Question 1

What is the impact of a stronger domestic currency on imports?

Accepted Answer

Imports become cheaper.

Answer

There is no impact on imports.

Answer

Imports become unavailable.

Answer

Imports become more expensive.

Question 2

What is the relationship between exchange rates and international trade?

Accepted Answer

Exchange rates can affect the competitiveness and volume of international trade.

Answer

International trade has no impact on exchange rates.

Answer

Exchange rates have no impact on international trade.

Answer

Exchange rates can only affect domestic trade.

Question 3

What is a fixed exchange rate?

Accepted Answer

A monetary system where the value of a currency is fixed to another currency, gold, or a basket of currencies.

Answer

The process of converting one currency to another.

Answer

A system where the value of currency is determined by supply and demand.

Answer

An exchange rate that constantly fluctuates.

Answer

A tax levied on currency exchanges.

Question 4

What is the impact of a depreciation of domestic currency on exports?

Accepted Answer

Exports become cheaper.

Answer

Exports become unavailable.

Answer

Exports become more expensive.

Answer

There is no impact on exports.

Question 5

What is an exchange rate?

Accepted Answer

The value of one currency in relation to another.

Answer

The amount of money a person has.

Answer

The price of gold in the market.

Answer

A tax on imports and exports.

Question 6

What is comparative advantage?

Accepted Answer

The ability of a country to produce a good at a lower opportunity cost than another country.

Answer

The ability of a country to produce a good with absolute advantage over another country.

Answer

The ability of a country to produce a good solely for domestic consumption.

Answer

The ability of a country to produce a good at a higher opportunity cost than another country.

Question 7

What is the law of comparative advantage?

Accepted Answer

Trade between two countries will be mutually beneficial if each country specializes in producing the good for which it has a lower opportunity cost.

Answer

Trade between two countries will be mutually beneficial if each country specializes in producing the good with absolute advantage.

Answer

Trade between two countries will be mutually beneficial if each country specializes in producing the good for which it has a higher opportunity cost.

Answer

Trade between two countries will only be beneficial if they have exactly the same opportunity costs for producing goods.

Question 8

What is the concept of absolute advantage?

Accepted Answer

The ability of a country to produce more of a good using the same amount of resources as another country.

Answer

The ability of a country to consume more of a good than another country.

Answer

The ability of a country to produce a good with comparative advantage over another country.

Answer

The ability of a country to produce a good at a lower opportunity cost than another country.

Question 9

What is opportunity cost?

Accepted Answer

The value of the next best alternative that must be given up in order to obtain something else.

Answer

The total cost of producing a good or service.

Answer

The monetary cost of a good or service.

Answer

The cost of producing a good without considering alternatives.

Question 10

Which of the following best represents the concept of comparative advantage?

Accepted Answer

Country A can produce 10 shirts or 5 pairs of shoes, while Country B can produce 8 shirts or 4 pairs of shoes.

Answer

Country A can produce 10 shirts and 5 pairs of shoes, while Country B can produce 12 shirts and 6 pairs of shoes.

Answer

Country A can produce 5 shirts and 10 pairs of shoes, while Country B can produce 4 shirts and 8 pairs of shoes.

Answer

Country A can produce 10 shirts and 5 pairs of shoes, while Country B can produce 8 shirts and 4 pairs of shoes.

Question 11

Which of the following is an example of comparative advantage?

Accepted Answer

Country A can produce 100 cars or 50 computers, while Country B can produce 80 cars or 40 computers.

Answer

Country A can produce 100 cars and 50 computers, while Country B can produce 120 cars and 60 computers.

Answer

Country A can produce 50 cars and 100 computers, while Country B can produce 40 cars and 80 computers.

Answer

Country A can produce 100 cars and 50 computers, while Country B can produce 80 cars and 40 computers.

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