AP Macro MACRO: International Economics 2

Question 1

If the U.S. dollar appreciates relative to the euro, what happens to U.S. exports to Europe?

Accepted Answer

U.S. exports become more expensive for Europeans, decreasing exports

Answer

U.S. exports become cheaper for Europeans, increasing exports

Answer

U.S. exports are unaffected because trade is denominated in dollars

Answer

U.S. exports increase because American firms earn more per unit sold

Question 2

Country A has a current account surplus. Which of the following must be true?

Accepted Answer

Country A has a capital and financial account deficit

Answer

Country A is running a budget surplus

Answer

Country A's currency is depreciating

Answer

Country A is a net importer of goods and services

Question 3

Which scenario best illustrates the concept of comparative advantage?

Accepted Answer

A country produces a good at a lower opportunity cost than its trading partner

Answer

A country produces all goods at lower absolute cost than its trading partner

Answer

A country exports only goods in which it has an absolute advantage

Answer

A country imports goods that require more capital than labor to produce

Question 4

A quota on imported steel would most likely result in which of the following in the domestic steel market?

Accepted Answer

Higher domestic steel prices and higher domestic steel output

Answer

Lower domestic steel prices and higher domestic steel output

Answer

Higher domestic steel prices and lower domestic steel output

Answer

Lower domestic steel prices and lower domestic steel output

Question 5

If a nation runs a persistent trade deficit, which of the following is the most likely long-run consequence for its currency under a flexible exchange rate system?

Accepted Answer

The currency will depreciate as supply of domestic currency on forex markets increases

Answer

The currency will appreciate due to high demand for imports

Answer

The currency will remain stable because trade deficits are self-correcting immediately

Answer

The currency will appreciate because foreigners accumulate domestic assets

Question 6

Which of the following is recorded as a credit (positive entry) in the U.S. current account?

Accepted Answer

A Japanese tourist spends money at U.S. hotels

Answer

A U.S. firm purchases a factory in Germany

Answer

A U.S. citizen buys a German-made car

Answer

The U.S. government sends foreign aid to Haiti

Question 7

A tariff on imported goods is most similar to which domestic policy tool in terms of its economic effect on consumers?

Accepted Answer

An excise tax on a domestically produced good

Answer

A production subsidy to domestic firms

Answer

A price ceiling set below the equilibrium price

Answer

An expansionary fiscal policy measure