Question 1

Which of the following is NOT a benefit of international trade?

Accepted Answer

Higher prices for domestic consumers due to trade restrictions

Question 2

According to the concept of comparative advantage, a country should specialize in producing goods for which it has:

Accepted Answer

The lowest opportunity cost

Question 3

Suppose the United States can produce 4 airplanes or 400 iPhones, and China can produce 2 airplanes or 300 iPhones. What is the opportunity cost for the U.S. to produce one airplane?

Accepted Answer

$$100$$ iPhones

Question 4

If Mexico gives up 40 tablets to produce 1 electric car, and Germany gives up 60 tablets to produce 1 electric car, which country has the comparative advantage in producing electric cars?

Accepted Answer

Mexico

Question 5

Which of the following best describes the gains from trade?

Accepted Answer

Every voluntary trade is mutually beneficial

Question 6

A famous essay entitled 'I, Pencil' illustrates which key insight about international trade?

Accepted Answer

Even simple products require inputs from around the world

Question 7

If the Federal Reserve wants to decrease the equilibrium interest rate from 6% to 4%, which of the following actions should it take?

Accepted Answer

The Fed buys $$1$$ billion in bonds

Question 8

Suppose the U.S. places a $$1000$$ tariff on imported cars, resulting in car prices increasing by $$950. $$This is an example of:

Accepted Answer

Contractionary fiscal policy

Question 9

If the government increases aggregate demand by $$10$$ billion through expansionary fiscal policy, what is the most likely effect on GDP?

Accepted Answer

GDP increases by more than $$0$$ but less than $$10$$ billion

Question 10

Which of the following is a real-world example of how international trade provides access to resources?

Accepted Answer

A country importing neodymium for electronics manufacturing

Question 11

Economies of scale are a benefit of international trade because:

Accepted Answer

Producers can lower average costs by increasing production for a larger market

Question 12

Which of the following statements about tariffs is correct?

Accepted Answer

Tariffs are a form of contractionary fiscal policy

Question 13

If a country liberalizes trade and its growth rate jumps from $$1.2\% to$$ $$2.7\% on $$average, this is most likely due to:

Accepted Answer

Increased competition and specialization

Question 14

Which of the following best describes specialization in the context of international trade?

Accepted Answer

Countries focus on producing goods for which they have a comparative advantage

Question 15

If the required reserve ratio is $$33\%$$ ($$\frac{1}{3}$$), what is the simple money multiplier?

Accepted Answer

$$3$$

Question 16

Which of the following is an example of increased competition due to international trade?

Accepted Answer

U.S. domestic car prices were $$750 to$$ $$1,000$$ higher because of trade restrictions

Question 17

Which formula correctly represents the opportunity cost of producing one unit of a good?

Accepted Answer

$$	ext{Opportunity Cost} = \frac{	ext{Units Given Up}}{	ext{Units Gained}}$$

Question 18

Which of the following is most likely to occur if a country restricts imports through tariffs?

Accepted Answer

Domestic prices for restricted goods increase

Question 19

If 98% of clothing purchased in the United States is imported, what does this suggest about the U.S. clothing market?

Accepted Answer

International trade plays a major role in providing clothing choices

Question 20

Which of the following is a direct result of every voluntary trade being mutually beneficial?

Accepted Answer

Both parties are made better off after the trade

International Trade 1

Study Guide - Practice Questions

Study Guide - Flashcards