Chapter 9 Applications: International Trade

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Exchange rates are particularly important because:

they link the price levels of various nations to one another

If a country had a trade deficit of $10 billion and then its exports rose by $10 billion, its net exports would now be

$0

Refer to the above diagram. The equilibrium dollar price of euro is:

$1.60

Which of the following concepts provides the basic rationale for international trade?

Comparative advantage

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

a U.S. export and a Canadian import

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is

a U.S. import and an Irish export.

A nation's true gain from international trade is:

an overall increase in output obtained through specialization and exchange

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,

producer surplus increases and total surplus decreases in the market for that good

The price of sugar that prevails in international markets is called the

world price of sugar

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Spain's

For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should

export copper, since that country has a comparative advantage in copper

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has

exports of $2 billion and a trade deficit of $1 billion

Net exports of a country are the value of

goods and services exported minus the value of goods and services imported

Since 1970, United States exports and imports have:

grown both absolutely and as a percentage of GDP

Depreciation of the dollar will:

increase the prices of U.S. imports, but decrease the prices of U.S. exports

Refer to the above diagram. If U.S. consumers increase their travel to Euro Zone nations, we would expect:

the demand for euros to increase, and the euro to appreciate


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