Chapter 1Introduction9Chapter 1 IntroductionnMultiple Choice QuestionsHistorians of economic thought often describe _ written by _ and published in _ as the first real exposition of an economic model.“Of the Balance of Trade,” David Hume, 1776“Wealth of Nations,” David Hume, 1758“Wealth of Nations,” Adam Smith, 1758“Wealth of Nations,” Adam Smith, 1776“Of the Balance of Trade,” David Hume, 1758Answer: EFrom 1959 to 2000,the U.S. economy roughly tripled in size.U.S. imports roughly tripled in size.the share of US Trade in the economy roughly tripled in size.U.S. Imports roughly tripled as compared to U.S. exports.U.S. exports roughly tripled in size.Answer: CThe United States is less dependent on trade than most other countries becausethe United States is a relatively large country.the United States is a “Superpower.”the military power of the United States makes it less dependent on anything.the United States invests in many other countries.many countries invest in the United States.Answer: AAncient theories of international economics from the 18th and 19th Centuries are:not relevant to current policy analysis.are only of moderate relevance in todays modern international economy.are highly relevant in todays modern international economy.are the only theories that actually relevant to modern international economy.are not well understood by modern mathematically oriented theorists.Answer: CAn important insight of international trade theory is that when countries exchange goods and services one with the other itis always beneficial to both countries.is usually beneficial to both countries.is typically beneficial only to the low wage trade partner country.is typically harmful to the technologically lagging country.tends to create unemployment in both countries.Answer: BIf there are large disparities in wage levels between countries, thentrade is likely to be harmful to both countries.trade is likely to be harmful to the country with the high wages.trade is likely to be harmful to the country with the low wages.trade is likely to be harmful to neither country.trade is likely to have no effect on either country.Answer: DBenefits of international trade are limited totangible goods.intangible goods.all goods but not services.services.None of the above.Answer: EAttempts to explain the pattern of international tradehave been a major focus of international economists.have proven to be hopeless.have proven to be a trivial exercise.have been the preoccupation of economic development theorists.None of the above.Answer: AWhich of the following does not belong?NAFTAUruguay RoundWorld Trade OrganizationNone Tariff BarriersNone of the above.Answer: DCost-benefit analysis of international tradeis basically useless.is empirically intractable.focuses attention on conflicts of interest within countries.focuses attention on conflicts of interests between countries.None of the above.Answer: CAn improvement in a countrys balance of payments means a decrease in its balance of payments deficit, or an increase in its surplus. In fact we know that a surplus in a balance of paymentsis good.is usually good.is probably good.may be considered bad.is always bad.Answer: DThe study of exchange rate determination is relativelydifficult.new and mathematical.old.obtuse.None of the above.Answer: BThe GATT wasan international treaty.an international U.N. agency.an international IMF agency.a U.S. government agency.a collection of tariffs.Answer: AThe international debt crisis of early 1982 was precipitated when _ could not pay its international debts.RussiaMexicoBrazilMalaysiaChinaAnswer: BInternational economics can be divided into two broad sub-fields:macro and micro.developed and less developed.monetary and barter.international trade and international money.static and dynamic.Answer: CA primary reason why nations conduct international trade is because of differences inhistorical perspective.location.resource availabilities.tastes.incomes.Answer: CInternational trade is sometimes used as a substitute for all of the following exceptinternational movements of capital.international movements of labor.domestic production of the same goods or services.domestic production of different goods and services.None of the above.Answer: DInternational trade forces domestic firms to become more competitive in terms ofthe introduction of new products.product design and quality.product reliability.product price.All of the above.Answer: EThe movement to free international trade is most likely to generate short-term unemployment in which industries?Industries producing non-tradable goodsImport-competing industriesExport industriesImport sectorsNone of the above.Ans