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Midterm Review Questions - International Trade and Finance
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This document contains a short review full of both multiple choice and short answer questions. It is intended to provide a a guide to enable students to properly study for their international trade and finance exam.

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  • August 25, 2023
  • 32
  • 2023/2024
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ECON73000 – International Trade & Finance
Practice Questions




© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

,Chapter 1:

Multiple Choice Questions

1. Which of the following factors is most likely to lead to a decline in a country’s exports?
a. A decrease in corporate taxes
b. A decline in the nominal interest rate
c. A decline in the input prices
d. An appreciation of the domestic currency vis-à-vis foreign currencies
Answer: D

2. _____ is considered to be the least mobile factor internationally.
a. Labor
b. Capital
c. Entrepreneurship
d. Land
Answer: D

Essay Questions

1. “Job-seeking immigration brings net economic benefits not only to the immigrants, but also to
the receiving country overall.” Justify the statement.

POSSIBLE RESPONSE: Immigration leaves some better off and some worse off in the
receiving country. The winners include the firms that employ the immigrants and the
consumers who buy the products that the immigrants help to produce. The losers are the
workers who compete with the immigrants for jobs. For the industrialized countries, the real
wages of low-skilled workers have been depressed by the influx of low-skilled workers from
developing countries. However, it has been observed that the net effect of immigration on
the receiving country is positive. The economic benefits have been higher than the economic
and social costs of immigration.




© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

,Chapter 2:

Multiple Choice Questions
1. Everything else remaining unchanged, when the price of a normal good increases,
consumers:
a. purchase more of the good.
b. purchase less of the good.
c. purchase the same amount of the good.
d. do not purchase any amount of the good.
Answer: B


2. The value of price elasticity of demand for a normal commodity is negative because it
indicates:
a. the inverse relationship between the price and the quantity demanded for the commodity.
b. that the value of the consumer surplus is negative for a normal good.
c. that the changes in quantity demanded are much less compared to the changes in price for
a normal good.
d. the direct relationship between price and consumer surplus from the commodity.
Answer: A

3. Which of the following will cause a rightward shift of the market supply curve?
a. An increase in the product price
b. A decrease in input prices
c. Change in consumers’ tastes
d. An increase in national income
Answer: B




© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

, 4. Refer to Figure 2.1 below. At a price of $70, the consumer surplus equals:

Price ($/unit)

150
Supply
120


70

40
Demand
10 Quantity
0 100 200 300 (thousands
)


a. $6,000,000.
b. $8,000,000.
c. $5,000,000.
d. $10,000,000.
Answer: B


Essay Questions
5. In a two-country world, the opening of free trade does not make everyone in the two
countries better off. What assumption(s) must be made in order to make the claim that both
countries do in fact benefit from the free trade?
POSSIBLE RESPONSE: It is true that free trade does not benefit everyone within a country.
However, if we accept the one-dollar-one-vote metric, and measure the national well-being of a
country, we will find that there are net national gains from trade. That means that the gainers are
gaining more than the losers are losing. Among the gainers are the consumers in the importing
country, who enjoy lower prices, and possibly a wider variety of the product, and the producers
in the exporting country, who are expanding their production as they are receiving a higher price
by accessing foreign demand through free trade. Among the losers are the consumers of the
product in the exporting country and the import-competing producers.




© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

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