Unit 3 Test Review

Global Trade

Multiple Choice

  1. Comparative advantage: ______:: absolute advantage: ______.
  1. Lower sales …. more sales
  2. Lower opportunity cost…more production
  3. More production…lower opportunity cost
  4. More sales… lower sales
  1. ______distribution of resources among nations leads countries to ______in products that require the use of their available resources. Countries may then ____ with other countries for the products they cannot produce.
  2. Unequal…specialize…trade
  3. Equal…specialize…trade
  4. Unequal…trade…shop
  5. Equal…trade…shop
  1. Strong dollar: ______imports:: weak dollar: ______exports.
  2. Increased….decreased
  3. Decreased…decreased
  4. Decreased…increased
  5. Increased…increased
  1. Germany has a 100% tariff on truck imports from the United States. If a truck costs $50,000 in the United States:

a)How much would it cost in Germany? And

b)Would this increase or decrease U.S. exports in Germany?

  1. $50,000 … decrease
  2. $50,000 … increase
  3. $160,000 … decrease
  4. $160,000 … increase

Short Answer

  1. What are three things that the United States could do enable the sale of more trucks to Germany?

1)

2)

3)

  1. How does international trade impact economic growth within a trading nation?
  1. How do fluctuations to the international exchange rate of a nation’s currency affect its balance of trade?
  1. Why do countries specialize in particular trade products?
  1. Explain the 4 arguments for free trade.
  1. Explain the 4 arguments for protectionism.

Fill-in-the-Blank

  1. The ______determines how much a foreign currency is worth in a certain nation.
  2. Nations may choose to impose a ______, or tax, on imports from other countries.
  3. A ______occurs when one nations exports more goods than it imports.
  4. Economists use the term ______to refer to one nation’s currency rising in value in comparison to another’s currency.
  5. Goods shipped abroad for sale are ______.
  6. A country has a ______when it has the lowest opportunity cost of producing a good.
  7. A young business that is shielded form foreign competition is called a(n) ______.

WORD BANK:

comparative advantage

appreciation

exchange rate

exports

free-trade zone

imports

infant industry

protectionism

tariff

trade surplus

depreciation

Critical Thinking

  1. Suppose the United States loses its comparative advantage in producing computers. How would this loss affect employment in the United States?
  1. Suppose you heard that the U.S. dollar is strong on world markets. (a) What does this news mean for imports and exports? (b) How will it affect American tourists in other countries?