Unit 9 International Trade Study Guide Coach Lott
1. Tariffs and quotas can have all of the following effects EXCEPT
promoting third-world development.increasing prices consumers pay for goods.
protecting domestic industry.
reducing trade deficits.
2. A persistent trade deficit causes
unemployment to increase in import industries.unemployment to increase in export industries.
the dollar to grow stronger.
lower prices on imported goods.
3. The North American Free Trade Agreement proposed free trade between the United States and
Central American countries. / the European Union.Brazil and Mexico. / Canada and Mexico.
4. The United States trade deficit causes
the value of the dollar to strengthen in foreign exchange markets.the value of the dollar to fall in foreign exchange markets.
increased employment opportunities for Americans in import industries.
worldwide recessions.
United States Merchandise Trade by Area
(in billions of dollars)
Area of the World / U.S. Imports from / U.S. Exports to
Western Europe / $215 / $163
Canada / $201 / $167
Japan / $131 / $56
Australia, New Zealand, South Africa / $10 / $16
OPEC Members (Saudi Arabia, Kuwait, Iran, and others) / $42 / $19
Source: Economic Report of the President.
5. The U.S. has the largest trade deficit in merchandise with which area of the world shown in the table?
CanadaAustralia, New Zealand, South Africa
Japan
OPEC
6. With which area or areas shown in the table does the U.S. have a positive trade balance in merchandise?
OPEC / Western EuropeCanada / Australia, New Zealand, South Africa
7. The graphs show the production possibilities frontiers for two countries who can produce only two products. Before the countries specialize, what is the total output sugar?
5 pounds / 25 pounds20 pounds / 21 pounds
8. The graphs show the production possibilities frontiers for two countries who can produce only two products. How much more total wheat will be produced after the countries specialize than before?
1 bushel / 6 bushels5 bushels / 4 bushels
9. The graphs show the production possibilities frontiers for two countries who can produce only two products. Country X has an absolute advantage in which product or products, if any?
sugar / both sugar and wheatwheat / neither sugar nor wheat
10. On the day shown in the illustration, how much American money would an importer receive in exchange for one British pound?
$0.7042 / $0.42$1.42 / $1.7042
11. On the day shown in the illustration, how many euros would exporters receive for each American dollar they exchanged?
0.9100 / 0.09891.9100 / 1.0989
12.
Based on the data in the illustration, for which product or products (if either) would the U.S. have an absolute advantage?
walnuts / both walnuts and computerscomputers / neither walnuts nor computers
13. When a nation imports more than it exports, economists say it has which of the following?
a trade surplus / a trade deficita balance of trade / a national difference
14. Suppose the exchange rate between the United States and Japan changes from $1 = 100 yen to $1 = 110 yen. What would happen to the prices of American goods in Japan?
They could increase or decrease.They will decrease.
They will remain the same.
They will increase.
15. What does it mean when an economist says that an area specializes in producing certain products?
They use their resources to produce a limited range of goods.They produce only certain goods rather than everything they need.
They produce only goods for which they have an export market.
They use the money from their exports to buy food and fuel.
16. The currency in Great Britain is the pound (£), and the price of a particular British car is £12,000. Suppose the exchange rate is £0.67 per dollar. What is the price of the British car in the United States?
$52,174 / $14,662$17,910 / $8,040
17. Specialization in a nation leads to
absolute advantage. / international trade.self-sufficiency. / comparative advantage.
18. Ed and Wendy decide to make extra money working at a local fair by painting names on coffee mugs and making sketches. Ed can paint 6 mugs or draw 2 sketches per hour. Wendy can paint 8 mugs or make 3 sketches per hour. Wendy has
an absolute advantage over Ed. / greater natural resources than Ed.more specialized production than Ed. / a comparative advantage over Ed.
19. Ecuador has a comparative advantage in the production of bananas over the United States. Which of the following statements is true?
Ecuador also has an absolute advantage in the production of bananas.The United States has an absolute advantage in the production of bananas.
Ecuador can produce bananas at a lower opportunity cost than the United States.
The United States cannot produce bananas.
20. According to the law of comparative advantage, a country should
specialize and export goods with the highest opportunity cost.specialize and export goods with the lowest production cost.
specialize and export goods with the lowest opportunity cost.
specialize and export goods with the lowest average cost.
Essay
Critical Thinking
21.Why is international trade better for all countries than an attempt for each country to produce everything it needs?
22.Evaluating Information State the arguments for the use of trade barriers to protect domestic industries, and evaluate the validity of those arguments.