Chapters 17-18 Practice Test Econ

Which statement best describes the result of international trade between two countries?

• Both countries gain through specialization

• Both countries avoid comparative advantage

• Both countries face no opportunity cost

• Both countries experience identical growth

What does an import quota aim to protect?

• Foreign markets

• Government tax revenue

• Local producers

• Black market activities

When the U.S. enacts a trade sanction on another country, what is most directly affected?

• The U.S. tax code

• The U.S. ability to import from that country

• Domestic unemployment rates

• Currency appreciation

When the U.S. dollar strengthens in value, it often results in

• More imports than exports

• Increased government intervention

• Reduced foreign investment

• Stable trade balances

With floating exchange rates, trade imbalances typically self-adjust due to

• Changes in interest rates

• Supply and demand forces

• Currency controls

• Import taxes

Comparative advantage refers to

• A country producing more of all goods

• A country’s ability to produce at lower opportunity cost

• The currency value relative to gold

• A balanced budget in international trade

What policy would a supporter of free trade most likely advocate?

• Import taxes to protect jobs

• Trade agreements like the WTO

• High tariffs to fund government programs

• Export bans on key goods

Tariffs can be defined as

• Government limits on export quantities

• Taxes placed on imported goods

• Taxes placed on exported goods

• Limits on domestic production

When a nation imports more than it exports, it is experiencing

• A trade surplus

• A trade deficit

• A balanced budget

• Capital outflow

Import restrictions such as tariffs usually

• Lower domestic prices

• Increase domestic prices

• Make no difference to domestic markets

• Encourage product innovation