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Fundamentals of Business Economics

CHAPTER 5 – MACROECONOMICS II – THE INTERNATIONAL
ECONOMY

5.1 Which of the following statements concerning international trade and
specialisation is true?

A By specialising in production of goods, which can be made relatively
cheaply, and trading with others who specialise in producing different
products, all can become better off.

B Trade involves domestic jobs moving to countries that have cheaper labour,
and this means that the country with high priced labour is worse off as a
result.

C Specialisation and trade only works under the protection of tariffs.

D Nations can only benefit from international trade if some other country
loses.

5.2 Which of the following must always balance?

A Visible balance

B Invisible balance

C Capital account

D The balance of payments

5.3 Which of the following statements about the balance of payments is NOT
correct?

A Payments that lead to demands for foreign currency are measured as
debits, while payments that lead to supplies of foreign exchange are
measured as credits.

B The current account balance plus the capital and financial account balances
add up to zero.

C A current account deficit is a sign of a weak economy, while a current
account surplus is a sign of a strong economy.

D A current account surplus implies that domestic residents are increasing
their net foreign assets.

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