2025 – 2026 ECO 336 USM MIDTERM
EXAM WITH CORRECT ACTUAL
QUESTIONS AND CORRECTLY WELL
DEFINED ANSWERS LATEST ALREADY
GRADED A+
An American firm that buys foreign exchange because its managers expect
the dollar to depreciate is - ANSWERS-(Both B + C)
increasing the demand for foreign exchange.
speculating
The biggest disadvantage of a fixed exchange rate is the - ANSWERS-tradeoff
between supporting the exchange rate and maintaining economic growth
Which of the following institutions is the most important participant in
foreign currency markets? - ANSWERS-A commercial bank
If Mexicans increasingly lose confidence in their domestic financial markets
and move their assets to other countries, the peso will depreciate -
ANSWERS-True
,If U.S. consumers increase their demand for foreign products and foreign
travel, the U.S. dollar would tend to depreciate as more dollars are supplied
to foreign exchange markets - ANSWERS-True
In order to protect against foreign exchange risk, firms can use - ANSWERS-
the forward market for foreign exchange
All else equal, if Canada raises its interest rates, - ANSWERS-the U.S. demand
for Canadian dollars increases
Purchasing Power Parity (PPP) implies that in - ANSWERS-the long run, a
given amount of money can buy the same amount of goods, whether they
are purchased at home or abroad.
Speculation would involve using forward contracts and options to reduce the
exchange rate risk on future foreign exchange transactions. - ANSWERS-False
Dumping occurs when a firm - ANSWERS-sells in a foreign country at prices
that are below fair value
Which of the following is NOT a true statement? - ANSWERS-Trade barriers
are usually a good way of protecting jobs
Some economists suggest that under the National Security Argument, the
optimal way for a nation to protect its access to a strategic mineral is with the
use of - ANSWERS-a stockpile
,One reason why consumers are unlikely to be too upset about tariffs is
because - ANSWERS-the costs are so spread out that no one pays a big share
of the total
Which of the following is an example of a countervailing duty? - ANSWERS-A
tariff is granted to an industry because foreign firms are subsidized by their
governments.
Which of the following is NOT a reason people tolerate tariffs and quotas? -
ANSWERS-Their personal jobs depend on tariffs and quotas
Developed countries have lost comparative advantage in - ANSWERS-labor-
intensive industries
Some economists argue that free trade is beneficial regardless of the actions
of a country's trading partners, including trading partners that heavily protect
their home markets. - ANSWERS-True
Sixty years after the signing of GATT and following eight completed round of
trade negotiations - ANSWERS-trade barriers have been successfully reduced
There are asymmetric incentives to support and to oppose protectionist trade
policies, with the stronger incentives going to those that would seek
protection. - ANSWERS-True
Which of the following describes the asymmetry Moncur Olson observed in
the incentives to support and oppose trade policy? - ANSWERS-The benefits
of policy are concentrated, and the costs are spread out over a large number
of participants
, "Cheap foreign wages" is a poor argument for protection because it fails to
recognize the importance of productivity. Which of the following does NOT
contribute to increasing productivity? - ANSWERS-Government subsidies
If a large percentage of economic activity in developing countries is
unrecorded, then the countries are likely to rely on which of the following
taxes to provide government revenue? - ANSWERS-Tariffs
If a nation protects an industry because it believes that there are positive
externalities in the production process, it is asserting that the free market will
- ANSWERS-produce less than is optimal from society's point of view
The biggest flaw in the logic of the labor argument is the failure to consider -
ANSWERS-the differences in national productivity levels
Tariffs are highest in which sector internationally? - ANSWERS-agriculture
If a country faces action under Section 301 of the U.S. Trade Act of 1974, it
means that the country has - ANSWERS-been charged by the United States
with systematically engaging in unfair trade practices
Economic sanctions - ANSWERS-are more likely to work if the international
community supports them
Television programming might be targeted for protection in a country using
which of the following arguments? - ANSWERS-cultural protection
EXAM WITH CORRECT ACTUAL
QUESTIONS AND CORRECTLY WELL
DEFINED ANSWERS LATEST ALREADY
GRADED A+
An American firm that buys foreign exchange because its managers expect
the dollar to depreciate is - ANSWERS-(Both B + C)
increasing the demand for foreign exchange.
speculating
The biggest disadvantage of a fixed exchange rate is the - ANSWERS-tradeoff
between supporting the exchange rate and maintaining economic growth
Which of the following institutions is the most important participant in
foreign currency markets? - ANSWERS-A commercial bank
If Mexicans increasingly lose confidence in their domestic financial markets
and move their assets to other countries, the peso will depreciate -
ANSWERS-True
,If U.S. consumers increase their demand for foreign products and foreign
travel, the U.S. dollar would tend to depreciate as more dollars are supplied
to foreign exchange markets - ANSWERS-True
In order to protect against foreign exchange risk, firms can use - ANSWERS-
the forward market for foreign exchange
All else equal, if Canada raises its interest rates, - ANSWERS-the U.S. demand
for Canadian dollars increases
Purchasing Power Parity (PPP) implies that in - ANSWERS-the long run, a
given amount of money can buy the same amount of goods, whether they
are purchased at home or abroad.
Speculation would involve using forward contracts and options to reduce the
exchange rate risk on future foreign exchange transactions. - ANSWERS-False
Dumping occurs when a firm - ANSWERS-sells in a foreign country at prices
that are below fair value
Which of the following is NOT a true statement? - ANSWERS-Trade barriers
are usually a good way of protecting jobs
Some economists suggest that under the National Security Argument, the
optimal way for a nation to protect its access to a strategic mineral is with the
use of - ANSWERS-a stockpile
,One reason why consumers are unlikely to be too upset about tariffs is
because - ANSWERS-the costs are so spread out that no one pays a big share
of the total
Which of the following is an example of a countervailing duty? - ANSWERS-A
tariff is granted to an industry because foreign firms are subsidized by their
governments.
Which of the following is NOT a reason people tolerate tariffs and quotas? -
ANSWERS-Their personal jobs depend on tariffs and quotas
Developed countries have lost comparative advantage in - ANSWERS-labor-
intensive industries
Some economists argue that free trade is beneficial regardless of the actions
of a country's trading partners, including trading partners that heavily protect
their home markets. - ANSWERS-True
Sixty years after the signing of GATT and following eight completed round of
trade negotiations - ANSWERS-trade barriers have been successfully reduced
There are asymmetric incentives to support and to oppose protectionist trade
policies, with the stronger incentives going to those that would seek
protection. - ANSWERS-True
Which of the following describes the asymmetry Moncur Olson observed in
the incentives to support and oppose trade policy? - ANSWERS-The benefits
of policy are concentrated, and the costs are spread out over a large number
of participants
, "Cheap foreign wages" is a poor argument for protection because it fails to
recognize the importance of productivity. Which of the following does NOT
contribute to increasing productivity? - ANSWERS-Government subsidies
If a large percentage of economic activity in developing countries is
unrecorded, then the countries are likely to rely on which of the following
taxes to provide government revenue? - ANSWERS-Tariffs
If a nation protects an industry because it believes that there are positive
externalities in the production process, it is asserting that the free market will
- ANSWERS-produce less than is optimal from society's point of view
The biggest flaw in the logic of the labor argument is the failure to consider -
ANSWERS-the differences in national productivity levels
Tariffs are highest in which sector internationally? - ANSWERS-agriculture
If a country faces action under Section 301 of the U.S. Trade Act of 1974, it
means that the country has - ANSWERS-been charged by the United States
with systematically engaging in unfair trade practices
Economic sanctions - ANSWERS-are more likely to work if the international
community supports them
Television programming might be targeted for protection in a country using
which of the following arguments? - ANSWERS-cultural protection
