International Economy Multiple Choice Questions
1. If a nation has an open economy it means that the nation:
A. Allows private ownership of capital
B. Has flexible exchange rates
C. Has fixed exchange rates
D. Conducts trade with other countries
Answer:
D.Conducts trade with other countries
2. The term Euro Currency market refers to
A. The international foreign exchange market
B. The market where the borrowing and lending of currencies take place outside the country of issue
C. The countries which have adopted Euro as their currency
D. The market in which Euro is exchanged for other currencies
Answer:
B.The market where the borrowing and lending of currencies take place outside the country of issue
3. Dumping refers to:
A. Reducing tariffs
B. Sale of goods abroad at low a price, below their cost and price in home market
C. Buying goods at low prices abroad and selling at higher prices locally
D. Expensive goods selling for low prices
Answer:
B.Sale of goods abroad at low a price, below their cost and price in home market
4. International trade and domestic trade differ because of:
A. Different government policies
B. Immobility of factors
C. Trade restrictions
D. All of the above
Answer:
D.All of the above
5. Market in which currencies buy and sell and their prices settle on is called the
A. International bond market
B. International capital market
C. Foreign exchange market
D. Eurocurrency market
Answer:
C.Foreign exchange market
6. Which one is not associated with the UNO
A. ILO
B. WHO
C. ASEN
D. All of the above
Answer:
C.ASEN
7. International Labor Organization is agency of
A. IBRD
B. UN Security Council
C. International Fund for Agricultural
D. United Nations
Answer:
D.United Nations
8. Headquarter of International Labor organization is located in
A. Geneva
B. Rome
C. France
D. Tokyo
Answer:
A.Geneva
9. General Agreement on Tariffs and Trade (GATT) went into effect?
A. 1945
B. 1948
C. 1946
D. 1947
Answer:
B.1948
10. Which of the following is the main objective behind the establishment of WTO
A. To settle disputes between nations
B. To widen the principle of free trade to sectors such as services and agriculture
C. To cover more areas than GATT
D. All of them
Answer:
D.All of them
11. International Labor Organization received nobel Peace Prize in
A. 1965
B. 1969
C. 1966
D. 1975
Answer:
B.1969
12. ” Term of trade ” between two countries refer to a ratio of
A. Export prices to import prices
B. Currency Values
C. Export to imports
D. Balance of trade to balance of payments
Answer:
A.Export prices to import prices
13. When was GATT replaced with WTO?
A. 1994
B. 1992
C. 1995
D. 1993
Answer:
C.1995
14. WTO comes as the third economic pillar of world-wide dimensions along
A. International Monetary Funds
B. international Economic
C. International Funding Organisation (IFO)
D. International Development Bank (IDB)
Answer:
A.International Monetary Funds
15. Gold standard means
A. Currency of the country is made of
B. Paper currency is not used
C. Currency of the country is freely convertible
D. (A) and (C)
Answer:
D.(A) and (C)
16. Underlying the application of the monopolistic competition model to
A. increases market size
B. allows companies to charge higher price
C. increases consumer choices
D. decreases the number of firms in an industry
Answer:
A.increases market size
17. Which of the following trade policies limits specified quantity of goods to be
A. Quota
B. Import tariff
C. Specific tariff
D. All of the above
Answer:
A.Quota
18. In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in
A. Military capabilities
B. labour productivities
C. relative availabilities of factors of production
D. Taste
Answer:
C.relative availabilities of factors of production
19. Since 1980s which of the following changes has happened in the world trade?
A. Share of “north-north” trade has decreased in total merchandise exports
B. Share of “south– south” trade has increased in total merchandise eports
C. share of agriculture produce has decreased in total merchandise exports
D. all of the above
Answer:
D.all of the above
20. According to Ricardo, a country will have a comparative advantage in:
A. Industries in which there are neither imports nor exports
B. import competiting industrie
C. Industries that sell to domestic and foreign buyers
D. industries that sell to only foreign buyers
Answer:
C.Industries that sell to domestic and foreign buyers
21. If a country has a linear (downward sloping) production possibilities
A. constant opportunity costs
B. decreasing opportunity costs
C. first increasing and then decreasing opportunity
D. increasing opportunity costs.
Answer:
A.constant opportunity costs
22. Boeing aircraft company was able to cover its production costs of the first―jumbo jetǁ in the seventies because Boeing could market it to several foreign airlines in addition to domestic airlines. This illustrates:
A. How economies of scale make possible a larger variety of products in international trade.
B. A transfer of wealth from domestic consumers to domestic producers as the result of trade
C. How a natural monopoly is forced to behave more competitively with international trade
D. How a natural monopoly is forced to behave less competitively with international trade
Answer:
A.How economies of scale make possible a larger variety of products in international trade.
23. Wassily Leontief used an input-output table in order to test the
A. Ricardian theory of comparative
B. Heckscher Ohlin theory of comparative
C. Linder theory of overlapping demand
D. all of the above
Answer:
B.Heckscher Ohlin theory of comparative
24. Which of the following is one of the conclusions of New Trade Theory
A. Countries as a while must gain from trade
B. A country can only hurt itself by using government policies
C. Consumers gain from the increased variety of goods that trade makes
D. A country may export a good or import it, but not both
Answer:
C.Consumers gain from the increased variety of goods that trade makes
25. .A tax of 20 cents per unit of imported cheese would be an example of a (an):
A. Compound tariff
B. Effective tariff
C. Ad valorem tariff
D. Specific tariff
Answer:
D.Specific tariff
26. According to the argument for protection, tariffs can shield new industries from import competition until they have grown strong and efficient enough to withstand the competition by foreign producers.
A. Scientific tariff argument
B. Infant industry argument
C. beggar they neighbour argument
D. foreign dumping argument
Answer:
B.Infant industry argument
27. Ad valorem tariffs are collected as
A. fixed amounts of money per unit traded
B. a percentage of the price of the product
C. a percentage of the quantity of imports
D. all of the above
Answer:
B.a percentage of the price of the product
28. Which of the following does not form part of current account under balance of
A. Export and import of goods
B. Export and import of services
C. Income receipts and payments
D. Capital receipts and payments
Answer:
D.Capital receipts and payments
29. Gifts and Relief are
A. Merchandise Payment
B. Service Payment
C. Factory Income
D. Transfer payment
Answer:
D.Transfer payment
30. A country is said to be in debt trap if
A. It has to abide by the conditionality imposed by the International Monetary Fund
B. It is required to borrow money to make interest payments on outstanding loans
C. It has been refused loans or aid by creditors
D. The World Bank charges a very high rate of interest on outstanding as well as new loans
Answer:
B.It is required to borrow money to make interest payments on outstanding loans
31. The effective rate of protection
A. distinguishes between tariffs that are effective and those that are ineffective
B. is the minimum level at which a tariff becomes effective in limiting imports
C. shows how effective a tariff is in raising revenue for the government
D. shows the increase in value added for domestic production that a particular tariff structure makes possible, in percentage terms
Answer:
D.shows the increase in value added for domestic production that a particular tariff structure makes possible, in percentage terms
32. Which type of tariff is expressly forbidden by the U.S. Constitution?
A. Import tariff
B. Export tariff
C. Specific tariff
D. Ad valorem tariff
Answer:
B.Export tariff
33. Arguments for free trade are sometimes disregarded by politicians because:
A. Maximizing domestic efficiency is not considered important
B. Maximizing consumer welfare may not be a chief priority
C. other economies
D. Economists tend to favor highly protected domestic markets
Answer:
B.Maximizing consumer welfare may not be a chief priority
34. Technological improvements are similar to international trade since they both:
A. Provide benefits for all producers and consumers
B. increase the nation aggregate income
C. Reduce unemployment for all domestic workers
D. Ensure that industries can operate at less than full capacity
Answer:
B.increase the nation aggregate income
35. A widely used indicator to differentiate developed countries from developing
A. international trade per capita
B. real income per capita
C. unemployment per capita
D. calories per capita
Answer:
B.real income per capita
36. All of the following are debit items in the balance of payments, except:
A. capital outflows
B. merchandise exports
C. private gifts to foreigners
D. foreign aid granted to other nations
Answer:
B.merchandise exports
37. The role of ———– is to direct one nation’s saving into another nation
A. merchandise trade flows
B. services flows
C. current account flows
D. capital flows
Answer:
D.capital flows
38. The current account includes
A. the value of trade in merchandise
B. services
C. unilateral transfers
D. all of the above
Answer:
D.all of the above
39. A current account surplus implies that
A. the country is a net lender to the rest of the world
B. the country is running a net capital account surplus
C. foreign investment in domestic securities is at very low levels
D. all of the above
Answer:
A.the country is a net lender to the rest of the world