Economics 1143 Self Test

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Arguments expressed in favor of free trade includes ...

free trade increases total output, free trade encourages international competition, free trade generally benefits everyone, free trade encourages peace

The ... of the United States guarantees bank deposits through the FDIC and various bonds

government

A decrease in the trade deficit ... the income of the average worker

increases

A financial asset can be created as long as an offsetting financial ... is created at the same time

liability

Because the banking system can create ... so easily, it has the potential to create economic problems

money

A ... is a loan secured by real estate

mortgages

nation that is charged as low a tariff on exports as any other nation

most-favored nations

A ... exchange rate is sometimes controlled by the government and sometimes allowed to fluctuate

partially flexible

Arguments expressed in favor of trade restrictions include ...

protection of domestic industries and workers, protection of national security, increased revenue

limit placed on quantity of imported goods

quota

Governments impose trade ... to protect domestic interests

restrictions

An S&L is a .... institution

savings and loan

Trade between a large nation and small nation is more beneficial to the ... nation because trade opens up more opportunities for that nation

small

A nation runs a trade ... when the value of its imports is less than the value of its exports

surplus

Nations running a trade ... are able to lend money to other nations

surplus

tax placed on internationally traded goods

tariff

sale to a third party to avoid trade restrictions

transshipment

Adherence to international economic policies is purely ...

voluntary

The combined value of all transactions listed on a balance of payments account must equal ...

zero

EMU

European Monetary Union

... growth is based on a trade surplus, which stimulates income growth

Export-led

FDIC

Federal Deposit Insurance Corporation

issuer of U.S money

Federal Reserve Bank

... are the economists' three definitions of money

M1, M2, L

international organization dedicated to eliminating trade barriers

WTO

WTO

World Trade Organization

The value of a nation's imports is usually ... the value of its exports

about the same as

A nation that can produce a good at a lower cost than another nation has an ... advantage in the production of that good

absolute

Banks can create money because the ... deposited in a bank fluctuates very little from day to day

amount of money

a nation's record of all transactions between its residents and those of all foreign nations

balance of payments

difference between the value of goods a nation imports and the value of goods it exports

balance of trade

A ... market is a market of rising prices

bull

A ... asset offers a higher rate of return but is less liquid and takes more than one year to mature

capital market

A ... stock entails more risk, but it is less expensive and allows its holder to vote at stockholders' meetings

common

free-trade association among nations

common market

"As long as the relative opportunity costs of producing goods differ among nations, there are potential gains from trade, even if one nation has an absolute advantage in the production of everything" is the principle of ... advantage

comparative

... advantage is more common than ... advantage in international trade

comparative, absolute

a nation's ability to produce goods more inexpensively than other nations

competitiveness

The price of everything in an economy is dependent on the value of its ...

currency

On a balance of payment account ... are payments going out of the nation and are indicated with a ... sign

debits, minus

International trade declined during the Great Depression because of ...

decreased income, increased trade restrictions

A nation running a trade ... must receive foreign aid, borrow from other nations, or live on its savings

deficit

A ... exchange rate is always established by a government, but a ... exchange rate is based entirely on the currency market and is free of government intervention

fixed, flexible

A ... is a periodic payment made to stockholders, and a ... is an increase in the value of a stock

dividend, capital gain

All nations benefit if each produces and exports good in which it has the greatest relative ...

efficiency

complete restriction on imports or exports

embargo

the price of one currency on terms of another

exchange rate

Money serves as a medium of ..., a measure of ..., and a store of ...

exchange, value, wealth

The United States has run a trade ... since 1976

deficit

selling a good below cost in a foreign nation

dumping


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