1 _______ refers to the situation in which a country’s joining in a free trade area leads to the increase of its trade in favor of member countries.
(A) Trade diversion effect.
(B) Trade distortion effect.
(C) Trade enhancement effect.
(D) Trade creation effect.

2 After Italy, Spain, Portugal joined the European Union, why does their trade deficit get worse? Which of the following statements is true? (A) They could not expand their government expenditure. (B) They could not depreciate their currency. (C) They could not offer tax incentives to industrial sectors. (D) They could not reduce welfare expenditure.

3 The value of a country’s currency will tend to depreciate if _______ . (A) the demand for the country’s imports increases. (B) the country’s money supply decreases. (C) the country’s citizens decrease their travel abroad. (D) domestic interest rates increase.

4 If interest rates in Taiwan increase but they stay the same in the rest of the world, then _______ . (A) the exchange rate of foreign currency to NT dollars will decrease (B) the exchange rate of NT dollars to foreign currency will decrease (C) Taiwan’s current account balance will deteriorate (D) Taiwan’s exports will decrease

5 Which of the following is NOT a major part in the balance of payment (BOP) in a country? (A) Current account. (B) Net errors and omissions. (C) Government budget. (D) Financial account.

6 The existence of the J-curve indicates that a real depreciation will cause _______ . (A) an initial increase in net exports (B) an initial increase in economic activity (C) a final reduction in net exports (D) an initial reduction in the demand for domestic goods

7 Which of the following policies CANNOT improve current account deficit? (A) To raise interest rate. (B) To depreciate domestic currency. (C) To raise tariff for foreign imports. (D) To decrease government expenditure.

8 Regarding the Marshall Lerner Condition (M-L Condition), which of the following statements is correct? (A) The sum of price elasticity of foreign demand for domestic products and the price elasticity of domestic demand for foreign products are less than 1. (B) Sugar and rice are products suitable for the M-L Condition. (C) The M-L Condition in the very short run may not be effective. (D) The M-L Condition in the long run may not be effective.

9 Which of the following countries does not belong to the member countries of CPTPP? (A) Singapore. (B) Vietnam. (C) New Zealand. (D) South Korea.

10 How should a country’s deficit in international balance of payment (BOP) be solved? Which of the following policies is incorrect? (A) To depreciate the deficit. (B) To lower the government expenditure. (C) To raise the interest rate. (D) To lower tariff.

11 In June 2022, South Korea’s inflation rate reaches 6%. Which of the following statements is correct? (A) South Korea faces a current account deficit in the first half of 2022. (B) Won (South Korea’s currency) depreciates too little. (C) The price of importing oil and food in South Korea is dropping down. (D) South Korea raises the interest rate too sharp.

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