1. Which of the following economic questions must all societies deal with?

A. What goods will be produced and in what quantities?
B. How can markets be kept competitive?
C. How can the problem of scarcity best be eliminated?
D. What will insure income is distributed equally to all members of society?
E. All of the above.

2. In 2000, which two countries are the US’s number one and number two trading partners in terms of volume of trade?

A. Japan and Korea
B. Canada and Japan
C. Germany and Britain
D. Japan and Mexico
E. Canada and Mexico

3. Barrier to trade:

A. increase the number of jobs worldwide.
B. decrease consumer prices.
C. increase the amount of global production.
D. benefit some groups at the expense of others.
E. are necessary to maintain international competition.

4. In the former Soviet Union people stood in long lines to buy almost anything. This:

A. results in goods being distributed to those who need them most.
B. involves very low opportunity costs for most people
C. is a fairly efficient allocation system.
D. allocates goods on a first-come, first-served basis.
E. system took the place of prices since the goods received were free.

5. Does Cuba, a non-capitalist nation, produce capital?

A. No, it must import it from capitalistic nations.
B. No, it doesn’t have a stock market.
C. No, it is not needed in a planned economy.
D. Yes, but it is owned and controlled by the state.
E. Yes, but it is only used to trade for natural resources which Cuba doesn’t have.

6. Which of the following will occur if the dollar is strong"

A. Export prices will decrease and American exporters will benefit.
B. Import prices will decrease and American exporters will benefit.
C. Export prices will decrease and American consumers will benefit.
D. Import prices will decrease and American consumers will benefit.
E. None of the above.

7. If total exports by the United States exceed total imports, the United States is experiencing a:

A. balance of payments deficit.
B. balance of payments surplus.
C. balance of trade deficit.
D. balance of trade surplus.
E. budget surplus.

8. If a $40,000 American computer costs a Korean importer 120,000 won, the exchange rate must be:

A. 1 won to 3 dollars.
B. 1 won to 0.25 dollars.
C. 1 dollar to 0.33 won.
D. 1 dollar to 3 won.
E. none of the above.

9. Labor-intensive products are likely to be exported by countries:

A. with a small population.
B. with a highly skilled labor force.
C. with many unskilled workers.
D. that have few raw materials.
E. that have abundant capital resources.

10. Money is not used in a:

A. socialistic economy.
B. capitalistic economy.
C. command economy.
D. barter economy.
E. market economy.

11. When the average price level (consumer price index) rises in our economy, consumers tend to buy _____ imported goods and _____ domestically-produced goods (every thing else held the same).

12. The US has been running trade deficits for many years. How are most of these deficits financed each year?

A. By buying securities or assets owned by other nations.
B. By selling securities or assets to other nations.
C. By sending gold reserves to other nations.
D. By printing the extra dollars needed (which invariably leads to a depreciation in the value of the US dollar).
E. By borrowing from the federal government.

13. If the US imports cars from Japan, then in the US;

A. car producers lose while consumers gain and the gain is greater than the loss.
B. car producers lose while consumers gain and the loss is greater than the gain.
C. car producers gain while consumers lose and the gain is greater than the loss.
D. car producers gain while consumers lose and the loss is greater than the gain.
E. car producers and consumers both lose.

14. Given one unit of labor working one year, Japan can produce 10 radios or 5 television sets, while Korea can produce with the same amount of labor only 4 radios or 1 television set. Which of the following terms of trade would be beneficial to both countries?

A. one television for one radio.
B. one television for two radios.
C. one television for three radios.
D. one television for five radios.
E. there is no terms of trade which would benefit both Japan and Korea.

15. According to the law of comparative advantage, a nation gains from international trade:

A. only if some other country loses.
B. only if it is able to run balance of payments surpluses.
C. when it produces and sells those products for which it has the lowest opportunity cost.
D. when it produces and sells those products for which it has the highest opportunity cost.
E. none of the above.