International trade is an "increasing-sum" game at which all players have the opportunity to become winners.

2. True
3. False

10 points

QUESTION 2

Comparative advantage

1. A. is also known as relative efficiency.
2. B. can lead to trade even in the face of absolute efficiency.
3. C. exists when one party can produce a good or service at a lower opportunity cost than another party.
4. D. all of the above

10 points

QUESTION 3

The euro zone is similar to the United States in terms of population, even though the gross domestic product (GDP) is less.

1. True
2. False

10 points

QUESTION 4

The G-7 is composed of

1. A. Canada, France, Japan, Germany, Italy, the U.K., and the United States.
2. B. Switzerland, France, Japan, Germany, Italy, the U.K., and the United States.C. Switzerland, France, North Korea, Germany, Italy, the U.K., and the United States.D. Switzerland, France, Japan, Germany, Canada, the U.K., and the United States.

10 points

QUESTION 5

Gresham's Law states that

1. A. bad money drives good money out of circulation.
2. B. good money drives bad money out of circulation.C. if a country bases its currency on both gold and silver, at an official exchange rate, it will be the more valuable of the two metals that circulate.D. none of the above.

10 points

QUESTION 6

How are international finance and domestic finance different?

1. A.Foreign exchange and political risks
2. B. Market imperfections
3. C. Expanded opportunity set
4. D. All of the above

10 points

QUESTION 7

Most foreign exchange transactions are for

1. A. intervention by central banks.
2. B. interbank trades between international banks or nonbank dealers.
3. C. retail trade.
4. D. purchase of hard currencies.

10 points

QUESTION 8

During the period of the classical gold standard (1875-1914) there were

1. A. highly volatile exchange rates.
2. B. volatile exchange rates.C. moderately volatile exchange rates.D. stable exchange rates.
3. E. no exchange rates.

10 points

QUESTION 9

The forward market

A. involves contracting today for the future purchase or sale of foreign exchange at the spot rate that will prevail at the maturity of the contract.

1. B. involves contracting today for the future purchase or sale of foreign exchange at a price agreed upon today.
2. C. involves contracting today for the right but not obligation to the future purchase or sale of foreign exchange at a price agreed upon today.
3. D. none of the above

10 points

QUESTION 10

Supporters of the gold standard for national currencies believe this precious metal provides:

2. A. an effective hedge against price inflation.
3. B. fixed exchange rates between all currencies.
4. C. monetary policy autonomy.
5. D. none of the above