CEA - Certified Economic Analyst International Trade and Finance Questions and Answers

Question 1

Country A can produce 10 tons of wheat or 5 tons of steel using the same amount of resources.
Country B can produce 6 tons of wheat or 4 tons of steel with the same resources.
According to the principle of comparative advantage, which of the following is true?

Accepted Answer

Country B has a comparative advantage in producing steel.

Answer

Country A should specialize in steel, and Country B in wheat.

Answer

Country A has an absolute advantage in both goods and should not trade.

Answer

Country A has a comparative advantage in producing steel.

Question 2

Which of the following transactions would be recorded as a credit in a country's Current Account component of the Balance of Payments?

Accepted Answer

A foreign tourist paying for a hotel stay within the country.

Answer

A domestic company purchasing a factory abroad.

Answer

The central bank increasing its holdings of foreign currency.

Answer

A domestic investor buying bonds issued by a foreign government.

Question 3

A government imposes a limit on the quantity of a specific good that can be imported per year. This type of trade barrier is known as a(n):

Accepted Answer

Quota

Answer

Ad valorem tariff

Answer

Subsidy

Answer

Voluntary Export Restraint (VER)

Question 4

According to the theory of Purchasing Power Parity (PPP), if a basket of goods costs $150 in the United States and €120 in the Eurozone, what should the nominal exchange rate (USD per EUR) be?

Accepted Answer

1.25

Answer

0.80

Answer

1.50

Answer

0.67

Question 5

Within the Mundell-Fleming model for a small open economy with perfect capital mobility, under a floating exchange rate regime, an expansionary fiscal policy will lead to:

Accepted Answer

No change in output as the currency appreciation crowds out net exports.

Answer

A depreciation of the domestic currency and a rise in net exports.

Answer

An increase in the domestic interest rate above the world interest rate.

Answer

A significant increase in national income due to the multiplier effect.

Question 6

Which international institution primarily focuses on providing long-term development assistance and poverty reduction through financing projects like infrastructure and education in developing countries?

Accepted Answer

The World Bank

Answer

World Trade Organization (WTO)

Answer

Bank for International Settlements (BIS)

Answer

International Monetary Fund (IMF)

Country A can produce 10 tons of wheat or 5 tons of steel using the same amount of resources.Country B can produce 6 tons of wheat or 4 tons of steel with the same resources.According to the principle of comparative advantage, which of the following is true?

Country A can produce 10 tons of wheat or 5 tons of steel using the same amount of resources.
Country B can produce 6 tons of wheat or 4 tons of steel with the same resources.
According to the principle of comparative advantage, which of the following is true?