Multiple Choice
1. Goods and services produced in the U.S. and consumed in Canada are ________ for the U.S. and ________ for Canada.
a. exports; imports
b. exports; exports
c. imports; exports
d. imports; imports
2. The economic argument for free trade is based on the principle of:
a. comparative advantage.
b. absolute advantage.
c. increasing opportunity cost.
d. tariffs and quotas.
3. a country imports more than it exports, it is:
a. experiencing a trade deficit.
b. experiencing a trade surplus.
c. maintaining a balance of trade.
d. not specializing according to comparative advantage.
4. of the following would be recorded in the current account except:
a. foreign aid to other countries.
b. the purchase or sale of goods and services internationally.
c. the purchase or sale of long-term assets internationally.
d. the payment of interest and dividends on U.S. assets held by foreigners.
5. a U.S. corporation sends a dividend check to a stockholder residing in Ireland, the transaction is recorded as a:
a. on current account.
b. on current account.
c. on capital account.
d. on capital account.
6.Which of the following tends to cause the U.S. dollar to appreciate in value?
a. Rapid income growth in foreign countries
b. An increase in U.S. prices above foreign prices
c. fall in U.S. interest rates below foreign levels
d. An increase in the level of U.S. income