International Trade and Exchange Rates: Imports, Exports, Protectionism, Exchange Rate Changes

1. International trade means

A buying and selling goods and services between countries
B only buying goods from local firms
C government spending inside one country only
D workers moving between occupations

2. Exports are

A goods and services bought from other countries
B goods and services sold to other countries
C taxes placed on imports
D money borrowed from commercial banks

3. Imports are

A goods and services bought from other countries
B goods and services sold to other countries
C goods produced and consumed only domestically
D subsidies given to local firms

4. A country has visible exports when it sells

A physical goods abroad
B banking services abroad
C tourism services abroad
D insurance services abroad

5. A country has invisible exports when it sells

A cars abroad
B rice abroad
C services to foreigners
D oil abroad

6. Which is an example of an import?

A Pakistan sells textiles to the UK
B Japan buys wheat from Australia
C Germany sells cars to France
D China exports phones to Africa

7. Which is an example of an export for Pakistan?

A Pakistan buys machinery from Germany
B Pakistan sells rice to Saudi Arabia
C Pakistan imports oil from the Middle East
D Pakistani consumers buy foreign cars

8. A trade surplus in goods occurs when

A export revenue from goods is greater than import spending on goods
B import spending on goods is greater than export revenue from goods
C government spending is greater than tax revenue
D unemployment is greater than employment

9. A trade deficit in goods occurs when

A exports of goods exceed imports of goods
B imports of goods exceed exports of goods
C inflation is lower than unemployment
D investment exceeds saving only

10. The current account mainly records

A trade in goods and services plus income and transfers
B only government tax revenue
C only commercial bank deposits
D only employment and unemployment

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. A country exports goods worth $80 billion and imports goods worth $100 billion. What is its balance of trade in goods?

A $20 billion surplus
B $20 billion deficit
C $80 billion deficit
D $180 billion surplus

12. A country exports services worth $45 billion and imports services worth $30 billion. What is its balance of trade in services?

A $15 billion surplus
B $15 billion deficit
C $75 billion deficit
D $30 billion surplus

13. Which is a likely benefit of international trade?

A countries can specialise and consume beyond domestic production possibilities
B countries must produce every good themselves
C consumers lose all choice
D prices must always rise

14. Specialisation in international trade is mainly based on

A countries producing goods in which they have lower opportunity cost or advantage
B countries producing only goods they cannot sell
C countries banning imports completely
D countries avoiding economies of scale

15. Which is a possible benefit of imports?

A greater consumer choice
B lower living standards always
C lower competition for domestic firms always
D zero opportunity cost

16. Which is a possible benefit of exports?

A higher output and employment in export industries
B lower national income always
C reduced foreign currency earnings
D lower demand for domestic goods abroad

17. Which is a possible disadvantage of relying heavily on exports of one product?

A vulnerability to changes in world demand or price
B guaranteed stability of income
C no risk from external shocks
D imports become impossible

18. Which is a possible disadvantage of importing many goods?

A domestic firms may face stronger competition
B consumers always lose choice
C prices always rise
D production costs always increase

19. Free trade means

A trade without protectionist barriers such as tariffs and quotas
B government bans all imports
C exports are taxed at 100%
D only one country can trade

20. Protectionism means

A restrictions placed on international trade to protect domestic industries
B complete removal of all trade barriers
C only exporting services
D a fall in domestic unemployment only

21. A tariff is

A a tax on imports
B a limit on the quantity of imports
C a payment to foreign producers
D a ban on all exports

22. A quota is

A a tax on imports
B a legal limit on the quantity of imports
C a subsidy paid to consumers only
D the exchange rate of a currency

23. An embargo is

A a complete ban on trade with a country or on a product
B a reduction in interest rates
C an increase in domestic saving
D a government budget deficit

24. A subsidy to domestic producers can be protectionist because it

A lowers domestic producers’ costs and helps them compete with imports
B raises import supply directly
C makes foreign goods cheaper
D removes domestic production

25. Which policy directly raises the price of imported goods?

A tariff
B export subsidy only
C lower income tax
D lower interest rates

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

26. Which policy directly limits the amount of imported goods?

A quota
B tariff
C depreciation
D expansionary fiscal policy

27. Which is a reason for protectionism?

A protect infant industries
B reduce domestic employment always
C increase dependence on imports
D reduce government revenue from tariffs to zero

28. An infant industry is

A a newly developing industry that may need temporary protection
B an industry producing only baby products
C an industry with no workers
D a foreign monopoly only

29. Which is a reason for protecting declining industries?

A to avoid sudden unemployment and allow time for adjustment
B to guarantee permanent inefficiency
C to reduce domestic output immediately
D to increase imports rapidly

30. Which is a possible disadvantage of protectionism?

A consumers may face higher prices and less choice
B domestic firms face more foreign competition immediately
C government cannot earn tariff revenue
D imports become free goods

31. Which is another possible disadvantage of protectionism?

A other countries may retaliate with trade barriers
B all exports must rise immediately
C domestic firms become perfectly efficient automatically
D consumers always gain lower prices

32. Which argument supports free trade?

A competition may lower prices and improve efficiency
B domestic firms are protected from all competition forever
C consumers get fewer goods
D world output must fall

33. Which argument supports protectionism?

A protecting jobs in industries threatened by imports
B increasing consumer choice from imports
C lowering all prices through foreign competition
D removing all government intervention

34. Which is most likely to happen after a tariff on imported shoes?

A imported shoes become more expensive
B imported shoes become cheaper
C demand for domestic shoes must fall
D government tariff revenue must be zero

35. Which is most likely to happen after an import quota on cars?

A supply of imported cars is restricted
B import quantity becomes unlimited
C foreign car prices must fall to zero
D domestic car firms must close

36. Exchange rate means

A the price of one currency in terms of another currency
B the inflation rate of one country
C the unemployment rate of one country
D the total exports of a country

37. If $1 = PKR 280, this shows

A an exchange rate
B a tariff
C a quota
D a trade embargo

38. Appreciation of a currency means

A the currency increases in value against other currencies
B the currency falls in value against other currencies
C exports become free
D imports are banned

39. Depreciation of a currency means

A the currency rises in value
B the currency falls in value
C inflation becomes zero
D unemployment disappears

40. If the rupee appreciates against the dollar, then for Pakistani consumers, US imports become

A cheaper
B more expensive
C impossible to buy
D unchanged always

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. If the rupee depreciates against the dollar, then for Pakistani consumers, US imports become

A cheaper
B more expensive
C free goods
D public goods

42. If a country’s currency appreciates, its exports usually become

A more expensive to foreign buyers
B cheaper to foreign buyers
C impossible to produce
D unaffected in every case

43. If a country’s currency depreciates, its exports usually become

A cheaper to foreign buyers
B more expensive to foreign buyers
C non-rival goods
D banned automatically

44. Which is a likely effect of depreciation on the current account?

A exports may rise and imports may fall, improving the current account
B imports become cheaper and rise sharply always
C exports become more expensive and fall always
D trade becomes impossible

45. Which is a likely effect of appreciation on the current account?

A exports may fall and imports may rise, worsening the current account
B exports become cheaper and rise
C imports become more expensive and fall
D domestic firms face no foreign competition

46. Depreciation may increase inflation because

A imported raw materials and finished goods become more expensive
B imports become cheaper
C export prices rise for foreign buyers
D domestic demand must fall to zero

47. Appreciation may reduce inflation because

A imported goods and raw materials become cheaper
B imports become more expensive
C domestic currency loses value
D export demand must increase

48. Which factor may cause currency appreciation?

A higher demand for the currency due to higher exports or higher interest rates
B lower demand for the currency
C higher supply of the currency on foreign exchange markets only
D falling confidence in the economy

49. Which factor may cause currency depreciation?

A lower demand for the currency or higher supply of it
B higher export demand only
C higher foreign investment inflows only
D higher interest rates attracting hot money only

50. Which chain is most accurate?

A currency depreciation → exports cheaper abroad → export demand may rise → current account may improve
B currency depreciation → imports cheaper → imports rise → current account always improves
C currency appreciation → exports cheaper abroad → exports must rise
D tariff → import price falls → import demand rises → domestic producers lose protection

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

1. Answer: A

A correct: international trade is trade between countries.
B wrong: local buying is domestic trade.
C wrong: government spending is fiscal activity.
D wrong: workers moving occupations is labour mobility.

2. Answer: B

A wrong: goods bought from other countries are imports.
B correct: exports are goods and services sold to other countries.
C wrong: taxes on imports are tariffs.
D wrong: bank borrowing is finance.

3. Answer: A

A correct: imports are goods and services bought from other countries.
B wrong: goods sold abroad are exports.
C wrong: domestic production/consumption is not importing.
D wrong: subsidies are government payments.

4. Answer: A

A correct: visible exports are physical goods sold abroad.
B wrong: banking is an invisible export.
C wrong: tourism is an invisible export.
D wrong: insurance is an invisible export.

5. Answer: C

A wrong: cars are visible goods.
B wrong: rice is a visible good.
C correct: invisible exports are services sold to foreigners.
D wrong: oil is a visible good.

6. Answer: B

A wrong: this is an export for Pakistan.
B correct: Japan buying wheat from Australia is an import for Japan.
C wrong: this is an export for Germany.
D wrong: this is an export for China.

7. Answer: B

A wrong: this is an import for Pakistan.
B correct: rice sold abroad is an export for Pakistan.
C wrong: oil bought from abroad is an import.
D wrong: buying foreign cars is importing.

8. Answer: A

A correct: surplus occurs when goods export revenue exceeds goods import spending.
B wrong: this is a goods trade deficit.
C wrong: this describes budget deficit.
D wrong: this is not trade.

9. Answer: B

A wrong: this is a trade surplus.
B correct: trade deficit in goods means goods imports exceed goods exports.
C wrong: inflation and unemployment are macro indicators, not trade balance.
D wrong: investment/saving is not goods trade balance.

10. Answer: A

A correct: current account includes goods, services, income and transfers.
B wrong: tax revenue is fiscal.
C wrong: bank deposits are financial/banking data.
D wrong: employment data is labour-market data.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. Answer: B

A wrong: imports are greater than exports, so no surplus.
B correct: $80bn – $100bn = -$20bn, a $20bn deficit.
C wrong: deficit is not $80bn.
D wrong: $180bn adds exports and imports.

12. Answer: A

A correct: $45bn – $30bn = $15bn surplus.
B wrong: exports are greater than imports.
C wrong: $75bn adds the figures.
D wrong: surplus is $15bn, not $30bn.

13. Answer: A

A correct: trade allows specialisation and consumption beyond what a country could produce alone.
B wrong: trade reduces the need to produce everything domestically.
C wrong: trade usually increases choice.
D wrong: prices may fall due to competition.

14. Answer: A

A correct: countries specialise where they have comparative advantage/lower opportunity cost.
B wrong: countries specialise in goods they can sell efficiently.
C wrong: banning imports prevents trade.
D wrong: specialisation may create economies of scale.

15. Answer: A

A correct: imports give consumers access to more goods/services.
B wrong: imports do not always lower living standards.
C wrong: domestic firms face more competition, not less.
D wrong: opportunity cost remains.

16. Answer: A

A correct: exports raise demand for domestic output and workers.
B wrong: exports may increase national income.
C wrong: exports earn foreign currency.
D wrong: exports mean foreign demand for domestic goods rises.

17. Answer: A

A correct: dependence on one export makes income vulnerable to price/demand shocks.
B wrong: income becomes less stable.
C wrong: external shocks become riskier.
D wrong: imports do not become impossible.

18. Answer: A

A correct: imports can compete with domestic producers.
B wrong: consumers usually gain choice.
C wrong: prices may fall due to competition.
D wrong: production costs may fall if imported inputs are cheaper.

19. Answer: A

A correct: free trade means trade without protectionist barriers.
B wrong: banning imports is protectionism.
C wrong: 100% export tax restricts trade.
D wrong: many countries can trade.

20. Answer: A

A correct: protectionism means using trade barriers to protect domestic industries.
B wrong: removing barriers is free trade.
C wrong: services exports are not protectionism.
D wrong: unemployment change is not the definition.

21. Answer: A

A correct: tariff is a tax on imports.
B wrong: quantity limit is a quota.
C wrong: payment support is a subsidy.
D wrong: export ban is embargo/export restriction.

22. Answer: B

A wrong: tax on imports is tariff.
B correct: quota is a legal quantity limit on imports.
C wrong: subsidy is financial support.
D wrong: exchange rate is currency price.

23. Answer: A

A correct: embargo is a complete trade ban.
B wrong: interest rate reduction is monetary policy.
C wrong: saving is financial behaviour.
D wrong: budget deficit is government spending exceeding revenue.

24. Answer: A

A correct: subsidy lowers local firms’ costs, helping them compete against imports.
B wrong: it does not raise import supply directly.
C wrong: it makes domestic goods cheaper, not foreign goods.
D wrong: it supports domestic production.

25. Answer: A

A correct: tariff adds tax to imports, raising their price.
B wrong: export subsidy supports exports, not import prices directly.
C wrong: income tax affects disposable income.
D wrong: interest rates affect borrowing/spending.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

26. Answer: A

A correct: quota directly limits import quantity.
B wrong: tariff raises import price but does not directly cap quantity.
C wrong: depreciation changes currency value.
D wrong: expansionary fiscal policy affects demand.

27. Answer: A

A correct: infant industries may need temporary protection while they grow.
B wrong: protection aims to protect jobs, not reduce them always.
C wrong: protection reduces import dependence.
D wrong: tariffs can raise revenue.

28. Answer: A

A correct: infant industry means a new/developing industry needing temporary help.
B wrong: it is not about baby products.
C wrong: it can have workers.
D wrong: it is not necessarily foreign.

29. Answer: A

A correct: protection can prevent sudden job losses and allow adjustment.
B wrong: protection should not aim to make inefficiency permanent.
C wrong: it aims to support domestic output.
D wrong: it usually reduces imports.

30. Answer: A

A correct: trade barriers can raise prices and reduce consumer choice.
B wrong: protection reduces foreign competition.
C wrong: tariffs can raise government revenue.
D wrong: imports remain economic goods.

31. Answer: A

A correct: trading partners may retaliate with barriers against exports.
B wrong: exports may fall if retaliation occurs.
C wrong: protection may reduce efficiency pressure.
D wrong: consumers may face higher prices.

32. Answer: A

A correct: free trade increases competition, which can lower prices and raise efficiency.
B wrong: permanent protection supports protectionism.
C wrong: free trade usually increases choice.
D wrong: world output may rise through specialisation.

33. Answer: A

A correct: protecting jobs threatened by foreign competition supports protectionism.
B wrong: more choice from imports supports free trade.
C wrong: lower prices from competition supports free trade.
D wrong: removing intervention supports free trade.

34. Answer: A

A correct: tariff raises the price of imported shoes.
B wrong: tariff makes imports dearer.
C wrong: demand for domestic shoes may rise.
D wrong: tariff revenue can be positive.

35. Answer: A

A correct: quota restricts the quantity of imported cars.
B wrong: quota limits quantity, not makes it unlimited.
C wrong: prices do not fall to zero.
D wrong: domestic firms may benefit.

36. Answer: A

A correct: exchange rate is the price/value of one currency in another currency.
B wrong: inflation is price-level rise.
C wrong: unemployment rate measures joblessness.
D wrong: exports are goods/services sold abroad.

37. Answer: A

A correct: $1 = PKR 280 is a currency exchange rate.
B wrong: tariff is import tax.
C wrong: quota is import limit.
D wrong: embargo is trade ban.

38. Answer: A

A correct: appreciation means currency value rises relative to others.
B wrong: falling value is depreciation.
C wrong: exports do not become free.
D wrong: imports are not banned.

39. Answer: B

A wrong: rising currency value is appreciation.
B correct: depreciation means a currency falls in value.
C wrong: inflation does not become zero automatically.
D wrong: unemployment does not disappear.

40. Answer: A

A correct: rupee appreciation means fewer rupees are needed to buy dollars, so US imports become cheaper.
B wrong: imports become cheaper, not dearer.
C wrong: they are still possible to buy.
D wrong: exchange rate changes affect prices.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. Answer: B

A wrong: depreciation makes foreign goods dearer.
B correct: more rupees are needed to buy dollars, so US imports become more expensive.
C wrong: imports do not become free goods.
D wrong: imports do not become public goods.

42. Answer: A

A correct: appreciation makes exports dearer to foreign buyers.
B wrong: exports become cheaper after depreciation.
C wrong: production is still possible.
D wrong: exports are usually affected.

43. Answer: A

A correct: depreciation makes exports cheaper to foreign buyers.
B wrong: exports become more expensive after appreciation.
C wrong: exports do not become non-rival goods.
D wrong: depreciation does not automatically ban exports.

44. Answer: A

A correct: cheaper exports and dearer imports may improve the current account.
B wrong: depreciation makes imports dearer.
C wrong: depreciation makes exports cheaper abroad.
D wrong: trade remains possible.

45. Answer: A

A correct: dearer exports and cheaper imports may worsen the current account.
B wrong: appreciation makes exports dearer, not cheaper.
C wrong: imports become cheaper, not dearer.
D wrong: domestic firms may face stronger import competition.

46. Answer: A

A correct: depreciation raises import prices, including imported raw materials.
B wrong: imports become dearer.
C wrong: foreign buyers often see exports as cheaper.
D wrong: domestic demand does not have to fall to zero.

47. Answer: A

A correct: appreciation lowers import prices and cost-push pressure.
B wrong: imports become cheaper.
C wrong: domestic currency gains value.
D wrong: export demand may fall.

48. Answer: A

A correct: higher exports or higher interest rates can raise demand for the currency.
B wrong: lower demand causes depreciation.
C wrong: higher supply causes depreciation.
D wrong: falling confidence causes depreciation.

49. Answer: A

A correct: lower demand or higher supply of a currency causes depreciation.
B wrong: higher export demand increases demand for currency.
C wrong: foreign investment inflows increase demand for currency.
D wrong: higher interest rates can attract money and cause appreciation.

50. Answer: A

A correct: depreciation can make exports cheaper abroad, increasing export demand and improving the current account.
B wrong: depreciation makes imports dearer, not cheaper.
C wrong: appreciation makes exports dearer abroad.
D wrong: tariff raises import price, not lowers it.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.