27. Whenever the value of a nation's exports equals the value of its imports, the nation is experiencing:
a. a trade deficit.
b. a trade surplus.
c. balanced trade.
d. a trade balance.
ANSWER: c
28. A bilateral trade balance is:
a. half the trade deficit.
b. the measure of imports only—not exports.
c. the difference between the value of imports and exports between two trading nations.
d. the sum of the value of imports and exports traded between two nations.
ANSWER: c
29. What entries are used to calculate a country's bilateral trade balance?
a. its unemployment and inflation rates
b. its exports to and imports from another country
c. its per capita income and imports
d. its exports and per capita income
ANSWER: b
30. Which of the following statements about the United States–China bilateral trade balance is correct?
a. It is a good indicator of the inequality of imports and exports between the United States and China.
b. It vastly understates the gap in imports and exports between the United States and China.
c. It may overstate the gap in imports and exports between the United States and China because some material inputs used to produce Chinese exports do not originate in China.
d. It shows that there is balanced trade between the United States and China.
ANSWER: c
31. The bilateral trade balance may not report the correct information because
a. data are not available.
b. the manufacturing required for a single final product is often spread across many countries.
c. transportation cost has gone up over the years.
d. the costs of parts and materials are not reported correctly.
ANSWER: b
32. The United States–China bilateral trade balance may overstate the trade gap if:
a. some of the inputs used to produce Chinese exports are imported.
b. none of the inputs used to produce Chinese exports are imported.
c. Chinese exports are valued in the U.S. Dollars rather than Chinese currency.
d. the United States imposes trade restrictions on Chinese imports.
ANSWER: a
33. “Value-added” in the context of international trade refers to:
a. the difference between the value of exports and the value of imported inputs used in producing exports.
b. the additional value a worker provides to a firm when she is hired.
c. the value added by being able to purchase goods in a competitive market.
d. the value added by import brokers when they mark up the price of the products.
ANSWER: a
34. A relatively new feature of world trade that involves spreading the production process across multiple countries is called:
a. bilateral trade.
b. offshoring.
c. industrial landscaping.
d. foreign direct investment.
ANSWER: b
35. How does one determine the “value-added” of a product produced and sold domestically?
a. Subtract the total value of imported raw and semi-finished materials used in production from the product's total value.
b. Add the cost of its transportation to the market to the product's total value.
c. Subtract the total value of all raw and semi-finished materials used in its production from the product's total value.
d. Subtract the total value of a country's imports from the total value of its exports.
ANSWER: a
36. Jane Ferlengeti, a U.S. citizen, purchases a phone for $300 that Apple imported from China. Apple paid its Chinese subsidiary $150 for the phone. How did these transactions change the U.S.–China bilateral trade balance?
a. It improved (i.e., increased) by $300.
b. It worsened (i.e., fell) by $300.
c. It worsened (i.e., fell) by $150.
d. They did not change the U.S.-–China trade balance, since Apple's $150 margin ($300–$150) offset the $150 cost of importing the phone from China.
ANSWER: c