Download Econ 114 3rd MT W 2016 White.tst

Econ 114 (04)
3rd Midterm
Winter 2015-16
White Version
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The existence of inflation in a country that is higher than inflation in the rest of the world will tend
to
A) decrease its imports.
B) increase the demand for that country's currency in the foreign-exchange market.
C) increase the supply of that country's currency in the foreign-exchange market.
D) increase its exports.
E) have no effect on the foreign-exchange market.
1)
2) If Canadian demand for French wine increases, the supply of Canadian dollars to the
foreign-exchange market will ________ and the demand for euros will therefore ________.
A) increase; increase
B) decrease; decrease
C) decrease; increase
D) increase; decrease
E) increase; remain the same
2)
3) The purchase of foreign assets by Canadians is, for Canada, considered a capital
A) inflow and is recorded as a credit on the current account.
B) inflow and is recorded as a credit on the capital account.
C) inflow and is recorded as a debit on the capital account.
D) outflow and is recorded as a debit on the current account.
E) outflow and is recorded as a debit on the capital account.
3)
4) An appreciation of the Canadian dollar implies
A) is shown only by changes in the official reserves of the Bank of Canada and does not influence
the exchange rate.
B) a fall in the external value of the dollar, such that more dollars are required to buy foreign
currency.
C) a rise in the external value of the dollar, such that fewer dollars are required to purchase
foreign currency.
D) a rise in the external value of the dollar, such that more dollars are required to purchase
foreign currency.
E) a fall in the external value of the dollar, such that fewer dollars are required to purchase
foreign currency.
4)
March 30, 2016
The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
FIGURE 1
5) Refer to Figure 1. If Paperland engages in international trade and the world price is PA, the amount
of newsprint produced by Paperland will be ________.
A) Q1
B) Q2
C) Q3
March 30, 2016
D) Q4
E) Q5
5)
The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
FIGURE 2
6) Refer to Figure 2. If Paperland does not engage in international trade, the equilibrium quantity of
newsprint produced will be
A) Q1 .
B) Q2 .
C) Q3 .
D) Q4 .
E) Q5 .
6)
7) A fall in the Canadian-dollar price of foreign currency is referred to as
A) a loss in the relative value of the Canadian dollar.
B) an increase in the exchange rate.
C) a depreciation of the Canadian dollar.
D) an appreciation of the Canadian dollar.
E) a fall in the external value of the Canadian dollar.
7)
March 30, 2016
FIGURE 3
8) Refer to Figure 3. An increase in demand or decrease in the supply of foreign exchange will
A) have no effect on the exchange rate.
B) encourage Canadians to buy more European goods.
C) cause the Canadian dollar to appreciate.
D) encourage Europeans to buy fewer Canadian goods.
E) cause the Canadian dollar to depreciate.
FIGURE 4
9) Refer to Figure4. An increase in demand for foreign exchange OR a decrease in the supply of
foreign exchange may be due to
A) equal rates of inflation.
B) foreign inflation in excess of domestic inflation.
C) increased preference for Canadian goods.
D) more Europeans travelling to Canada.
E) domestic inflation in excess of foreign inflation.
March 30, 2016
8)
9)
10) Canada's balance of payments is sometimes incorrectly said to be "in surplus" . The reason this
must be incorrect is that
A) unlike most countries, Canada's balance of payments is almost always balanced.
B) Canada's balance of payments has been in deficit for almost all of its history.
C) like any other country in the world, Canada's balance of payments is always perfectly
balanced.
D) the Canadian government has long been committed to avoiding balance of payments
surpluses.
E) it is not possible for capital flows to be in a surplus situation.
FIGURE 5
11) Refer to Figure 5.. A rise in the exchange rate (moving up the vertical axis) indicates
A) a depreciation of the Canadian dollar.
B) that more euros are required to purchase one Canadian dollar.
C) that fewer dollars are needed to purchase one euro.
D) an appreciation of the Canadian dollar.
E) no effect on the value of the currency.
March 30, 2016
10)
11)
FIGURE 6
12) Refer to Figure 6. A fall in the exchange rate (moving down the vertical axis) indicates
A) no effect on the value of the currency.
B) a depreciation of the Canadian dollar.
C) that fewer euros are required to purchase one Canadian dollar.
D) that more dollars are needed to purchase one euro.
E) that fewer dollars are needed to purchase one euro
12)
13) A country that engages in no foreign trade is said to be in a situation of
A) autarky.
B) absolute advantage.
C) comparative advantage.
D) isolation.
E) reciprocal absolute advantage.
13)
14) If a Canadian company builds and operates a mine in Indonesia, in the foreign-exchange market
there will be a(n)
A) decrease in the debits on Canada's capital account.
B) increase in the demand for dollars in the foreign-exchange market.
C) fall in the demand for dollars in the foreign-exchange market.
D) increase in the supply of dollars to the foreign-exchange market.
E) fall in the supply of dollars to the foreign-exchange market.
14)
March 30, 2016
15) Canada is a net exporter of oil. An increase in the world price of oil, ceteris paribus, means that
Canada's terms of trade will
A) improve.
B) deteriorate.
C) deteriorate as long as Canada exports more oil than it imports.
D) improve as long as all of Canada's production of oil is being exported.
E) not change.
15)
16) When opportunity costs are identical between two countries for all goods,
A) there will be gains from trade for both countries if one country has an absolute advantage in
the production of some commodity.
B) there will be absolute advantages from trade but no comparative advantages from trade.
C) international trade will be advantageous only to the country that has an absolute advantage
in the production of some commodity.
D) there can be no gains from trade unless there are economies of scale in some of the products.
E) absolute advantages will determine the gains from trade.
16)
17) When a Japanese firm buys Canadian lumber, this transaction appears as a
A) debit on the Canadian capital account.
B) credit on the Canadian current account.
C) credit on the Japanese capital account.
D) debit on Canada's trade account.
E) credit on the Japanese current account.
17)
18) Other things being equal, if the Canadian dollar depreciates, the quantity of foreign exchange
demanded will decline because
A) the Canadian-dollar price of Canadian goods will rise.
B) the foreign-exchange price of foreign goods will rise.
C) the foreign-exchange price of foreign goods will fall.
D) the Canadian-dollar price of foreign goods will fall.
E) the Canadian-dollar price of foreign goods will rise.
18)
19) If two countries each produce wool and cotton, we know that the country with the comparative
advantage in cotton will also have a lower
A) opportunity cost to produce cotton.
B) resource input per unit produced of cotton.
C) resource input per unit produced of both cotton or wool.
D) opportunity cost to produce wool.
E) resource input per unit produced of wool.
19)
20) Payments made to foreign firms arising from Canadians' purchases of foreign goods and services
are shown in Canada's
A) capital account.
B) capital-service account.
C) current account.
D) foreign-currency reserves.
E) official financing account.
20)
March 30, 2016
21) The "terms of trade" reflect the
A) conditions under which trade takes place, as established by the World Trade Organization.
B) amount of absolute advantage held by one country over another.
C) difference in opportunity costs between two countries.
D) quantity of domestic goods that must be exported to get a unit of imported goods.
E) quantity of imports that must be purchased to sell a unit of exported goods.
21)
22) Two nations want to engage in trade but discover that one of them is more efficient in producing all
goods. In this case,
A) the less efficient country should engage in importation of goods only.
B) no trade is possible.
C) the more efficient country should import all goods.
D) each nation should export the good in which it has a comparative advantage.
E) the more efficient country should produce all goods and export them.
22)
23) Consider Canada's trade with the United States. Canadian exports to the U.S., Americans travelling
in Canada, and U.S. capital flows into Canada all give rise to
A) a depreciation of the Canadian dollar.
B) a supply of U.S. dollars on the foreign-exchange market.
C) a decrease in U.S. dollar reserves in Canada.
D) a lower value of the Canadian dollar.
E) a demand for U.S. dollars on the foreign-exchange market.
23)
24) One region is said to have an absolute advantage over another region in the production of good X
when
A) an equal quantity of resources can produce more of good X in the first region than in the
second region.
B) the first region has a more productive labour force than the second.
C) the opportunity cost of one unit of X is lower in the first region than in the second region.
D) the first region has a larger supply of the raw materials required to produce good X.
E) there is no demand for good X in the second region.
24)
25) When specialization according to comparative advantage also makes economies of scale possible,
A) there will be additional gains from trade.
B) it will be beneficial for all trading countries to impose tariffs.
C) the production possibilities boundaries of all trading countries will shift inward.
D) costs will rise in all trading countries.
E) trade is not beneficial to the country that has the absolute advantage in both goods.
25)
26) The increases in a nation's output and consumption that result from specialization and trade are
called
A) absolute advantage.
B) the terms of trade.
C) comparative advantage.
D) the gains from trade.
E) autarky.
26)
March 30, 2016
The diagram below shows Robinson Crusoe's annual production possibilities boundary for the production of bananas and coconuts.
FIGURE 7
27) Refer to Figure 7. Starting from point A and moving to point B, Robinson Crusoe's opportunity cost
of producing each additional kilogram of coconuts is
A) increasing.
B) increasing followed by decreasing.
C) decreasing.
D) decreasing followed by increasing.
E) constant.
27)
28) China fixes its exchange rate (yuan per units of foreign currency) at a rate well above its
free-market equilibrium level, which means that China is keeping the external value of the yuan
A) at its free-market price.
B) in line with the world market for foreign currency.
C) at the rate established by its trading partners.
D) artificially low.
E) artificially high.
28)
29) Consider two countries that can produce rice and other products. If neither country has an absolute
advantage in the production of rice,
A) the opportunity cost of producing rice must be identical in the two countries.
B) there is no possibility that either country will import rice from the other.
C) then rice should not be produced.
D) neither country can possibly have a comparative advantage in the production of rice.
E) rice will still be traded as long as one of the countries has a comparative advantage in its
production.
29)
March 30, 2016
30) When a grocery importer in Sweden buys Quebec maple syrup, this transaction
A) appears as a debit item on the Canadian capital account.
B) appears as a debit item on the Canadian current account.
C) appears as a credit item on the Canadian capital account.
D) appears as a debit item on the Swedish current account.
E) appears as a credit item on the Swedish current account.
March 30, 2016
30)
Answer Key
Testname: ECON 114 3RD MT W 2016 WHITE
1) C
2) A
3) E
4) C
5) E
6) C
7) D
8) E
9) E
10) C
11) A
12) E
13) A
14) D
15) A
16) D
17) B
18) E
19) A
20) C
21) D
22) D
23) B
24) A
25) A
26) D
27) E
28) D
29) E
30) D
March 30, 2016