INR 2002 Exam 3 Practice Tests Chapter 7 Practice Quiz 1 What is the effect of trade barriers a They make imports cheaper b They make imports more expensive c They cause domestic economies to collapse d They force countries to withdraw from international institutions 2 As measured by percentage of GDP how has the importance of trade to the U S economy changed over the last 45 years a Trade has become more important b Trade has become less important c Trade has remained constant as a percentage of GDP d It is impossible to measure what percentage of GDP is due to trade 3 Which would be an example of protectionism a putting taxes on goods that are manufactured in other countries b having the government purchase new goods on an open market c taxing a good to discourage consumption of it d going to war with another country 4 What does comparative advantage imply for countries a They should specialize in the goods they make most efficiently b They should try to increase the productivity of industries in which they are weak c They should develop nuclear capabilities d They should try to distribute income more equally within the country 5 If all the barriers to trade were removed in the United States what is likely to occur a The United States economy would lose several billion dollars b Other countries will take advantage of U S markets c The U S economy would gain several hundred billion dollars d Consumers would have to pay much more for goods 6 What does the Stolper Samuelson theory predict regarding a country s economy a Trade will eventually lead domestic industries to collapse b Free trade benefits industries that use scarce factors of production c Countries will forgo their comparative advantage when facing international threats d Protectionism benefits industries that use scarce factors of production 7 In The Wealth of Nations what does Adam Smith argue best promotes economic growth a socialism b mercantilism c specialization d conservatism 8 Which of the following is a nontariff barrier to trade a quotas on imports b subsidies to domestic industries c regulations targeted at foreign goods d all of the above 9 Which of the following is typically considered a factor of production a agricultural products b human capital c instruction manuals d access to factories 10 What is comparative advantage a hegemony b having more nuclear weapons than neighboring countries have c being financially self sufficient d the ability to produce one good more efficiently than other goods 11 Which organization is the predecessor to the World Trade Organization a the United Nations b the World Bank c the General Agreement on Tariffs and Trade d the European Union 12 During what time period were Germany s exports the highest as a percentage of its GDP a the 19th century b during World War I c between World War I and World War II d the 1990s 13 Due to quotas how does the price of sugar in the United States compare to its price in the rest of the world a The price of sugar in the United States is higher b The price of sugar in the United States is relatively the same as in the rest of the world c The price of sugar in the United States is lower d It is impossible to compare sugar prices across countries 14 What is factor price equalization a when countries impose tariffs b when wages become more similar across countries as trade increases c when countries leave trade institutions d when countries settle trade disputes 15 What is absolute advantage a military dominance b the ability to produce more of a good or service than other countries using the same effort and resources c the ability to produce all of a good that you desire to consume internally d being the first country to start producing a particular good 16 In what industries did European countries form a common market in 1951 a coal and steel b bread and wine c automobiles and airplanes d cloth and vegetables 17 Which organization is an example of a regional trade agreement a NAFTA North American Free Trade Agreement b WTO World Trade Organization c GATT General Agreement on Tariffs and Trade d IMF International Monetary Fund 18 What is MERCOSUR a an information technologies corporation b a military alliance c a pharmaceutical company d a trade agreement 19 Which of the following groups within the United States tends to favor protectionism a labor b owners of human capital c owners of capital d corporate executives 20 What does the Heckscher Olin theory predict about exports a A country will export goods that use its scarce factors of production b A country will export goods that use its abundant factors of production c A country will export only to its neighbors d A country will not export if it is geographically isolated 21 What is most favored nation status a when a country becomes president of the UN Security Council b when a country gives all signatories to an agreement the same benefits of trade c when a country builds an embassy in another country d when a country invites another to join a military alliance Chapter 8 Practice Quiz 1 Most foreign direct investment is regulated by a bilateral treaties b the World Bank c the International Monetary Fund d the World Trade Organization 2 Which of the following is an example of a multinational corporation a a company that exports its products internationally b a company that imports input goods from other countries c a company that owns production facilities in multiple countries d a company that makes loans to other firms internationally 3 How does the Heckscher Olin theory explain increasing investment in emerging markets a Loans are made to countries where capital is abundant b Loans are made to countries where capital is scarce c Loans are made to geographically isolated countries d Developed countries are most likely to default on debt 4 What did the IMF advise Indonesia to do during the 1997 Asian financial crisis a pull out of bilateral trade agreements b cut subsidies c print more currency d make loans to neighboring countries 5 What is the World Bank a an institution that manages trade disputes b a union of bank employees c an organization that regulates the price of currency d an organization that engages in concessional finance 6 The Bank for International Settlements BIS was created to help oversee which problematic debtor in the 1930s a the United States b Germany c the IMF d the United Kingdom 7 Which of the following is an example of foreign direct investment a Firestone builds
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