ECONOMIC - TOPIC VII - MULTIPLE CHOICE QUESTIONS - By Antonio Ginés
Comparative advantage refers to the ability of a person or a country to produce a particular good at a lower . . . cost and opportunity cost than another person or country
marginal
total
average
. . . advantage is the ability to produce a product most efficiently given all the other products that could be produced
Comparative
Absolute
Partial
. . . advantage which refers to the ability of a person or a country to produce a particular good at a lower absolute cost than another
Absolute
Comparative
Partial
. . . advantage explains how trade can create value for both parties even when one can produce all goods with fewer resources than the other.
Comparative
Absolute
Partial
Traditionally trade was regulated through . . . treaties between two nations
bilateral
multilateral
trilateral
For centuries under the belief in . . . most nations had high tariffs and many restrictions on international trade
Mercantilism
Liberalism
Keynesianism
In the . . . century, especially in the United Kingdom, a belief in free trade became paramount
19th
18th
17th
In the years since the . . . War, controversial multilateral treaties like the General Agreement on Tariffs and Trade (GATT) and World Trade Organization have attempted to create a globally regulated trade structure.
Second World
First World
Vietnam
. . . is usually most strongly supported by the most economically powerful nations
Free trade
Mercantilism
Keynesianism
The Netherlands and the United Kingdom were both strong advocates of free trade when they were economically dominant, today the United States, the United Kingdom, Australia and Japan are its greatest proponents. However, many other countries (such as India, . . . and Russia) are increasingly becoming advocates of free trade as they become more economically powerful themselves
China
Nigeria
Bolivia
Traditionally agricultural interests are usually in favour of free trade while manufacturing sectors often support protectionism. This has changed somewhat in recent years, however. In fact, agricultural lobbies, particularly in . . ., are chiefly responsible for particular rules in the major international trade treaties which allow for more protectionist measures in agriculture than for most other goods and services
the United States, Europe and Japan
the United States, China and Russia
the United States, Australia and Japan
During . . . there is often strong domestic pressure to increase tariffs to protect domestic industries
recessions
expansions
peaks
The regulation of international trade is done through the . . . at the global level
World Trade Organization
United Nations Organization
International Monetary Found
. . . is the economic policy of restraining trade between states, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other restrictive government regulations designed to discourage imports, and prevent foreign take-over of local markets and companies
Protectionism
Free trade
Liberalism
. . . is closely aligned with anti-globalization, and contrasts with free trade, where government barriers to trade are kept to a minimum
Protectionism
Liberalism
Neoliberalism
Historically, . . . was associated with economic theories such as mercantilism (that believed that it is beneficial to maintain a positive trade balance), and import substitution
protectionims
free trade
liberalism
Historically, protectionism was associated with economic theories such as mercantilism (that believed that it is beneficial to maintain a positive trade balance), and import substitution. During that time, . . . famously warned against the 'interested sophistry' of industry, seeking to gain advantage at the cost of the consumers
Adam Smith
Friedrich Hayek
Ludwing von Mises
Virtually all modern day economists agree that . . . is harmful in that its costs outweigh the benefits, and that it impedes economic growth.
protectionism
free trade
comunism
Economics Nobel prize winner and trade theorist . . . once famously stated that, "If there were an Economist’s Creed, it would surely contain the affirmations 'I understand the Principle of Comparative Advantage' and 'I advocate Free Trade'."
Paul Krugman
Milton Friedman
John Stigler
Import . . . will increase the cost to importers, and increase the price of imported goods in the local markets, thus lowering the quantity of goods imported
tariffs
quotas
subsidies
To reduce the quantity and therefore increase the market price of imported goods.
Import quotas
Tariffs
Administrative Barriers
Countries are sometimes accused of using their various rules (eg. Regarding food safety, environmental standards, electrical safety, etc.) as a way to reduce the imports
Administrative barriers
Tariffs
Import quotas
Government . . . (in the form of lump-sum payments or cheap loans) are sometimes given to local firms that cannot compete well against foreign imports
subsidies
barriers
quotas
Export . . . are the opposite of export tariffs, exporters are paid a percentage of the value of their exports
subsidies
barriers
quotas
A government may intervene in the foreign exchange market to lower the value of its currency by . . . its currency in the foreign exchange market.
selling
buying
pegging
Some major critics of the . . . reject the idea of protectionism, either in theory, practice or both. Free market advocates are among those who disagree with any type of government intervention because, they say, a free market without interference will allocate resources more efficiently
Common Agricultural Policy
European Agriculture
UE Agriculture
. . . is a type of trade policy that allows traders to act and transact without interference from government
Free trade
Protectionism
Mercantilism
The value of free trade was first observed and documented by . . . in his magnum opus, The Wealth of Nations in 1776.
Adam Smith
David Ricardo
Benjamin Franklin
The value of free trade was first observed and documented by Adam Smith in his magnum opus, The Wealth of Nations in 1776. Later, . . . demonstrated the benefits of trading via specialization.
David Ricardo
Friedrich Hayek
George Stigler
The countries mainly protect their . . .
agricultural and basic or strategic industries
nonessential goods
basic or strategic industries
Free trade is more than anything for . . .
nonessential goods
agricultural goods
basic goods
A . . . is a trading bloc which gives preferential access to certain products from the participating countries
preferential trade area
free trade area
customs union
It is the first stage of economic integration
Preferential trade area
Free trade area
Customs union
Almost any PTA has a main goal of becoming a . . . in accordance with the General Agreement on Tariffs and Trade
FTA
CU
CM
The EU and the ACP countries; India and Afghanistan or India and Mauritius.
Preferential trade area
Free trade area
Customs union
. . . is a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods and services traded between them
Free trade area
Preferential trade area
Customs union
It can be considered the second stage of economic integration.
Free trade area
Preferential trade area
Customs union
Countries choose this kind of economic integration form if their economical structures are complementary
Free trade area
Preferential trade area
Customs union
Countries choose free trade area if their economical structures are complementary. If they are competitive, they will choose . . .
customs union
preferential trade area
economic and monetary union
Unlike a . . ., members of a free trade area do not have the same policies with respect to non-members, meaning different quotas and customs.
customs union
preferential trade area
customs area
To avoid evasion (through re-exportation) the countries use the system of certification of origin most commonly called rules of origin, where there is a requirement for the minimum extent of local material inputs and local transformations adding value to the goods. Goods that don't cover these minimum requirements are not entitled for the special treatment envisioned in the . . . provisions
free trade area
preferential trade area
customs union
Iceland, Norway, Switzerland and Liechtenstein are members of EFTA.
Free trade area
Preferential trade area
Customs union
A . . . is a free trade area with a common external tariff
customs union
preferential trade area
customs trade area
It is the third stage of economic integration.
Customs union
Preferential trade area
Free trade area
The Southern Common Market (MERCOSUR) is a Regional Trade Agreement (RTA) among Argentina, Brazil, Paraguay and Uruguay
Customs union
Common market
Free trade area
A . . . is a customs union with common policies on product regulation, and freedom of movement of the factors of production (capital and labour) and of enterprise
common market
preferential trade area
free trade area
This is the fourth stage of economic integration.
Common market
Customs union
Economic and monetary union
The Andean Community (CAN) is a trade bloc comprising the South American countries of Bolivia, Colombia, Ecuador and Peru
Common market
Customs union
Economic and monetary union
An . . . is a common market with a common currency
economic and monetary union
free trade area
preferential trade area
This is the fifth stage of economic integration
Economic and monetary union
Customs union
Common market
The euro is used by . . . European Union member states
sixteen
twenty seven
twelve
The . . . is an international organization designed by its founders to supervise and liberalize trade
World Trade Organization
International Monetary Found
World Bank
The . . . officially commenced on 1 January 1995, under the Marrakesh Agreement, succeeding the 1947 General Agreement on Tariffs and Trade (GATT).
World Trade Organization
International Monetary Found
World Bank
Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the . . . Round (1986-1994).
Uruguay
Argentina
Brasil
The WTO's predecessor, the . . ., was established after World War II
General Agreement on Tariffs and Trade
International Monetary Found
World Bank
One of the WTO's criticisms is that . . . leads to a divergence instead of convergence of income levels within rich and poor countries (the rich get richer and the poor get poorer).
Free trade
Protectionism
Mercantilism
One of the WTO's criticisms is that smaller countries have . . . negotiation power
less
more
the same
The . . . is an international financial institution that provides leveraged loans to developing countries for capital programs with the stated goal of reducing poverty
World Bank
International Monetary Found
World Trade Organization
The . . . is an international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on Exchange rates and the balance of payments
International Monetary Fund
World Bank
World Trade Organization
Rodrigo Rato became the ninth Managing Director of the . . . on June 7, 2004 and resigned his post at the end of October 2007
IMF
WTO
NATO
The European Union (EU) is an economic and political union of . . . member states, located primarily in Europe
27
16
12
The . . . is an economic and political union of 27 member states, located primarily in Europe. It was established by the Treaty of Maastricht on 1 November 1993
European Union
European Economic Community
European Free Trade Area
The European Union (EU) is an economic and political union of 27 member states, located primarily in Europe. It was established by the Treaty of Maastricht on 1 November 1993, upon the foundations of the pre-existing . . .
European Economic Community
European Free Trade Area
European customs union
The European Union (EU) has a population of almost . . . million
500
300
400
The . . . generates an estimated 30% share (US$ 18.4 trillion in 2008) of the nominal gross world product.
European Union
United States of America
Mercosur
The . . . has developed a common market through a standardised system of laws which apply in all member states, ensuring the freedom of movement of people, goods, services and capital
European Union
European Free Trade Area
European Economic Community
A common currency, the euro, has been adopted by sixteen member states constituting the . . .
Eurozone
European Free Trade Area
European Economic Community
The EU has developed a limited role in foreign policy, having representation at the WTO, G8 summits, and at the UN. It enacts legislation in justice and home affairs, including the abolition of passport controls between many member states which form part of the . . . Area.
Schengen
Maastricht
London
The . . . acts as the EU's executive arm and is responsible for initiating legislation and the day-to-day running of the EU.
European Commission
European Parliament
Council of the European Union
The President of the European Commission and all the other commissioners are nominated by the . . .
Council
Parliament
Court of Justice
The President of the European Commission and all the other commissioners are nominated by the Council. Appointment of the Commission President, and also the Commission in its entirety, have to be confirmed by . . .
Parliament
Court of Justice
Senate
The 785 Members of the European Parliament (MEPs) are directly elected by EU citizens every . . . years
five
four
three
MEPs sit according to . . .
political groups
their nationality
their importance
The . . . of the European Parliament carries out the role of speaker in parliament and represents it externally
President
vice president
MEP
The President and vice presidents of the European Parliament are elected by MEPs every . . . years.
two and a half
five
four
The . . . of the European Union consists of a government minister from each member states and meets in different compositions depending on the policy area being addressed.
Council
Parliament
Commission
The judicial branch of the EU consists of the . . .
European Court of Justice and the Court of First Instance
European Court of Justice
Court of First Instance
In the European Union, the . . . mainly deals with cases taken by individuals and companies
Court of First Intance
European Court of Justice
Court of Second Instance
In the European Union, the . . . primarily deals with cases taken by member states, the institutions and cases referred to it by the courts of member states.
European Court of Justice
Court of First Instance
Court of Second Instance
In economics, the balance of . . . measures the payments that flow between any individual country and all other countries
payments
trade
services
The . . . is used to summarize all international economic transactions for that country during a specific time period, usually a year.
balance of payments
balance of trade
balance of services
The . . . is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers.
balance of payments
balance of trade
balance of services
The balance of payments reflects all payments and liabilities to foreigners (. . .) and all payments and obligations received from foreigners.
debits
credits
loans
The balance of payments reflects all payments and liabilities to foreigners and all payments and obligations received from foreigners (. . .).
credits
debits
loans
The balance of payments identity states that: . . .
Current Account = Capital Account + Financial Account + Net Errors and Omissions
Capital Account = Current Account + Financial Account + Net Errors and Omissions
Capital Account = Current Account + Financial Account
This is a convention of . . . entry accounting, where all debit entries must be booked along with corresponding credit entries such that the net of the Current Account will have a corresponding net of the Capital and Financial Accounts.
double
single
multiple
Composition of current account: . . .
the balance of trade, the net factor income and net transfer payments
the balance of trade, the gross factor income and the gross transfer payments
the balance of services, the gross factor income and the gross transfer payments
The balance of . . . (or net exports, sometimes symbolized as NX) is the difference between the monetary value of exports and imports of output in an economy over a certain period of time
trade
payments
services
The balance of . . . is the relationship between a nation's imports and exports.
trade
payments
services
A favourable balance of trade is known as a trade . . . and consists of exporting more than is imported;
surplus
deficit
gap
An unfavourable balance of trade is known as a trade . . . or, informally, a trade gap
deficit
surplus
lose
The balance of . . . is sometimes divided into a goods and a services balance
trade
payments
capital
Investments are recorded in the . . . account
capital
current
trade
Income from investments is recorded in the . . . account
current
capital
trade
Net transfer payments such as . . .
foreign aid
the money sent by individuals working abroad, known as remittances, to their families back home.
income from investments
The . . . account in the international accounts shows (1) capital transfers receivable and payable; and (2) the acquisition and disposal of nonproduced nonfinancial assets.
capital
current
net factor income
The . . . account records all transactions between a domestic and foreign resident that involves a change of ownership of an asset.
capital
current
net factor income
The . . . account is the net result of public and private international investment flowing in and out of a country
capital
current
net factor income
The . . . account includes foreign direct investment, portfolio investment (such as changes in holdings of stocks and bonds) and other investments (such as changes in holdings in loans, bank accounts, and currencies).
capital
current
net factor income
From a domestic point of view, a foreign investor acquiring a domestic asset is considered a capital . . .
inflow
outflow
netflow
From a domestic point of view, a domestic resident acquiring a foreign asset is considered a capital . . .
outflow
inflow
netflow
Countries without capital controls are said to have . . . Capital Account Convertibility
full
gross
net
The . . . records transactions that involve financial assets and liabilities and that take place between residents and nonresidents.
financial account
capital account
net factor income
The Central Bank . . . its foreign currency reserves when there is a deficit in balance of payments
reduces
increases
maintains
The . . . between two currencies specifies how much one currency is worth in terms of the other
exchange rates
exchange interest
exchange money
An exchange rate of 102 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 102 is worth the same as USD . . .
1
100
300
The . . . exchange rate refers to the current exchange rate
spot
forward
backward
The . . . exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.
forward
backward
spot
The . . . exchange rate is the price in foreign currency of one unit of a domestic currency.
nominal
real
proportional
The . . . exchange rate is the rate at which an organization can trade goods and services of one economy (e.g. country) for those of another.
real
nominal
proportional
If the price of a good increases 10% in the UK, and the Japanese currency simultaneously appreciates 10% against the UK currency, then the price of the good . . . for someone in Japan.
remains constant
decreases
increases
A . . . exchange rate, sometimes called a pegged exchange rate, is a type of Exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.
fixed
floating
IMF system
A . . . exchange rate is usually used to stabilize the value of a currency, vis-a-vis the currency it is pegged to. This facilitates trade and investments between the two countries, and is especially useful for small economies where external trade forms a large part of their GDP.
fixed
floating
IMF system
A . . . exchange rate is also used as a means to control inflation. However, as the reference value rises and falls, so does the currency pegged to it.
fixed
floating
IMF system
A . . . exchange rate prevents a government from using domestic monetary policy in order to achieve macroeconomic stability.
fixed
floating
IMF system
A . . . exchange rate is a type of Exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign Exchange market.
floating
fixed
IMF system
The . . . exchange rates automatically adjust, they enable a country to dampen the impact of shocks and foreign business cycles, and to pre-empt the possibility of having a balance of payments crisis.
floating
fixed
IMF system
In certain situations, . . . exchange rates may be preferable for their greater stability and certainty
fixed
floating
IMF system
The debate of making a choice between fixed and floating exchange rate regimes is set forth by . . . model, which argues that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. It can choose any two for control, and leave third to the market forces.
Mundell-Fleming
Kondratiev
Kuznets
In cases of extreme appreciation or depreciation, a central bank will normally intervene to stabilize the currency. Thus, the exchange rate regimes of floating currencies may more technically be known as a . . . float
managed
controled
fixed
Running of . . . exchange rate: If imports increase, the U.S. dollar demand increases and the exchange rate euro/U.S. dollar increases, as a consequence the imports decrease and the exports increase and, therefore, the U.S. dollar demand decreases, going back to a balance
floating
fixed
managed
Running of . . .: This system allows a fluctuation of 2% in either direction of the fixed exchange rate for the Central Bank. In this 2%, if the imports increase, the U.S. dollars demand increase and the exchange rate euro/U.S: dollar increases; the Central Bank increases the U.S: dollars supply, therefore the exchange rate euro/U.S. dollar decreases and returns to equilibrium
IMF System
floating exchange rate
fixed exchange rate
The . . . Round (1986 to 1994) led to a treaty to create the WTO to mediate trade disputes and set up an uniform platform of trading.
Uruguay
Maastricht
Buenos Aires
The WTO's predecessor, the . . ., was established after World War II
General Agreement on Tariffs and Trade
International Monetary Fund
Word Bank
The . . .'s predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II
WTO
IMF
World Bank
The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after . . .
World War II
World War I
Vietnam War
The WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), was established after World War II in the wake of other new multilateral institutions dedicated to international economic cooperation - notably the . . . institutions known as the World Bank and the International Monetary Fund.
Bretton Woods
Uruguay Round
Maastricht Treaty
The . . . was to be a United Nations specialized agency and would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. But the treaty was not approved by the United States and a few other signatories and never went into effect. In the absence of this organization, the GATT would over the years "transform itself" into a de facto international organization