.28..objective.

Question 1 Which of the following is not an argument for protectionism? a) To protect infant industries b) To increase the level of imports c) To protect strategic industries d) To improve the balance of payments Question 2 A demand switching policy to improve the trade position could involve: a) Higher interest rates b) Higher income tax c) Tariffs d) Reduced government spending Question 3 Free trade is based on the principle of: a) Comparative advantage b) Comparative scale c) Economies of advantage d) Production possibility advantage Question 4 If a country can produce 10 of product A or 4 of product B the opportunity costof 1B is: a) 0.4A b) 2.5A c) 10A d) 1B Question 5 Tariffs: a) Decrease the domestic price of a product b) Increase government earnings from tax c) Increase the quantity of imports d) Decrease domestic production Question 6 The terms of trade measure: a) The income of one country compared to another b) The GDP of one country compared toanother c) The quantity of exports of one country compared to another d) Export prices compared to import prices Question 7 In a floating exchange rate system: a) The government intervenes to influence the exchange rate b) The exchange rate should adjust to equate the supply and demand of the currency c) The Balance of Payments should always be in surplus d) The Balance of payments will always equal the government budget Question 8 The balance of payments equals: a) The difference between household spending and income b) The difference between government spending and income c) A measure of the economic transactions between UK residents and the rest of the world. d) The difference between inflation andunemployment Question 9 If there was a balance of payments deficit then in a floating exchange rate system: a) The external value of the currency would tend to fall b) The external value of the currency would tend to rise c) The injections from trade are greater than the withdrawals d) Aggregate demand is increasing Question 10 To prevent the external value of the currency from falling, the government might: a) Reduce interest rates b) Sell its own currency c) Buy its own currency with foreign reserves d) Increase its own spending.