econ exam # 3 (aplia)

Total output in an economy increases when each person specializes because

D. each person spends more time producing that product in which he or she has a comparative advantage.

If the real exchange rate between the U.S. and Argentina is 1, then

D. purchasing-power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.

In the open-economy macroeconomic model, if net capital outflow increases then

D. the supply of dollars in the market for foreign-currency exchange shifts right.

If the supply of loanable funds shifts right, then the equilibrium

B. interest rate falls, so domestic residents will want to purchase more foreign assets.

If the exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs

A. $5.

The most obvious benefit of specialization and trade is that they allow us to

A. consume more goods than we otherwise would be able to consume.

Other things the same, a higher real interest rate raises the quantity of

A. loanable funds supplied.

Refer to Figure 3-16. Hosne has a comparative advantage in the production of

A. purses and Merve has a comparative advantage in the production of wallets.

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

A. the nominal exchange rate is 120/140

If the U.S. real exchange rate appreciates, U.S. exports

B. decrease and U.S. imports increase.

Table 3-30 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. Refer to Table 3-30. Falda has an absolute advantage in the production of

B. wheat.

Refer to Table 3-35. At which of the following prices, if any, could both Denmark and Finland gain from trade?

C. 1.4 pounds of ham per dozen eggs.

Which of the following is an example of U.S. foreign direct investment?

C. A U.S. beverage company opens a bottling plant in Russia.

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

C. Iowa has a comparative advantage in the production of corn.

Which of the following is correct?

C. NCO = NX

Refer to Figure 9-20. With trade, Vietnam will

C. export 1,500 units of rice.

The dollar is said to appreciate against the euro if

C. the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.

Refer to Table 3-34. Indonesia's opportunity cost of producing bananas is

D. 2.5 units of rice. This is higher than India's opportunity cost of producing bananas.

When a country allows trade and becomes an exporter of a good,

D. consumer surplus decreases and producer surplus increases.

Question #10 This question deals with trade between two large countries. Click on the link below which shows the market for Plutonium for each of the countries. Given this information construct the trade equilibrium on the graph provided below.

New Zealand (0,3) (20,1) Australia (0,2) (15, 2.5)