Civics test review

The cost of manufacturing a specific good in a developing country is less than the cost to manufacture it in the United States. What is the MOST likely result if that country exports the good to U.S. markets?

The prices will decrease and the quantity produced will increase.

• The Five Stages of __________ • Growth • Peak • Recession • Trough • Recovery

Business cycle

Which farm has the absolute advantage in total production?

Farm 4

Which outcome is a major result of the situation described in this excerpt? Many U.S.-based multinational corporations have relocated much of their low-skilled production to foreign countries where wage rates for unskilled workers are relatively low. . . . Large numbers of U.S. jobs have been lost in the textile and apparel industries. —"Futurework Report" U.S. Department of Labor, 1999

U.S. workers will need to develop marketable skills to gain employment.

State lawmakers are considering a proposal to increase the minimum wage. Why would some economists criticize this proposal?

Businesses would hire fewer employees or cut work hours

The U.S.-Chile Free Trade Agreement went into effect in 2004. How did the treaty cause the changes in imports and exports to Chile?

By eliminating tariffs between the countries

Which country is MOST likely to have a comparative advantage?

Country 2

Which action would be best for a country seeking a comparative advantage in global trade?

Develop new technologies to make production more efficient

Based on this information, what is a weakness of free trade agreements?

Economic downturns can affect both countries involved in a free trade agreement.

Based on this excerpt, foreign-trade zones are important to the U.S. economy because they do what? Foreign-trade zones are secure areas under U.S. Customs supervision. . . . Located in or near U.S. Customs ports of entry, they are the U.S. version of what are known internationally as free trade zones [FTZ]. . . . Last year, exports from facilities operating under FTZ procedures amounted to $17.1 billion. . . . This slight rise is consistent with a mid-term pattern that began in 1994 when the average level of exports increased by 50 percent above the previous five years. With U.S. exports rising faster than the GDP growth rate, there is potential for further growth in zone export activity. —Michael Kantor, Secretary of Commerce Chairman, 1996

Encourage financial growth in the private sector

Based on this excerpt, which reason would make participation in this free trade agreement attractive to member countries? Since the passage of the CAFTA-DR [Dominican Republic-Central America-United States Free Trade Agreement] . . . [t]he Business Development Mission to Central America and the Dominican Republic will assist U.S. businesses to initiate or expand their exports and investment opportunities to . . . leading industry sectors by making business-to-business introductions, providing first-hand market access information, and providing access to government decision makers. — "CAFTA-DR Mission Goals," Export.gov, 2008

Expanding entry into markets will promote entrepreneurship.

Which phrase BEST describes the effect of an increase in U.S. steel imports?

Fewer goods sold by U.S. steel companies

Aggregate demand

Goods and services required in the economy

Use the list below to answer the question.

In 2009, there was a decline in consumption by the United States.

Stock market returns are an example of which type of economic indicator?

Leading indicators

What is one advantage of establishing trade barriers rather than allowing free trade?

Protection of domestic industries

Write a statement that BEST defines deflation.

Persistent fall in the general price level of goods or services

This scenario describes which part of the business cycle? • The economy has contracted in three consecutive quarters. • Annual Gross Domestic Product (GDP) fell 1.4% compared with the year before. • Estimates report that the economy will continue to contract in the fourth quarter.

Recession

What type of unemployment is experienced by workers losing their jobs to a new technology?

Structural

Describe the relationship between the consumer price index (CPI) and the business cycle?

The CPI decreases during periods of contraction or recession

The Federal Reserve System regulating the flow of currency into the economy is indicative of what economic policy?

The Monetary policy

How does this agreement negatively affect the U.S. economy? Under the North American Free Trade Agreement (NAFTA), the last restrictions on U.S.-Mexican agricultural trade were removed in 2008. Between 2007 and 2008, the value of agricultural exports to Mexico increased by 23%, and the value of imports from Mexico increased by 26% for the main commodities that had been subject to those restrictions.

The US farmers will experience more competition

Changes in global labor markets have contributed MOST to what change with the U.S. economy?

The growth of the service sector

What is a likely effect of increasing tariffs on imported cars?

The price consumers pay for imported cars will rise

How would inexpensive lumber from Canada affect the U.S. market for new homes?

The prices for new homes would decrease. Which would make more people want to buy homes.

What is a phrase that BEST explains the difference between nominal and real Gross Domestic Product (GDP)?

The real GDP is adjusted for inflation

Which statement is BEST supported by the information in this excerpt? During normal economic conditions, monetary policy in the United States and most other advanced economies operates through control of a short-term interest rate. Movements in this short-term rate, in turn, ultimately affect economic activity and prices through its effect on a range of financial conditions, including, among others: longer-term interest rates, the supply of bank loans, the level of equity and house prices, and exchange rates. —The Federal Reserve Board, 2010

The short-term interest rate influences the long-term interest rate.

Which factor BEST explains how these developments improve Brazil's productive efficiency? Since 2004, Brazil has been the world's largest beef and poultry exporter and fourth largest pork exporter, with total meat sales generating over US $8 billion in 2005. Exports have been driven by the combination of rising incomes in many parts of the world and Brazil's ready availability of land and feed resources to support meat production. —U.S. Department of Agriculture, Amber Waves, 2006

They encourage greater specialization.

Which title BEST describes the information? ________ ? ________ • Government Spending • Taxation • Public Transfer Payments

Tools of Federal Fiscal Policy

Which statement illustrates a likely result of the change described in the excerpt? For twenty years, most Central American and Dominican Republic exports to the United States benefited from duty-free treatment. . . . The CAFTA-DR (Dominican Republic-Central America-United States Free Trade Agreement) moves beyond one-way preferences to full partnership and reciprocal commitments, under which U.S. exports benefit from duty-free access. —"Why Central America and the Dominican Republic?" Office of the U.S. Trade Representative

U.S. manufacturers will increase sales to Central America because of fewer import taxes.