. Comparative advantage
D. none of above B. Factor endowments
134. A market in which currencies of different C. Factors of production
countries are bought and sold.
D. none of above
A. Trade Wars
B. Foreign Exchange Market 139. Lana can bake 10 cakes in 8 hours, while
Lenny can bake 4 cakes in 8 hours. Lenny
C. Embargo
has an Absolute Advantage in making
D. Protective Market cakes.
135. The purpose of a tariff, when used for A. True
protectionism, is to B. False
A. limit the number of foreign goods im-
ported into the country. 140. The main benefit of free trade between
B. make an imported good more expen- two countries is that
sive than its domestically produced coun- A. income distribution in each country
terpart. will become more equitable
C. raise revenues to pay subsidies to do- B. employment in each country will in-
mestic producers. crease
D. stall importation while perishable C. migration from one country to the
items rot. other will increase
136. In comparing a tariff and quota, we find D. each country can consume beyond its
that constraints of resources and productivity
A. both will generate revenue for govern- E. each country will become more self-
ment. sufficient
B. the tariff generates revenue for the
government but the quota does not 141. Business and investors can already de-
mand what they want from the nation-
C. neither the tariff nor the quota gener-
state that would advance their interests.
ates revenue for the government.
A. TRUE
D. the tariff generates revenue for the
government but the quota does not. B. FALSE

142. France introduced import quotas in C. Economics

A. 1931 D. Demand
B. 1934
148. Limiting the amount of German-made
C. 1831
cars entering the U.S. is an example of
D. 1835 which trade barrier?
143. Top 5 two-way trading partners in 2018
NARAYAN CHANGDER
A. China, Japan, United States, Republic
of Korea, India
B. United States, China, Japan, Republic
of Korea, India
C. United States, China, India, Japan, Re-
public of Korea
D. China, United States, Japan, Republic A. Quota
of Korea, India B. Embargo
144. Goods often come from abroad or contain C. Tariff
imported parts.
D. Subsidy
A. True
B. False 149. Factors of production are perfectly mobile
between different countries
145. Limits the quantity of a good imported
into a country. A. True
A. Tariff B. False
B. Quota
150. US Exports = $12 million and US Im-
C. Embargo
ports = $20 million. What does the United
D. Subsidy States have? Hint:(X-M)
146. These are entities established by formal A. Trade Surplus
political agreements between their mem-
B. Trade Failure
bers who have the status of international
treaties. C. Balance of Trade
A. Corporations D. none of above
B. Trade Unions
151. A term that means there is not enough of
C. Development Agencies
something is
D. International Organizations
A. supply
147. This occurs when the supply is low and
the demand is high B. economics
A. Natural Resource C. scarcity

B. Scarcity D. enterprise

152. Developing countries are called develop- C. prevent the trading of services across
ing because they have: nations’ borders.

A. fewer languages than developed coun- D. encourage countries to establish quo-
tries. tas.
B. smaller populations than developed
countries. 157. The rate at which goods are exchanged
between one another in the international
C. larger populations than developed market is called
countries.
A. the exchange rate.
D. lower incomes than developed coun-
tries. B. term of trade.
C. an absolute advantage.
153. What type of exchange rate system do
most countries operate under? D. a comparative advantage.
A. Flexible
158. Various features of BOT can be explained
B. Floating by GDP?
C. Fictitious A. True
D. Fixed
B. False
154. International trade can have important C. I don’t know
effects on the distribution of income be-
cause D. none of above
A. the more powerful country dictates the 159. exchange rate is not fixed by the
terms of trade. monetary authorities.
B. of government corruption. A. Fixed
C. different countries use different cur- B. Flexible
rencies.
C. quotas
D. different industries employ different
factors of production. D. tariffs
155. When the pound appreciates 160. Use the table in the picture to determine
A. exports become cheaper what should country A produce according
to Comparative Advantage.
B. imports become cheaper
C. exports won’t change in price
D. the current account balance should im-
prove
156. The principal objective of WTO is to: A. Planes

A. reduce the level of all tariffs and en-
B. Planes and Submarines
courage trade
C. Submarines
B. to increase tariffs on all imported
goods D. Neither Planes nor Submarines

161. A manufacturing firm based in country C C. Multilateral Institutions

buys in raw materials from country A and D. Provisional Institutions
sells the finished goods to country B. The
firm could gain if country C’s currency: 165. The Concept of reciprocal demand was in-
A. depreciated against both other curren- troduced by Ricardo
cies A. True
B. depreciated against currency A but ap- B. False
preciated against currency B
NARAYAN CHANGDER
166. The ability of one person or nation to pro-
C. appreciated against currency A but de- duce more of a good than another person
preciated against currency B or nation
D. appreciated against both currencies A. Comparative Advantage
162. Based on this table, which statement B. Absolute advantage
BEST describes the situation? C. exports
D. protectionism
167. The price of one nation’s currency in

terms of another nation’s currency
A. Germany has an absolute advantage in A. exchange rate
both products, but Greece should still spe- B. conversion percentage
cialize in fish.
C. conversion protocol
B. Germany has an absolute advantage in
D. exchange percentage
motorcycles, and Greece has an absolute
advantage in fish. 168. What is “The ability to produce more
C. Germany has an comparative advan- goods/services than another country”?
tage in motorcycles, but Greece has an ab- A. Absolute Advantage
solute advantage in both products.
B. Comparative Advantage
D. In this particular case, neither side C. Embargo
would benefit from specializing more in
one of the particular products. D. Standards
163. What is the term for the rate a person or 169. Why is a nation is better off when it pro-
organization must pay to borrow money duces goods for which It has a comparative
from a bank? advantage?
A. Discount Rate
B. Interest Rate
C. Return Rate
D. Monetary Rate
164. WTO is a
A. Permanent Institution
B. Multilateral Agreement

A. It produces those goods more effi- happen to the prices of American goods in
ciently can trade for items for which it has Japan?
no comparative advantage

A. increase or decrease
B. it can focus on producing items no B. decrease
other country produces
C. remain the same
C. It can trade for items for which it has
D. increase
not resources to produce.
D. None of the above answers are cor- 174. Declining costs per unit of output results
rect. from international trade especially if:
A. international trade affords producers
170. is the concentration of the productive monopoly power
efforts of individuals and firms on a lim-
ited number of activities. B. national governments levy import tar-
iffs and quotas
A. exports
C. producing goods entails increasing
B. imports costs
C. exchange rates D. economies of scale exist for producers
D. specialization 175. A lower tariff on imported aluminum
would most likely benefit:
171. As a result of trade, specialization in the
Ricardian model tends to be A. Foreign producers at the expense of
domestic consumers
A. complete with constant costs and with
increasing costs. B. Domestic manufacturers of aluminum
B. complete with constant costs and in- C. Domestic consumers of aluminum
complete with increasing costs. D. workers in the domestic aluminum in-
C. incomplete with constant costs and dustry
complete with increasing costs. 176. which of the following will shift the ag-
D. incomplete with constant costs and in- gregate demand curve to the right?
complete with increasing costs. A. A report that corporate earnings were
E. None of the above. lower than expected.
B. An increase in interest rates caused by
172. A tariff is a
a tightening of monetary policy
A. limit on how much of a product can be C. Increased imports caused by appreci-
imported ation of the dollar
B. limit on how much a product can be ex- D. Increased spending by businesses on
ported computers
C. ban on trade with a specific nation E. an increase in the government’s bud-
D. tax on imported goods get surplus
173. Suppose the exchange rate between the 177. Choose all of the following that are fac-
United States and Japan changes from $1 tors causing globalisation:
= 100 yen to $1 = 110 yen. What would A. Changes in technology

B. Changes in government policies reduc- D. a requirement that promotes safety on

ing protectionism all products.
C. Increased cultural understanding 183. What is incorrect about FPI?
D. Growth in MNCs A. It is mainly in the form of stocks or
178. Which of the following is NOT a way to bonds.
overcome deficits in the balance of pay- B. It is involved in management.
ments? C. It is denominated in a national cur-
NARAYAN CHANGDER
A. Price control rency.
B. Devaluation D. It takes place primarily through finan-
cial institutions such as banks and invest-
C. Export promotion
ment funds.
D. Government reserves
184. occurs when a country exports more than
179. Current International Economic Problem- it imports (brings money into the econ-
sand Challenges does not include: omy)
A. Slow Growth and High Unemployment A. favorable balance of trade
in Advanced Economies after “the Great B. Fixed exchanged
Recession”
C. floating exchange rate
B. Trade Protectionism in Advanced Coun-
tries D. Imports
C. Structural Imbalances in Advanced 185. Which of the following will cause the ex-
Economies change rate of a currency to go up?
D. Narrowing down Poverty in Many De- A. An increase in the demand for import.
veloping Countries B. A balance of payment deficit.
180. NAFTA BEST represents the controversy C. Speculation that the exchange rate will
that exists over fall.
A. scarcity D. An increase in investment flow into the
country
B. embargoes
C. debt 186. According to the principle of comparative
advantage,
D. trade barriers
181. What formula do we use to find Compar-

ative Advantage?
A. We Give Up / If We Make
B. If We Make / We Give Up
A. South Korea should export steel
182. A standard is B. South Korea should export steel and
A. a cash grant or loan from the govern- DVDs
ment to support the business. C. Japan should export steel
B. a tax on imports. D. Japan should export steel and DVDs
C. an official ban on trade. Explanation:Again recall that comparative

advantage was defined as the opportunity B. International Trade Policy

cost of producing goods. Japan can pro- C. International Trade Organization
duce 80 tons of steel or 40 DVDs. The

opportunity cost of producing one ton of D. International Monetary Fund
steel is the loss of 1/2 of a DVD that Saudi
191. What is opportunity cost?
workers could otherwise have produced.
= Have table (SK:1/2-2; Japan:1-1)= SK A. a graph that shows how much an econ-
gives up the least to produce a ton of steel, omy can produce between 2 goods
so it has a comparative advantage in steel B. how much money something is
production. Similarly, Japan has a com-
parative advantage in DVD production. C. the opportunity one has to give up in
order to gain something else
187. Who introduced the theory of absolute D. land, labor, capital, entrepreneurs
advantage?
A. Adam Smith 192. A closed economy is one in which:
B. David Ricardo A. Imports exactly equal exports, so that

trade is balanced.
C. Bertil Ohlin
B. Domestic firms invest in industries
D. Michael Porter overseas.
188. If the tariff on computers is not changed, C. The home economy is isolated from
but the government then adds hitherto foreign trade
nonexistent tariffs on imported semi- D. Saving exactly equals investment at
conductor components, then the effective full employment.
rate of protection in the computer industry
will 193. Specific tariffs are
A. increase. A. imports taxes stated in ads industry
B. decrease publications
C. remain the same. B. import taxes calculated as a fixed

charge for each unit of imported goods
D. no longer apply.
C. the same as import quotas
189. The figure illustrates the international D. import taxes calculated as a fraction of
movement of capital. When there is in- the value of the imported good
ternational movement of AB of capital in
both Nations, the rate of return on capital 194. A foreign trade zone is
in Nation 1
A. a regional area within which trade with
A. Increase NF foreign nations is allowed
B. Increase CN B. a free trade agreement among several
C. Decrease CN nations
D. Decrease NF C. designed to limit export of manufac-
tured goods by placing export taxes on
190. examines the reasons for and the ef- goods made within the zone
fects of restrictions on international trade. D. designed to promote exports by defer-
A. International Trade Theory ring import duties on intermediate inputs

and waving such duties if the final prod- 200. The reason international trade is con-
uct is re-exported rather than sold domes- trolled has to do with how economics re-
tically lates to:
A. Politics
195. A factor of production that can be used in
any sector of an economy is a(an) B. Biology
A. specific factor. C. Chance Factors
B. mobile factor. D. Invention
NARAYAN CHANGDER
C. export-competing factor. 201. Restriction to regulate international com-
D. import-competing factor. merce is called a(n)
A. Trade
196. The current account in the balance of pay-
ments consists of B. Subsidy
A. goods and services account and cur- C. Trade Barrier

rent transfer D. Free Trade
B. current transfer, direct investment 202. Which definition BEST describes the term
and portfolio investment balance of trade?
C. goods and service account, income ac- A. the difference between a country’s ex-
count and current transfer change rate and the value of a country’s
D. income, current transfer, other invest- imports
ment and errors and omissions B. the value of a country’s goods and ser-
vices that are exported divided by its per
197. If Country A can produce coffee beans at capita income
a lower opportunity cost than Country B,
then Country A has a(n) in the produc- C. the difference between the yearly
tion of coffee beans value of a country’s exports and the yearly
value of goods it produces
D. the value of a country’s exported
B. Comparative Advantage goods and services minus the value of
goods and services a country imports
198. International trade not helps consumers
to obtain foreign goods at lower prices 203. Countries with different comparative ad-
A. True vantages and specializations would
each country through trade.
B. False
A. Benefit
199. A good that is sent to another country for B. Not Benefit
sale
204. When a currency experience falling value,
A. export
it refer to the terms in variable ex-
B. import change rate system.
C. quota A. appreciation
D. subsidy B. depreciation

205. Which of the following is most likely to 210. International trade results in not equal-
reduce Australia’s import volumes? ization of price

A. A recession in Australia and an appre- A. True
ciation of the Australian dollar B. False
B. An economic expansion in Australia 211. Which of the following policies permits a
and a depreciation of the Australian dollar specific quantity of goods to be imported
C. An economic expansion in Australia at tariff rate and applies a higher tariff
and an appreciation of the Australian dol- rate to imports above company?
lar A. Quota
D. A recession in Australia and a depreci- B. Import tariff.
ation of the Australian dollar C. Specific tariff.
206. What action would benefit domestic pro- D. All of the above.
ducers? 212. What is the opportunity cost of China pro-
A. Higher tariffs ducing cars?
B. Lower tariffs
C. Lower quotas
D. Higher standards
207. pick the factors affecting terms of trade

A. Terms of trade
B. Tariff and Devaluation
A. .80
208. Tariffs and Quotas can benefit nations im- B. 1.25
posing them by
C. 1.4
A. Raising revenue
D. .71
B. increasing variety of goods
213. FDI stands for
C. lowering prices
A. Foreign domestic Investment
D. increasing consumption B. Foreign Direct Income
209. Safety, environmental, health, or other C. Foreign Dispute Evaluation
technical requirements set by a govern- D. Foreign Direct Investment
ment. Imports must meet these require-
ments before they are allowed to come 214. Depending on the method of determining
into the country. the duty, it is divided into what duties.
A. import, export, transit
A. Standards
B. special, ad valorem, mixed
B. Subsidy
C. seasonal, anti-dumping, compen-
C. Quota satory
D. Tariffs D. nominal, effective

215. Higher price levels in the UK would result 220. An argument against trade protectionism
in is that it will increase
A. Increased exports and appreciation of A. competition for domestic industries
the £ B. domestic price level
B. Increased exports and depreciation of C. the current account deficit
the £ D. opportunities for domestic infant in-
C. Increased imports and an apprecia- dustries
NARAYAN CHANGDER
tion of the £
221. The aim of internal and external trade is
D. Increased imports and depreciation of to stabilize the prize level
the £ A. True
216. A tax on an imported good is called a? B. False
A. quota 222. Who propounded that a country produces
and exports the product in which it has
B. barrier
comparative advantage:
C. tariff
A. Ricardo
D. standard B. Posner
217. Trade bloc:Myanmar, Thailand, Cambodia, C. Ohlin
Singapore, Vietnam, Indonesia D. Smith
A. NAFTA 223. What trade barrier puts a tax on im-
B. ASEAN ported goods?
C. European Union A. tariff
B. embargo
D. none of above
C. subsidy
218. A is a type of protectionist trade re- D. standard
striction that sets a physical limit on the
quantity of a good that can be imported 224. Andre Prenoor, U.S. entrepreneur, in-
into a country in a given period of time. vests $50 million to develop a theme park
in Malaysia.
A. Trade
A. Current account
B. Trade Barrier
B. Capital/Financial account
C. Tariff
225. Ricardo describes trade taking place as a
D. Quota result of countries having in production
of particular goods, relative to each other.
219. A government payment that supports a
business or market. A. absolute advantage
A. Tariff B. comparative advantage
C. both absolute and comparative advan-
B. Standards
tage
C. Embargo
D. neither absolute nor comparative ad-
D. Subsidy vantage

226. Most tariffs have 230. following a decrease in the real interest
A. only revenue effects rate, there is an increase in financial capi-
tal outflows from Country A. The increase

B. only protective effects in capital outflows will mostly likely have
C. both protective and revenue effects which of the following effects on Country
A’s net exports and aggregate demand?
D. neither protective or revenue effects
A. net exports decrease, aggregate de-
227. China has to pay extra money when they mand decreases.
import their steel into the United States.
B. net exports decrease, aggregate de-
What is this trade barrier called?
mand no change
C. net exports increase, aggregate de-
mand increases
D. net exports increase, aggregate de-
mand decreases
E. net exports increase, aggregate de-
A. Subsidy mand no change.
B. Tariff
231. is the ability of a nation or region to
C. Quota produce more of a certain product.
D. Embargo A. Comparative Advantage
228. The current account in the balance of pay- B. Capital
ment consists of ? C. Absolute Advantage
A. good and service account and current
D. Factors of Production
transfer.
B. current transfer, direct investment 232. Who has the ABSOLUTE advantage in pro-
and portfolio investment. ducing cotton?
C. goods and service account, income ac-
count and current transfer.
D. income, current transfer, other invest-
ment and errors and omissions.
A. America
229. Should Canada impose a tariff on imports,
one would expect Canada’s: B. Brazil
A. Terms of trade to improve and volume
233. When the government spends more
of trade to decrease
money than it is taking in as revenue, this
B. Terms of trade to worsen and volume is known as
of trade to decrease
A. Deficit Spending
C. Terms of trade to improve and volume
B. Surplus Spending
of trade to increase
C. Transition
D. Terms of trade to worsen and volume
of trade to increase D. Equilibrium

234. An excess demand for a particular cur- 239. Deficits in balance of payments can be
rency in the floating exchange rate system solved by
will lead to A. increasing government spending.
A. a depreciation of that currency. B. lowering interest rates.
B. an appreciation of that currency. C. raising indirect taxes.
C. a long-term surplus of that currency. D. discouraging import.
D. a long-term shortage of that currency.
240. Overtime, economic interdependence of
NARAYAN CHANGDER
235. Being an expert in one job, product, or nations has:
service is called A. grown
A. economic interdependence B. diminished
B. economic specialization C. remained unchanged
C. opportunity cost D. cannot say
D. scarcity 241. A tax placed on goods imported into a
country
236. The circular flow model of a market econ-
omy shows A. Quota
A. how profits are made B. Tariff
B. what inputs are required for what out- C. Embargo

puts D. Subsidy
C. how many firms can support the needs 242. The specifications that products must
of how many households meet for various purposes such as health,
D. the interactions between households safety or compliance are called?
and firms in the free market A. Standard
237. When a country has the lowest opportu- B. Embargo
nity cost for producing the good or service C. Rates
A. Comparative Advantage D. License
B. Absolute Advantage 243. If a firm increases its output in the
C. Trade Surplus and unit costs , then the firm is experi-
D. Trade Failure encing of scale.
A. long run; decrease; economies
238. An agreement among the United States,
B. long run; increase; economies
Canada and Mexico designed to remove
tariff barriers between the three coun- C. short run; decrease; diseconomies
tries. D. long run; decrease; diseconomies
A. NAFTA
244. Terms of Trade may be flavorable or un-
B. ASEAN favourable
C. EU A. true
D. none of above B. false

245. An increase in exports leads to which of C. Trade Barrier

the following: D. Embargo

A. An increase in demand for the domes-
tic currency 250. If it is ascertained that Foreign uses
prison-slave labor to produce its exports,
B. A decrease in demand for the domes- then home should
tic currency
A. export cloth.
C. An increase in the supply of the domes-
tic currency B. export widgets.
D. A decrease in the supply of the domes- C. export both and import nothing.
tic currency D. export and import nothing.
246. There are two main categories of inter- E. All of the above.
national trade theories-classical by Adam 251. Importance of the study of International
Smith and Ricardo; and modern by economicsSelect the wrong one
A. Heckscher and Ohlin; Adam Smith and A. Optimum use of resources
Ricardo
B. Growth and development
B. Heckscher and Ohlin; Keynes
C. Greater choice for consumers
C. Keynes; Heckscher and Ohlin
D. Currency minting
D. Adam Smith and Ricardo; Heckscher
and Ohlin 252. Which of the following is not an advan-
tage of international trade?
247. measurements that restrict or prevent
A. Better product can be obtained.
trade with other countries
B. Prices for products are lower.
A. imports
C. Local producers may be hurt
B. trade barriers
D. Products that cannot be produced at
C. embargo
home can be obtained.
D. free trade
253. Economies of Scale are the unit cost re-
248. Two main characteristics of investments ductions associated with a small scale of
are: output.
A. risk and profitability A. True
B. resource transfer and balance of pay- B. False
ment effects
254. The benefit or advantage of an economy
C. job creation and technology transfer
to be able to produce a commodity at a
D. higher rate of returns and technology lesser opportunity cost than other entities
transfer is referred to as
249. Any law passed to limit free trade among A. Opportunity Cost
nations. B. Absolute Advantage
A. Quota C. Comparative Advantage
B. Dumping D. Growth

255. which of the following would decrease B. Trade Failure

the demand for A$ by the Japanese
C. Absolute Advantage
A. a fall in their unemployment
D. Comparative Advantage
B. increased Japanese exports of steel
and cars 261. Which country does not have a floating
C. decreased Japanese imports of iron exchange system
ore
A. Germany
NARAYAN CHANGDER
D. a free trade agreement between
Japan and Australia B. Canada
C. Australia
256. An import quota restricts the volume of
imports much speedier and tighter than a D. Venezuela
tariff
A. true 262. Given the information in the table, For-
eign’s opportunity cost of widgets is
B. false
257. A firm’s , relative to that of other

firms, is generally regarded as the most
important determinant of competitive-
ness.
A. income level A. 1.5.
B. frets B. 0.5.
C. preferences C. 2.0.
D. productivity
D. 6.0.
258. Tires made in Tennessee factories are
used on cars in Europe. 263. The balance of payment is composed of
the capital account, official reserve ac-
A. import count and
B. export
A. aggregate account.
259. Nontariff trade barriers could include all B. current account.
of the following except
C. basic account.
A. domestic content laws
B. government procurement policies D. service account.
C. health, safety, and environmental 264. When a currency gains value, we say it
standards has
D. antidumping/countervailing duties ap-
A. depreciated
plied to imports
B. appreciated
260. A country’s exports fall short of the
value of its imports C. exchanged
A. Trade Surplus D. gotten weaker

265. If the Mexican Peso depreciates in rela- in the figures.As more wheat is produced,
tion to the Chinese Yuan, how is Mexico how will the opportunity cost of producing
affected? wheat, as represented in Figures 1 and 2,

A. Mexico has less purchasing power in be affected?
Chinese currency
B. Mexico benefits from increased pur-
chasing power
C. Mexico would have more Chinese in-
vestors
A. Figure 1:Decrease / Figure 2:Increase
D. They would be invaded by China
B. Figure 1:Increase / Figure 2:Decrease
266. Higher income levels in the US would re- C. Figure 1:No Change / Figure 2:In-
sult in crease
A. Increased exports and appreciation of D. Figure 1:No Change / Figure 2:De-
the US Dollar crease
B. Increased exports and depreciation of 270. International trade theory refers to:
the US dollar
A. the microeconomic aspects of interna-
C. Increased imports and appreciation of tional trade
the US Dollar
B. the macroeconomic aspects of interna-
D. Increased imports and depreciation of tional trade
the US Dollar
C. open economy macroeconomics of in-
267. What is an advantage of a floating ex- ternational finance
change rate? D. all of above
A. There is no advantadge 271. What kind of economic integration ar-
B. Interest rates are free to be employed rangement has common policies on product
to domestic goals regulation, and free movement of goods,
services, capital and labour?
C. Reduced speculation from foreign in-
vestors A. Common markets
D. High consumer and business confi- B. Preferential trading area
dence C. Free trade areas
D. Custom unions
268. favor trade barriers, where as fa-
vor fewer (or no) trade restrictions. 272. trade is referred to as a trade that
A. Embargoes / Quotas involves buying and selling of goods be-
tween two individuals or businesses lo-
B. Protectionists / Free Traders cated in two different countries or it can
C. Subsidies / Tariffs be trade between two different countries
D. Absolute Advantage / Comparative Ad- A. Internal
vantage B. International
269. Two alternative production possibility C. Inter-regional
frontiers for apples and wheat are shown D. Domestic

273. Placing taxes on imported shoes from A. The country begins to export the good.
Vietnam is an example of B. The tariff-equivalent of the quota be-
A. trade barrier comes negative
B. trade surplus C. Quota rents become zero
C. balanced budget D. The domestic price rises above the
D. monetary policy world price, to keep the tariff-equivalent
of the quota constant
274. A country can have an increased surplus
NARAYAN CHANGDER
in its balance of trade as a result of 278. Country “G” can produce 20 hamburgers
or 80 hot dogs. Country “H” can produce
A. an increase in domestic inflation 14 hamburgers or 28 hot dogs. What is
B. declining imports and rising exports the opportunity cost for Country “G” to
C. higher tariffs imposed by its trading produce 1 hamburger?
partners A. 60 hot dogs
D. an increase in capital inflow B. 40 hot dogs
E. an appreciating currency C. 4 hot dogs
275. If a French firm buys computers from the D. 4 hamburgers

United States, there would be an increase 279. The opportunity cost of one DVD in Japan
in which of the following in the foreign exis
change market?
A. Demand for United States dollars and
supply of euros
B. Demand for both United States dollars
and euros
C. Supply of United States dollars and de- A. One ton of steel
mand for euros B. 2 ton of steel
D. Supply of both United States dollars C. 3 ton of steel
and euros
D. 4 ton of steel
E. International value of the euro relative
to the United States dollar 280. If the Mexican peso depreciates com-
pared to the Canadian dollar, exports from
276. The is involved in the economy be- Canada to Mexico
cause it makes laws to protect businesses.
A. would likely decrease
A. business
B. would likely increase
B. foreign trade
C. wouldn’t change at all
C. government
D. would have to stop all together
D. global economy
281. is the highest hierarchical level in the
277. What happens if a quota has been keep- organisational
ing the domestic price above the world
price, but then the world price rises above A. General council
what has been the domestic price? B. Ministerial conference

C. Director General C. customs union

D. Secretariat at WTO D. common market

282. Proponents of free trade claim all of the 287. A tariff that prohibits imports has only
following as advantages except A. a revenue effect and redistribution ef-
A. relatively high wage levels for all do- fect
mestic workers. B. revenue effect and protection effect
B. a wider selection of products for con- C. consumption effect and protection ef-
sumers fect
C. increased competition for world pro- D. redistribution effect and consumption
ducers. effect
D. the utilization of the most efficient pro- 288. the value of all money coming into a coun-
duction processes. try thanks to exports, minus all the money
going out of the country as it pays for im-
283. Those who benefit from the protection- ports
ism policy through tariff are
A. absolute advantage
A. user in a foreign country.
B. balance of payments
B. domestic users.
C. comparative advantage
C. producers in foreign countries. D. Unfavorable Balance of Trade
D. domestic producers
289. The table above indicates the production
284. when a country, or several countries, im- alternatives of two countries, A and B,
pose economic sanctions against a nation which produces computers and steel using
by refusing to trade with it. equal amounts of resources. if both coun-
tries always produce at full employment,
A. standards
which of the following statement must be
B. tariffs correct?
C. purchasing power
D. embargo
285. An exchange rate

A. determines a country’s imports
B. determine the price of one country’s
currency in terms of another country’s
currency
C. determine a country’s exports
D. none of above
286. An agreement that will reduce tariffs and

other trade barriers is an example of a A. Mutually advantageous trade can oc-
cur between the two countries when 1 unit
A. Free Trade area of steel from Country A is exchanged for 2
B. Preferential trade area computers from Country B.

B. Mutually advantageous trade can oc- C. Ke = YaIM / Export 100%

cur between two countries when 2 units D. none of above
of steel from Country B are exchanged for
1 computer from Country A. 294. With a partial trade agreement,
C. Country A has an absolute and compar- A. two or more countries agree to liberal-
ative advantage in production of comput- ize trade in a selected group of categories.
ers, and Country B has an absolute and
B. two or more countries set common tar-
comparative advantage in the production
iff towards non-members.
NARAYAN CHANGDER
of steel.
C. two or more countries allow free mo-
D. Country B has an absolute advantage
bility of inputs such as capital and labour.
in the production of both commodities, but
a comparative advantage in the produc-
tion of steel D. none of above
E. Country A has an absolute advantage 295. According to Gravity model, we expect
in the production of both commodities, but the United States to trade less with:
a comparative advantage in the produc-
A. Canada, Mexico
tion of steel.
B. Japan, China
290. The following are International trade the-
C. Bangladesh, Nepal
ories except:
D. Germany
A. New trade
B. Free trade 296. Demand is said to control the of con-
sumer goods.
C. Comparative advantage theory
A. scarcity
D. none of above
B. enterprise
291. How many stars in the flags of
C. supply
Venezuela?
D. mixed
A. 7
B. 8 297. A tariff-rate quota
C. 6 A. is a limit on the number of tariffs that
a country can place on imports
D. none of above
B. uses a single tariff along with import
292. Comparative advantage looks at relative quotas to restrict imports
efficiency, taking into account the produc-
C. is designed to avoid the price in-
tion with the lowest opportunity costs.
creases caused by simple tariffs
A. TRUE D. is a two-tier tariff system intended to
B. FALSE restrict imports
293. The formula for finding the export quota 298. The dominant trading nation in the world
is: market since World War II was
A. Que = YaSMIN / Expert 1/2 A. the United Kingdom.
B. Ke = Export / YaIM 100% B. the United States.

C. Japan. B. Price is lower in one country than in an-

D. Germany. other.

E. China. C. The productivity of labour differs
across countries and industries.
299. A decrease in the demand for US goods D. Exports give a country a political ad-
will do what to the value of the US dol- vantage over other countries that export
lar? less.
A. Depreciate the value of our money
303. What is ASEAN?
B. Appreciate the vale of our money
A. the Association of Southeast Asian Na-
300. Why is an embargo used in situations tions
where countries have severe political dif-
B. trade bloc between the USA and Asia
ferences?
C. a collegiate conference for athletics
A. An embargo is a way to increase trade
between countries. D. none of above
B. A country can set unfair standards for
304. Increased foreign competition tend to
the opposing country.
A. Intensify inflationary pressure at
C. Embargoes typically ban all trade be-
home
tween two countries.
D. The taxes collected on imports can be B. Induce falling output per worker-hour
used for military tactics. for domestic workers
C. Place constraints on the wages of do-
301. If two nations specialize according to the mestic workers
law of comparative advantage and then
trade with each other, which of the follow- D. Increase profits of domestic import-
ing would be true? competing industries
A. a smaller number of goods would be 305. Which country has an absolute advan-
available in each trading nation tage in cloth?
B. Total world production of goods would A. U.S.
be decrease
B. U.K
C. Everyone within each nation would be
better off. 306. An argument that seeks to protect work-
D. Each nation would increase its con- ers of a country from becoming unem-
sumption possibilities ployed due to competition from products
made by workers in developing countries
E. One nation would gain at the expense who usually work for much lower wages
of the other nation and benefits.
302. According to the theory of comparative A. Domestic Employment
advantage, which of the following is not a
B. National Security
reason why countries trade?
C. Trading Bloc
A. Costs are higher in one country than in
another. D. Balance of Trade

307. Which of the following body is not re- 312. Choose the correct member countries of
lated to the WTO? ASEAN.
A. Dispute Settlement Body
B. Council of trade in goods
C. Exchange Rate Management Body
D. Trade Policy Review Body
NARAYAN CHANGDER
308. A lower tariff on imported steel would
most likely benefit
A. Indonesia
A. foreign producers at the expense of
domestic consumers. B. Thailand
B. domestic manufacturers of steel. C. China

C. domestic consumers of steel. D. Vietnam
D. workers in the steel industry. E. Japan
309. Mill’s Theory of reciprocal demand was
313. Motivation for countries to trade
developed with a two commodity (linen
and cloth ) model A. obtaining scarce resources
A. True B. decrease in wages
B. False
C. higher cost on products
310. free trade agreements among countries D. none of above
in a region
A. quota 314. What is meant by absolute advantage
in international trade according to Adam
B. trade bloc
Smith?
C. trade block
A. The ability of a country to produce all
D. embargo types of goods or services at the same op-
311. Is there a country who has a comparative portunity cost as other countries.
advantage in the production of shoes? B. The ability of a country to produce all
types of goods or services at a lower op-
portunity cost than other countries.
C. The ability of a country to produce cer-
tain goods or services at the same oppor-
tunity cost as other countries.
D. The ability of a country to produce a
particular good or service at a lower op-
A. Yes, China.
portunity cost than other countries.
B. Yes, India.
E. The ability of a country to produce cer-
C. No tain goods or services at a higher oppor-
D. none of above tunity cost than other countries.

315. People traveling to another country and B. 20, 000 units

people who import foreign goods benefit C. 30, 000 units
from

D. 42, 000 units
A. appreciation Explanation:Demand = 40Supply = 20=
B. depreciation amount to import = 40-20 = 20 (Sw
sugar + tariff)
C. trade barriers
D. protectionism 320. How would you represent the imposition
of a tariff?
316. Financial assistance from the government
to encourage production of or the purchase
of a good is best described as a
A. Tariff
B. Embargo
C. Subsidy
D. Trade
317. Country “G” can produce 20 hamburgers A. S (world) would shift upwards
or 80 hot dogs. Country “H” can produce B. S (world) would shift downwards
14 hamburgers or 28 hot dogs. What is
the opportunity cost for Country “H” to C. S (domestic) would shift upwards
produce 1 hot dog? D. S (domestic) would shift downwards
A. 12 hamburgers 321. The supply curve will shift to the right if
B. 2 hamburgers
C. 1/2 hamburger A. number of tourist increase in the coun-
try
D. 3 hamburgers
B. foreigner buy import goods
318. The goal of the North Atlantic Free Trade C. foreigner did not make investment in
Agreement is to trade barriers. the country
A. Decrease D. none of above
B. Increase
322. How is spending by tourists visiting Aus-
319. With the tariff, the total quantity of im- tralia recorded in the BoP?
ports falls to
A. As a service debit in the current ac-

A. 12, 000 units count

B. As an income credit in the current ac- 327. Measure the price of one nation’s cur-
count rency in terms of another nation’s currency
C. As a service credit in the current ac- A. appreciation
count B. depreciation
D. As a service credit in the capital ac- C. exchange rate
count
D. balance of trade
323. When the value of a nation’s imports are
NARAYAN CHANGDER
328. Country “A” can produce 12 cars or 8
greater than the value of its exports, the
computers. Country “B” can produce 15
nation has
cars or 5 computers. Which country has
A. a trade surplus the absolute advantage in terms of cars?
B. a positive balance of payments A. Country “A”
C. a favorable balance of trade B. Country “B”
D. an unfavorable (negative) balance of C. Neither
trade D. Both
324. What is the formula for calculating com- 329. What is another term for trade between
parative advantage? nations?
A. Cost/Output A. Free trade
B. Output/Cost B. International trade
C. Voluntary trade
325. Foreign trade deficit
D. Trade barrier
A. increase in the country’s export of
goods and services over import of goods 330. Income tax is the best example of what
and services type of tax?
B. increase in the country’s import of A. Regressive
goods and services over export of goods
B. Proportional
and services
C. Progressive
C. the balance of the current operations
and capital movement number of the bal- D. Property
ance sheet
331. Having a comparative advantage in a
D. none of above good means that a country can produce the
good
326. The measure of the price of one nation’s
currency in terms of another nation’s cur- A. Comparatively faster than any other
rency is a/n country.
B. Cheaper than most countries.
A. appreciation
C. At a lower opportunity cost compared
B. depreciation
to another country
C. exchange rate
D. Better than every other country in the
D. floating exchange rate world.

332. When the dollar falls C. kathmandu

A. it takes less dollars to equal a unit of D. Male

foreign currency
338. What is the theme song for international
B. it takes the same unit to equal a unit of trade?
foreign currency
A. Randy Newman, “You Got a Friend In
C. it takes more dollars to equal a unit of Me”
foreign currency
B. The Rembrandts, “I’ll Be There For
D. none of above You”
333. What trade agreement reduces trade bar- C. Biz Markie, “Just a Friend”
riers between the US, Canada, & Mexico? D. Dionne Warwick, Elton John, Gladys
A. European Union Knight & Stevie Wonder, “That’s What
Friends Are For”
B. North American Free Trade Agreement
339. In the Customs Union
C. Association of Southeast Asian Na-
tions A. all foreign tariffs are replaced by a sin-
gle domestic tariff
D. United Nations
B. all internal and external tariffs are re-
334. The Concept of gross barter terms of placed by a single tariff
trade was introduced by
C. all external tariffs are replaced by a
A. Joan Robinson single external tariff
B. F.W.Taussig D. all internal tariffs are replaced by a sin-
gle external tariff
335. A limit on the quantity or the value of a
commodity that can be brought into a coun- 340. If Hong Kong and Taiwan have identi-
try is called a(n): cal production possibilities curves that are
subject to increasing opportunity costs:
A. Tax Barrier
A. Trade would depend on differences in
B. Tariff
demand conditions
C. Quality Control
B. Trade would depend on economies of
D. Import Quota large-scale production
336. Two or more people depending on each C. Trade would depend on the use of dif-
other for goods and services is called ferent currencies
A. economic specialization D. There would be no basis for gainful

trade
B. scarcity
341. Mill’s Theory of reciprocal demand was
C. economic choices
developed with the illustration of two
D. economic interdependence countries
337. The first SAARC summit was held in A. England and Germany
1985 in B. Germany and U.S.A
A. Dhaka C. U.K and U.S.A
B. Bangalore D. none of above

342. When a nation is skilled in the produc- C. The trade balance moves toward sur-
tion of a commodity it is called When plus, and equilibrium income is unaf-
a country is skilled in the production of a fected.
commodity it is called D. The trade balance moves toward sur-
A. Comparative AdvantageComparative plus, and equilibrium income decreases.
Advantage E. The trade balance is unaffected, and
B. Full beneficial benefit equilibrium income decreases.
NARAYAN CHANGDER
C. Absolute ProfitAbsolute Profit 346. An organization that manufactures and
markets products in many different coun-
D. None of these None of the given
tries and has multinational stock owner-
343. For Marie and Isabella to benefit the ship and multinational management is a
most, what should happen?
A. domestic corporation
B. oligopoly
C. trade bloc
D. multinational corporation
A. Marie should make bracelets and Is-
347. Embargoes:
abella should make earrings and they
trade. A. ban trade with other countries
B. Marie should make earrings and Is- B. generate tax revenues for that country
abella should make bracelets and they C. hurt domestic producers
trade. D. lower prices of goods
C. They should both make their own
bracelets and earrings and not trade. 348. Travis takes two trips to Ecuador. On his
first trip, he finds that one US dollar is
D. none of above worth 25, 000 Ecuadorian Sucre. On his
return trip, he finds that the dollar is now
344. If the value of a country’s currency de- worth 26, 000 Ecuadorian Sucre. What is
creases, which of the following would be a LIKELY result of this change in exchange
expected: rates?
A. An increase in Aggregate Demand A. More Americans will travel to Ecuador
(AD)
B. More money will be printed in Ecuador
B. A decrease in Aggregate Demand (AD)
C. More Europeans will travel to Ecuador
345. Which of the following is true in the short D. Fewer Americans will travel to
run if consumers buy more imported goods Ecuador
and fewer domestic goods?
349. is the precursor of WTO
A. The trade balance moves toward
A. NAFTA
deficit, and equilibrium income de-
creases. B. GATT
B. The trade balance moves toward C. SAARC

deficit, and equilibrium income increases D. EC

350. When a country both exports and imports C. Port of Savannah

a type of commodity, the country is en- D. Port of Brunswick
gaged in

A. Inter-industry trade. 355. A political and economic organization of
10 countries in Asia is often abbreviated
B. An attempt to monopolize the relevant
to what term?
industry.
A. NAFTA
C. Increasing returns to scale.
B. EU
D. Intra-industry trade.
C. ASEAN
351. Country “G” can produce 20 hamburgers
D. TRADERS
or 80 hot dogs. Country “H” can produce
14 hamburgers or 28 hot dogs. What is 356. There is a significant increase in official in-
the opportunity cost for Country “G” to terest rates in Australia. All other things
produce 1 hot dog? being equal, which of the following would
A. 4 hot dogs be true?
B. 1/4 hot dogs A. The AUS Dollar depreciates against
most other currencies
C. 4 hamburgers
B. No change AUS Dollar
D. 1/4 hamburger
C. The US Dollar depreciates against
352. occurs when a nation imports more than most other currencies
it exports
D. The AUS Dollar appreciates against
A. favorable balance of trade most other countries
B. floating exchange rate
357. What is a trade surplus?
C. Unfavorable Balance of Trade
A. when the value of exports exceeds the
D. managed floating exchange rate value of imports
353. The purpose of the founding of the Euro- B. when the value of imports exceeds the
pean Union (EU) in 1993 was to value of exports
A. Prevent the poor from causing a revo- C. when the values of imports and ex-
lution. ports are equal to each other
B. Fight the growing global network of D. when the value of money greater than
terrorism. the amount of goods and services im-
ported
C. Become an economic power to com-
pete with the United States. 358. Allows for free trade of many goods
D. Guarantee the freedom of movement among United States, Canada, and Mex-
of people, goods, services, and capital. ico.
A. NAFTA
354. Which of the following does NOT play a
role in Georgia’s economy? B. ASEAN
A. Northeast Inland Port C. EU
B. Northwest Outland Port D. Free Trade

359. Those who benefited from the policy of 364. Which of the following are protection-
protectionism through the tariff are ism policies purposes?I. infant industry
A. user in a foreign country. argumentII. transportation cost argumen-
tIII. national security argumentIV. domes-
B. local consumers tic employment argument
C. local producers A. I, II III and IV
D. foreign consumers B. I, II and III
NARAYAN CHANGDER
360. According to the table, what is the Euro C. I, III and IV
equivalent of 1 USD? D. I and IV
365. The study for how people’s needs and

wants are provided is
A. scarcity
B. mixed
A. 1.32 Euros C. economics
B. 0.53 Euros D. enterprise
C. .76 Euros 366. Promotes free trade within 10 Southeast
D. 1.59 Euros Asian countries.
A. NAFTA
361. The strengthening of regional blocks like
EU, ASEAN, and UN is gaining a stable B. ASEAN
ground. C. EU
A. TRUE D. Free Trade
B. FALSE 367. A tax on goods bought from another coun-
try
362. Trade agreement between a group of
neighboring countries that promote trade A. Tariff
with each other by lowering trade barri- B. Import Quota
ers.
C. Embargo
A. trade group
D. None of them
B. trading bloc
368. Which of the following is NOT the advan-
C. trade association
tages of international trade?
D. countries of trade A. Increase world output
363. A decrease in value of one currency rela- B. Depletion of country’s reserves
tive to the other C. Sharing the knowledge and technology
A. Currency Depreciation D. relationship between trading partners
B. Currency Appreciation
369. In most cases, tariffs and quotas harm
C. Exchange Rates consumers by causing
D. none of above A. higher prices and fewer choices

B. higher unemployment B. export both and import nothing.

C. surplus and waste C. export and import nothing.

D. unexpected deflation D. export cloth.
370. and quotas are the main ways the 374. Forces of supply and demand establish
United States government controls trade. value of one currency
A. Products
B. Tariffs
C. Foreign
D. International
371. An important insight of international

trade theory is that when countries ex- A. Infant industries argument
change goods and services one with the B. World Trade Organization (WTO)
other it
C. Foreign exchange rate
A. is always beneficial to both countries.
D. Floating exchange rate
B. is usually beneficial to both countries.
C. is typically beneficial only to the low 375. For advanced countries such as the US,
wage trade partner country. tariffs on imported raw materials tend to
be
D. is typically harmful to the technologi-
cally lagging country. A. equal to tariffs on imported manufac-
tured goods
E. tends to create unemployment in both
countries. B. lower than tariffs on imported manu-
factured goods
372. A set of notarial measures aimed at lim-
iting the volume of export and import in C. higher than tariffs on imported manu-
the form of a quantity or amount during a factured goods
certain period: D. the highest of all tariffs
A. license; 376. What does a protective tariff seek to pro-
B. subsidy tect?
C. quota A. Protectionists
D. advalor fight B. Free Trade
373. Given the information in the table, if it is C. Revenue
ascertained that Foreign uses prison-slave D. Domestic Industries
labor to produce its exports, then home
should 377. According to the direction of movement,
the goods are divided into duties
A. to ad valorem, specific and combined
duties
B. to preferential or discriminatory du-
A. export widgets. ties

C. to countervailing, anti-dumping and re- 382. One potential advantage for a country
taliatory duties of encouraging a multinational business to
D. import, export and transit duties set up is that it will:
A. always create more jobs than might be
378. Which country has an absolute advan-
lost
tage in rice production?
B. keep all of the profits made within the
A. Vietnam
country
B. Mexican
NARAYAN CHANGDER
C. not compete with the existing national
379. The statement that “tariffs are needed businesses
to protect Malaysian firm from foreign D. pay taxes to the government
producers who sell excess goods in the
Malaysian markets at less cost” could be 383. Who is credited with the concept of the
most closely associated with which tariff Law of Comparative Advantage?
argument?
A. Diversification for stability.
B. Increased domestic employment.
C. Cheap foreign labour.
D. Protection against dumping.
380. With free trade, quantity imported will
be
A. Adam Smith
B. John Keynes
C. Karl Marx
D. David Ricardo
A. Q1QE
B. q1 vomiting 384. Which country has the absolute advan-
tage in producing wheat?
C. QEQ2
D. Zero
381. If two countries have identical production
possibility frontiers, then trade between
them is not likely if
A. their supply curves are identical.
B. their cost functions are identical.
C. their demand conditions identical.
D. their incomes are identical. A. Mexico
E. None of the above. B. Vietnam

385. Comparative Advantage is the theory: A. trade barriers

A. a scenario in which one country can B. free trade enablers

manufacture a product at a higher quality C. open trade policies
and a faster rate for a greater profit than
another competing country. D. closed trade policies
B. a condition or circumstance that puts 390. Which has more to do with opportunity
a country in a favourable or superior cost?
trade position for example resource en-
dowment
C. economy’s ability to produce goods
and services at a lower opportunity cost 391. an official ban on trade or other commer-
than that of trade partners. cial activity with a particular country.
D. an economic theory where the govern- A. embargo
ment seeks to regulate the economy and
B. tariff
trade in order to promote domestic indus-
try C. sanction
D. barrier
386. In 2014, India was in the top of the coun-
tries with the percentage of account 392. A tariff can be defined as a:
holders.
A. tax on imports.
A. lowest
B. tax on exports.
B. highest
C. legal limit on imports.
C. modest
D. legal limit on exports.
D. largest
393. special taxes place on products imported
387. the main benefits of free trade include from another country.
A. peace, better choice, prices and qual- A. Quotas
ity
B. Tariffs
B. less imports because they cant pene-
trate strong markets C. Subsidies
C. the sharing of the world s resources D. Sanctions
D. greater benefits for less developed 394. Which country has a comparative advan-
economies as they can trade more tage in wheat?
388. If 1 USD costs 4 BRL (1 BRL=0.25 USD) A. U.S.

and the BRL depreciates the new exchange B. U.K
rate could be
395. One potential disadvantage for a country
A. 1 BRL = 0.10 USD of encouraging a multinational business to
B. 1 BRL = 0.50 USD set up is that:
389. Tariffs, quotas, embargoes, and any A. jobs might be lost in existing national
other regulation or policy that restricts in- businesses
ternational trade B. tax revenue to the government will fall

C. these companies never export any 400. What is the term for the economic pol-
products from the countries they operate icy of restraining trade between states
in through methods such as tariffs on im-
D. costs of production are likely to be high ported goods, restrictive quotas, and a va-
and this will raise prices riety of other government regulations?
A. Protectionism
396. Which of the following is a part of the B. Free trade
financial account?
C. Trade balance
NARAYAN CHANGDER
A. Inheritance taxes
D. Exchange rates
B. Transactions in patents
401. If the world equilibrium price of widgets
C. Reserve assets were 4 Cloths, then
D. None of the above A. both countries could benefit from
trade with each other.
397. An argument that supports the use of
trade barriers when a new industry is in B. neither country could benefit from
the early stages of development. trade with each other.
A. Free Trade C. each country will want to export the
good in which it enjoys comparative ad-
B. Infant Industries vantage.
C. National Security D. neither country will want to export the
D. Balance of Trade good in which it enjoys comparative ad-
vantage.
398. The purpose of the protectionism policy E. both countries will want to specialize
in the international trade are listed below in cloth.
EXCEPT
402. the least or smallest amount
A. a country should not depend on an-
other country produce security goods A. most
B. the new industry is not ready to com- B. maximum
pete with the foreign firm C. minimum
C. creating goods relations between mer- D. median
chant countries
403. A regional trade organization made up of
D. an increase in the value of currency European nations
will cause A. NAFTA
399. What is the full form of ASEAN? B. EU
A. Association of South East Asian Na- C. ASEAN
tions D. CARICOM
B. Administration of Southern East Asian 404. Which group benefits when the US dollar
Nations depreciates against other currencies?
C. Organisation of South East Asian Na- A. Foreign citizens vacationing in the U.S.
tions B. U.S. citizens buying foreign goods and
D. None services

C. U.S. citizens traveling in foreign coun- C. to be mean!

tries D. none of above

D. Foreign governments with U.S. trea-
sury bonds 408. Historians of economic thought often de-
scribe written by and published in
405. What is the Law of Comparative Advan- as the first real exposition of an eco-
tage? nomic model.
A. “Of the Balance of Trade, “ David
Hume, 1776
B. “Wealth of Nations, “ David Hume,
1758
C. “Wealth of Nations, “ Adam Smith,
1758
D. “Wealth of Nations, “ Adam Smith,
1776
E. “Of the Balance of Trade, “ David
Hume, 1758
A. producing items a country is most effi-
cient at producing with the lowest oppor- 409. What is “The ability to produce at a
tunity cost lower opportunity cost than another coun-
try”?
B. ability to produce a good or service at
a lower opportunity cost than competitors A. Absolute Advantage
C. ability to produce a good or service at B. Comparative Advantage

a lower opportunity cost than other coun- C. Quota
tries
D. Subsidy
D. all of the above
E. none of the above 410. Promotes free trade within the 28 Euro-
pean member countries.
406. When determining comparative advan- A. NAFTA
tage one must determine
B. ASEAN
A. Opportunity cost
C. EU
B. Specialization
D. Free Trade
D. Embargoes 411. Out of the following, which investment
has the highest return but also the highest
407. Why would a country impose a tariff or risk?
quota on imported goods?
A. CDs
A. to raise the price of imported goods
B. Stock
and encourage people to buy local
B. to raise the price of imported goods to C. Savings Account
help other countries make more money D. Bonds

412. The concept of comparative advantage 416. The study of exchange rate determina-
makes the assumption that everyone will tion is relatively
be better off
A. difficult.
A. producing enough of a specific final
good to export B. new and mathematical.
B. producing the products they produce C. old.

relatively best D. obtuse.
NARAYAN CHANGDER
C. producing enough of a good to con-
sume domestically with enough to export 417. Under a flexible exchange rate system,
D. producing only products they can pro- the indian rupee will appreciate against
duce with greater output than any other the Japanese yen when
country A. India’s inflation rate exceeds japan’s
413. Which one is wrong? Which one is B. India has a trade deficit with japan
wrong?
C. Japan’s economy enters a recession,
A. Edgeworth box diagramEdgeworth but India’s does not
box line
D. japan’s money supply decreases while
B. Priyabis Singar In Vyapar Sharit, India’s money supply increases
Dirdhakalin Hass Prior to the Principal
Singer Business Condition has been E. real interest rates in India increase rel-
lacking in the long run. ative to those in Japan
C. Edgeworth Customs Union Edge-
418. Goods and services produced in one coun-
worth Zakat Union
try and purchased by another
D. Jacob Wiener Customs UnionJa-
cob Wiener Zakat Union A. Imports
B. Exports
414. This details a person’s borrowing and re-
payment history for the last seven years C. Economic Advantages
reported to the company’s by a person’s
D. Absolute Advantages
previous and current lenders.
A. Insurance 419. The theory of relative advantage is
B. Payment history A. It is in their interests to help countries
C. Credit Report increase exports and limit imports.
D. IRA B. specialization in the production of
goods that have achieved the greatest ef-
415. A government imposed limit on the quan- ficiency for the country and export, ex-
tity of goods and services that may be im- changing them for goods with a minimum
ported from another country is called a? advantage of the country
A. standard
C. he says that the country should con-
B. embargo sume only what it produces.
C. tariff D. taxing imports is a means of creating
D. quota jobs and increasing the country’s income

420. After the implementation of the tariff, to- 425. In international trade there is no restric-
tal imports on the diagram are: tion to movement of goods and services

A. True
B. False
426. Increased exports can be attributed to a
dollar.
A. Strong
A. Q1 to Q4 B. Weak
B. Q2 to Q3 427. If 1 Dollar = RM 4.10 become 1 Dollar =
C. Kch RM 4.20, it shows that the RM experience
of value.
D. Q2 to Q4
A. falling
421. The removal of trade barriers so that
B. rising
goods can flow freely between countries.
A. Free Trade 428. A is a rule or other order prescribed
by authority, to keep order within conduct
B. Business Opportunity
A. regulation
C. Open Borders
B. economy
D. Non-sanctioned purchases
C. division of labor
422. Which country is not one of Australia’s
D. opportunity cost
top 5 trading partners for exports?
A. UK 429. What will be the effect of depreciation?
B. New Zealand A. imports will be cheaper
C. China B. exports will be cheaper
D. Japan C. imbalance in balance of payments
423. This refers to the unrestricted flow of D. All
goods and services between countries. 430. What is the last day of school?
A. Free trade A. May 21st
B. Trade barriers B. May 22nd
C. Trade bloc C. May 23rd
D. Trade D. May 24th
424. Who has the COMPARATIVE advantage 431. The developing countries need to protect
in producing cotton? their infant industries from competition
through imposing
A. indirect taxes
B. income taxes
A. America C. import taxes
B. Brazil D. export taxes

432. Mercantilists believed that a country 435. WTO has observed governments
could increase the amount of wealth it had A. 25
by
B. 11
A. Promoting exports and discouraging
imports C. 32
D. 09
B. Discouraging exports and promoting
imports 436. When an exchange rate of a currency de-
NARAYAN CHANGDER
C. Controlling imports and exports preciates, the following will be likely to
happen:
D. Increasing both imports and exports
A. import prices will fall and export prices
433. Which trade theory contends that a coun- will rise
try that initially develops and exports a B. export sales will fall and import pur-
new product may eventually become an im- chases will increase
porter of it, and may no longer manufac-
C. export prices will fall and import prices
ture the product:
will rise
A. Theory of factor endowments D. prices of all products will not change
B. Theory of overlapping demands
437. The real income of domestic producers
C. Economies of scale theory and consumers can be increased by
D. Product life cycle theory A. Technological progress but not interna-
tional trade
434. What is the difference between compara-
B. International trade but not technologi-
tive advantage and absolute advantage?
cal progress
C. Technological progress and interna-
tional trade
D. Neither technological progress nor in-
ternational trade
438. The UNCTAD was born in 1964 at

A. Geneva
B. London
C. Washington
A. There is no difference D. Tokyo
B. Nations with comparative advantage
439. What is the advantage of free capital
specialize in the production of goods for
flow among countries?
which they have a lower opportunity cost
A. more efficient use of capital
C. Nations with comparative advantage
specialize in the production of goods for B. benefits both lenders and borrowers
which they have a higher opportunity cost C. huge investments of all kinds all over
D. An unimportant consideration in a na- the world
tion’s decisions on what to produce trade D. financial crisis

440. If the Home economy suffered a melt- 445. Who gave the income trade terms?
down, and the Unit Labor Requirements in A. tossing
each of the products quadrupled (that is,

doubled to 30 for cloth and 60 for wid- B. Dorrance (Dorrance)
gets) then home should C. Jacob Weiner (Jacob Weiner)
A. export cloth. D. Robertson (Robertson)
B. export widgets.
446. China has to pay extra money when they
C. export both and import nothing. import their steel into the United States.
D. export and import nothing. What is this trade barrier called?
E. All of the above.
441. A(n) is an example of a quota where

foreigners hold quota licenses
A. export quota
B. embargo A. Subsidy
C. auction quota B. Tariff
D. tariff quota C. Quota
442. What is the ability to produce a product D. Embargo
most efficiently known as?
447. International transactions require conver-
A. Comparative advantage sions between currencies.
B. Absolute advantage A. True
C. Division of labor B. False
D. Opportunity cost
448. Floating exchange rates
443. Improvements in technology for produc- A. are set daily by the Fed
ing all goods must result in:
B. are an established by an agreement of
A. An inward shift in the production pos- two nations
sibilities curve
C. values are determined by supply and
B. A flatter production possibilities curve demand
C. An outward shift in the production pos- D. are a result of bilateral agreements
sibilities curve
449. In a two product two country world, in-
D. A steeper production possibilities
ternational trade can lead to increases in
curve
A. consumer welfare only if output of
444. The value of exchange rate is determined both products is increased.
by the demand and supply of currency is B. output of both products and consumer
refer to the exchange rate system. welfare in both countries.
A. variable C. total production of both products but
B. fixed not consumer welfare in both countries

D. consumer welfare in both countries 454. A depreciation of a country’s currency

but not total production of both products. means for this country’s residents that im-
E. None of the above. ported goods are
A. Cheaper
450. What are tariffs? B. More expensive
A. political boundaries between nations
455. If two countries begin to trade and
B. military blockades of specific coun- both produce a product subject to internal
NARAYAN CHANGDER
tries economies of scale, then the country with
C. disputes between state governments the rate of production will produc-
over boundaries tion until it controls of the market.
D. taxes on the import or export of goods A. lower; increase; 100%
from a country B. higher; increase; 100%
C. higher; increase; 50%
451. Refers to when one individual, firm, or
country has the lowest opportunity cost D. lower; increase; 50%
for producing the good or service.
456. Countries trade with each other because
A. Absolute Advantage they are and because of
B. Comparative Advantage A. different, costs
C. Trade off B. similar, scale economies
D. Balance of trade C. different, scale economies
D. similar, costs
452. Germany sends a shipment of cars to the
United States. This is an example of what E. None of the above.
type of business? 457. International trade is based on the idea
that
A. Exports should exceed imports
B. Imports should exceed exports
C. Resources are more mobile interna-
A. Domestic tionally than are goods
B. International D. Resources are less mobile internation-
C. Multinational ally than are goods
Explanation:International trade refers to
D. Franchising
buying and selling of goods and services
453. What is an official ban on trade or other in different countries. Hence, it is based
commercial activity with a particular coun- on the idea that resources are less mo-
try? bile internationally. The fundamental rea-
son behind international trade is that the
A. Tariff countries cannot produce equally well or
B. Product standard cheaply all that they need. This is be-
cause of the unequal distribution of natu-
C. Embargo ral resources among them or differences
D. Quota in their productivity levels.

458. Based on the table provided, which one 462. Absolute advantage is determined by:
of the following statements is correct? A. actual differences in labor productivity

between countries.
B. relative differences in labor productiv-
ity between countries.
C. both (a) and (b)
A. Japan has the absolute advantage in D. neither (a) nor (b)

producing cars 463. The price of one nation’s currency in
B. Japan has the comparative advantage terms of another nation’s currency is called
in producing cars A. foreign exchange
C. The United States has the absolute ad- B. exchange rate
vantage in producing both cars and com-
C. foreign exchange rate
puters
D. currency converter
D. The opportunity cost of producing a car
in Japan is 1/2 a computer 464. If the home country government grants a
subsidy on a domestically produced good,
459. Refers to the unrestricted flow of goods, domestic producers tend to:
services, and productive resources be-
tween countries. A. capture the entire subsidy in the form
of higher profits
A. Trade
B. increase their level of production
B. Free Trade
C. reduce wages paid to domestic work-
C. Trade Barriers ers
D. Balance of Trade D. consider the subsidy as an increase in
production cost
460. A tax on imports set by the importing
country on the exporting country is known 465. The US and Canada have been experienc-
as ing a conflict over US restrictions on im-
ported softwood lumber. Who would be
A. Tariff
MOST LIKELY to support the US restric-
B. Quota tions?
C. Standard A. Canadian lumber firms
D. Embargo B. US new home buyers
C. US lumber importers
461. This is an economic and political union be-
tween 27 European countries? D. US lumber firms
A. USMCA 466. Dumping means
B. Association of Southeast Asian Na- A. a form of illegal price discrimination.
tions (ASEAN)
B. referred to tariff imposed on imports.
C. European Union (EU)
C. selling more goods than allowed by im-
D. Port of Savannah port quota.

D. a practice of selling goods at lower 472. the process of increased connection be-
prices in foreign. tween countries. It is demonstrated
through economics, politics and culture.
467. Quotas are government imposed limits
on the of goods trade between coun- A. Exchange
tries. B. Globalization
A. prices C. Mercantilism
B. quantity D. Ethnocentric
NARAYAN CHANGDER
C. revenue
473. established by the interacion of the
D. costs market forces of demand for and supply
of the currency
468. Factor endowments refer to a nation’s po-
sition in factors of production necessary to A. Fixed Exchange Rate
compete in a given industry.
B. Flexible Exchange Rate
A. True
C. floating exchange rate
B. False
D. none of above
469. U.S. goods become more expensive
474. External economies of scale will av-
A. when the dollar appreciates erage cost when output is by
B. when the dollar depreciates A. reduce; increased; the industry
470. A closed economy is a closed economy. B. reduce; increased; a firm
A. whose borders are not open to other C. increase; increased; a firm
countries whose borders are not open to
D. increase; increased; the industry
other countries
B. Who does not have any financial rela- E. reduce; reduce; the industry
tionship with any other country Who does
475. How many members are in the ASEAN?
not have any financial relationship with
any other country A. 18
C. One who does minimum international B. 67
trade is doing minimum international
C. 10
trade
D. None of these None of the given D. 53
471. Ways to keep imported products out of 476. The ability to produce a product most ef-
a country by establishing rules and regula- ficiently given all the other products that
tions on how they can be used or produced. could be produced.
A. standard A. Absolute Advantage
B. sanction B. Comparative Advantage
C. tariff C. Positive Advantage
D. embargo D. Negative Advantage

477. What is international trade? 480. The payments that the government gives
to certain industries to provide financial
help are known as a(n)

A. embargo
B. quota
C. tariff
A. Voluntary exchange of G/S between in- D. subsidy

dividuals and businesses of different na-
481. Export means
tions
B. Voluntary exchange between individu- A. buying goods from another country
als and businesses of the same nation B. selling goods to another country
C. Trade between domestic industries C. only making one kind of product
D. Trade between infant industries D. none of above
478. Export means
482. If a very small country trades with a very
A. to get rid of the goods you don’t need. large country according to the Ricardian
B. sending a product to another country model, then
for sale. A. the small country will suffer a de-
C. to get more goods to be able to make crease in economic welfare.
more money.
B. the large country will suffer a de-
D. bringing a product into a country to be crease in economic welfare.
sold.
C. the small country will enjoy gains from
479. Which relationship BEST illustrates a com- trade.
parison of absolute advantage and com-
D. the large country will enjoy gains from
parative advantage?
trade.
A. A country with an absolute advantage
will always have a comparative advantage E. None of the above.
in producing products.
483. The is the largest container port along
B. A country with a comparative advan- the east coast of the United States.
tage can produce a greater output of a
A. Port of Tacoma
products than a country with an absolute
advantage. B. Northeast Inland Port
C. A country with an absolute advantage C. Port of Savannah
can produce a product at a lower oppor-
D. Port of Long Beach
tunity cost than a country with a compara-
tive advantage in producing all products.
484. What does sustainable mean?
D. A country with a comparative advan-
A. allows for continual reuse (maintained
tage can produce a product at a lower op-
and supported)
portunity cost, even if another country has
an absolute advantage in the production B. interactions between human social
of all goods. system and the rest of the ecosystem

485. The differences between domestic trades 490. Name one important component of inter-
an international trade is as follows EX- national economics.
CEPT A. International balance of trade.
A. there is greater specialization in inter- B. International cash balance.
national trade than in domestic trade.
C. Exchange rate.
B. trade documentation is simpler in do-
D. Export-import ratio.
mestic trade than in international trade.
491. The ability of an individual, firm, or coun-
NARAYAN CHANGDER
C. there are less trade barriers in inter-
national trade than domestic trade. try to produce a good or service at a lower
opportunity cost than other producers.
D. different currencies are used in inter-
national trade. A. Absolute Advantage
486. Which of the following theories of inter-
national trade does not imply “full special- C. Monopoly
ization”? D. Governmental Advantages
A. The theory of absolute superiority 492. What is the impact of an increase of tar-
B. The theory of comparative advantage iffs on imported goods for domestic pro-
ducers
C. Heckscher Olin theory
A. Government revenues will increase
D. Leontev paradoxes
B. Prices will decrease
487. The price of one currency in the currencies
C. Imports will fall
of other nations.
D. Domestic firms will produce more
A. Trade Wars
B. Foreign Exchange Market 493. A country’s exports exceeds the value of
its imports
C. Foreign Exchange Rate
A. Trade Surplus
D. Protective Market
B. Trade Failure
488. Which of the following is not an argu- C. Tariff
ment for free trade, but against?
D. Quota
A. Common currency
494. Which option correctly describes a trade
B. Protecting national security deficit?
C. Reducing trade barriers A. Exports are greater than imports
D. Facilitate trade among members B. Imports are greater than exports
489. It simply means that the country can pro- 495. brings money into the country by
duce more of a good than another country sending products the country.
A. Trade Surplus A. Exports; into
B. Trade Failure B. Exports; out of
C. Comparative Advantage C. Imports; into
D. Absolute Advantage D. Imports; out of

496. Which of the following is not a benefit of 500. When citizen in a country want to im-
international trade? port the goods from foreign country, they
A. Lower domestic prices. have to demand a foreign currency. From

the statement above, choose other deter-
B. A greater range of consumption minant of foreign currency demand.
choices.
A. Make direct investment to foreign
C. High wage levels for all domestic work- countries
ers.
B. Make indirect investment to foreign
D. Development of more efficient meth- countries
ods and new products.
C. Expected depreciation of local cur-
497. If nations limit trade in of clothing who rency
will benefit? D. Expected appreciation of local cur-
A. Domestic Consumers of clothing rency
B. Domestic producers of clothing E. Travelling to a foreign country
C. Foreign Producers of clothing
501. A country engaging in trade according to
D. department stores who sell clothing the principles of comparative advantage
gains from trade because it
498. With free trade, prices will
A. is producing exports indirectly more ef-
ficiently than it could alternatively.
B. is producing imports indirectly more
efficiently than it could domestically.
C. is producing exports using fewer labor
units.
D. is producing imports indirectly using
fewer labor units.
A. Decrease from PE to P1 E. None of the above.
B. Increase from P1 to PE 502. Japan claims that the snow in Japan is
C. Not change different from other places. Because of
this, their laws prevent skis from being im-
D. none of above
ported into the country unless they meet
499. Developing nations often maintain that specific standards. This is called a
industrial countries permit raw materials A. tariff
to be imported at very low tariff rates
B. quota
while maintaining high tariff rates on man-
ufactured imports. Which of the following C. standard-based trade barrier
refers to the above statement? D. non-trade-related restriction
A. Tariff-quota effect
503. The Malaysian government buys a new
B. Nominal tariff effect Boeing 787 from the U.S. This transaction
C. Tariff escalation effect is recorded as
D. protective tariff effect A. current account

B. financial/capital account C. Specialize and export goods with the

C. official reserves lowest average cost
D. none of above D. Specialize and export goods with the

highest opportunity cost
504. With free trade, quantity consumed will
508. If there are large disparities in wage lev-
els between countries, then
NARAYAN CHANGDER
A. trade is likely to be harmful to both
countries.
B. trade is likely to be harmful to the coun-
try with the high wages.
C. trade is likely to be harmful to the coun-
try with the low wages.
A. Increase from Q1 to QE
D. trade is likely to be harmful to neither
B. Increase from Q1 to Q2 country.
C. Not change
E. trade is likely to have no effect on ei-
D. Increase from QE to Q2 ther country.
505. in the study of international economics
509. The global financial crisis of 2008-2009
A. international trade policies are exam- temporarily slowed down globalization’s
ined before bases for trade progress.
B. adjustment policies are discussed be-
A. True
fore the balance of payments
C. the case of many nations is discussed B. False
before the two-nation case
D. none of above 510. An agreement that will eliminate trade
barriers as well as the barriers for the
506. Which of the following protectionist mea- flow of FOP is an example of a
sures puts in the greatest burden on do-
A. Free Trade area
mestic taxpayers?
A. Tariff B. Preferential trade area
B. Subsidies C. customs union
C. Quotas D. common market
D. none of above
511. An example of a Common Market
507. According to the law of comparative ad-
vantage, a country should A. NAFTA
A. Specialize and export goods with the B. EU
lowest production cost
C. ANZAC
B. Specialize and export goods with the
lowest opportunity cost D. CARICOM

512. The classical trade theories of Smith and 516. Which headline below is an example of
Ricardo predict that using standards as a trade barrier?

A. Countries will completely specialize in A. “US producers of wheat get big payday
the production of export goods. from Congress”
B. Considerable trade will occur between B. “Only professionally cleaned oranges
countries with different levels of technol- allowed in the US”
ogy C. “Limit of 1 million tons of sugar to be
C. Small countries could obtain all of the imported”
gains from trade when trading with large D. “Mexican imports completely abol-
countries ished”
D. All of the above 517. Taxes on imported goods
513. occurs, according to the U.S. De- A. sanction
partment of Commerce, whenever a U.S. B. tariff
citizen, organization, or affiliated group
C. embargo
takes an interest of 10% or more in a for-
eign business entity. D. stoppage
A. Foreign portfolio investment 518. Goods and services produced in one coun-
B. Overseas remittance try and sold to other countries
C. Foreign direct investment A. Imports

B. Exports
D. Official development assistance
C. Economic Advantages
514. BMW pays $1 million to a U.S. shipper D. Absolute Advantages
for transporting cars from Germany to the
United States. 519. Which of the following statement is
A. Current account FALSE?
A. Protectionism is practiced only in do-
mestic trade.
515. Which of the following will increase the B. Size of market is relatively bigger for
United States trade deficit? international trade.
A. United States firms buying technologi- C. Usage of different units of currency in
cally advanced computers from Germany international trade.
B. European citizens traveling in large D. Resources are more mobile domesti-
numbers to the United States cally than they are internationally.
C. A United States company being hired 520. If a tariff and import quota lead to equiv-
to build a production plant in another coun- alent increases in the domestic price of
try steel, then:
D. The United States dollar depreciating A. the quota results in efficiency reduc-
in the foreign exchange market tions but the tariff does not
E. The United States selling one million B. the tariff results in efficiency reduc-
tons of wheat to China tions but the quota does not

C. they have different impacts on how 525. What deals with taxes and government
much is produced and consumed spending?
D. they have different impacts on how in- A. Monetary Policy
come is distributed B. Fiscal Policy
521. The practice of goods being traded be- C. Trade Policy

tween countries without any tariffs that D. Labor Policy
might slow down trade is known as
526. Globalization is the economic integra-
NARAYAN CHANGDER
A. Barriers tion of the world through increased trade,
B. Embargoes investment, and monetary transactions
across international borders.
C. Restriction
A. True
D. Free Trade B. False
522. Comparative advantage suggests that 527. Putting policies in place that are designed
countries will engage in trade with one an- to protect domestic industries from too
other, exporting the goods that they have much foreign competition.
a advantage in.
A. protectionism
A. relative B. patriotism
B. comparative C. economic stabalism
C. relative or comparative D. free trade
D. absolute or relative 528. Similar to import tariffs, import quotas
tend to result in
523. To say that net exports are negative is
the same as saying that A. higher prices and reduced imports
B. increased government revenue
A. there is a capital account deficit.
C. increased consumer surplus
B. there is a budget deficit.
D. decreased producer surplus
C. the exchange rate has depreciated.
529. Interest income remains
D. there is a current account deficit.
A. Current Account-Credit Side On the
524. What is a trade deficit? credit side of the current account
A. When the value of exports exceeds the B. Current Account-Credit Side On the
value of imports debit side of the current account
B. when the value of imports exceeds the C. Capital Account-Credit Side On the
value of exports credit side of the capital account
D. Capital Account-Borrowing Side The
C. when the values of imports and ex-
borrowing side of the capital account
ports are equal
D. when the value of imports for one na- 530. Did you represent the theory of purchas-
tion is greater than the value of imports ing power parity?
for another nation A. Ricardo Ricardo

B. Marshal Marshal D. none of above

C. Jacob WeinerJacob Weiner
535. One advantage to the business of becom-

D. Castle Castle ing a multinational is that:
531. Which is an example of a quota? A. it will be able to produce goods closer
to each country’s market
A. The U.S. stops trade with China.
B. it will have fewer factories and operat-
B. The U.S. limits the amount of foreign
ing bases
cars brought into our country.
C. The U.S. pays a high tax on BMW cars C. communication will be easier within
brought into the country. the business
D. none of above D. it will tend to produce the same basic

product for markets throughout the world
532. Government payments transferred ex-
porting companies allowing the companies 536. If a small country imposes a tariff, then
to compete with other nations at the inter- A. the producers must suffer a loss
national market price without having to in-
B. the consumers must suffer a loss
cur the costs associated with selling at the
lower price. C. the government revenue must suffer a
A. Tariff loss
B. Embargo D. the demand curve must shift
C. Standard 537. The Government of India and RBI have an

D. Subsidy important role in NPCI growth as well as
nurturing leading banks in India especially
533. Tick the factor that influence the exis- in the first years.
tence of the international trade in eco-
A. True
nomics.
B. False
A. Different technology
B. Different labor skills 538. What does appreciate mean?
C. Different factor of production
D. Different currency
E. Different types of climate
534. Suppose the U.S. lowers the tariff on im-

ported beef, making foreign beef cheaper
than U.S. beef. What would be the conse-
quences?
A. Imported beef and U.S.-produced beef
will increase
A. to decrease in value
B. Imported beef and U.S.-produced beef
B. to increase in value
may decline
C. Imported beef may increase and U.S.- C. to remain the same in value
produced beef may decrease D. none of above

539. Having comparative advantage means C. Imports should exceed exports.

that a country can produce
D. Exports should exceed imports.
A. goods at a lower opportunity cost.
B. more goods than another country. 544. An argument that cites the importance of
maintaining industries critical to the coun-
540. Taiwanese baseballs sell in the US for try even when the industry cannot effi-
$10, but an identical domestically made ciently compete at the international level.
one sells for $12.50. If the US govern- A. Domestic Employment
NARAYAN CHANGDER
ment imposes a 20% tariff on Taiwanese
baseballs, what would be the result? B. Infant Industries
A. Since the Taiwanese ball would still C. Free Trade
be cheaper, there would be little to no D. National Security
change.
B. Since the Taiwanese ball is now more 545. Government policy can influence rivalry
expensive, US sales will likely increase. through regulation and antitrust laws.
C. Since the Taiwanese ball will now sell A. True
at the same price as the US ball, sales will B. False
likely equalize.
D. Since the Taiwanese ball is now more 546. What happens if a country does not fol-
expensive, the US will begin exporting low the law of comparative advantage?
balls to Taiwan. A. The country will experience losses in
541. The value of a nations currency in relation international trade.
to a foreign currency. B. The country will experience benefits in
A. Equilibrium Rate international trade.
B. Export Rate C. The country will experience an in-

crease in the costs of producing goods or
C. Exchange Rate
services.
D. Import Rate
D. The country will experience a de-
542. When Mataeo buys Euros through , he crease in the cost of producing goods or
will use his U.S. dollars to pay for them. services.
A. the foreign exchange market E. The country will experience an in-
crease in the cost of consuming goods or
B. the currency exchange market
services.
C. a floating exchange market
D. foreign currency market 547. The difference between money paid to,
and received from, other nations in trade
543. International trade is logically associated is the
with which assumption? A. balance of trade
A. Resources are less mobile internation-
B. absolute advantage
ally than domestically.
C. balance of payments
B. Resources are more mobile interna-
tionally than are goods. D. comparative advantage

548. The use of trade barriers to protect a na- C. quota

tion’s industries from foreign competition
D. subsidy

A. Balance of trade
B. NAFTA 554. If you are going to visit America and have
$2999 to spend, how much currency could
C. Quotas you obtain? (1AUD = 0.68USD)
D. Protectionism A. = 1x 0.68
549. Country’s wealth was determined by the B. = 1 / 0.68
amount of its gold and silver holdings.
C. = 2999 x 0.68
A. trade surplus
D. = 2999 / 0.68
B. mercantilism
C. absolute advantage 555. A trade surplus is generally known as a
D. competitive advantage A. positive balance of trade.

B. negative balance of trade.
550. To avoid a quota or a tariff, a country
may choose to limit an export. C. positive balance of payments.
A. Quota D. negative balance of payments.
B. Voluntary Export Restraint
556. Leontief paradox is connected with which
C. Import of the following theories
D. Protective Tariff A. Absolute cost advantage theory
551. This is a tax on imports that is used to in- B. Relative cost advantage theory
crease price of foreign products and raise C. Heckscher Ohlin theory
government revenue.
D. Factor price equalisation theory
A. tariff
B. quota 557. Countries gain when they produce items
C. subsidy they are most efficient at producing and
that have the lowest opportunity cost.
D. embargo
552. When domestic currency gain its value in B. Comparative Advantage
relation to a foreign currency in the inter-
national money market, it is a situation of: C. Law of Comparative Advantage
A. Currency appreciation D. Absolute Disadvantage
B. Currency depreciation
558. A tax imposed by one country on the
C. Currency devaluation goods of another.
D. None of these A. Excise tax
553. An increase in the value of a currency B. Tariffs
A. appreciation C. Real estate tax
B. depreciation D. Sales tax

559. Government policy about exports and im- 564. It is correct to say that countries within
ports is called a customs union have
A. Commercial policy A. Common external barriers
B. Fiscal policy B. Common currency and a common cen-
C. Monetary policy tral bank
D. Finance policy C. Common policies on product regula-

tion.
NARAYAN CHANGDER
560. Those in favor of protectionist trade poli- D. None of the above
cies would most likely
A. Believe that restrictions harm con- 565. What is difference between the value of
sumers exports of goods and value of imports of
goods called
B. Argue in support of free trade
A. Balance of payment
C. Support a massive reduction in tariffs
B. Balance of trade
D. Cite the need to preserve domestic in-
dustries and jobs C. Disinvestment
D. All of these
561. “A country should produce and export
that good which is produced by the coun- 566. As the U.S. dollar becomes stronger, it
try’s most abundant factor of production” takes foreign currency to equal a dol-
Which of the following theory postu- lar.
late this statement?
A. Absolute cost advantage theory
B. Ricard’s theory of international trade
C. Heckscher-Ohlin model of interna-
tional trade
D. None of these
562. Quotas are not popular with consumers A. more

because they limit consumer choice. This
makes products more expensive. B. less
A. False 567. Which of the following will cause the tar-
B. True iff equivalent of a quota to increase in a
small country?
563. An individual, firm, or country has the A. A decrease in domestic demand (the
lowest opportunity cost for producing the demand curving shifting left).
good or service.
B. A decrease in domestic supply (the
A. Absolute advantage supply curving shifting left).
B. Comparative advantage C. A rise in the world price
C. Opportunity Cost D. A rise in the quantity of imports permit-
D. Balance of trade ted by the quota

568. Which situation correctly describes a C. 2 pounds of cotton

trade deficit? D. 0.5 (1/2) pounds of cotton

A. tariffs are higher than income taxes
573. To whom do you attribute the modern
B. exports are greater than imports theory of International trade?
C. tax revenue is higher than government A. Ohlin
spending
B. Wines
D. imports are greater than exports.
C. Ellisworth
569. A primary reason why nations conduct in-
D. none of above
ternational trade is because:
A. Some nations prefer to produce one 574. Floating exchange rates are determined
thing while others produce another by
B. Resources are not equally distributed A. supply and demand
to all trading nations B. the demand from foreigners
C. Trade enhances opportunities to accu- C. the interest rate
mulate profits
D. the government
D. Interest rates are not identical in all
trading nations 575. One likely effect of moving to free inter-
national trade is that
570. In order to protect domestic producers,
countries may trade barriers. A. a monopoly in the home market be-
comes an oligopoly in the world market.
A. Increase
B. an oligopoly in the home market be-
B. Decrease comes a monopoly in the world market.
571. The redistribution effect of an import tar- C. a purely competitive firm becomes an
iff is the transfer of income from the do- oligopolist.
mestic: D. a purely competitive firm becomes a
A. Producers to domestic buyers of the monopolist.
good E. None of the above.
B. Buyers to domestic producers of the
good 576. an individual, firm, or country using the
fewest inputs to produce the same amount
C. Buyers to the domestic government of output or the individual, firm, or coun-
D. Government to the domestic buyers try producing the largest number of units
of output given the same productive re-
572. What is America’s opportunity cost for sources.
producing sugar?
577. Which American industry has least been

affected by import competition in recent
A. 2 pounds of sugar years
B. 0.5 (1/2) pounds of sugar A. Automobiles

B. Steel 583. What does the term “capital” represent

C. Radios and Tvs in the context of international economics?
D. Computer software A. Financial assets or resources used in
the production of goods and services
578. A country has a comparative advantage
in production of goods if the country is B. Natural resources and raw materials
endowed with used in the produc- C. Human effort and skills
tion of those goods.
NARAYAN CHANGDER
D. Government policies and regulations
A. well ; inputs; intensively
B. not well ; inputs; intensively 584. IBRD also known as
C. well ; outputs; secondarily
A. EXIM Bank
D. not well; outputs; secondarily
B. World Bank
movement of capital. When there is inter- C. GATT
national movement of capital in both Na- D. SAARC
tions, how does the yield for Nation 1’s
owners of noncapital factors change? 585. This is the most restrictive of the trade
A. Lose CNEG restrictions a nation can use to close off
B. Gain CNEG all importation of a product.
C. Lose CNRG A. tariff
D. Gain CNRG B. quota
580. Higher interest rates C. subsidy
A. Make foreigners decide to buy more of D. embargo
a country’s government bonds
B. Attracts portfolio flows to a country 586. Economies of scale’ is also known as
C. Controls inflationary pressures A. Benefiting scales.
D. All the above
B. Returns of scale
581. The exchange rate is determined by C. EOS
A. Stock Market
D. None of the above
B. Supply and Demand
C. Foreign investment in a country 587. Comparative Advantage
D. Income distribution A. which country can produce a greater
582. The disadvantages and negative aspects amount of the product
of globalization are: B. which country can produce a better
A. job losses in developed nations product
B. periodic international financial crises C. Which country is better compared to
C. climate disaster the other
D. all of above D. none of above

588. In order to know whether a country has 593. refers to the rate at which the goods
a comparative advantage in the production of one country exchange for the goods of
of one particular product we need informa- another country.

tion on at least unit labor requirements
A. terms of trade
A. one
B. two B. balance of payment
C. three C. real cost

D. four D. quotas
E. five
594. Comparative advantage is determined
589. Foreign trad may not lead to exhaustion
by:
of essential materials and minerals.
A. True A. actual differences in labor productivity
between countries.
B. False
B. relative differences in labor productiv-
590. An increase in domestic demand for im-
ity between countries.
ports leads to which of the following:
A. An increase in demand for the domes- C. both (a) and (b)
tic currency D. neither (a) nor (b)
B. A decrease in demand for the domes-
tic currency 595. a situation in which producers in one na-
C. An increase in the supply of the domes- tion depend on others to provide goods
tic currency and services they do not produce.
D. A decrease in the supply of the domes- A. Specialization
tic currency
B. Economic Interdependence
591. A fee charged for goods brought into a
country from another country. C. Imports
A. Quota D. Exports
B. Dumping
C. Tariff 596. According to the factor endowment model
of Heckscher and Ohlin, countries heavily
D. Embargo
endowed with land will:
592. Dynamic comparative advantage theory
A. Devote excessive amounts of re-
A. helps explain why some nations use in- sources to agricultural production.
dustrial policy to support potentially com-
petitive new firms B. Devote insufficient amounts of re-
sources to agricultural production.
B. cannot explain strategic competition
between firms such as Boeing and Airbus C. Export products that are land-
C. is another name for Ricardo’s compar- intensive.
ative advantage theory D. Import products that are land-
D. None of the above intensive.

597. External economies of scale arise when 601. What is the increase in the value of a cur-
the cost per unit rency?
A. Rises as the industry grows larger and A. Exchange rate
falls as the average firm grows larger.
B. Recession
B. Falls as the industry grows larger and
rises as the average firm grows larger. C. Depreciation
C. Falls as the industry and the average D. Appreciation
NARAYAN CHANGDER
firm grows larger.
D. Remains constant over a broad range 602. Which of the following economic factors
of output. is MOST LIKELY to support free trade?
E. Rises as the industry and the average A. the United Steelworkers of America
firm grows larger
B. Coca-Cola Corporation
598. The value of the U.S. Dollar appreciates C. the Anti-Globalization Coalition
versus the Mexican Peso. Who is hurt?
D. US electronics producers
A. An American tourist traveling in Mex-
ico
603. The idea that a nation will specialize in
B. An American producer who exports to what it can produce at a lower opportunity
Mexico cost than any other nation.
C. A Mexican firm who imports products A. Absolute Advantage
from the U.S.
D. No one benefits
C. Law of Comparative Advantage
599. What are the 3 categories that a tax can
fall into? D. Absolute Disadvantage
A. Progressive, Recessional, Propor-
604. How Plaza’s supermarket deal with the
tional
blackout?
B. Progressive, Property, Regressive
A. Doing nothing
C. Property, Regressive, Proportional
B. invested in its own infrastructure
D. Progressive, Regressive, Proportional
C. Using dynamo
600. Given the information in the table,
Home’s opportunity cost of cloth is D. none of above
605. The law of demand establishes that there

is a a relation between b
and quantity.
A. clear b) preference
A. 1.5.
B. 2.0 B. negative, b)preference
C. 0.5. C. Positive, b) price

D. 3.0. D. negative, b) price

606. China’s most favored nation trading sta- 610. A country is said to have a compara-
tus will be taken away if congress and the tive advantage in the production of a good
President agree that the Chinese Govern- when it

ment is guilty of human rights abuses. All
A. has no opportunity cost of producing
Chinese imports will experience a sharp in-
goods.
crease in taxes if China is no longer consid-
ered a most favored nation. B. has lower opportunity cost of produc-
ing of the goods
A. Tarriff
C. requires fewer labour hours to pro-
B. Quota
duce the goods.
C. Embargo
D. requires more labour hours to produce
D. Subsidies the goods.
607. Government payments transferred to ex- 611. Which is NOT a cost of Trade Barriers
porting companies allowing the companies
A. lower demand for goods
to compete with other nations
B. Increased prices on imports
A. Tariff
C. fewer product choices & less competi-
B. Exchange Rates
tion
C. Subsidy
D. increased demand for domestic goods
D. Standards
612. Attempts to explain the pattern of inter-
608. Which of these does not have an effect national trade
on exchange rates?
A. have been a major focus of interna-
A. Inflation tional economists.
B. Selling of domestic reserves B. have proven to be hopeless.
C. Selling of foreign reserves C. have pr
D. Higher domestic demand D. none of above
609. Suppose that in one week Sam can knit 613. A government can determined the value
5 sweaters or make 4 blankets and Rob of exchange rate in
can knit 10 sweaters or make 6 blankets.
Which of the following is true? A. flexible exchange rate system
A. Sam has an absolute advantage in B. fixed exchange rate system

making blankets
614. How much is 60 dollars in Rupees? One
B. Sam has neither a comparative nor an U.S. Dollar in FC One FC in U.S. Dollars In-
absolute advantage in knitting sweaters dian Rupee 52.02 .0192
or making blankets
A. 1.15 rupees
C. Sam has a comparative advantage in
B. 3121.2 rupees
making blankets
C. .99 rupees
D. Sam has a comparative advantage in
knitting sweaters D. 2709.38 rupees

615. Choose the correct member countries of 620. Nation that operates in a state of
ASEAN. self-reliance and is characterised by self-
A. Indonesia sufficiency and limited (or no) trade with
global partners.
B. Thailand
A. developing country
C. China
D. Vietnam B. central planning economy
E. Japan C. autarky
NARAYAN CHANGDER
616. The ability to produce something using D. colonies
fewer resources than other producers is
621. This law states that in a production pro-
called having the
cess, adding more workers might initially
A. Absolute Advantage increase output and eventually creates the
B. Comparative Advantage optimal output per worker.
C. Better Advantage A. Diminishing marginal utility
D. Competitive Advantage B. Negative marginal returns
617. What is being represented by the “green C. Diminishing marginal benefit
flow lines” D. Diminishing marginal returns
622. In today’s world, most countries impose

tariffs
A. only on imports
B. only on exports
C. on both imports and exports
A. Flow of Money D. on imports, exports and nontraded
B. Flow of Goods and Services goods
C. law
623. Floating exchange rates are determined
D. none of above by
618. Currency depreciation results in A. supply and demand
A. Increased exports, increased imports B. the President of the United States
B. Decreased exports, decreased im- C. the central bank
ports
D. the stock of gold reserves
C. Increased exports, decreased imports
D. Decreased exports, increased imports 624. Which of the following would benefit the
most from protectionist policy?
619. Importing more than exporting is
A. trade surplus A. big firms.
B. the trade fails B. domestic industry.

C. balance of trade C. importers.
D. balance of payment D. unemployed.

625. A means of preventing a foreign product B. There is a current account surplus

of service from freely entering a nation’s C. The current account is balanced
territory.

D. none of above
A. Trade War
B. Trade Off 631. When a country wants to cut some or all
trade off with another country as a pun-
C. Trade Association
ishment, they will place what on the other
D. Trade Barrier country?
626. The measure of how much one currency is A. Embargo
worth in relation to another. B. Tariff
A. change rate C. Subsidies
B. exchange rate D. Quota
627. Embargoes, tariffs, and quotas are exam- 632. The factor endowment model of interna-
ples of tional trade was developed by
A. trading blocs A. Adam Smith
B. trade barriers B. David Ricardo
C. free trade C. John Stuart Mill
D. exchange rates D. Eli Heckscher and Bertil Ohlin
628. Economic theory: 633. Inter-regional specialization leads to
A. seeks to explain the events large production in all the countires
B. seeks to forecast the events A. True
C. abstracts from many details that sur- B. False
round the economic event
634. An exchange rate is used to
D. all of above
A. Promote the argument supporting free
629. We have to supply a local currency when trade.
a foreigner want to (tick more than
B. Promote the use of subsidies on for-
one answer)
eign goods.
A. buy local goods
C. Determine the process of one coun-
B. expected local currency depreciation try’s imports in terms of another country’s
C. travel to our country exports.
D. purchase financial assets in foreigner D. Determine the price of one country’s
country currency in terms of another country’s
currency.
E. make indirect investment
630. When imports, income flows and trans- 635. Mill’s Theory of reciprocal demand is a
fers out of the UK exceed exports, income two by two model
flows and transfers into the UK A. True
A. There is a current account deficit B. False

636. An increase in the value of currency is B. Quota

called C. Embargo
A. appreciation D. Tariff
B. depreciation
641. The Heckscher-Ohlin theory explains
C. trade surplus comparative advantage as the result of dif-
D. exchange rate ferences in countries
A. economies of large-scale production
NARAYAN CHANGDER
637. Balance of trade is measure as
B. relative abundance of various re-
A. Difference between import and export
sources
of goods
C. relative costs of labor
B. Difference between import and export
of services D. research and development expendi-
tures
C. Difference between import and export
of capital 642. Countries trade with each other because
D. Difference between all exports and all they are
imports A. Competitive
638. Country “C” can produce shirt in 30 min- B. Interdependent
utes or 1 chair in 60 minutes. Country “D” C. Isolated
can produce a shirt in 45 minutes or 1 chair
D. Self-sufficient
in 45 minutes. Which country has the ab-
solute advantage in terms of shirts? 643. A rough measure of the economic relation-
A. Country “C” ship among nations, or their interdepen-
dence, is
B. Country “D”
A. GDP
C. Neither
B. GDP per capita
D. Both
C. ratio of imports and exports to GDP
639. The Heckscher-Ohlin theorem states that
D. ratio of imports and exports to
a country will have comparative advan-
GDP/capita
tage in the good whose production is rela-
tively intensive in the with which the 644. the value of its exports minus the value
country is relatively abundant. of its imports for measurable during a spe-
A. frets cific time
B. technology A. balance of imports
C. factor/resource B. balance of exports
D. opportunity cost C. balance of trade
D. none of above
640. A type of trade restriction that sets a
physical limit on the quantity of a good 645. An is a government order that re-
that can be imported into a country in a stricts the exchange of goods with a spec-
given period of time. ified country.
A. Subsidy A. embargo

B. tariff B. Currency Depreciation

C. quota C. Trade Surplus

D. subsidy D. Absolute Advantage
646. Capital liberalisation refers to the free 651. Watches made in Norway are worn by
movement of capital in and out of a people in California.
country. A. import
A. labour B. export
B. technology
652. In 2007, the U.S. balance of payments
C. financial was:
D. currency A. Running a surplus
647. The function that identifies the maximum B. balanced by increased trade advan-
combinations of two products that a nation tage
can produce by fully utilizing all factors of C. running a deficit
production with the best technology avail- D. exactly equal to the balance of trade
able. surplus
A. production positive frontier (PPF)
653. Which trade barrier is implemented when
B. production possibility finance (PPF) countries have strong political disputes
C. production possibility frontier (PPF) or disagreements? (Example:The United
D. none States and Cuba)
A. Standards
648. How is foreign investment different from
domestic investment? B. Quota
A. The investors are foreigners. C. Embargo

D. Tariff
B. There are complicated factors includ-
ing legal systems, customs, transporta- 654. Which of the following is not an assump-
tion, etc. across borders tion of classical theory of international
C. Exchange rate is involved. trade?
D. Open market creates a less intensively A. There are two factors of production,
competitive environment. labour and capital.
B. Industry is assumed to have constant
649. An economy without trade relations with
opportunity cost ratio.
other countries is called
C. Factors are mobile within the country
A. Open economy
but immobile across the countries.
B. Closed economy
D. All of the above
C. Protected economy
655. As the U.S. dollar becomes weaker, it
D. An unprotected economy takes foreign currency to equal one dol-
650. Requirements a good must meet before lar.
it can enter the country as an import A. more
A. Standards B. less

656. Which of the following us not a character- 661. If Malaysia increases the tariff on im-
istic of international trade? ported cars, this will
A. Tariff and quota. A. decrease the amount of cars imported.
B. Foreign exchange market. B. increase the amount of cars imported.
C. Common currency. C. decrease the amount of cars imported
D. Higher national standard of living. and increase the production of cars in
Malaysia.
NARAYAN CHANGDER
657. Which of the following is the term used
D. increase the amount of cars imported
for the monthly payment on insurance poli-
and increase the production of cars on
cies?
Malaysia.
A. Deductible
662. Who purposed Reciprocal Demand theory
B. Premium
of International Trade
C. Term
A. Adam Smith
D. Charge
B. J M Keynes
658. The figure illustrates the international C. J S Mill
movement of capital. When there is inter-
D. David Ricardo
national movement of AB of capital in both
Nations, what is the incorrect statement 663. Trade balance and balance of payment ex-
for Nation 1? perience a condition if the local cur-
A. The return on capital in two nations rency is overvalued.
equalizes at BE=O1N=O2T A. worse
B. The return on investment is ABER B. good
C. The loss of capital owners is CNRG
664. Exports for China would increase if
D. The increase in total product is ERG
A. the yen was weak
659. Goods or services produced in the home
B. the yen was strong
country and sold in another country.
C. the yen appreciated
A. exports
D. the US dollar was weak
B. imports
C. transports 665. Which of the following is not an argu-
ment against protective tariffs?
D. outgoers
A. Restricting international trade robs us
660. The most likely reason why some govern- of part of its benefits.
ments impose tariffs on imported goods is:
B. Free admission of imports is one of the
A. to reduce the rate of inflation most effective ways of expanding the for-
B. to increase employment in foreign eign markets of home industries.
countries C. When one country institutes tariffs, it
C. to reduce the Balance of Payments is likely that other countries will follow.
D. to increase output in their own coun- D. A tariff that keeps out foreign goods in-
tries creases the market for U.S. goods.

666. From 1959 to 2000, D. the output per worker of widgets as

A. the U.S. economy roughly tripled in compared to the output of some other
product is higher in that country.

size.
B. U.S. imports roughly tripled in size. E. Both B and C.
C. the share of US Trade in the economy 671. Suppose that the domestic government
roughly tripled in size. allows a specific number of goods to be
D. U.S. Imports roughly tripled as com- imported each year, but it does not spec-
pared to U.S. exports. ify from where the product is shipped or
who is permitted to import. Such a trade
E. U.S. exports roughly tripled in size. barrier is known as
667. This refers to free trade agreements A. an import tariff
among countries in a region. B. a tariff-rate quota
A. Trade agreement C. a selective quota
B. Trading bloc D. a global quota
C. Trade Barriers
672. Embargoes are trade restrictions usually
D. All of the above
placed on other countries for what rea-
668. Who among the following is associated sons?
with the factor price equalisation theorem A. No reason
A. David Ricardo B. Petty reasons
B. Adam Smith C. Political reasons
C. Stolper-Samelson D. Because we get along with them.
D. Bergson
673. A number of scholars define globalization
669. Free traders point out that: as a multidimensional group of social pro-
cedures.
A. There is usually an efficiency gain from
having tariffs A. TRUE
B. There is usually an efficiency loss from B. FALSE
having tariffs
674. The ability to produce more goods than
C. Producers lose from tariffs at the ex- another country using the same amount of
pense of consumers resources is known as
D. Producers lose from tariffs at the ex- A. Comparative Advantage
pense of the government
B. Absolute Advantage
670. The Ricardian theory of comparative ad-
vantage states that a country has a com- 675. Taxes on imports specifically to raise
parative advantage in widgets if money, are rarely used today.
A. output per worker of widgets is higher A. Quota

in that country. B. Dumping
B. that country’s exchange rate is low. C. Import
C. wage rates in that country are high. D. Revenue Tariff

676. A limit placed on the quantities of a prod- 680. Which trade agreement are the countries
uct that can be imported on the map part of?
A. quota A. ASEAN
B. tariff B. NAFTA
C. closed door option C. European Union
D. filter D. MDH
NARAYAN CHANGDER
681. A situation in which a nation imports
677. If Country Alpha has been experiencing more goods and services than it exports.
a higher inflation rate than Country Beta
over the past decade, which of the follow- A. Balance of Trade
ing is true? B. Balance of Payments
A. Alpha’s currency will have appreciated C. Trade Surplus
relative to Beta’s currency D. Trade Failure
B. Alpha’s currency will have depreciated
relative to Beta’s currency 682. If the world equilibrium price of widgets
were 40 cloths, then
C. Alpha will have had lower nominal in-
A. both countries could benefit from
terest rate than Beta
D. Alpha will have had slower growth in
B. neither country could benefit from
the money supply than Beta
E. Alpha’s economy will have grown at a C. each country will want to export the
faster rate than Beta’s good in which it enjoys comparative ad-
vantage.
678. The principal benefit of tariff protection
goes to: D. neither country will want to export the
good in which it enjoys comparative ad-
A. Domestic consumers of the good pro- vantage.
duced
E. both countries will want to specialize
B. Domestic producers of the good pro- in cloth.
duced
683. If the world terms of trade for a country
C. Foreign producers of the good pro-
are somewhere between the domestic cost
duced
ratio of H and that of F, then
D. Foreign consumers of the good pro- A. country H but not country F will gain
duced from trade.
679. Which of the following will cause an de- B. country H and country F will both gain
preciation of the Australian Dollar? from trade.
A. lower interest rates C. neither country H nor F will gain from

trade.
B. decrease in export volume
D. only the country whose government
C. political instability subsidizes its exports will gain.
D. low inflation E. None of the above.

684. That the division of labor is limited by the B. sets a limit on imports coming into the
size of the market best applies to which country
explanation of trade:

C. lets limitless exports leave the country
A. Factor endowment theory D. sets limits on exports leaving the coun-
B. product life cycle theory try
C. economies of scale theory 688. Which economic system does the gov-
D. overlapping demand theory ernment make all economic decisions and
owns most of the property-it is sometimes
685. Voluntary exchange of goods or services called communism?
is called a(n) A. Traditional
A. Tariff B. Command
B. Trade C. Market
C. Quota D. Mixed
D. Embargo 689. What is NOT an advantage of BOP?
686. The diagram shows A. It is of great value in forecasting and
evaluating its business and economic con-
ditions
B. Giving information about the size of
the economy
C. Revealing the nature, size, composi-
tion and direction of a country’s interna-
tional trade
A. China has an absolute advantage over
D. BOP can also serve as a basis to eval-
manufactured goods and the USA has an
uate a country’s solvency
absolute advantage over software produc-
tion. 690. If balance of trade is showing deficit of
B. USA has an absolute advantage over rupees 200 crore and value of imports is
manufactured goods and the China has an rupees 900 crore, then, the value of ex-
absolute advantage over software produc- ports would be
tion. A. Rupees 200 crore
C. China has a comparative advantage B. Rupees 500 crore
over manufactured goods and the USA has C. Rupees 700 crore
a comparative advantage over software
production. D. Rupees 900 crore
D. USA has a comparative advantage over 691. The EU is better seen as an example of
manufactured goods and the China has
a comparative advantage over software A. A Economic and monetary union
production.
B. Free trade area
687. A quota C. A Customs Union
A. lets limitless imports into the country D. A Complete Economic integration

692. International trade is sometimes used as D. 5

a substitute for all of the following except Explanation:-Expansion of the National Fi-
A. international movements of capital. nancial Switch (NFS)-Implementation of
the CTS-Upgradation of the Electronic
B. international movement s of labor. Clearing Service (ECS).
C. domestic production of the same
697. The introduction of a tariff by Brazil on
goods or services.
Australian Beef would likely impact on the
D. domestic production of different goods Australian Economy by
NARAYAN CHANGDER
and services. A. Increase in imports
693. Which of the following would be MOST B. Increase the value of the Australian
supportive of British tariffs? dollar
A. a US company hoping to export goods C. Force consumers to switch from Beef
to Great Britain. to Chicken
B. a British company hoping to export D. Decrease export volumes
goods to other countries. 698. A sum of money granted by the govern-
C. British consumers. ment or a public body to assist an industry
or business so that the price of a commod-
D. British manufacturers who sell their
ity or service may remain low or competi-
products domestically.
tive.
694. Nations that are the target of embargoes A. loan
are forced to deal with which of the follow- B. subsidy
ing?
C. sanction
A. falling prices
D. tariff
B. lower tariffs
699. With free trade, the total quantity of im-
C. increased scarcity ports would equal
D. more foreign competition
695. are quotas that lead to a complete abol-

ishment of trade.
A. embargoes
B. voluntary export restraints
C. nontariff barriers
D. orderly marketing agreements A. 10, 000 units
B. 40, 000 units
696. How many areas did the RBI hand over
to NPCI the responsibility of finding solu- C. 42, 000 units
tions in? D. 50, 000 units
A. 2 Explanation:Import quantity = 50-10 =
40 (Sw line:Demand-Supply = amount to
B. 3 be imported)Explanatory video:(1) Tariff-
C. 4 Trade Protectionism-YouTube

700. 1) Trade between two countries can ben- 705. A Chinese company sells $1 million worth
efit both countries if of socks to the U.S. army.

A. each country enjoys superior terms of A. credit
trade.
B. debit
B. each country exports that good in
which it has a comparative advantage. 706. If the US dollar appreciates relative to
the Canadian dollar, what is a likely out-
C. each country produces a wide range of
come?
goods for export.
A. trade surplus in US
D. each country has a more elastic supply
for the exported goods. B. trade deficit in Canada
701. The ability of one person or nation to pro- C. trade deficit in both
duce more of a good than another person D. trade surplus in Canada
or nation
707. Consumer surplus in a market for a good
A. Comparative Advantage
exists because:
B. Absolute advantage
A. Some producers charge different
C. competitive advantage prices for the good in different markets
D. real advantage B. Producers don’t have the ability to set
their own price
702. Which team has won 11 games in a row
in the last 13? C. When the price of goods decrease,
most consumers buy more
A. Flamengo
D. Some consumers are willing to pay
B. America MG more than the equilibrium price
C. River Plate
708. What type of international investment
D. Palm trees
can describe as a “financial investment”?
703. Monopolistic competition is associated A. Foreign direct investment (FDI)
with
B. Foreign portfolio investment (FPI)
A. cut-throat price competition
C. Real estate investment
B. product differentiation
D. Goods investment
C. strategic interaction of firms
D. high profits margins 709. A problem encountered when implement-
ing an “infant industry” tariff is that
704. The ability to produce more of a given A. domestic consumers will purchase the
product using a given amount of a re- foreign good regardless of the tariff.
source.
B. the industry may never “mature.”
C. most industries require tariff protec-
B. Comparative Advantage tion when they are mature.
C. Positive Advantage D. the tariff may hurt the industry’s do-
D. Negative Advantage mestic sales.

710. A tax on imported goods. 715. The deadweight cost of tariff equals
A. import
B. export
C. tariff
D. none of above
711. All of these restrict international trade
NARAYAN CHANGDER
EXCEPT
A. quotas A. $10, 000
B. $25, 000
B. subsidies
C. $50, 000
C. embargoes
D. $75, 000
D. trade deficits Explanation:Tariff = 15-10 = 5Abundant
quantity = 50-40 = 10= DWL = 10 * 5
712. Which nation is not a part of the EU?
= 50
A. Taiwan
716. Who propounded the theory of compara-
B. Spain tive costs?
C. Germany A. Ricardo
D. France B. News
C. IiAdam Smith
713. The value of all monetary transactions
between a country’s economy and the rest D. none of above
of the world.
717. in production of a good or service exists
A. Balance of Trade when one individual, firm, or country has
B. Trade Failure the lowest opportunity cost for producing
the good or service.
C. Balance of Payments
D. Trade Surplus
714. In 2015 Nigeria exported $59.8 billion 718. If the US dollar increases in value com-
worth of goods, but imported $42.4 bil- pared with the Mexican peso, what has
lion worth of goods. In 2015 Nigeria had the dollar done?
a
A. depreciate
B. appreciate
C. contractionary policy
D. flexible exchange rate
719. Given the information in the table.
A. Trade fails
B. Trade surplus

A. neither country has a comparative ad- E. Value of the dollar appreciates, net ex-
vantage in cloth. ports increase.

B. Home has a comparative advantage in
cloth. 723. In the stage of economic develop-
ment, theres no monetary system, capital
C. Foreign has a comparative advantage investment, or formal economic develop-
in cloth. ment.
D. neither country has a comparative ad-
A. Primitive Equilibrium
vantage in widgets.
B. Transition
720. is an increase in the value of a cur-
rency as measured by the amount of for- C. Takeoff
eign currency it can buy. D. High Development
A. specialization
B. depreciation 724. To focus on producing one thing to im-
prove productivity is known as:
C. exchange rates
A. Specialization
D. appreciation
B. International trade
721. What is the formula for calculating the
Balance of Payments? C. Absolute Advantage
A. Balance of current account + Balance D. Supply and Demand
of capital account
B. Balance of current account + Balance 725. Comparative Advantage
of capital account + Balance of financial A. which country can produce a product
account at a higher opportunity cost
C. Current account + Financial account B. which country can produce the most of
+ Balancing item a product
D. Balance of current account-Balance of
C. which country can produce a product
capital account + Balance of financial ac-
at a lower opportunity cost
count
D. none of above
722. If the real interest rates in the United
States rise relative to rates in other coun- 726. The tariff levied in a “large country”
tries, what will happen to the interna- (Home), lowers the world price of the im-
tional value of the United States dollar and ported good. This causes
United States net exports?
A. foreign consumers to demand less of
A. Value of the dollar depreciate, net ex-
the good on which was levied a tariff.
ports increase.
B. Value of the dollar depreciates, net ex- B. domestic demand for imports to de-
ports decrease crease.
C. Value of the dollar depreciates, net ex- C. domestic demand for imports to in-
ports do not change crease.
D. Value of the dollar appreciates, net ex- D. foreign suppliers to produce less of
ports decrease the good on which was levied a tariff.

727. An increase in the value of currency will 732. Comparative advantage is when a coun-
cause try an produce a product for
A. promoting cost push inflation A. Less of a product
B. promoting demand pull inflation B. More of a product
C. increase the value of import
C. A higher opportunity cost
D. increase the value of export
D. A lower opportunity cost
NARAYAN CHANGDER
728. A situation in which a nation exports
more goods and services than it imports. 733. These companies obtain resources from
A. Balance of Payments nature
B. Trade Surplus A. Primary sector
C. Trade Failure B. Secondary sector
D. Balance of Trade C. Terciary sector
729. A closed economy is one in which D. none of above
A. imports exactly equal exports.
734. today, roughly million people live in
B. domestic firms invest in foreign coun-
the countries other than the one in which
tries.
they were born:
C. the home economy is isolated from for-
eign trade or investment. A. 190
D. All of the above. B. 100
E. None of the above. C. 500
730. The figure illustrates the international D. 50
movement of capital. When there is in-
ternational movement of AB of capital in 735. The next best alternative.
both Nations, the rate of return on capital
in Nation 2 is changed by A. Opportunity Cost
A. + drop B. Trade Surplus

B. -TH C. Trade fails
C. -TJ D. Comparative advantage
D. + TH
736. are profits that accrue to whomever
731. Another name for the difference between has the right to import the good that is re-
the value of a country’s imports and ex- stricted by the quota
ports
A. quota license
A. Trade Weighted Value of a Dollar
B. Flexible Rate of Exchange B. quota rents
C. Foreign Exchange Rate C. quota prices

D. Balance of Trade D. None of the above

737. What do NAFTA, EU, and ASEAN have in B. country H and country F will both gain
common? from trade.

A. Each group attempts to enforce trade C. neither country H nor F will gain from
barriers rigidly. trade.
B. All three groups use the same cur- D. only the country whose government
rency. subsidizes its exports will gain.
C. They are all interested in promoting E. None of the above.
free trade.
D. The United States is a member of all 743. The IMF was established in the year
three. A. 1946
738. Which of the following best describes Di- B. 1944
vision of labour?
C. 1947
A. Breaking down of work into smaller
D. 1945
units
B. Doing variety if diversified work 744. If the value of visible exports exceeds
C. Each worker creates the final product the value of visible imports balance relates
to;
D. none of above
A. Current account BOP
739. What trade barrier prohibits the im-
port/export of a product? B. Capital account BOP
A. Tariff C. Balance of trade

B. Standard D. None of these
C. Subsidy 745. The movement to free international trade
D. Embargo is most likely to generate short-term un-
employment in which industries:
740. Answer the following statement:You
must have both time and labor to be Ab- A. Industries in which there are neither
solute advantage imports nor exports
A. True B. Import-competing industries
B. False C. Industries that sell to domestic and
foreign buyers
741. Which of these are *NOT* trade barriers
D. Industries that sell to only foreign buy-
A. Licenses ers
B. Environmental regulations
C. Health measures 746. Which of the following is an advantage
of division of labour?
D. Grants
A. Less job satisfaction
742. If the world terms of trade equal those
B. Delays in work
of country F, then
C. Increased speed of work
A. country H but not country F will gain
from trade. D. none of above

747. Each country has a new infant industry to 752. International trade applies models
promote. Countries use the infant industry to help understand the international econ-
argument to omy while international finance applies
A. control money supply in the economy. models to help understand the inter-
national economy.
B. protect new industries from the estab-
lishment of foreign competitors. A. analytical; macroeconomic
C. avoid structural unemployment. B. microeconomic; analytical
NARAYAN CHANGDER
D. reduce inflation problems. C. microeconomic; macroeconomic
748. A quantitative limit imposed on imported D. macroeconomic; microeconomic

goods is known as
753. Placing taxes on imported shoes from
A. embargo. Vietnam is an example of a
B. tariff. A. Trade surplus.
C. quota. B. Monetary policy.
D. dumping. C. Balanced budget.
749. Trade between two countries can be use- D. Trade barrier.
ful if cost ratios of goods are
754. What occurs when EXPORTS exceed IM-
A. Understand
PORTS?
B. Decreasing
A. Trade Surplus
C. Equal
B. Trade Failure
D. Different
C. Trade Equilibrium
750. What is the best explanation of
D. Economic Growth
economies of scale?
A. Costs per unit increase as the volume 755. NAFTA is a trade agreement between
of production increases. which of the following countries?
B. Costs per unit decrease as the volume A. the United States, Cuba, and Brazil.
of product decreases.
B. the United States, Canada, and Mex-
C. Larger economies make more prod- ico.
ucts.
C. the United States, Puerto Rico, and
D. Cost per unit decreases as the volume Cuba.
of production increases.
D. Brazil, Bolivia, Peru, and Columbia.
751. Which of the following will cause the ex-
change rate of a currency to go up? 756. What trade barrier involves government
payment to encourage/protect certain eco-
A. An increase in the demand for imports. nomic activity?
B. A decrease in the supply of exports.
A. Tariff
C. Speculation that the exchange rate will
B. Standard
fall.
D. An increase in investment flows into C. Subsidy
the country D. Embargo

757. If the value of a country’s currency in- good or service at a lower marginal and
creases, which of the following is ex- opportunity cost over another?
pected:

A. Comparative advantage
A. Inflation B. Absolute advantage
B. Deflation C. Trade balance
758. The Heckscher-Ohlin theory explains D. Opportunity cost
comparative advantage as the result of dif-
ferences in countries 763. What are some positives of globaliza-
tion?
A. Economies of large-scale production
A. Cheap sneakers and clothes
B. *b. Relative abundance of various re-
sources. B. Cheap electronics
C. Information is easy to access and it
C. Relative costs of labor.
travels quickly (internet and social media)
D. Research and development expendi-
D. All of the answers are correct
tures.
764. The currency exchange rate of the South
759. Prices at which currencies are traded is
African rand for the Botswana pula fell by
called
5.7% between August 2014 and August
A. Exchange Currency 2015. What would be the immediate ef-
B. Exchange Rate fect of this?
C. Foreign Exchange Market A. Botswana’s level of protection would
fall.
D. Local Currency Demand
B. Botswana’s tourists travelling to South
760. International economics can be divided Africa would find it less expensive
into two broad sub-fields: C. South Africa’s imports would be
A. macro and micro. cheaper.
B. developed and less developed. D. South Africa’s tourists travelling to
Botswana would receive more pula per
C. monetary and barter.
rand
D. international trade and international
money. 765. China has a pegged exchange rate which
means
761. The nation’s ability to produce general
A. it always keeps below US $ and main-
goods more efficiently than another entity
tains its advantage in trade
is referred to as?
B. it is part fixed and part floating depend-
A. Specialization
ing on world events
C. it is pegged to currency in Asia so that
C. Opportunity Cost CVhina maintains its dominance
D. Absolute Advantage D. all of these options
762. What is the term for the ability of a coun- 766. Group of countries that join together to
try or a company to produce a particular trade as if they were a single country.

A. trading bloc 771. Refer to the presence or absence of sup-

plier industries and related industries that
B. trade policy
are intentionally competitive.
C. NAFTA
A. Demand conditions
D. trade agreement B. Relating and supporting industries
767. Free international trade’ means that: C. Firm strategy, structure, and rivalry
A. goods can be transported between D. none of above
NARAYAN CHANGDER
countries free of charge for ever
772. A resource that can’t be replaced in a
B. all countries use the same currency so short period of time
it does not cost anything to convert cur- A. Scarcity
rencies
B. Renewable Resource
C. there are no tariffs or quotas to limit
trade between countries C. Nonrenewable Resource
D. Economics
D. businesses can produce in any country
without any legal controls 773. The WTO had 77 members countries on it
formation on January 1,
768. If a nation has an open economy, it means
the nation: A. 1995
A. allows private ownership of capital B. 1996

C. 1994
B. has flexible exchange rates
D. 1998
C. has fixed exchange rates
D. conducts trade with other countries 774. What is described as a policy in which
there is no government regulation and
769. A tariff is a form of taxation on foreign countries may trade as they please?
products while a quota is a on imports A. Free trade
from foreign countries.
B. Balance of trade
A. Boost
C. Imports
B. Increase D. Exports
C. Limit
775. Import colors-
D. Rise
A. leading to a reduction in international
770. Why do countries negotiate and accede to trade
international trade agreements? choose B. causing prices to rise
all the correct answers C. brings income to the state budget
A. Market Access D. barchasi
B. Strengthening Domestic Policy Reform
776. What trade barrier puts safety, health or
C. Increased multilateral bargaining environmental standards that foreign pro-
power ducers have to comply?
D. Strategic Linkages A. Standard

B. Embargo 782. According to the table, what is the USD

C. Quota equivalent of 1 Australian dollar?

D. Tariff
777. The gains from international trade are

closely related to:
A. The labor theory of value
A. 1 USD
B. How much the autarky price differs
B. 1.3192 USD
from international terms of trade change
C. 1.5896 USD
C. The fact that a country must lose from
trade. D. 1.0283 USD
D. All of the above 783. One of the predictions of the Heckscher-
Ohlin model is that:
778. Trade between two countries can be use-
ful if cost ratios of goods are: A. countries with different factor endow-
ments but similar technologies and pref-
A. Undetermined erences will have a strong basis for trade
B. Decreasing with each other.
C. equal B. countries will tend to specialize, but
D. different not completely, in their comparative ad-
vantage good.
779. The real cost terms of trade was devel- C. reciprocal demand leads to an equilib-
oped by Viner rium terms of trade by inducing changes
A. True in both demand and supply.
B. False D. All of the above
780. The movement to free international trade 784. If the tariff on computers is not changed,
is most likely to generate short-term un- but domestic computer producers shift
employment in which industries? from domestically produced semiconduc-
tors to imported components, then the ef-
A. Industries producing non-tradable
fective rate of protection in the
goods
A. increase.
B. Import-competing industries
B. decrease
C. Export industries
C. remain the same.
D. Import sectors
D. no longer apply.
781. All of the following are gains from trade,
EXCEPT: 785. Country “A” can produce 12 cars or 8
computers. Country “B” can produce 15
A. lower prices for consumers cars or 5 computers. Which country has
B. a more efficient allocation of re- the absolute advantage in terms of com-
sources puters?
C. greater choices for consumers A. Country “A”
D. protection of domestic jobs B. Country “B”

C. Neither 790. It takes Mrs. Lee 5 hours to quilt a blan-

D. Both ket. It takes Mr. Mosley 2 hours to quilt
a blanket.
786. If the U.S. government disagrees with a
A. Mr. Mosley has an absolute advantage
foreign country’s politics and wants to pre-
in blanket making.
vent trading with that country, the most
effective action the U.S. government can B. Mrs. Lee has an absolute advantage in
take is to blanket making.
NARAYAN CHANGDER
A. Place high tariffs on all goods from that C. Mr. Mosley has a comparative advan-
country. tage in blanket making.
B. Place an embargo on all goods from D. Mrs. Lee has a comparative advantage
that country. in blanket making.
C. Enforce safety standards on all goods 791. Government payments to a local supplier
from that country. to reduce the supplier costs. This helps lo-
D. Enforce a quota on all goods shipped cal businesses survive because it is getting
from that country. direct aid from the government
787. Which below is the best example of non- A. Balance of trade
tariff in protectionism? B. protectionism
A. Specific tax C. exchange rate
B. Embargo D. subsidy
C. Ad-Value tax
792. Goods or services produced in another
D. Foreign Exchange Control country and purchased by the home coun-
E. Export subsidies try.
788. The exchange of goods and services by A. exports
sale or barter driven by the need for re- B. imports
sources.
C. transports
A. Fair Trade
D. outgoers
B. Globalization
C. Trade 793. There is an absolute advantage when one
country is more efficient than any other
D. Standard of Living country in producing a particular product.
789. What does factor intensity reversal A. True
mean?
B. False
A. A good is having high capital labour ra-
tio in two different countries 794. Heckscher-Ohlin theory is known as
B. A good is capital intensive in one coun- A. modern theory of international trade
try and labour intensive in other country B. factor endowments theory of interna-
C. Price of capital in one country is high tional trade
and price of labour in other country is C. both modern theory of international
higher. trade and factor endowments theory of in-
D. None of these ternational trade

D. neither modern theory of international C. Embargo

trade nor endowments theory of interna- D. Quota
tional trade

800. An increase in the value of a currency rel-
795. The effective rate of protection measures ative to another
A. the “true” ad valorem value of a tariff. A. Currency Appreciation
B. the quota equivalent value of a tariff. B. Currency Depreciation
C. the efficiency with which the tariff is C. Exchange Rates
collected at the customhouse.
D. Subsidy
D. the protection given by the tariff to do-
mestic value added. 801. The WTO has members
A. 151
796. A law that cuts off most or all trade with
a specific country. B. 164
A. Quota C. 104
B. Voluntary Export Restraint D. 139
C. Embargo 802. The figure illustrates the international
D. Protective Tariff movement of capital. When there is no
international movement of capital, Nation
797. Currency depreciation could be caused by 1 and Nation 2 invest their entire capital
A. Supply of £s Increase or Demand for stock domestically, its total output of coun-
£s Increase try 1 is
B. Supply of £s Increase or Demand for A. O1FGA
£s Decrease B. MG
C. Supply of £s Decrease or Demand for C. O1FEB
£s Decrease
D. I wonder
D. Supply of £s Decrease or Demand for
£s Increase 803. Which of the following is usually an ef-
fect of an embargo?
798. Which of the following is NOT a beneficial
A. Prices fall because consumers have
effect of direct investment on the Home
more options.
country?
B. Prices rise because consumers have
A. Transfer of technology
fewer options.
B. Higher profits C. Countries benefit because open trade
C. Risk diversification is encouraged.
D. Avoids the possible loss of export mar- D. Smaller countries give in to the de-
kets mands of larger countries.
799. Limits the quantity of a good imported 804. The price of one country’s currency in
into a country terms of another country’s currency
A. Comparative Advantage A. exchange rate
B. Trade Failure B. comparative advantage

C. opportunity cost 809. International trade in intermediate goods

is a major part of total merchandise trade.
D. absolute advantage
A. It depends on a data source
805. when a country exports more than it im-
B. it depends on an exchange rate
ports
C. true
A. the trade fails
D. false
B. trade surplus
NARAYAN CHANGDER
C. trade account 810. completely ban trade with a country usu-
ally due to political disputes
D. balance of trade
A. quota
806. limits the quantity of a good imported
B. subsidy
into a country
C. embargo
A. embargo
D. none of above
B. quota
C. tariff 811. Country A can produce 1 ton of wheat or
4 ton of coal using one resource. Country
D. none of above
B can produce 2 tons of wheat or 5 tons of
coal using the same resource. Which one
807. A country that operates in self-reliance
is more appropriate?
and self-sufficiency and does not trade at
all with global partners. A. Country A exports wheat and imports
coal
A. A developing country
B. Country B exports wheat and imports
B. Colony
coal
C. Autarky
C. Country A neither exports nor imports
D. none of above wheat
808. The payments that the government gives D. Country B neither exports nor imports
to certain industries to provide financial coal
help are known as a(n)
812. What is meant by profits from interna-
tional trade according to the law of com-
parative advantage?
A. Increase the cost of producing goods
or services.
B. Increases the opportunity cost of pro-
ducing goods or services.
C. Increase profits from international
A. Embargo
trade.
B. Quota
D. Increase the relative price of com-
C. Tariffs modities.
D. Subsidies E. Increasing the wealth of a country.

813. External trade is also called 818. The relationship between exchange rate
A. Foreign trade and quantity demand of foreign currency is

B. International trade
A. negative
C. Both
D. none of above B. positive
814. When the US$ exchange rate falls it will 819. The following image demonstrates Don-
usually ald Trump’s preference for
A. help to reduce a US trade deficit.
B. increase the foreign price of US ex-
ports.
C. reduce the price of US imports.
D. reduce US inflation
815. If the US $ were to appreciate in relation

A. Globalism
to the Euro, what effect would this have?
A. European consumers would have more B. Internationalism
purchasing power in US C. Protectionism
B. US consumers can buy more European D. Americanization
goods and services for fewer $$
C. US consumers can buy more English 820. Barter means:
goods and services for fewer $$
A. The method of consumption of goods
D. European tourists to the US will spend and services
more $$
B. compensatory trading style
816. International economics deals with:
C. natural exchange of one good or ser-
A. the flows of goods, services, payments vice for another good or service
among nations
D. none of above
B. policies directed at regulating the
flows of goods, services, payments among 821. According to the table, what is the USD
nations equivalent of 1 Australian?
C. the effects of policies on welfare of the
nations
D. all of above
817. If the value of a country’s exports fall

short of the value of its imports
A. 0.97 USD
A. the trade fails
B. trade surplus B. 1.32 USD
C. balance of trade C. 1.28 USD

D. none of above D. 1.03 USD

822. Who has the COMPARATIVE advantage A. absolute advantage

in making earrings?
B. competition
C. specialization
D. comparative advantage
827. To plan for his business trip to Denmark,

A. Marie
Tony needs to know how many Danish kro-
NARAYAN CHANGDER
B. Isabella nes his US dollars are worth. Tony needs
to be aware of
823. Which of the following theory of interna-
tional trade does not suppose “ complete A. the exchange rate.
specialisation”? B. any currency embargoes.
A. Absolute cost advantage theory
C. international tariffs.
B. Relative cost advantage theory
D. whether or not the US dollar currently
C. Heckscher Ohlin model of interna- enjoys a comparative advantage in trade.
tional trade
D. All of these 828. Assume the United States can use a given
amount of its resources to produce either
824. What is a trade deficit? 20 airplanes or 8 automobiles and Japan
A. When a country’s exports exceed its can employ the same amount of its re-
imports sources to produce either 20 airplanes or
10 automobiles. The U.S should specialize
B. When a country’s imports exceed its in
exports
A. automobiles.
C. When a country’s exports and imports
are equal B. airplanes.
D. When a country’s trade is completely C. both goods.
restricted
D. neither of the goods.
825. Empirical studies indicate that productiv-
ity performance is 829. Balance of payment is measured as
A. directly related to globalization of in- A. Difference between visible items of ex-
dustries. ports and imports
B. inversely related to globalization of in- B. Difference between invisible items of
dustries. exports and imports
C. not related to globalization of indus- C. Difference between external and inter-
tries. nal flow of gold
D. Any of the above. D. Difference between all receipts of for-
E. None of the above. eign exchange and payment of foreign ex-
change
826. If a country can produce a certain good
at a lower opportunity cost than another 830. Which country has comparative advan-
country is has the tage in making Iron Ore?

A. Exports are greater than imports

B. Imports are greater than exports

835. An increase in the value of one currency
in terms of another currency is a/n
A. appreciation
B. depreciation
C. fixed exchange rate
A. Australia
D. floating exchange rate
B. China
836. Terms of trade is defined as
831. A main advantage of specialization re-
sults from A. a statistic that measures the weighted
average of export prices
A. Economics of large scale production
B. an index that measures the terms of
B. The specializing country behaving as a
trade in a nation
monopoly
C. a statistic that measures the weighted
C. Smaller production runs resulting in
average of export prices divided by import
lower unit costs
prices
D. High wages paid to foreign workers
D. a statistic that measures the ratio of
832. Only producing certain goods instead of exports to import
everything you need is known as
837. What causes an increase in the price of
A. importing imported goods?
B. specialization A. A tariff
C. balance of trade B. An embargo
D. absolute advantage C. A subsidy
833. The long-run market supply curve in the D. A quota
presence of internal economies of scale
838. If the Balance of Payment of a country
is , and in the presence of external
is adverse, then which institution will help
economies of scale, it is
that country?
A. downward sloping; downward sloping
A. World Bank
B. upward sloping; horizontal
B. World Trade Organisation
C. horizontal; upward sloping
C. International Monetary fund
D. downward sloping; horizontal D. Asian Development Bank
E. upward sloping; downward sloping
839. What is not a part of the Current Account
834. Which option correctly describes a trade Balance
deficit? A. Buying firms
B. Net Income Flows
C. Net Transfers
D. Balance of trade in goods and services

840. Trading blocs, such as NAFTA and the B. Trade Wars

EU, increase trade between their member
C. Embargo
countries by trade barriers.
D. Protective Tariff
A. Increasing
B. Decreasing 847. Trade development countries of the
world?
841. Those who benefit from the protection-
ism policy through tariff are A. Makes it independent
NARAYAN CHANGDER
A. users in a foreign country B. Strengthens interdependence
B. domestic users C. It burns separately
C. producers in foreign countries D. none of above
D. domestic producers
848. Assume that the Federal Reserve pursues
842. The capital of Venezuela is a contractionary monetary policy. Based
A. Caracas on the resulting change in the interest
rate, what will happen to the international
B. Bogota value of the dollar, United States imports,
C. Ottawa and United States exports?
D. none of above A. International value of the dollar in-
creases, United States imports increase,
843. A trade war is a cost of United States exports increase.
A. trading blocs
B. International value of the dollar in-
B. globalization crease, United States imports increase,
C. trade barriers United States exports decrease.
D. exchange rates C. International value of the dollar in-
crease, United States imports decrease,
844. Refers to the price of one country’s cur- United States increase.
rency express in terms of another coun-
try’s currency. D. International value of the dollar de-
crease, United States imports increase,
A. Quota United States decrease.
B. Tariff
E. International value of the dollar de-
C. Exchange Rates crease, United States imports decrease,
D. NAFTA United States increase.
845. There is grater amount of risk involved in 849. Agreement that will eliminate all tariffs
the internal trade and other trade barriers between Canada,
Mexico, and the US
A. True
B. False A. NAFTA
B. EU
846. a succession of trade barriers between
nations. C. ASEAN
A. Quota D. CARICOM

850. If the value of a currency in a fixed ex- 855. An agreement to reduce tariffs between
change rate system is raised, it is called: the United States, Mexico, and Canada is
known as

A. Appreciation
B. Depreciation A. NAFTA
C. Revaluation B. European Union
D. Devaluation C. ASEAN
D. Protectionist Movement
851. Permit to carry out foreign trade rela-
tions based on the list of goods specified 856. The GATT was
by the state
A. an international treaty.
A. license
B. an international U.N. agency.
B. subsidy
C. an international IMF agency.
C. quota
D. a U.S. government agency.
D. none of above
E. a collection of tariffs
852. Limits the quantity of a good imported
into a country. 857. . A is when the value of products
is greater than exported (exports are less
A. Quota than imports.
B. Standards A. Trade Failure
C. Tariff B. Trade Surplus
D. Embargo C. Tariff
853. Top 5 countries to which Australia sends D. Embargo
it’s exports:
858. Ad valorem tariffs are collected as
A. China, Japan, Republic of Korea, USA,
India A. fixed amounts of money per unit
traded
B. China, Japan, New Zealand, USA, India
B. a percentage of the price of the prod-
C. China, Japan, Republic of Korea, Singa-
uct
pore, India
C. a percentage of the quantity of imports
D. China, Japan, USA, Republic of Korea,
India D. all of the above
854. Japanese auto firms agree to limits set 859. is a decrease in the value of a cur-
in Washington D.C., on the # of Japanese rency as measured by the amount of for-
cars that may be sold in the U.S. eign currency it can buy.
A. Embargo A. depreciation
B. Quota B. exchange rates
C. Tarriff C. subsidy
D. Standard D. appreciation

860. Currently, the foreign exchange rate for B. exchange rates

all world currencies is
C. protectionism
A. fixed exchange rate, based on the U.S.
dollar. D. free trade
B. a floating exchange rate, based on the 865. Why do individuals, businesses, and gov-
U.S. dollar. ernments trade goods and services?
C. a fixed exchange rate, based on mar-
NARAYAN CHANGDER
ket forces of supply and demand.
D. a floating exchange rate, based on
market forces of supply and demand.
861. In a fixed exchange rate system, a gov-

ernment must intervene to stop the value
of its currency from falling by:
A. Buying its currency
B. Selling its currency
862. The comparative advantage model of Ri- A. To try something new unique
cardo was based on
B. Because other countries expect it
A. intraindustry specialization and trade
C. no nation can produce all the G/S it
B. interindustry specialization and trade needs/wants
C. demand conditions underlying special- D. Because they are required by law to do
ization and trade so
D. income conditions underlying special-
ization and trade 866. The original members of the IMF were
863. The opportunity cost for Timmy to pro- A. 29
duce one desk is 4.5 chairs. The oppor- B. 44
tunity cost for Lauren to produce one desk
is 6 chairs. Knowing this, who should spe- C. 5
cialize in producing desks? D. 67
A. Lauren, because she has the higher op-
portunity cost 867. Tariffs are NOT defended on the grounds
B. Timmy, because he has the lower op- that they
portunity cost A. improve the terms of trade of foreign
C. There is not enough information to nations.
know. B. protect jobs and reduce unemploy-
D. none of above ment.
864. raises the standard of living world- C. promote growth and development of
wide and can lead to a more peaceful, in- young industries.
terdependent world. D. protect domestic producers from for-
A. trade barriers eign low prices

868. What is the primary purpose NAFTA? C. technology

A. To reduce trade barriers among the D. opportunity costs

US, Canada, and Mexico
B. To reduce trade barriers among Cen- 873. Which of these does NOT apply to a free
tral America and Mexico trade agreement
C. To reduce trade barriers among Brazil A. The EU is a free trade agreement
and Mexico
B. Allows tariff free trade with other
D. To encourage free trade between the countries
US, Europe, and Canada
C. Means there is a wider market for
869. What trade barrier is beneficial to both firms to sell to
domestic producers AND domestic con- D. Means transport costs are zero
sumers of a good?
A. subsidy 874. Free traders maintain that an open econ-
B. quota omy is advantageous in that it provides all
of the following except
C. embargo
A. Increased competition for world pro-
D. tariff
ducers
870. A country should specialize in production B. A wider selection of products for con-
of the good in which they have an absolute sumers
advantage.
C. The utilization of the most efficient pro-
A. True duction methods
B. False
D. Relatively high wages levels for all do-
871. Intra-industry trade theory mestic workers
A. explains why the United States might
875. What trade barrier limits the amount of
export autos and import clothing
a good allowed in the country?
B. explains why the United States might
export and import differentiated versions A. Embargo
of the same product, such as different B. Tariff
types of autos
C. Quota
C. assumes that transport costs are very
low or do not exist D. Subsidy
D. ignores seasonal considerations for
876. If there is a fixed rate tax taken, such as
agricultural goods
social security, from everyone’s pay check.
872. The Heckscher-Ohlin model rules out the What type of tax would this be?
classical model’s basis for trade by as- A. Regressive
suming that is (are) identical between
countries. B. Proportional
A. factor endowment C. Progressive
B. factor intensities D. Property

877. Who has the COMPARATIVE advantage 882. What do NAFTA, EU, and ASEAN have in
in producing sugar? common?
A. The United States is a member of all
three.
B. Each group attempts to enforce trade
barriers rigidly.
A. America C. All three groups use the same cur-
NARAYAN CHANGDER
rency.
B. Brazil
D. They are all interested in promoting
878. Currency depreciation could be caused by free trade
A. Supply Increase or Demand Increase 883. The ability to produce a good at a lower
B. Supply Increase or Demand Decrease opportunity cost than others is called a
advantage.
C. Supply Decrease or Demand Decrease
A. natural.
D. Supply Decrease or Demand Increase
B. absolute.
879. Ad valorem tariffs are C. comparative.
A. imports taxes stated in ads industry D. complementary.
publications
884. Who has the ABSOLUTE advantage in
B. import taxes calculated as a fixed making bracelets?
charge for each unit of imported goods
C. the same as import quotas
D. import taxes calculated as a fraction of
the value of the imported good
A. Marie
880. The product cycle theory of trade is es-
sentially a B. Isabella
A. static, short run trade theory 885. Goods or services that a country sells to
B. dynamic, long run trade theory other nations
A. Duty
C. zero-sum theory of trade
B. Tariff
D. negative-sum theory of trade
C. Export
881. Which of the following theories discusses D. Import
the demand side?
A. Adam Smith’s theory of absolute ad- 886. One of the PRIMARY reasons that trade
vantage between nations takes place is because
A. no nation can be economically self-
B. Hexer Ohlin’s business philosophy
sufficient
C. mill’s theory of mutual demand
B. resources are evenly distributed
D. All around the world

C. nations use their absolute advantage 891. The figure illustrates the international
in production to monopolize international movement of capital. Nation 1 owns O1A
markets capital stock, Nation 2 owns O2A capital

D. nations produce a surplus at a lower stock; All capital is fully invested.Capital
cost and export it for goods that are too moved from which country to which coun-
costly to produce try?
A. From Nation 1 to Nation 2
887. Current account records transactions re-
lating to B. From Nation 2 to Nation 1
A. Export and import of goods C. There is no capital movement
B. Non factor and factor income D. Not enough information to conclude
C. Current transfers
D. All of these 892. International Economics deals with
A. trade between states
888. Assume that Country A is relatively abun-
dant in labor and Country B is relatively B. trade between cities
abundant in land. Note that wages are C. trade between countries
the returns to labor and rents are the re-
turns to land. According to the factor price D. trade between countries around the
equalization theorem, once Country A be- world
gins specializing according to comparative
advantage and trading with Country B 893. Taxes on imported goods, to protect do-
mestic goods.
A. wages and rents should fall in Country
A A. Quota
B. wages and rents should rise in Country B. Dumping
A
C. Import
C. wages should rise and rents should fall
in Country A D. Protective Tariff
D. wages should fall and rents should rise
894. WTO stands for
in Country A
A. World Tariff Organisation
889. What is a consequence of quotas for con-
sumers in the US? B. World Tax Organisation
A. Lower prices C. World Trade Organisation
B. Higher Prices D. World Trademark Organisation
C. Higher standards set on imported
goods 895. NOT an argument for free trade
D. Lower subsidies A. improved products
890. International trade has promoted interde- B. export industries

pendence of nations C. specialization and comparative advan-
A. True tage
B. False D. reduced competition

896. WTO was formed to overcome in ineffec- B. items purchased from other countries.
tiveness of to promote
C. items sold to other countries.
A. IMF
D. producing specific goods and less
B. GATT goods faster, cheaper and better than oth-
C. NAFTA ers can.
D. IBRS
902. Rent seeking occurs when one group or-
ganizes and lobbies the government to pro-
NARAYAN CHANGDER
897. Economist believe which of the following
are benefits of international trade: tect its interests.
A. there can be increased consumption A. True
for all. B. False
B. global production will be increased.
903. Which option correctly describes a trade
C. world resources will be used more ef-
surplus?
ficiently.
D. all of these are true.
898. If the United States experiences steady

growth in GDP and low unemployment
rates, what would happen in the foreign
exchange market?
A. US currency would appreciate A. Exports are greater than imports
B. US currency would depreciate B. Imports are greater than exports
899. Currency swap is a method of 904. The country of Algonia produced and then
shipped out $5 billion in goods and ser-
A. hedging against foreign exchange risk
vices to other nations. It brought in $4
B. speculating in foreign exchange billion in goods and services? What does
C. Import this country have?
D. Export A. A balanced budget
900. refers to the unrestricted flow of goods, B. A trade deficit

services, and productive resources be- C. A trade balance
tween countries
D. A trade surplus
A. free trade
B. balance of trade 905. What are reasons for trade imbalances
between countries? (I)(Several answers
C. trade surplus
may be correct.)
D. the trade fails
A. different population size
901. Specialization is B. different prices of single goods
A. dependence on others to get products
C. overvaluation of a country’s currency
you do not produce and needing to pur-
chase items from them. D. different climate conditions

906. Assume the United States buys $5 million 910. 10 nation group in Asia to abolish trade
worth of video games from Japan. At the restrictions
same time, Japan buys $2 million worth

of wheat from the United States. If these
were the only two transactions between
these countries, which is true of the United
States’ balance of trade?
A. The US has a trade surplus of $5 mil-
lion
B. The US has a trade surplus of $2 mil-
A. International Monetary Fund (IMF)
lion
B. European Union (EU)
C. The US has a trade deficit of $5 million
C. ASEAN
D. The US has a trade deficit of $3 million
D. OPEC
907. In 2017 Nicaragua exported $4.88 bil-
lion worth of goods, but imported $6.94 911. When the number of foreigner travel to
billion. In 2017 Costa Rica had a other country is increase, it will increase
the demand of foreign currency of that
country. As a result it will the demand
curve.
A. shift to the left
B. shift to the right
C. remains unchanged
D. none of above
A. Trade fails
912. When the value of export is greater than
B. Trade surplus
the value of import, it is called ?
908. Of the many arguments in favor of tar- A. Trade surplus
iffs, the one that has enjoyed the most sig- B. Trade fails
nificant economic justification has been the
C. Protectionism
A. Infant industry argument
D. none of above
B. Cheap foreign labor argument
913. What is meant by the law of comparative
C. Balance of payments argument
advantage?
D. Domestic living standard argument
A. The ability of an economy to produce a
909. 1 Euro =.9 US Dollars, if you exchange particular good or service at a lower op-
$1, 000 US for Euros, you would get portunity cost than its trading partners.
? B. The ability of an economy to produce a
A. 900 euros particular good or service at a higher op-
portunity cost than its trading partners.
B. 9000 euros
C. The ability of an economy to produce
C. 1000 euros a particular good or service at the same
D. 100 euros opportunity cost as its trading partners.

D. The ability of an economy to produce 918. Lop-sided economic development of a

all types of goods or services at the same country is not at all desirable
opportunity cost as its trading partners. A. True
E. The ability of an economy to produce
B. False
any type of good or service at a lower op-
portunity cost than its trading partners. 919. 2) The Ricardian model attributes the
gains from trade associated with the prin-
914. The US bans beef imports from Canada
ciple of comparative advantage result to
NARAYAN CHANGDER
after a Mad Cow Disease outbreak there.
This is an example of which type of barrier A. differences in technology.
to trade? B. differences in resources.
A. Standards C. differences in labor productivity.
B. Quota D. differences in preferences.
C. Subsidy
920. What 2 things made international trade
D. Tariff
easier?
915. The ability of a country or region to spe- A. Currency & trade barriers
cialize in producing a good that another
B. Currency & exchange rates
country can produce for the purposes of
trade is best described as C. Exchange rates & trade barriers
A. Comparative Advantage D. Currency & specialization
B. Capital 921. When the dollar “rises” compared to
C. Absolute Advantage other currencies (it appreciates), which
D. Factors of Production group benefits the MOST?
A. those who export products
916. International trade forces domestic firms
to become more competitive in terms of B. those who import products
A. the introduction of new products. 922. What is a currency system in which each
B. product design and quality. country tries to keep the value of its cur-
rency constant against one another called?
C. product reliability.
A. fixed exchange rate
D. product price.
B. flexible exchange rate
917. Import quotas are most commonly admin-
istered C. floating currency exchange
A. By permitting all imports until the D. constant pricing

quota is filled for the year, then none af-
923. A resource that Earth or people can re-
ter that
place is
B. By taxing imports
A. Economics
C. By auctioning import licenses to the
B. Renewable Resource
highest bidder
D. By granting import rights to foreign C. Nonrenewable Resource
firms or governments D. Scarcity

924. What is a want? 928. NAFTA, the EU, and ASEAN all benefit its
A. A person members by

B. Something you would like to have but A. raising trade barriers with all nations
don’t need to live B. promoting trade with all nations
C. Purple C. raising trade barriers with just their
D. Something you need to live members
925. Trade bloc:United States, Canada, and D. lowering trade barriers with their
Mexico member nations
A. European Union 929. What position does Venezuela rank in
B. ASEAN terms of oil exports?
C. NAFTA A. 5th
D. none of above B. an offer
926. You are the manager of Fun World, a C. 1st

small amusement park that only charges D. none of above
per ride. The diagram shows the demand
curve for a typical customer. At $5 per 930. The sale of a product in another country
ride, how much consumer surplus does at a price lower than that charged in the
each customer get? home market
A. Quota
B. Dumping
C. Trade Barrier
D. Embargo
931. Increased foreign competition tends to

A. increase profits of domestic import-
competing industries.
A. $5 B. place constraints on the wages of do-
B. $15 mestic workers.
C. $25 C. induce falling output per worker for do-
mestic workers.
D. $50
D. intensity inflationary pressures at
927. The figure illustrates the international home
movement of capital. When there is inter-
national movement of capital in both Na- 932. The interconnection of the world today is
tions, how does the yield for Nation 2’s often referred to as
owners of non-capital factors change?
A. Lose THMR
B. Gain THMR
C. Lose THEM
D. Gain THME A. Nationalism

B. Communism 938. During the Cold War, developing coun-

C. Globalization tries could:
D. Isolationism A. find no way to benefit from the super-
power struggle.
933. When was World Bank established?
B. benefit by playing the USSR against the
A. Dec 1945
U.S.
B. Mar 1947
C. suffer and only watch the conflict that
NARAYAN CHANGDER
C. Apr 1945 never involved them.
D. Jan 1947
D. never change sides and benefit from
934. A government order stopping trade with military aid.
another country
939. What is the purpose of the world Trade
A. tariff
Organisation?
B. embargo
A. To restrict and limit international trade
C. quota
D. none of above B. To regulate and control global trade
C. To promote and facilitate international
935. requirements a good must meet before it
trade
can enter the country as an import.
A. Free Trade D. To encourage and support domestic
trade
B. Standard
C. Subsidy 940. Placing taxes on imported shoes from
D. National Security Vietnam is an example of a
936. The money that people pay to the govern- A. trade barrier.
ment. B. trade surplus.
C. exchange rates.
D. absolute advantage.
941. A government procurement regulation

A. Goods or practice constitutes a nontariff barrier
when
B. Taxes
C. Services A. Government agencies are required to
purchase from the lowest bidder.
D. Profit
B. Government shows a preference for
937. Benefits of international trade are limited domestic sellers over foreign sellers.
to
C. Government requires that goods that
A. tangible goods.
it purchases meet a uniform safety stan-
B. intangible goods. dard
C. all goods but not services. D. Government purchases are financed
D. services. by tax receipts.

942. Country can trade when there is different 947. will increase the quantity of a prod-
in ability to produce goods uct while decreasing the price.

A. Subsidy
B. Quota
C. Embargo
D. Tariff
948. How many main Impacts are there that

shape international trade for every nation
A. 1
A. True
B. False B. 2
943. a tax placed on goods imported into a C. 3

country D. 4
A. quota
949. Study on economic interdependence
B. export
between countries and its effects on
C. tariff economies is known as
D. embargo
A. International Economics
944. When one country can produce a prod-
B. Business Economics
uct more cheaply than another country can,
this is called C. Gender economics
A. a tariff. D. None of the above
B. free trade.
C. comparative advantage. 950. Consider a tax that imposes a flat rate
of 2, 000 dollars annually regardless of
D. absolute advantage income. Who will be affected negatively?
945. An example of a Monetary Union A. Upper income
A. NAFTA
B. Middle income
B. EU
C. Lower income
C. ASEAN
D. CARICOM D. All will be affected negatively
946. Gains from trade can be decomposed 951. A restriction on the quantity of a good
into: that can be imported into a country is a(n):
A. Gains from stability and exchange A. tariff.
B. Gains from terms of trade and inflation
B. quota.
C. Gains from exchange and gains from
specialisation C. embargo.
D. None of these D. restricted exchange rate.

952. Any good transported from one country 957. Which of the following is not a non-tariff
to another is called a(n) barrier?
A. Import A. a quota on apparel
B. Export B. a tax equal to 12% of value on im-
C. Trade ported oil
D. Quota C. A regulation requiring government
agencies to favor domestically producers.
953. The largest amount of trade with the
NARAYAN CHANGDER
D. A voluntary export restraint on cars.
United States in recent years has been con-
ducted by 958. If you ordered a McTrio McMexico at a
A. Canada McDonald’s in Mexico for 149 pesos, how
much would that cost in U.S. dollars? 1
B. Germany peso = 0.05 dollars
C. Mexico
D. Uk
954. The Ricardian two-country, two-good
model predicts that there are potential
benefits from trade, but NOT
A. the effect of trade on income distribu-
tion.
B. when one country has an absolute ad-
vantage in the production of both goods.
A. $0.75
C. the mechanism that determines which
country will specialize in which good. B. $7.45
D. when both countries have the same C. $74.50
types of technology available. D. $745
955. Which of the following are not included 959. Prior to World War 1, the largest home
in balance of trade? country of foreign investments was
A. Payment of interest and dividend A. China
B. Expenditure by tourists B. the United States of America
C. Borrowing from rest of the world C. the United Kingdom
D. All of these D. Japan
956. the ability of an individual, a firm, or 960. After the implementation of the quota,
a country to produce more of a good or total domestic production on the diagram
service than competitors, using the same is:
amount of resources
C. Monopoly
D. Governmental Advantage

A. Q1 966. A record of all transactions between the

residents of a country and the residents of
B. Vomiting
all other countries, over a period of time.

C. Q2 to Q3
A. balance of payments
D. Q3 to Q4 B. export ledger
961. A combination of things that limit the C. import ledger
flow of goods, services, and productive re- D. Net Export Account
sources between countries
967. A subsidy is
A. Trade barriers
A. a cash grant or loan from the govern-
B. Trade Surplus ment to support the business.
C. Trade fails B. a law that promotes safety.
D. Balance of trade C. a tax on imports.
962. The world has experienced four signifi- D. a specific number of imports allowed.
cant periods of globalization 968. The statement:“Absolute advantage re-
A. True quires one country to be better at produc-
tion of one product and another country to
B. False
be better at production of another good for
specialization and trade to be mutually ad-
963. World Trade Organisation came into force
vantageous.”
on
A. is not true at all
A. 27th July 2007
B. poorly explains all trade flows in the
B. 1st January 1995 modern global economy
C. 15th September 1993 C. perfectly explains all trade flows in the
D. 1st January 1947 modern global economy
D. was fundamental for mercantilists
964. Who advocated absolute cost advantage
theory 969. The main benefits of free trade include
A. Adam Smith A. increased choice. lower prices and
better quality
B. David Ricardo
B. less imports because they can’t pene-
C. Ohlin trate competitive markets
D. Samuelson C. the more efficient sharing of the
world’s resources
965. If I am better at all types of production,
I have the in all forms of production. D. greater benefits for developing
economies as they can trade more
970. Labor, human capital, entrepreneurship,
B. Specialization
natural resources, and capital are all ex-
C. Absolute advantage amples of which of the following?
D. developed nation A. Outputs

B. Substitutes in Production A. TRUE

C. Absolute Advantage B. FALSE
D. Factors of Production
976. If I am better at all types of production,
971. Use the following headlines to answer I have the In all forms of production.
the question below. U.S. Embargo against A. comparative advantage
Cuba 2005 Quotas on Chine’s Textiles
B. specialization
2002 U.S. Tariffs on Steel The above head-
NARAYAN CHANGDER
lines are all examples of C. developed nation
A. Trade barriers D. Absolute advantage
B. Trade embargoes 977. a problem with a fixed exchange rate is
C. Trade subsidies that if it is set too low
D. Trade quotas A. it will slow exports
972. is an inland port that will add a 324- B. it will reduce imports
mile freight rail service to connect the port C. it will increase the level of debt a gov-
of Savannah directly to a site north of ernment must pay back
Gainesville.
D. it will force up interest rates
A. Savannah River Port
978. A tax on imports
B. Port of Savannah
A. tariff
C. Northeast Inland Port
B. import tax
D. Mississippi River Port
C. supply
973. Americans are free to manage their own
D. embargo
A. state 979. What is a TRUE statement concerning the

B. property imposition in the U.S. of a tariff on cheese?
C. government A. It lowers the price of cheese domesti-

cally.
D. laws
B. It raises the price of cheese interna-
974. Carterville imported $10 billion in goods tionally.
and services and exported $9 billion in
C. It raises revenue for the government.
goods and services. Which of the follow-
ing does Carterville have? D. It will always result in retaliation from
abroad.
A. a trade deficit
B. a balanced budget 980. Goods or services that a country buys
from other nations.
C. a trade surplus
A. Duty
D. a trade balance
B. Tariff
975. Reducing inflation problem is a reason
for protecting domestic industries from for- C. Export
eign competition. D. Import

981. What is Brazil’s opportunity cost for pro- A. There would be an increase in the num-
ducing cotton? ber of imported beef and the number of
beef produced in the US

B. There would be a decrease in the num-
ber of imported beef and the number of
beef produced in the US
A. 3 pounds of cotton C. There would be an increase in the num-
B. 0.33 (1/3) pounds of cotton ber of imported beef and a decrease in the
number of beef produced in the US
C. 3 pounds of sugar
D. There would be a decrease in the num-
D. 0.33 (1/3) pounds of sugar ber of imported beef and an increase in
the number of beef produced in the US
982. An exchange rate is used to
A. promote the argument supporting free 986. With a tariff,
trade.
B. promote the use of subsidies on for-
eign goods.
C. determine the price of one country’s
imports in terms of another country’s im-
ports.
D. determine the price of one country’s
currency in terms of another country’s
currency. A. Prices would increase and local pro-
duction increase
983. For a country to maximize its productiv-
ity in a global economy, it requires B. Prices would increase and local pro-
duction decrease
A. only imports.
C. Prices would decrease and local pro-
B. only exports. duction decrease
C. both exports and imports.
D. none of above
D. neither exports nor imports.
987. These are the goals of Horizontal FDI, ex-
984. The exchange of goods, services, and/or cept
productive resources among individuals,
A. To avoid tariff barriers
businesses, and/or governments.
B. To reduce production costs
A. Trade
C. To gain market shares and prolong
B. Trade Surplus
product life cycle
C. Trade barriers
D. To specialize production on an interna-
D. Trade fails tional scale
985. Suppose the US decreases the tariff on 988. Do you enjoy our presentation?
imported beef which makes foreign beef
cheaper than US beef. What would the A. No, it’s too long.
consequences be? B. Yes, I love it.

C. Kind of B. different growing seasons of the year

D. none of above for agricultural products
C. product differentiation for goods such
989. Trade between two countries can benefit
as automobiles
both countries if
D. high per capita incomes in exporting
A. each country exports that good in
countries
which it has a comparative advantage.
B. each country enjoys superior terms of 994. The figure illustrates the international
NARAYAN CHANGDER
trade. movement of capital. What is the correct
C. each country has a more elastic de- statment the welfare effects of this move-
mand for the imported goods. ment?
D. each country has a more elastic supply A. In Home country, total productin-
for the supplied goods. creases, capital owners gain, and non-
capital owners lose.
E. Both C and D.
B. In Host country, total productin-
990. The ability to produce a product most ef- creases, capital owners lose, and non-
ficiently given all the other products that capital owners gain.
could be produced.
C. In Host country, total productde-
A. absolute advantage creases, capital owners lose, and non-
B. comparative advantage capital owners gain.
991. A protective tariff is intended to protect D. A&B are correct
the E. A&C are correct
A. consumer from higher prices on for-
eign goods. 995. An exchange rate
B. consumer from higher priced goods A. is the value of a currency relative to
produced within the country. another currency.
C. manufacturer from higher prices on B. is the ability to produce more of a given
materials produced within the country. product.
D. manufacturer or farmer from lower C. is the ability to produce a product most
priced goods imported into the country. efficiently.
992. Which foreign currency does Plaza accept D. occurs when a nation exports equal
as payment? their imports.
A. US 996. It suggested that the value of a commod-
B. UK ity was determined by and could be mea-
C. VND sured objectively by the average number
of labor hours necessary to produce it.
D. none of above
A. Exchange theory of value
993. Intraindustry trade can be explained by
B. Labor theory of value
all of the following except
A. high transportation costs as a propor- C. Subjective theory of value
tion of product value D. Objective theory of value

997. Who first investigated the Hexer-Ohlein B. is usually good.

theory? Who first tested the Hexer- C. is probably good.
Ohlein theory?

D. may be considered bad.
A. Balasa (Balasa)
B. McDougall (McDougall) 1002. Government policy about exports and
imports is called
C. Samuelson (Samuelson)
A. commercial policy
D. Leontief (Leontief)
B. fiscal policy
998. The fact that industrialized countries levy C. monetary policy
very low or no tariff on raw materials and
semi processed goods D. fiscal policy
A. helps developing countries export 1003. Trade bloc established in Europe
manufactured products
A. NAFTA
B. has no effect on developing country ex-
B. ASEAN
ports
C. EU
C. hurts developing country efforts to ex-
port manufactured goods D. AND
D. none of the above 1004. The EU
999. A person who favors a free-trade policy A. Does not allow free movement of peo-
would most likely ple
A. support higher tariffs on imports B. Creates a market for unrestricted
trade between 25 countries
B. support lower tariffs on imports
C. Allows each country to set their own
C. more strict embargoes
employment and product safety laws
D. higher quotas on imports
D. Creates more competition between EU
1000. The figure illustrates the international based firms
movement of capital. When there is no
1005. The international debt crisis of early
international movement of capital in both
1982 was precipitated when could not
Nations, the yield for Nation 2’s capital
pay its international debts.
owners is the area of
A. THMR A. Russia
B. clump B. Mexico
C. inset C. Brazil
D. HJM D. Malaysia
1001. An improvement in a country’s balance 1006. One possible disadvantage to busi-

of payments means a decrease in its bal- nesses of globalisation is that:
ance of payments deficit, or an increase in A. all products will become more expen-
its surplus. In fact we know that a surplus sive
in a balance of payments B. there will be more international com-
A. is good. petition

C. there will be less choice and variety for E. Destroying Local Market
their consumers
1012. In the case presented above, should
D. they will tend to produce on a small there be a specialization of production?
scale and this will raise costs
1007. The Heckscher-Ohlin assumes that

are identical between countries.
A. tastes and preferences
NARAYAN CHANGDER
B. technology levels
C. factor endowments
D. both a and b A. Yes. China in shoes. India in clothes.
B. Yes, India in shoes. China in clothes.
1008. An export can be defined as any product
that is: C. No
A. made from goods bought from another D. none of above
country
1013. the difference between a country’s total
B. sold to another country exports and total imports
C. bought from another country A. Balance of Trade
D. made in another country B. Gross Trade Report
1009. There are 3 element in Balance of Pay- C. Gross Trade Accounting
ment as below except D. Nominal Trade Account
A. overall balance
1014. Which of the following is a top 5 export
B. capital and financial account for Australia
C. national income account A. Education and Coal
D. current account B. Tourism and Motor Vehicles
1010. All of the following are examples of C. Coal and Machinery
trade barriers, except? D. Education and Electrical Equipment
A. Quota
1015. A limit to the number of imports that
B. Income Tax may enter a country
1011. Which are the influences of dumping? A. tariff
(Choose more than one answer) B. embargo
A. Helps to gain market share and to C. demand
clear unsold stock
D. quota
B. Help to increase the price in domestic
market 1016. Attempts to explain the pattern of inter-
C. Minimizing Investment Risk (through national trade
larger market share) A. have been a major focus of interna-
D. Benefit terms of export incentives, tional economists.
recognition, and cheap funds for exports B. have proven to be hopeless.

C. have proven to be a trivial exercise. C. Tariffs / Quotas

D. have been the preoccupation of eco- D. Corruption / War

nomic development theorists.
1023. International trade concerns:
1017. International trade tends to cause wel-
A. trade in goods and services
fare losses to at least some groups in a
country B. migrations
A. The less mobile country’s resources C. foreign direct investments
B. The more mobile country’s resources D. all above
C. The lower the country’s initial living 1024. which of the following would decrease
standard the demand for A$ by the British
D. The higher the country’s initial living A. more UK students go on gap year in
standard australia
1018. A tariff can raise a country’s wel- B. UK buy more australian exports
fare
C. Uk invest in australian mining projects
A. never
D. UK tourists decide to stay in Majorca
B. sometimes rather than go all tge way to australia
C. always
1025. What is true about comparative advan-
D. none of above tage?
1019. The production possibilities curve is an A. It was first thought out by the mathe-
illustration of what? matician David Rimaro
A. Opportunity costs and trade-offs B. A country can produce at a lower op-
B. Only opportunity costs portunity cost than another country.
C. Only trade-offs C. A country can produce at a higher op-

portunity cost than another country.
D. none of the above
D. Comparative advantage assumes that
1020. An economy without international trade costs change and there is not a constant
is known as closed economy. return to scale.
A. TRUE
1026. The relationship between exchange rate
B. FALSE and quantity foreign currency supply is
1021. All exchange transactions take place at
the fixed exchange rate A. negative
A. True B. positive
B. False 1027. High levels of openness are most likely
associated with a country’s
1022. Which of the following is NOT an obsta-
cle to economic development? A. political orientation.
A. Population Growth B. size.
B. Natural Resources / Geography C. resource availability.

D. historical association with foreign en- 1032. A government policy or restriction that
tangling alliances. limits international trade is known as a?
E. None of the above. A. quora
B. trade barrier
1028. What are the payments made by the
government to provide financial support to C. subsidy
certain industries? D. standards
A. Embargo
NARAYAN CHANGDER
1033. Foreign investors prefer direct invest-
B. Sanction ments to portfolio investments because
they want to
C. Subsidy
A. diversify risk and gain higher rate of
D. Quota return on capital
1029. Balance of payments used the sys- B. export product to the host market
tem accounting C. retain direct control over their unique
production knowledge or managerial
A. single entry
skills
B. double entry
D. transfer knowledge and technology to
C. cash basis local investors
D. accrual basis 1034. In the foreign exchange rate system,
the value of the currency of a country is
1030. If the export value is more than im- determined by
port value, it shows that the rate of trade
terms is A. demand and supply of export and im-
port.
A. profit
B. total central bank reserves.
B. loss
C. international Monetary Fund.
C. win-win situation D. demand and supply of currency.
D. none of above
1035. An agreement between the United
1031. Arguments for free trade are sometimes States, Canada, and Mexico designed to
disregarded by the political process be- remove tariff barriers.
cause A. European Union
A. economists tend to favor highly pro- B. ASEAN
tected domestic markets. C. NATO
B. economists have a universally ac- D. NAFTA
cepted decisive power over the political
decision mechanism. 1036. The trade theory that first indicated
importance of specialization in production
C. maximizing consumer welfare may not
and division of labor is based on the idea
be a chief priority for politicians.
of which is developed first by Adam
D. the gains of trade are of paramount Smith in his famous book, The Wealth of
concern to typical consumers. Nations, published in 1776.

A. theory of comparative advantage 1041. international trade without government

B. theory of absolute advantage restrictions.
A. Imports

C. theory of relative advantage
B. Embargo
D. theory of static advantage
C. trade barriers
1037. An example of a Free trade area
D. free trade
A. NAFTA
1042. What was a result of trade according to
B. EU Adam Smith?
C. ASEAN A. 0:0
D. CARICOM B. 1:0 or 0:1
1038. Globalisation is best defined as C. 1:1
A. increased international trade as a re- D. undefined
sult of free movement of goods and capi- 1043. Total value of goods and services in a
tal between countries country for a specific time period.
B. a situation where all of the world uses A. Gross National Income (GNI)
the same common currency
B. Per capita income
C. the growing trend for companies to
C. Gross Domestic Product
stop making products within their own
country D. Gross National Happiness
D. the increase in the world tourist indus- 1044. Technological improvements are similar
try leading to more global travel to international trade since they both
1039. How should developing countries pro- A. Provide benefits for all producers and
tect their new industries from competi- consumers
tion? B. increase the nation’s aggregate in-
come
A. Export duties
C. reduce unemployment for all domestic
B. Indirect taxes
workers
C. Import bojlari
D. ensure that industries can operate at
D. Income tax less than full capacity
1040. Absolute advantage refers to the abil- 1045. The concept of free trade can be defined
ity of a country to produce more efficiently as
than another country. A. the reduction of tariffs and subsidies
in countries so they are no longer as large
as they were in the past
B. the removal of all trade barriers both
direct and indirect to facilitate more effi-
cient use of scarce resources
C. the free movement of all goods, ser-
A. True vice, ideas, people, money and technology
B. False across the globe

D. trade which is based on the cheapest 1050. Tariffs are different from assigned im-
prices due to the benefits of perfect com- port quotas in that tariffs will
petition and economies of scale A. restrict imports
1046. In the Ricardian model, if a country’s B. increase the price of imported goods
trade is restricted, this will cause all ex- C. benefit domestic consumers of im-
cept which? ported goods
A. Limit specialization and the division of D. hurt domestic producers of goods fac-
NARAYAN CHANGDER
labor. ing import competition
B. Reduce the volume of trade and the E. generate additional revenue for the do-
gains from trade mestic government
C. Cause nations to produce inside their 1051. Which institution is called an ‘accessible
production possibilities curves credit window’?
D. May result in a country producing A. International Finance Corporation
some of the product of its comparative dis- (IFC) International Finance Corporation
advantage B. International Monetary Fund (IMF) In-
E. None of the above. ternational Monetary Fund
C. International Bank for Reconstruction
1047. means a nation has an advantage when and Development (IBRD) International
it can produce a god at a lower opportunity Bank for Reconstruction and Development
cost than another nation. D. International Development Authority
A. comparative advantage (IDA) International Development Bank
B. absolute advantage 1052. The relationship between the value of a
country’s exports and the value of its im-
C. purchasing power
ports.
D. balance of trade
A. Trade Failure
1048. Pounds = 1 US Dollar, if you exchange B. Trade Surplus
1, 000 for Pound you would get C. Balance of Trade
A. 15.3 Pounds D. Balance of Payments
B. 530 Pounds 1053. limit the flow of goods, services, and
C. 1530 Pounds productive resources between countries.
A. trade surplus
D. 153 Pounds
B. trade barriers
1049. What is a decrease in the value of a cur- C. balance of trade
rency?
D. none of above
A. Appreciation
1054. Internal trade have a first hand knowl-
B. Depreciation edge of the demand and supply position
C. Inflation A. True
D. Absolute advantage B. False

1055. Trade must be and B. Comparative advantage leads to most

A. Unvoluntary and benefitcial trade

B. Voluntary and Non-fradulent C. Comparative advantage has no effect
on trade.
C. On purpose and timely
D. Comparative and absolute advantage
D. benefit both parties and be quick are the same.
1056. How often is BOP calculated? 1060. International trade is governed by mon-
A. Every calendar year etary policy of one country
B. Every 6 months A. True
C. Everyday B. False
D. Every week 1061. the opening or expansion of interna-

tional trade usually affects all members of
1057. Financial Account transactions include society:
items such as
A. positively
A. Imports
B. negatively
B. Exports
C. most positively but some negatively
C. Transfers & Remittances
D. most negatively but some positively
D. Purchase and sale of stocks and bonds
1062. What is MOST LIKELY to happen to U.S.
1058. This diagram shows imports and exports if the US dollar be-
comes stronger relative to other curren-
cies?
A. imports will decrease, exports will in-
crease
B. both imports and exports will increase
C. imports will increase, exports will de-
crease
D. both imports and exports will decrease
A. Country A has absolute advantage 1063. A specification of a maximum amount of
over both goods. a foreign produced good that will be al-
B. Country B has a comparative advan- lowed to enter the country over a given
tage in the production of pulses time period is referred to as a (an):
C. Country A has a comparative advan- A. domestic subsidy

tage in the production of pulses B. export subsidy
D. both A and B are correct. C. import quota
1059. Which of the following is true? D. export quota
A. Absolute advantage leads to most 1064. The outsourcing of low-skilled service

trade. industry jobs (such as answering customer

inquiries) from advanced countries to low- C. Canada

wage countries, such as India, reduces D. England
costs and prices in advanced countries.
1070. The SAPTA was unanimously enforced
A. True
by all the member countries of the SAARC
B. False at the summit held in 1995
1065. Economies of scale can be defined as: A. New Delhi
A. An increase in average production B. kathmandu
NARAYAN CHANGDER
costs as the quantity of production is in- C. Male
creased. D. Islamabad
B. A fall in average production costs as
1071. Ecotourism is-responsible travel natural
the quantity of production is increased.
areas that conserve the environment and
C. An increase in total production costs improves the well being of the locals.
as the quantity of production is increased. A. True
D. A fall in total production costs as the B. False
quantity of production is increased.
1072. The current transfer includes the follow-
1066. What is not a part of the BoP ing items EXCEPT
A. Investment Account A. gift.
B. Current Account B. military aid.
C. Financial Account C. financial aid.
D. Capital Account D. investment
1067. is (are) all goods and services pro- 1073. A feasible effect of international trade
duced or based in one country that are sold is that a
abroad. A. Monopoly in the home market be-
A. Necessities comes an oligopoly in the world market
B. Exports B. Oligopoly in the home market becomes
an monopoly in the world market
C. Global Licensing
C. Purely competitive firm in the home
D. Imports market becomes an oligopolist
1068. Trade bloc:France, Germany, Spain D. Purely competitive firm in the home
market becomes a monopolist
A. European Union
B. NAFTA 1074. The earliest statement of the principle
of comparative advantage is associated
C. ASEAN with
D. none of above A. David Hume.
1069. The US imports the most from this coun- B. David Ricardo.
try C. Adam Smith.
A. China D. Eli Heckscher.
B. Japan E. Bertil Ohlin.

1075. Turkey trades textiles, food products, C. neither technological progress nor in-
and building materials to Germany in ex- ternational trade.
change for German machinery, technology,

D. both technological progress and inter-
and cars. This trade is possible because national trade.
A. neither country has an absolute advan- E. None of the above.
tage in any good
1079. Who gains the most from free foreign
B. each country has comparative advan- trade?
tage in different goods
A. import-competing industries;
C. the countries are forced to trade with
each other B. iste’molchilar;
C. developing countries;
D. both countries share comparative ad-
vantage in the same goods D. ishlab chiqarishning yosh tarmoqlari
1080. Which generalization is the MOST ac-
1076. terms of trade is calculated by multi-
curate comparison of absolute advantage
plying the commodity terms of trade index
and comparative advantage?
by productivity changes in domestic export
industries A. A nation can have either an absolute
advantage or a comparative advantage in
A. Gross Barter
production, but not both
B. Double Factoral B. A nation can have an absolute advan-
C. Single Factoral tage without having a comparative advan-
tage in production
D. none of above
C. A nation that has an absolute advan-
1077. Which country has the absolute advantage will automatically have a compara-
tage in producing rice? tive advantage in production
D. A nation that has a comparative advan-
tage will automatically have an absolute
advantage in production
1081. How would you represent the imposi-
tion of a subsidy?
A. Mexico
B. Vietnam
1078. The real income of domestic producers

and consumers may be increased by
A. S (world) would shift upwards
A. technological progress, but not inter-
national trade. B. S (world) would shift downwards
B. international trade, but not technolog- C. S (domestic) would shift upwards
ical progress. D. S (domestic) would shift downwards

1082. The theory of absolute superiority is B. Artificially keeping a country’s cur-

A. It is the principle that explains the ad- rency below market value.
vantage of international trade, that each C. The use of protectionist measures to
country has such a good that it can pro- protect domestic employment.
duce more of the good than other coun- D. The use of administrative barriers to
tries for the same unit cost. limit imports.
B. Having an absolute advantage in the
costs of production of goods completely 1086. Which trading bloc shares a common cur-
NARAYAN CHANGDER
explains the reasons for the wide spread rency?
of foreign trade. A. North Atlantic Free Trade Agreement
C. it is to focus all efforts in the country (NAFTA)
on the production of goods with relatively B. European Union (EU)
high efficiency and export them. C. Association of Southeast Asian Na-
D. is to investigate the reasons for the tions (ASEAN)
usefulness of international trade. D. none of above
1083. With the tariff, the government collects 1087. The opportunity cost of cloth in terms
of widgets in Foreign is if it is ascertained
that Foreign uses prison-slave labor to pro-
duce its exports, then home should
A. export cloth.
B. export widgets.
C. export both and import nothing.
D. export and import nothing.
A. $75, 000 E. All of the above.
B. $100, 000
1088. the actual amount of goods and services
C. $125, 000 that can be bought with a given unit of
D. $150, 000 money
Explanation:Tariff = 15-10 = 5Import A. parity
quantity = 20= Government revenue =
20 * 5 = 100 B. purchasing power
C. exchange rate
1084. What is India’s financial motto?
D. open market operations
A. 360◦ Finance.
B. Money talks, cash screams. 1089. Higher income levels in the UK would re-
sult in
C. Cash is king, digital is divine.
A. Increased exports and appreciation of
D. Think big, cash bigger. the £
1085. In trade, dumping can be defined as: B. Increased exports and depreciation of
A. The selling of a good in another coun- the £
try at a price below its unit cost of produc- C. Increased imports and appreciation of
tion. the £

D. Increased imports and depreciation of 1095. Exports minus imports or how many
the £ goods a county exports versus imports

A. Exports
1090. What is NPCI?
B. Subsidy
A. National Payments Corporation of In-
dia C. Quotas
B. National Payments Corporation of In- D. Balance of Trade

donesia 1096. What occurs when IMPORTS are greater
than EXPORTS?
1091. Cost-benefit analysis of international
trade A. Trade Surplus
A. is basically useless. B. Trade Failure

C. Trade equilibrium
B. is empirically intractable.
D. Nothing
C. focuses attention on conflicts of inter-
est within countries. 1097. Refers to free trade agreements among
D. focuses attention on conflicts of inter- countries in a region (ex:EU, ASEAN, and
ests between countries. NAFTA).
A. Free Trade
1092. Which of the following is NOT a priority
B. Trade
for developing countries?
C. Balance of Trade
A. Governments should invest in the peo-
ple D. Trading Bloc
B. Focus on microeconomics policies 1098. All the following are the 3 C’s or credit
C. Encourage competition and free enter- except
prise A. Capacity
D. Open economies to free trade B. Collateral
C. Compound
1093. What countries are involved in NAFTA?
D. Character
A. America, Canada, Mexico
1099. is the ability to produce a good at a
B. Brazil, Mexico, America
lower opportunity cost than another pro-
C. Mexico, Latin America, America ducer.
D. Canada, America, Latin America A. comparative advantage
B. appreciation
1094. Which of the following country is not
the member of the ASEAN? C. absolute advantage
A. Laos D. deprecation
B. Cambodia 1100. The figure illustrates the international

movement of capital. When there is no
C. Philippines
international movement of capital, Nation
D. Mauritius 1 and Nation 2 invest their entire capital

stock domestically, rates of return on cap- A. an income debit in the current account
ital in Nation 1 and Nation 2 are respec- B. a service debit in the current account
tively denoted by thelength of
C. a service deficit in the current account
A. O1N and O2T.
D. an income deficit in the current ac-
B. CN and TH count
C. O1F and O2J.
1104. Which trade barrier is implemented
D. O1C and O2H. when countries have strong political dis-
NARAYAN CHANGDER
1101. Goods and services brought in from agreements? (Example:The United States
other countries and Cuba)
A. supply
B. exports
C. imports
D. tariff
1102. The Australian govt spent $19m on the

construction of the Thai-Laos Friendship A. Standards
bridge across the Mekong River. This pay-
B. Quota
ment was recorded in the Balance of Pay-
ments as C. Embargo
D. Tariff
1105. NAFTA stands for

A. North American Free Trade Associa-
tion
B. North Atlantic Free Trade Agreement
C. North Atlantic Free Trade Arrange-
A. a debit in secondary income ment
B. a debit in the Financial account D. North American Free Trade Agreement
C. a capital transfer debit
1106. The earliest statement of the principle
D. none of above comparative advantage is associated with
1103. Expenditure by Toyota Australia, on A. Adam Smith
freight costs for imported cars, is recorded B. David Ricardo
in the balance of payments as
C. Eli Heckscher
D. Bertil Ohlin
1107. An import is
A. producing certain goods very well and
for a reduced cost.
B. items sold to other countries.

C. dependence on others to get products A. comparative advantage

you do not produce and needing to pur- B. absolute advantage
chase items from them.

D. items purchased from other countries. 1112. If one Canadian Dollar is worth 1.06 US
Goods come into the USA. dollars, you would receive US dollars
if you traded 100 Canadian dollars.
1108. When individuals work for businesses,
what resource are they providing?
A. Capital
B. Labor
C. Loans
D. Raw materials A. 100
1109. The balances of payments refer to B. 106
A. the balance of financial records show- C. 160

ing the total inflow of money into the coun- D. 150
try.
1113. Refer to the nature of home demand for
B. the balance of financial records show- the industry’s product or service.
ing the total money outflow paid to other
countries. A. Demand conditions
C. the balance of financial records show- B. Relating and supporting industries

ing the total export and import to other C. Firm strategy, structure, and rivalry
countries. D. none of above
D. the balance of financial records show-
ing the total inflow of money into the coun- 1114. Arguments for free trade are sometimes
try and the total money outflow paid to disregarded by politicians because:
other countries. A. Maximizing domestic efficiency is not
considered important
1110. An increase in domestic interested rates,
relative to the world, leads to which of the B. Maximizing consumer welfare may not
following: be chief priority
A. An increase in demand for the domes- C. There exist sound economic reasons
tic currency for keeping one’s economy isolated from
other economies
B. A decrease in demand for the domes-
tic currency D. Economists tend to favor highly pro-
tected domestic markets
C. An increase in the supply of the domes-
tic currency 1115. What is the USMCA?
D. A decrease in the supply of the domes- A. trade bloc consisting of the United
tic currency States, Mexico and Canada
1111. America can produce more DVDs per la- B. trade bloc between European coun-
bor hour than can any other country in the tries
world. Is this an example of comparative C. an exchange rate between American
or absolute advantage? currency and Canadian currency

D. the balance of trade between Canada A. a tariff

an Mexico B. a negative trade balance
1116. International trade in goods and ser- C. an embargo
vices is sometimes used as a substitute for D. a trade treaty
all of the following except:
A. International movements of capital 1122. An international organization of Euro-
pean countries formed to reduce trade bar-
B. International movements of labor riers and increase cooperation among its
NARAYAN CHANGDER
C. International movements of technol- members
ogy A. European Union
D. domestic production of different goods B. European Cooperation
and services
C. Association of European Countries
1117. Coming into effect in 1994, NAFTA en- D. European Confederation
couraged free trade between the United
States and which two other countries? 1123. People worldwide increasingly share
A. canda and cuba similar preferences.
B. japan and china A. True
C. Canada and mexico B. False
D. panama and brazil 1124. A system in which the exchange rates
for currencies change as the supply of and
1118. If China placed a on copper, con- demand for the currencies change.
sumers would likely pay for goods
made with copper A. Trade Wars
A. exchange rate; higher prices B. Flexible Rate of Exchange
B. tariff; higher prices C. Foreign Exchange Rate
C. tariff; lower prices D. Protective Market
D. exchange rate; lower prices 1125. Why do people trade?
1119. Many workers have moved across bor- A. They want to find out how much their
ders, and jobs have shifted to emerging currency is worth compared to another
markets country’s currency.
A. True B. They expect to be better off as a result
of trade.
B. False
C. They trade to increase scarcity.
1120. A fixed exchange rate is also known as D. They trade so they don’t have to
barter.
A. pegged exchange rate
1126. A firm’s foreign direct investment. de-
B. Petty Exchange rate cisions are, in the case of horizontal FDI,
1121. In an effort to bring down the govern- strongly influenced by and, in the case
ment of Cuba, the US adopted a policy of of vertical FDI, strongly influenced by
refusing to trade with Cuba. This is called A. Materials costs; labor costs

B. Trade costs; production costs B. Mrs. Lee giving money to a student.

C. Labor costs; trade costs C. Mr. Mosley transferring money to his

D. Production costs; trade costs wife’s account
D. none of above
1127. Import and Export of service are known
as 1132. An increase in United States imports
A. Nominal trade will result in which of the following in for-
eign exchange markets?
B. Invisible trade
A. Increase foreign demand for United
C. Visible trade
States dollars
B. Decreased supply of United States dol-
1128. A Flexible exchange rate is also called lars
as C. Increased United States demand for
A. floating foreign currencies
B. flying D. A decrease in the value of foreign cur-
rencies
C. flexing
E. An increase in the value of the United
D. none of above
States dollar
1129. Which statement BEST reflects the dif-
ference between tariffs and quotas? 1133. The current account shows
A. Tariffs raise prices on exports, while A. international movement of goods and

quotas set limits on imports. services
B. Tariffs raise prices on imports, while B. international movement of capital

quotas set limits on exports. C. foreign exchange market
C. Tariffs raise prices on exports, while D. international movement of invest-
quotas set limits on exports. ments
D. Tariffs raise prices on imports, while
1134. In the short-run, tariffs and quotas help
quotas set limits on imports.
protect
1130. Which of the following statement is A. domestic jobs
NOT correct regarding the membership of
B. foreign employment
the IMF?
C. price wars
A. All member countries of the IMF are
not sovereign states D. consumer choice
B. Nauru is the latest member of the IMF 1135. Ad valorem tariffs are collected as
C. All “member countries” of the IMF are A. fixed amounts of money per unit
members of the United Nations traded
D. Currently its membership is 189 B. a percentage of the price of the prod-
1131. What is Balance of Payment uct
A. transfer of money going in and out of C. a percentage of the quantity of imports

country D. all of the above

1136. Intra-industry trade cannot be ex- 1141. Any activity which slows or outright
plained by blocks the free exchange of goods and ser-
A. imperfect competition model vices between nations.
B. slicing up the value chain A. Voluntary Trade
C. comparative advantage B. Specialization

D. competitive advantage C. Currency Exchange
D. Trade Barrier
NARAYAN CHANGDER
1137. A stronger British pound is beneficial
for: 1142. An exchange rate is the number of units
A. U.S. exchange students studying in of:
Britain with a U.S. scholarship. A. a nation’s money that is equal to one
B. British firms selling goods and ser- unit of another nation’s money.
vices in Canada.
B. a nation’s output that is equal to one
C. British investors who have invested unit of another nation’s output.
money in Australia.
C. gold backing a nation’s money.
D. exchange students with a British schol-
arship studying in Canada D. none of these.
1138. An increase in domestic inflation rates, 1143. This is an economy’s ability to produce
relative to the world, leads to which of a particular good or service at a lower op-
the following: portunity cost than its trading partners.
A. An increase in demand for the domes- A. Comparative advantage
tic currency B. Trade surplus
B. A decrease in demand for the domes- C. Trade fails
tic currency
D. Law of supply and demand
1139. These companies these companies pro-
vide services 1144. Balance of trade is the
A. Primary sector A. Different between export and import
of service
B. Secondary sector
B. Total of export and import service
C. Tertiary sector
D. none of above C. Different between export and import
of goods
1140. If a production possibilities frontier is D. Total of export and import of goods
bowed out (concave to the origin), then
production occurs under conditions of 1145. Ban trade with a country usually due to
A. constant opportunity costs. political disputes
B. increasing opportunity costs. A. Subsidy
C. decreasing opportunity costs. B. Embargo
D. infinite opportunity costs. C. Tariff
E. None of the above. D. Quota

1146. The value of one currency expressed in A. Flexible exchange rate system
terms of another is known as the
B. Fixed exchange rate system

A. Internal Funds
C. Floating exchange rate system
B. External Funds
D. Stable exchange rate system
C. Development
D. Exchange Rate 1151. Which of the following is NOT a Criti-
cism of Adam Smith’s Theory of Interna-
1147. When the government spends more
tional Trade:
than it collects.
A. It assumes that each exporting coun-
try has an absolute cast advantage in the
production of a specific commodity.
B. It failed to explore in any comprehen-
sive manner the factors influencing trade
between two or more countries.
C. It was too elementary.
A. Surplus
D. Backward countries do not sell their
B. Supply
surplus produce in foreign markets but
C. Deficit are constrained to export despite domes-
D. Demand tic shortages.
1148. Which of the following SAARC member 1152. Which one would not be subject to a
has the highest population? sales tax?
A. Bangladesh A. Meal from a restaurant
B. Pakistan
B. Ice cream from the gas station
C. Nepal
C. A shirt from target
D. Afghanistan
D. A doctor visit
1149. A sudden shift from import tariffs to
free trade may cause short-term unem- 1153. Imposing a quota on imports will
ployment in competition and increase demand for do-
A. import competing industries. mestic goods.
B. exporting industries. A. Increase
C. industries that neither import nor ex- B. Decrease
port.
D. service industries 1154. What does “BOT” stand for?
E. None of the above. A. Balance of trade
1150. An exchange rate system where the cen- B. Robot
tral bank sets the value of the exchange
C. Balance of trace
rate in relation to another currency is re-
ferred to as a: D. Balance of payment tagsEng

1155. International trade forces domestic C. is an economic policy aimed at pro-

firms to become more competitive in terms tecting the foreign economy from national
of competition
A. The introduction of new products D. is an economic policy aimed at pro-
B. Product design and quality tecting the national economy from foreign
C. Product price competition.
D. All of the above
is a meeting of the “trade ministers”
NARAYAN CHANGDER
1161.
1156. Harley-Davidson USA purchases $25 of the members of countries of the trade
million in production machinery from a organisation
Japanese company.
A. Ministerial
A. Current account
B. Capital/Financial account B. Conference
1157. Absolute advantages refer to a country C. General Council

stability to produce more of the product
D. IP Council
than another country can, with the same
amount of resources.
A. TRUE 1162. A nation engaging in trade according to
the Ricardian model will find its consump-
B. FALSE tion bundle
1158. Instead Chinese labor, the United A. inside its production possibilities fron-
States imports goods that were produced tier.
with Chinese labor.
A. of importing B. on its production possibilities frontier.
B. to import C. outside its production possibilities
C. in exporting frontier.
D. none of above D. inside its trade-partner’s production
possibilities frontier.
1159. If the value of a country’s exports ex-
ceeds the value of its imports E. on its trade-partner’s production pos-
A. the trade fails sibilities frontier.
B. trade surplus
1163. When was NPCI founded?
C. balance of trade
D. none of above A. 2008
1160. Protectionism in: B. 2006

A. is an economic policy aimed at protect- C. 2007
ing the national economy from national
competition D. 2009
B. is an economic policy aimed at
strengthening foreign competition 1164. Which trade barrier is represented by
through the national economy the image?

C. Lose THEM
D. Gain THME

1168. Comparative advantage is an econ-
omy’s ability to produce a particular good
or service at a opportunity cost than
its trading partners.
A. lower
A. Tariff B. higher
B. Quota C. similar
D. different
C. Standards
D. Subsidy 1169. Identify the basis of trade of the follow-
ing table:
1165. The purchase of United States govern-
ment bonds by Japanese investors will be
included in Japan’s
A. current account
B. financial account
C. the trade fails
D. foreign direct investment A. Malaysia has comparative advantage
in Cloth
E. imports
B. Malaysia has absolute advantage in
1166. What standards do labour provisions in Cloth production
most North-South FTAs require signatories
C. Japan has comparative advantage in
to uphold? Choose all the correct answers
Car
A. Core labour standards including free-
D. Japan has absolute advantage in Cloth
dom of association and the right to collec-
tive bargaining. 1170. Consider the following two cases. In the
B. Elimination of all forms of forced or first, a U.S. firm purchases 18% of a for-
compulsory labor. eign firm. In the second, a U.S. firm builds
a new production facility in a foreign coun-
C. Abolition of child labor.
try. Both are , with the first referred
D. Elimination of discrimination in em- to as and the second as
ployment and occupation. A. foreign direct investment (FDI); in-
1167. The figure illustrates the international flows; outflows
movement of capital. When there is inter- B. foreign direct investment (FDI) in-
national movement of capital in both Na- flows; brownfield; greenfield
tions, how does the yield for Nation 2’s C. foreign direct investment (FDI) out-
owners of capital change? flows; brownfield; greenfield
A. Lose THMR D. foreign direct investment (FDI) out-
B. Gain THMR flows; greenfield; brownfield

E. foreign direct investment (FDI) in- 1176. Who propounded the theory of compar-
flows; greenfield; brownfield ative costs?
1171. The figure illustrates the international A. Ricardo

movement of capital. When there is inter- B. News
national movement of capital in both Na- C. Adam Smith
tions, the amount of capital movement is
D. Ohlin
NARAYAN CHANGDER
A. AB 1177. Why World Bank was established?
B. O1B A. None below
C. Aai B. To improve the adverse Balance of Pay-
D. O2B ment situation of the nonmember coun-
tries
1172. Which statement BEST reflects the dif-
C. To reconstruct the economies dam-
ference between tariffs and quotas?
aged during the Second World War
A. Tariffs raise prices on exports, while
D. To promote the International Trade
quotas set limits on imports.
B. Tariffs raise prices on imports, while 1178. An agreement that will eliminate all tar-
quotas set limits on exports. iffs and other trade barriers is an example
of a
C. Tariffs raise prices on exports, while
quotas set limits on exports. A. Free Trade area
D. Tariffs raise prices on imports, while B. common market
quotas set limits on imports. C. customs union
1173. One reason country’s choose to over- D. monetary union
value their currency is:
1179. A quota affects trade by
A. Increased export competitiveness
A. imposing a tax on imported goods.
B. Greater employment is domestic in-
dustries B. limiting the quantity of goods that can
be imported.
C. Cheaper imports
C. offering a subsidy to producer who ex-
D. none of above ports to foreign countries.
1174. The local currency experience if the D. the voluntary action of foreign manu-
government set the exchange rate below facturing manufacturers their exports.
the market exchange rate.
1180. What is the ability to produce more of
A. undervalued a given product with the same amount of
B. overvalued resources known as?
1175. The income terms of trade concept was A. comparative advantage

introduced by G.S.Dorrance B. trade balance
A. True C. absolute advantage
B. False D. specialization

1181. Which of the following best explains the B. balance of trade

terms of trade for an economy?
C. exchange rates

A. The prices of exports compared to the
volume of exports D. embargo
B. The difference between export income 1185. If the international value of the United
and export expenditure States dollar depreciates in comparison
C. The ratio of export income to import ex- with the Japanese yen, which of the fol-
penditure lowing is most likely to occur?
D. The prices of exports compared to the A. United States exports to Japan will in-
prices of imports crease
1182. After the implementation of the trade B. The United States government will in-
subsidy, total imports on the diagram are: crease the tariff on Japanese imports
C. The United States balance-of-trade
deficit with Japan will become even
larger.
D. United States tourists can be expected
to visit Japan in greater numbers
E. Trade between the United States and
A. Q1 to Q2 Japan will not be affected
B. Q1 to Q3
1186. An unfavourable movement in the terms
C. Q3 to Q2 of trade will mean that:
D. Q1
A. a holiday to Bali will become more ex-
1183. How will Japan’s short-term invest- pensive for Australians
ment in India come into India’s balance B. imports are now more expensive to
of payments? Short-term investment by buy.
Japan in India will be on which side of In-
dia’s balance of payments? C. the value of the Australian dollar has
risen against a basket of other nations’
A. Current Account-Credit Side On the
currencies
credit side of the current account
B. Current Account-Credit Side On the D. Australia has to export more goods
debit side of the current account and services to purchase the same volume
of imports
C. Capital Account-Credit Side On the
credit side of the capital account 1187. Which one does not restrict interna-
D. Capital Account-Borrowing Side The tional trade?
borrowing side of the capital account
A. Quota
1184. This is a measurement of the value of B. Subsidies
one nation’s currency relative to the cur-
rency of other nations? C. Embargoes
A. tariff D. Trade Deficits

1188. If a country imposes an import tariff, its 1193. Tariff is a specification of a maximum
welfare can improve if amount of commodities which maybe im-
A. the country is a small country rather ported into a country in any period of time.
than a larger country A. TRUE
B. its terms of trade improve enough B. FALSE
C. the tariff enhances the welfare of its
trading partners 1194. Why does the United States need to im-
port products?
NARAYAN CHANGDER
D. its government’s tax revenue in-
creases because of the tariff A. The US does not import products
B. Some are easier and cheaper to make
1189. Which of the following is an advantage in other countries
of a fixed exchange rate system:
C. The US makes all of its own products
A. Improved trade relations
D. none of above
B. Increased flexibility of monetary policy
C. Increased certainty for stakeholders 1195. Country “G” can produce 20 hamburg-
(higher investment) ers or 80 hot dogs. Country “H” can pro-
D. none of above duce 14 hamburgers or 28 hot dogs. What
is the opportunity cost for Country “H” to
1190. What is the term for the cost of the next produce 1 hamburger?
best alternative use of money, time, or re- A. 2 hot dogs
sources when one choice is made rather
than another? B. 1/2 hot dogs
A. Opportunity cost C. 1.5 hot dogs
B. Absolute advantage D. 15 hot dogs
C. Comparative advantage 1196. Plaza was establish by many people?
D. Trade balance
A. 4
1191. In which of the following categories B. 3
are there transactions of balance of trade
C. 1
recorded?
A. Visible items D. none of above
B. Invisible items 1197. What is a potential benefit of free

C. Capital transfers trade?
D. All of these A. More employment in sunrise indus-
tries
1192. Compartive advantage is a contributing
B. Specialization in commodity produc-
factor to
tion
C. Less unemployment in sunset indus-
B. International Economic Competition tries
C. International Conflicts D. Access to goods that are not produced
D. International trade in the domestic market

1198. If the U.S. government uses an expan- 1203. What is the WTO?
sionary monetary policy to reduce interest A. Replaced the GAFT (General Agree-
rates, then it will:

ment on Free Trade)
A. lead to higher imports and lower ex- B. Countries have the ability to trade with
ports. other countries as they see fit.
B. cause the exchange rate for U.S. cur- C. Current rounds of negotiations are
rency to depreciate. called the “Dota Rounds”’
C. lower levels of consumption and in- D. Lowers trade barriers in developed na-
vestment. tions to increase imports
D. cause the exchange rate for U.S. cur- 1204. Assume the exchange rate of US dollars
rency to appreciate. to Indian Rupees changes from $1=500
Rupees to $1=200 Rupees. Which group
1199. the price of one country’s currency ex-
will be helped by this change?
press in terms of another country’s cur-
rency A. US exporters of US goods to India
A. currency B. Indian manufacturing firms
B. exchange rate C. Indian citizens holding US dollars
C. capstone D. US importers of Indian goods
D. none of above 1205. Based on this table, if these two coun-

tries trade with each other, what should
1200. What is the BOT also referred to? each country make?
A. The net imports
B. Gross domestic product
C. The economics balance
A. South Korea makes all of the TV sets
D. The international trade balance
and Japan makes all the cars
1201. Much of U.S. foreign aid has been given B. South Korea makes all of the cars and
for: Japan makes all of the TV sets
A. political and military purposes. C. South Korea makes all TV sets and
B. humanitarian purposes. Japan gives up 50 TV sets in favor of 25
cars.
C. nongovernmental organizations.
D. Japan makes all of the cars and South
D. national security reasons. Korea shifts half of its car production to
TVs
1202. What country has the COMPARATIVE
advantage for Cheese Sticks? 1206. Fixed exchange rate is fixed by the Gov-
ernment in terms of
A. currency
B. Gold Reserves
A. USA C. Fixed assets
B. CANADA D. All of these

1207. This trade barrier limits the number of B. Absolute Advantage

products that can be brought into a coun- C. Comparative Advantage
try.
D. Balance of Trade
A. Tariff
1213. An is a good or service bought in one
B. Quota
country that was produced in another.
C. Embargo
A. tariff
D. Subsidy B. quota
NARAYAN CHANGDER
1208. A corporation is considered a multina- C. export
tional if D. import
A. Parent; more than 10% of its stock is
1214. If the value of a country’s currency de-
held by a foreign company
creases, which of the following would be
B. Child; more than 50% of its stock is expected:
held by a foreign company
A. An increase in Aggregate Supply (AS)
C. Parent; it owns more than 10% of a for-
B. A decrease in Aggregate Supply (AS)
eign firm
D. Child; more than 10% of its stock is 1215. Foreign trade may adversely affect the
held by a foreign company consumption habits of a country through
the importation of cheaply manufactured
1209. Each month, Ima Newhere, who recently and harmful commodities.
arrived in the United States, sends half her A. True
paycheck to her sister in Poland.
B. False
A. Current account
1216. “Nation could become rich and powerful
only by exporting more than importing.”
1210. This is the advantage companies get is the view on trade of:
when production of either goods or ser- A. Adam Smith
vices becomes more efficient. B. David Ricardo
A. Economies of scale C. Mercantilists
B. Economies of scope D. none of above
C. Command economy
1217. The opportunity cost of one DVD in
D. Market economy South Korea is
1211. The International trad helps the econom-
ically backward and underdeveloped coun-
tries.
A. True
B. False A. One ton of steel
1212. What a company gives up in order to B. 2 ton of steel
make another product is known as C. 3 ton of steel
A. Opportunity Cost D. 4 ton of steel

1218. Dan can eat either a hot dog or a ham- 1224. If the world terms of trade equal those
burger. He chooses to eat the hot dog. of country, F then
What is his opportunity cost?

A. country H but not country F will gain
A. Hamburger from trade.
B. Hotdog B. country H and country F will both gain
from trade.
1219. Suppose that there is a balance of trade
in both the US and Canada. Then, the C. neither country H nor F will gain from
US dollar appreciates against the Canadian trade.
dollar. What would the likely outcome be? D. only the country whose government
A. A trade deficit in both countries subsidizes its exports will gain.
B. A trade surplus in Canada E. None of the above.
C. A trade surplus in the US 1225. If two countries have identical produc-

tion possibility frontiers, then trade be-
D. A trade deficit in Canada
tween them is not likely if
1220. Internal trade is also called as A. their supply curves are identical.
A. Home trade B. their cost functions are identical.
B. Domestic trade C. their demand functions differ.
C. Inter-regional trade D. their incomes are identical.
D. All the above E. None of the above.
1221. NOT argument for free trade 1226. An import quota is meant to (blank) the
A. domestic job security number of a particular good brought into
the country.
B. national economic security
A. affect
C. infant industries
B. benefit
D. open competition
C. restrict
1222. countries were members of WTO as
D. increase
on 1st January 1995
A. 151 1227. A floating exchange rate system is one
in which:
B. 164
A. the value of a currency is pegged to the
C. 104 value of another currency
D. 139 B. the value of a currency is mostly al-
1223. What countries are a part of the lowed to be determined by supply and de-
“USMCA”? (Formly known as NAFTA) mand, but the country intervenes to stop
extreme fluctuations.
A. USA United Kingdom Mexico
C. the value of a currency is allowed to
B. Europe USA Canada UK be determined solely by the demand for,
C. USA Canada Mexico and supply of, the currency on the foreign
D. North America South America Green- exchange market.
land D. none of above

1228. Which year was Automercados Plaza’s 1233. The table shows the exchange rate of
(supermarket) founded? the Australian dollar ($A) expressed as
A. 1963 units of foreign currency per $A. How has
the value of the Australian dollar changed
B. 1987 in Year 2 compared to Year 1?
C. 1677
D. none of above
NARAYAN CHANGDER
1229. According to the Heckscher-Ohlin model,
the source of comparative advantage is a A. It has appreciated against the Euro
country’s: and depreciated against the Yen
A. technology B. It has depreciated against the Euro
B. advertising and appreciated against the Yen
C. factor endowment C. It has appreciated against the Euro
and depreciated against the $US
D. both a and c
D. It has depreciated against the Euro
1230. are the goods and services that a and appreciated against the $US
country produces domestically and sells to
buyers in a foreign country 1234. The definition of the exchange rate of a
A. trade currency is:
B. imports A. the price level in the country
C. exports B. the rate at which imports can be
D. tariff bought from export revenue
C. the price of one currency in terms of
1231. Those in favor protectionist trade poli-
how much it buys of another
cies would MOST likely
A. Support a rediction in tariffs D. the price of a currency in terms of the
goods that can be bought with it
B. Argue against trade barriers
C. Argue for trade barriers 1235. What is a tariff?
D. believe that trade restrictions harm A. A government order to stop trade
consumers.
B. A limit placed on imports
1232. An import quota is a C. A tax placed on imports
A. tax on import quantities above the le- D. none of above
gal limit.
B. way to increase tariff revenues for the 1236. Name of important component of inter-
exporting country. national economics?
C. legal limit on the amount of a good that A. International balance trade
can be imported into a country.
B. International exchange rate
D. legal incentive for members of WTO to
C. International balance of payment
increase their exports of a good or ser-
vice. D. Import-export proportion

1237. what is hyperinflation? 1242. Import means

A. deflation A. buying goods from another country

B. inflation B. selling goods to another country
C. a situation in which prices rise very C. only making one kind of product
fast D. none of above
D. none of above
1243. an economic or military measure put in
1238. Adam Smith argues that these two con- place to punish another country
cepts results in more productivity. A. sanction
A. division of labor B. tariff
B. artisanship C. embargo
C. industrialization D. strike
D. specialization of tasks 1244. Doctor:Goods or Service?
1239. When a nation imports more than it ex-
ports, economists say it has which of the
following?
A. A trade surplus
B. A balance of trade
C. A trade deficit
A. Goods
D. A national difference
B. Service
1240. IBRD stands for 1245. a reason why some countries use fixed
A. International Bank for Reconstruction exchange rates-often set at low values is
and Development so
B. Industrial Bank for Revival and Devel- A. exports are encouarged and imports
opment made more expensive
C. Investment Bank for Reconstruction B. to improve their budget surplus
and Development C. to allow investment in capital infras-
D. Indian Bank for Reconstruction and tructure
Development D. all of these options
1241. Import quotas tend to result in all of the 1246. Which among the following is/are an
following except: example/s of International economics
A. domestic producers of the imported theory?a) Balance of receipt theoryb)
good being harmed Malthusian theoryc) Heckscher-Ohlin
theoryd)Peacock-Wisemen theory
B. domestic consumers of the imported
good being harmed A. Balance of receipt theory
C. prices increasing in the importing B. Malthusian theory
country C. Heckscher-Ohlin theory
D. prices falling in the exporting country D. Peacock-Wisemen theory

1247. Exchange rates suddenly change and C. Passenger Motor Vehicles

now fewer U.S. dollars are required to buy
D. Natural Gas
a British Pound. What happened to our
money?
1253. Coins and paper bills used as money
A. The US Dollar Appreciated
A. currency
B. The US Dollar Depreciated
B. tender
1248. The pattern of trade would be:
NARAYAN CHANGDER
C. mediums of exchange
A. U.S. exports wheat while UK exports
cloth D. all of the above
B. U.S. exports cloth while UK exports
wheat 1254. What were the mercantilists’ views on
international trade?
C. Trade will not occur because U.K is dis-
advantaged in both goods. A. They support international trade as a
means of increasing a country’s wealth.
D. none of above
B. They oppose international trade be-
1249. This is what you miss when you choose cause it can reduce a country’s wealth.
one choice over another.
C. They consider international trade to
A. Sunk costs have no influence on a country’s wealth.
B. Future costs
D. They consider international trade to
C. Opportunity costs only be beneficial for developed countries
D. Income E. They consider international trade only
1250. Any commercial transaction that crosses beneficial for developing countries.
the borders of two or more nations is
known as 1255. The theory which explores the possibil-
ity of two nations operating at the same
A. international business level of efficiency benefitting by trading
B. global manufacturing with each other is-
C. domestic marketing A. Comparative advantage theory
D. market segmentation B. Reciprocal demand theory.
1251. the state of being unemployed or with- C. Haberler’s opportunity cost theory.
out a job, but available to work
D. H-O theory.
A. proponents
B. unemployment 1256. What is a disadvantage of Free Trade
C. poverty Agreements
D. employer A. better materials
1252. One of Australia’s top five imports is: B. outsourcing of jobs
A. Iron Ore C. bad labels

B. Coal D. none of above

1257. In an inflationary environment, then 1261. Explain that most trade takes place be-
over time cause of advantage in the production
of a good or service.

A. a specific tariff will tend to raise more
revenue than an ad valorum tariff A. absolute
B. an ad valorum tariff will tend to raise B. comparative
more revenue than an ad specific tariff
C. an optimum tariff will tend to raise 1262. Which of the following is an effect of a
more revenue than an escalating tariff tariff?
D. an escalating tariff will tend to raise A. Lower prices for consumers
more revenue than an optimum tariff
B. Higher prices for consumers
1258. The U.S. can produce 50 cars and 25
tools. Peru can produce 20 cars and 15 C. Consumers can’t get product once
tools. Who has the absolute advantage in quota is met
tools? D. It helps foreign producers
A. Peru
B. U.S. 1263. Exchange rates that are determined by
the supply and demand of goods and ser-
C. neither vices between two countries is known as
D. not enough info
1259. The rate at which goods are exchanged
at the international is defined as
A. term of trade.
B. the exchange rate.
C. an absolute advantage
D. a comparative advantage.
1260. If a foreign mining company establishes A. Fixed exchange rate
a coal mine in Queensland, the likely im- B. Flexible exchange rate
pact on the Circular Flow of Income Model
for Australia would be: 1264. What does APR stand for?
A. An increase in Australia’s unemploy- A. Annual Progressive Rate
ment rate and an increase in business in-
vestment B. Annual Percentage Raise
B. A decrease in Australia’s unemploy- C. Accumulated Percentage Rate
ment rate and an increase in business in-
vestment D. Annual Percentage Rate
C. An increase Australia’s unemployment 1265. According to comparative advantage

rate and a decrease in business invest- theory, nations can still gain from trade
ment even without an absolute advantage.
D. A decrease in Australia’s unemploy-
A. True
ment rate and a decrease in business in-
vestment B. False

1266. What happen to the price of goods and 1271. Which is the Plurilateral agreement?
quantity when tax was imposed in inter- A. ASEAN Free Trade Area (AFTA)
national trade?
B. United States-Mexico-Canada Agree-
A. Price = increase, Quantity = increase ment (USMCA)
B. Price = decrease, Quantity = in- C. Information Technology Agreement
crease
D. South Asian Free Trade Area (SAFTA)
C. Price = increase, Quantity = de-
1272. What happens when a nation’s currency
NARAYAN CHANGDER
crease
depreciates?
D. Price = decrease, Quantity = de-
crease A. Its products become more expensive
to other nations
1267. Which of the following does not belong? B. Its products become cheaper to other
A. NAFTA nations and exports may increases
B. Uruguay Round C. Nothing
C. World Trade Organization D. It halts all trade
D. Non Tariff Barriers 1273. which of followings is not the subject

matter of international finance?
1268. What is the basis for calculating compar-
A. the foreign exchange markets
ative advantage in international trade?
B. the balance of payments
A. Cost of producing goods or services.
C. basics and gains from trade
B. Opportunity cost of producing goods or
services. D. policies to adjust balance of payment
disequilibria
C. Relative prices of commodities.
1274. An economy with foreign trade is
D. Profits from international trade.
known as
E. All true
A. let economy happen.
1269. throughout the post-WWII, the impor- B. an open economy.
tance of tariffs as a trade barrier has C. a closed economy.
A. increased D. a planned economy.
B. decreased
1275. The Society is the creation of inter-
C. remained the same national trade
D. fluctuated wildly A. Agricultural
1270. If the value of a country’s exports ex- B. Modern

ceeds the value of its imports. C. Modern industrial
A. Balance of trade D. none of above
B. Trade Surplus 1276. When was IFM established
C. Trade fails A. Dec 27, 1945
D. Trade barriers B. Jan 30, 1947

C. Jan 1, 1946 1280. Someone who strongly opposes a trade

D. Sept 24, 1947 barrier like quotas or tariffs would MOST
LIKELY argue that the barrier

1277. David Ricardo theory states that
A. might cause more unemployment in do-
mestic industries
B. will lead to higher prices and fewer im-
ported goods
C. would lead to lower government in-
volvement in the economy
D. would completely eliminate imported
A. Benefits can be gained through high- goods
est productivity
B. Benefits can be gained from importing 1281. an increase in the value of a currency
cheap goods relative to another
C. International trade exist when prices A. appreciation
in two countries change
B. depreciation
D. International trade will always benefit
two countries equally 1282. What is “Engaging in trade without bar-
riers; most efficient”?
1278. When one country is good at producing
in a particular commodity, they have a(n) A. Protectionism
B. Free Trade
D. International trade
1283. Labor, human capital, entrepreneurship,

natural resources, and capital are exam-
ples of which of the following?
A. Absolute superiority
B. Complete specialization
B. Ishlab chiqarish omillari
C. Absolute advantage
C. Business
D. Economy
1279. The rate at which goods are exchanged
between one another in the international 1284. What three counties make up NAFTA?
market is called
A. U.S., China, and Mexico
A. the exchange rate.
B. an absolute advantage. B. U.S., United Kingdom, and China
C. a comparative advantage. C. U.S. Canada, and Mexico

D. term of trade. D. U.S., Canada, China

1285. Which of the following is most likely to 1289. A definition of a multinational business
cause an increase in the international value is one that:
of the dollar? A. has a foreign sounding name
A. Higher U.S. interest rates B. imports goods from one country and
B. lower U.S. government spending exports them to another one
C. higher real interest rates abroad C. exports goods to many different coun-
tries
D. expansionary monetary policy in the
NARAYAN CHANGDER
U.S. D. has factories or operations in more
than one country
1286. How is an exchange rate determined in
the money market? 1290. The concept of comparative advantage
makes the assumption that everyone will
A. The forces of supply and demand be better off
B. Government/the Federal Reserve A. Producing enough of a specific final
Bank good to export.
C. Whatever sellers of goods are willing B. Producing the products they produce
to take relatively best.
D. Investors decide the value of the cur- C. Producing enough of a good to con-
rency they wish to invest sume domestically with enough to export.
D. Producing only products they can pro-
1287. Which of the following statement is cor-
duce with greater output than any other
rect?
country.
A. Every member country of the IMF au-
tomatically becomes the member of the 1291. An opportunity cost can be define as sec-
World Bank ond best alternative that have to let go
B. The World Bank has 45 founder mem-
bers
C. India is not the founding member of
the World Bank
D. IMF is the part of World Bank group
1288. Having comparative advantage means

that a country can produce A. True
B. False
1292. Which of the following explains why

banks charge higher interest for lower
credit scores?
A. People with lower credit scores have a
good history of repaying debt
A. goods at a lower opportunity cost.
B. People with lower credit scores are al-
B. more goods than another country. ways poor

C. People with lower credit scores are al- B. worsen

ways rich C. not change

D. People with lower credit scores have a
D. any of the above
bad history of repaying debt
1293. The difference between import tariffs 1298. Export will and import will
and quotas is: when local currency had undervalued.
A. tariffs are a tax on locally produced A. increase, increase

goods but quotas limit the quantity of im- B. decrease, decrease
ports
C. increase, decrease
B. tariffs are a tax on imports and quotas
D. decrease, increase
are a tax on exports
C. tariffs are a tax on imports and quotas 1299. The fact that the U.S. tends to import
limit the quantity of imports goods from Guatemala that it could pro-
D. tariffs are a tax on all products but quo- duce more abundantly itself tends to sug-
tas just limit the quantity of imports gest that
A. Guatemala has an absolute advantage
1294. Dumping means in producing these goods.
A. a form of illegal price discrimination.
B. Guatemala has a comparative advan-
B. referred to tariff imposed on imports. tage in producing these goods.
C. selling more goods than allowed by im- C. Guatemala has more net exports than
port quota. the U.S.
D. a practice of selling goods at lower D. Guatemala enjoys a trade deficit over
prices in foreign. the U.S.
1295. These are goods that brought into 1300. In 2009 the exchange rate of the Sin-
one country from another county. gapore dollar changed from 1.49 = 1 US
A. Import dollar to 1.43 Singapore dollars = 1 US
B. Export dollar.How would this affect the import
prices and export prices for Singapore?
C. Trade
A. decrease/decrease
D. Quota
B. decrease/increase
1296. The Federal Reserve keeps a measure of
C. increase/decrease
the international value of the dollar
A. Trade Weighted Value of a Dollar D. increase/increase
B. Flexible Rate of Exchange 1301. When a currency loses value in compar-

C. Foreign Exchange Rate ison to another country
D. Protective Market A. appreciate
B. depreciate
1297. If a small country imposes a tariff on an
imported good, its terms of trade will C. Protectionism
A. improve D. Unfavorable Balance of Trade

1302. Which term describes the free move- 1308. To increase a variety of goods available
ment of goods, services, capital, and labor in trade, two countries should
across national borders?
A. remove all trade barriers
A. Protectionism
B. Outsourcing B. increase tariffs on one another
C. Globalization C. increase quotas against one another
D. Localization
D. increase all trade barriers against
NARAYAN CHANGDER
1303. What is an exchange rate? each other
A. The rate at which goods are exchanged
between two countries 1309. International trade in goods and ser-
vices tends to
B. The price of one nation’s currency in
terms of another’s A. increase all domestic costs and prices
C. How many US dollars you can ex-
change for RMB at Travelex B. keep all domestic costs and prices at
the same level
D. The price of goods in terms of a foreign
currency C. Lessen the amount of competition fac-
ing home manufacturers
1304. A positive balance of trade is also
known as a: D. Increase the amount of competition
A. Trade Surplus facing home manufacturers
B. Trade Failure
1310. The difference in value between a coun-
C. Balance of Trade
try’s imports and exports is its
D. none of above
A. quota
1305. Tariffs are used to protect “Infant Indus-
tries” B. trading block
A. True C. appreciation
B. False
D. balance of trade
1306. Which of the following is international
trade? 1311. The figure illustrates the international
A. Trade between provinces movement of capital. When there is no
B. Trade between regions international movement of capital, Nation
1 and Nation 2 invest their entire capital
C. Trade between countries
stock domestically, which area belongs to
D. none Nation 2’s capital owners?
1307. What is a need? A. O1CGA
A. Nothing
B. O1FGA
B. Something you have to have to live
C. Something you would like to have C. O1JMA
D. Ice cream D. inset

1312. If a tariff and import quota lead to C. Embargoes typically ban all trade be-
equivalent increases in the domestic price tween two countries
of steel, then:

D. The taxes collected on imports can be
A. the quota results in efficiency reduc- used for military tactics
tions but the tariff does not
1317. A useful material found in the environ-
B. the tariff results in efficiency reduc- ment
tions but the quota does not
A. Natural Resource
C. they have identical impacts on how
B. Scarcity
much is produced and consumed
C. Renewable Resource
D. they have identical impacts on how in-
come is distributed D. Economics
1313. Which of these is *NOT* a factor of pro- 1318. If you ordered a Teriyaki McBurger at
duction? a McDonald’s in Japan for 350 yen, how
much would that cost in U.S. dollars? 1
A. Human Capital
yen = 0.007 dollars
B. Natural Resources
C. Physical Capital
D. Land Ownership
1314. Internal trade concerned with two mon-
etary policy
A. True
B. False
A. $24.50
1315. government payments transferred ex- B. $245
porting companies allowing the companies
C. $2.45
to compete with other nations at the inter-
national market price without having to in- D. $350
cur the costs associated with selling at the
1319. a tariff imposed to protect domestic
lower price
firms from import competition
A. embargoes
A. protective tariff
B. tariffs
B. competitive tariff
C. subsidies
C. barrier tariff
D. taxes
D. defensive tariff
1316. Why is an embargo used in situations 1320. What does it mean to depreciate in
where countries have severe political dif- value?
ferences?
A. An embargo is a way for countries that
initially opposed each other to resolve
their differences
B. A country can set unfair standards for
the opposing country

A. to gain in value 1326. According to the argument for pro-

B. to remain the same in value tection, tariffs can shield new industries
from import competition until they have
C. to fall in value grown strong and efficient enough to with-
D. to gain value by 100 fold stand the competition by foreign produc-
ers.
1321. They developed the Factor proportions
A. scientific tariff argument
Theory.
B. infant industry argument
NARAYAN CHANGDER
A. Stolper and Samuelson
C. beggar they neighbor argument
B. Heckscher and Ohlin
D. foreign dumping argument
C. R T Malthus
D. JS Mill 1327. Which of the following is not the objec-
tive of the IMF?
1322. Current account in the Malaysian Bal- A. To ensure balanced international trade
ance of Payment (BOP) contains
B. To ensure exchange rate stability
A. receipts and payments on goods and
C. To promote international monetary co-
services.
operation
B. receipts on goods and services. D. To provide loan to private sectors
C. payments on goods and services.
1328. An export is
D. receipts and payments on goods.
A. items purchased from other countries.
1323. What is “Engaging in trade with barri- B. dependence on others to get products
ers”? you do not produce and needing to pur-
A. Protectionism chase items from them.
B. Free Trade C. items sold to other countries. Goods
exit the USA.
C. NAFTA
D. producing certain goods very well and
D. International Trade for a reduced cost.
1324. International Economics is a eco- 1329. What country has the ABSOLUTE advan-
nomics tage in Water Bottles?
A. Positive
B. Normative
C. Public A. USA
D. Traditional B. Canada
1325. No trade is allowed with a certain coun- 1330. A tax placed on goods imported into a
try country
A. Tariff A. Exchange Rates
B. Import Quota B. Embargo
C. Embargo C. Standards
D. None of them D. Tariff

1331. The World Bank is an international orga- B. 0.33 (1/3) pounds of cotton
nization to help: C. 3 pounds of sugar

A. developed countries profit from devel- D. 0.33 (1/3) pounds of sugar
oping countries’ problems.
B. foster development through loans and 1336. International trade MOST OFTEN takes
advice. place because of differences in
C. finance failing governments as a tax- A. trade barriers.
evading tactic. B. comparative advantage.
D. the developed countries remain domi- C. exchange rates.
nant.
D. absolute advantage.
1332. A tax on imported goods and usually de-
1337. In the foreign exchange rate system,
signed to protect domestic production of
the value of the currency of a country is
similar goods is
determined by
A. Tariff
A. demand and supply of export and im-
B. Quota port
C. Embargo B. total central bank reserves
D. Subsidy C. International Money Fund
1333. A primary reason why nations conduct D. demand and supply of currency
international trade is because of differ-
1338. What is the difference between a fixed
ences in
rate exchange system and a floating rate
A. historical perspective. system?
B. location. A. Government sets rate vs market sets
C. resource availability. rate
D. frets. B. Doesn’t exist vs does exist
C. Never changing vs always changing
1334. International trade and domestic trade
differ because of D. Currency never appreciates vs can ap-
preciate
A. different government policies
B. immobility factor 1339. This refers to the price of one country’s
currency expressed in terms of another
C. immobility variables
country’s currency.
D. none of these
A. Currency Rate
1335. What is Brazil’s opportunity cost for B. Money Rate
producing sugar?
C. Exchange rate
1340. In what document the “promise” key-

word is used
A. 3 pounds of cotton A. Letter of credit

B. Bill of Exchange D. customs duties that are not aimed at

C. Visa card public welfare.
D. Promissory note 1346. If the United States has a balance of

trade deficit with China, it means that
1341. American tourists benefit when the dol-
A. The U.S. imports more products from
lar does what?
China than it exports to China.
A. Rises (appreciates) B. The U.S. exports more products to
NARAYAN CHANGDER
B. Falls (depreciates) China than it imports from China.
1342. Which is NOT a benefit of Trade Barriers C. U.S. dollars are more valuable in China
than the Chinese currency is in the U.S.
A. make imports more expensive to buy
D. American companies are investing
B. causes higher demand for domestic more in their operations in China than
goods China is investing in the United States.
C. protects domestic jobs
1347. Empirical studies indicate that best
D. lowers demand for domestic goods enhances productivity growth for local in-
dustries
1343. From April 2021, which new subsidiary
did NPCI create to increase growth espe- A. local competition
cially in the business to consumer segment B. cut-throat competition
for small businesses? C. destabilizing competition
A. NPCI International Payments Limited D. global competition
(NIPL)
E. None of the above.
B. NPCI Bharat BillPay Limited (NBBL)
1348. If the trade price is higher than the do-
C. Bharat Bill Payment System (BBPS) mestic price, then the country will:
D. Indian Bank’s Association (IBA) A. Importing goods from other countries
1344. Homogenization is the name given to B. Export goods to other countries
the process whereby globalization causes C. Does not carry out international trade
one culture to consume another. It
D. Lowering the price of goods in the do-
would tend to highlight the rise of world
mestic market
beat, world cuisines, world tourism, uni-
form consumption patterns and cosmopoli- E. Increase the price of goods in the do-
tanism mestic market
A. True 1349. A country that can produce a good using
B. False fewer resources than another country has
a(n):
1345. Customs tariff is: A. lower opportunity cost of producing
A. list of systemized customs duty rates; the good than another country.
B. systemized customs duty movement B. absolute advantage.
mechanism C. specialization in the production of the
C. customs duties aimed at the welfare of good.
the state; D. all of these.

1350. Andy can produce a pillow in 15 minutes 1355. The price of one currency in terms of
or a blanket in 20 minutes, and Barbara other currency is called
can produce a pillow in 20 minutes or a

A. Foreign exchange rate
blanket in 30 minutes. Who has the com-
parative advantage in making blankets? B. Flexible rate of exchange
A. Andy C. Current rate of exchange
B. Barbara D. None of the above
C. Neither 1356. What do NAFTA, EU, and ASEAN have in
D. Both common?
A. The United States is a member of all
1351. In the country levying the tariff, the tar-
three
iff will
B. Each group attempts to enforce trade
A. increase both consumer and producer
barriers rigidly
surplus
C. All three groups use the same cur-
B. decrease both consumer and producer
rency
surplus
C. increase consumer surplus and de- D. They are all interested in promoting
crease producer surplus free trade
D. decrease consumer surplus and in- 1357. Ad valorem tariff is a

crease producer surplus A. tariff imposed by the government on
1352. First Economist who introduced basic the imposed products.
idea of International Economics B. tariff imposed by the government on
A. Adam Smith the exported products.
B. David Ricardo C. tariff imposed on imported goods
based on the value of the good.
C. Hume
D. tariff imposed in a fixed amount
D. J M Keynes charged per unit of imported goods.
1353. In 1962, the United States prohibited
1358. For America and Brazil to benefit the
all imports and exports to and from Cuba.
most, what should happen?
A. Tariff
B. Embargo
C. Quota
D. none of above
A. America should produce cotton and im-
1354. Where is the headquarters of the WTO port sugar from Brazil.
Located?
B. America should produce sugar and im-
A. Austria port cotton from Brazil.
B. Geneva C. Both countries should produce their
C. New York own cotton and sugar.
D. Washington DC D. none of above

1359. The NFS became the smallest network B. To achieve self-sufficiency

of shared ATMs in India. C. To increase government control over
A. True the economy
B. False D. To benefit from specialization and com-
parative advantage
1360. Foreign outsourcing is
1365. Which of the following is not an ob-
A. The transfer of operations to foreign
jective of the World Trade Organization
contractors.
NARAYAN CHANGDER
(WTO)
B. An example of foreign direct invest-
A. to promote free trade among member
ment.
countries by reducing trade barriers
C. An example of internalization.
B. to handle trade disputes among mem-
D. Currently illegal in the U.S. ber nations
1361. Adam Smith describes trade taking C. to offer loans to developing economics
place as a result of countries having D. to be a forum for trade negotiations
in production of particular goods, relative
to each other. 1366. is the ability of a firm to design, pro-
duce, and market goods and services that
A. absolute advantage are better and/or cheaper than those of
B. comparative advantage other firms.
C. both absolute and comparative advan- A. Competitiveness
tage B. Protectionism
D. neither absolute nor comparative ad- C. Comparative advantage
vantage
D. Interventionism
1362. All the following are benefits of protec- 1367. NAFTA caused trade barriers to be re-
tionism, EXCEPT: duced resulting in-
A. protection of domestic jobs A. surge in immigration
B. national security B. decline in factory production
C. protection of infant industries C. decrease in price of goods
D. cheaper prices for consumers D. rise in taxes on products
1363. Who advocated the theory of compar- 1368. One possible opportunity for a business
ative cost advantage doctrine of interna- as a consequence of globalisation is:
tional trade?
A. able to sell products successfully in
A. Adam Smith all foreign markets without changing the
B. David Ricardo products
C. Alfred Marshal B. able to increase prices as there will be
less competition
D. J.M. Keynes
C. more likely to be able to create a
1364. What is the primary reason behind coun- monopoly
tries engaging in international trade? D. able to buy a wider range of imported
A. To reduce domestic production costs materials and products

1369. Divisions of labour is also called as 1374. What are some negatives of globaliza-
A. Individual specialization tion?

B. Inter-regional specialization A. Workers are exploited in sweatshops
C. Both B. Pollution and deforestation
D. none of above C. Low wages for factory workers in Asia
and Africa
1370. A fixed interest rate will not rise or fall
D. All of the answers are correct
during the term of the loan but a variable
interest rate will. 1375. Exports increase, imports decrease
A. Fixed, Variable A. When a currency appreciates
B. Variable, Compound B. When a currency depreciates
C. Simple, Fixed
1376. A record of all the transactions that
D. Variable, Fixed occurred between the individuals, busi-
nesses, and government units of one na-
1371. George can dust a room in 20 minutes
tion and those of the rest of the world.
and mop a room in 30 minutes. Ben can
dust a room in 25 minutes and mop a room A. Balance of Exports
in 25 minutes. Who has absolute advan- B. Balance of Power
tage in dusting?
C. Balance of Trade Payments
A. Ben
D. Balance of Imports
B. Ben & George
C. George 1377. An important difference between tariffs
and quotas is that tariffs
D. No one
A. raise the price of goods
1372. Free trade means B. generate tax revenue for the govern-
A. the countries use the same currency ment
B. No trade barriers C. stimulate international trade
C. there is a quota on some goods D. help domestic producers
D. trade is quick and easy 1378. Something that is offered by a commu-
1373. What is the purpose of the law of com- nity to everyone is called a(n)
parative advantage?
A. Increase the cost of producing goods
or services.
B. Increases the opportunity cost of pro-
ducing goods or services. [
C. Increase profits from international
trade.
A. Tax
D. Increases the cost of consuming
goods or services. B. A public Service
E. Increase the cost of distributing goods C. Armed Service
or services. D. Government

1379. Small companies face only local ones in 1384. Goods a country brings into the country,
competition. produced by other countries.
A. True A. Import
B. False B. Exports
C. Quota
1380. Unprocessed goods’ share in total world
imports in a long-term D. Embargo
NARAYAN CHANGDER
A. rises 1385. Arrange the groups of economic integra-
B. declines tion in order from low to high (Arrange the
groups of economic integration in low to
C. stays the same high order) 1) Free Trade Area (Free Trade
D. depends on the flow of capital Area) 2) Economic Union (Economic Union)
3) Common Market (Common Market) 4)
1381. A large company that has operations in Tatkar Sangh (Zakat Sangh)
more than one country. A. 1, 4, 3, 2
B. 1, 3, 2, 4
C. 2, 1, 4, 3
D. 1, 3, 4, 2
1386. What is meant by opportunity cost in

the law of comparative advantage?
A. Costs incurred to produce certain
goods or services.
A. Domestic Corporation B. Costs incurred to produce any type of
B. Multinational Corporation good or service.
C. Foreign Corporation C. Costs that must be borne when not pro-
ducing certain goods or services.
D. State Corporation
D. Costs that must be borne when not pro-
1382. Goods a country sells to other countries. ducing all types of goods or services.
A. Import E. Costs that must be borne when produc-
ing certain goods or services
B. Export
C. Quota 1387. One argument against NAFTA
D. Subsidy A. Lower prices of goods

B. Outsources jobs to outside countries
1383. An appreciation of a country’s currency
means that for foreigners this country’s C. Increase competition
goods are D. Economic growth
A. Cheaper
1388. According to the principle of absolute ad-
B. More expensive vantage, Japan should

D. a country exports goods for which its

resource endowments are most suited

1391. A tax on imported goods.
A. Embargo
A. export steel
B. Subsidy
B. export DVDs
C. Tariff
C. export steel and DVDs
D. Quota
D. There is no basis for gainful specializa-
tion and trade 1392. The diagram shows the production pos-
Explanation:Countries with an absolute sibilities curve for Country Y. Which of the
advantage can decide to specialize in following statements is true?
producing and selling a specific good or
service and use the generated funds to
purchase goods and services from other
countries.
1389. An individual, firm, or country using the
fewest inputs to produce the same amount
of output or the individual, firm, or coun-
try producing the largest number of units
of output given the same productive re-
sources. A. If Country Y is producing at point C, it
is using all its resources efficiently
B. The opportunity cost of producing
B. Infant industries more machines is constant
C. Absolute advantage C. Country Y cannot produce at point E
D. Balance of trade
D. The most efficient point of production
1390. The trade model of the Swedish is point D
economists Heckscher and Ohlin maintains
1393. A benefit, profit, or value of something
that
that must be given up to acquire or achieve
A. absolute advantage determines the something else.
distribution of the gains from trade
A. Opportunity Cost
B. comparative advantage determines
the distribution of the gains from trade B. Comparative Advantage
C. the division of labor is limited by the C. Specialization

size of the world market D. Production

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