2002 Great Plains Economics Challenge
Exam 3: International/Current Events

1.      A barrier to trade in the form of laws forbidding trade in certain goods is called
      a.       a tariff.
      b.      an embargo.
      c.       a quota.
      d.      an import tax.
      e.       a voluntary restraint agreement.

2.      A “stronger” U.S. dollar in foreign exchange markets
a.       improves sales for U.S. exporters.
b.      tends to lower aggregate demand in the U.S.
c.       tends to improve the U.S. balance of trade.
d.      lowers the purchasing power of the dollar in foreign countries.
e.       causes high interest rates in the U.S.

3.      If the exchange rate between the U.S. dollar and the European euro is 50 cents = one euro, what would be the price in dollars of a German car which costs 40,000 euros?
a.       $80,000
b.      $20,000
c.       $10,000
d.      $8,000
e.       $2,000

4.      An increase in U.S. tariffs on foreign-produced steel would probably benefit all the following groups except
a.       domestic steel producers
b.      U.S. steelworkers
c.       users of domestic steel
d.      domestic iron ore producers
e.       businesses in steel-producing areas

5.      The table below gives the number of tons of widgets and cogs that can be produced in Country X and Country Y by using the exact same amount of productive resources:

The theory of comparative advantage suggests that under these conditions, Country Y would find it advantageous to
a.       export widgets and import cogs.
b.      export cogs and import widgets.
c.       export both widgets and cogs and import nothing.
d.      import both widgets and cogs and export nothing.
e.       neither export nor import either widgets or cogs.

6.      If interest rates in the U.S. and South Korea are initially at 10 percent, but then U.S. interest rates fall to 5 percent, we would expect that:
a.       the dollar would appreciate against the South Korean won.
b.      the dollar would depreciate against the South Korean won.
c.       there would be no significant change in exchange rates between the dollar and the won.
d.      both the dollar and the won would fall in value against gold
e.       both the dollar and the won would rise in value against gold.

7.      The extraordinary performance of the Japanese economy from after World War II through the 1980s can be attributed in part to all of the following except:
a.       pro-business government policies.
b.      abundant natural resources.
c.       highly skilled and educated work force.
d.      high saving/investment rate.
e.       strong work ethic.

8.      Trade between countries leads to
a.       reduced labor productivity.
b.      increased interdependence.
c.       higher product prices.
d.      job losses in at least one of the countries.
e.       decreased amounts of products in at least one of the countries.

9.      By value, the largest category of goods both imported and exported by the United States is
a.       petroleum and petroleum products.
b.      raw (crude) materials.
c.       food and animal products.
d.      machinery and transport equipment.
e.       chemicals.

10.  Suppose the per capita income in the U.S. is $20,000 while in Pakistan it is $1000. If the growth rate in the U.S. is only 1%, what growth rate would Pakistan need to achieve to get the same dollar amount change in its per capita incomes as the U.S.?
a.       100%
b.      20%
c.       10%
d.      5%
e.       2%

11.  Which of the following scenarios would most likely lead to an appreciation in the value of Mexican pesos?

12.  The main motive behind creating barriers to the importation of goods and services from abroad is to
a.       increase economic efficiency.
b.      reduce the prices of domestically produced goods.
c.       help expand the exportation of goods.
d.      benefit some special interest group(s).
e.       lower the cost of producing goods.

13.  All of the following probably attributed to the collapse of the former Soviet economy except:
a.       low labor productivity.
b.      the difficulty of central planners to efficiently coordinate production.
c.       the difficulty of encouraging and incorporating technological change.
d.      the devotion of a relatively large percentage of its resources to military uses.
e.       Soviet consumers’ widespread discontent over the high prices set by the government for most consumer goods.

14.  All other things unchanged, if there is a large increase in U.S. exports, then there will be
a.       an increase in U.S. demand for foreign currencies.
b.      a decrease in the supply of foreign currencies.
c.       upward pressure on the U.S. price level.
d.      a decrease in the U.S. GDP.
e.       decreased employment in the U.S.

15.  If the U.S. eliminated all tariffs and other trade restrictions, then economic well-being would
a.       increase for the U.S. but fall for smaller countries.
b.      increase for the U.S. only if other countries did the same.
c.       increase for the U.S and all of its trading partners.
d.      decrease for the U.S. even if other countries did the same.
e.       decrease for the U.S. and all of its trading partners.

Answer Key