Macro Test 4

________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry.

The infant industry argument

If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to:

a floating exchange rate

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?

expansionary

_____________ are numerical limitations on the quantity of products that can be imported.

import quotas

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

progressive tax

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.

proportional tax

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

regressive

When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market.

soft peg

For firms engaged in international trade, ____________________ can have an enormous effect on profits.

swings in exchange rates

Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________.

taking a management responsibility

What do goods like gasoline, tobacco, and alcohol typically share in common?

they are all subject to government excise taxes

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

Automatic stabilizers

A ______________________ means that government spending and taxes are equal.

balanced budget

As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a(n) __________ advantage and toward industries where it has a(n) ___________ advantage.

comparitive; comparative

The _____________ is an example of a large-scale common currency.

euro

People or firms use one currency to purchase another currency at the _______________________.

foreign exchange markets

An import quota or tariff on French wine that raises the prices for wine will probably:

hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices.

If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

progressive

If government tax policy requires Bill to pay $20,000 in taxes on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

proportional

Low-wage U.S. workers suffer from protectionism in all the industries that they don�t work in, because:

protectionism forces them to pay higher prices for basic necessities like clothing and food.

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include:

the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with ________________________

the tools of demand and supply

____________ means selling goods below their cost of production.

Dumping

It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________.

National Interest Argument

A tariff differs from a quota in that a tariff is:

a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole.

aggregate demand

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.

contractionary

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

The _____________________________ is the largest market in the world economy.

foreign exchange market

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement:

is essentially correct

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________.

regressive

If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then:

the dollar depreciated agiast the yen

If 20 Mexican pesos could buy $2.00 U.S. dollars in 2006 and $1 U.S. dollar in 2010, then:

the dollar stregnthend agianst the peso

Tariffs result in a decrease in consumer surplus because:

the price of the protected good increases and quantity consumed decreases.

In 2009, 1 U.S. dollar purchased 1400 Korean won and in 2013 it purchased 900 Korean won. How much did 1000 Korean won cost in U.S. dollars in 2009 and 2013?

2009: .71 dollars, 2013: 1.11 dollars

In 2010, 100 Japanese yen purchased 0.88 U.S. dollars and in 2013, it purchased 0.93 U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013?

2010: 113.6 yen, 2013: 107.5 yen

Which of the following would be expected if the tariff on foreign-produced automobiles were increased?

The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:

budget surplus

When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:

discretionary fiscal policy

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:

domestic producers can attain the economies of scale to allow them to compete in world markets.