AP Macroeconomics 7.3.5 Test

In Zagora, a fictitious nation, a worker cna produce either 5 books or 10 gadgets in an hour. In Plovdiv, another fictitious nation, a worker cna produce either 3 books or 5 gadgets in an hour. The opportunity cost of 1 gadget is:

0.50 books in Zagora and 0.60 books in Plovdiv.

Which of the following transactions would be recorded as a credit in the U.S. current account?

A. A Mexican bank's purchase of Microsoft stock Microsoft is an American- owned firm). And C. A Mexican consumer's purchase of a computer produced in the U.S. by a U.S. firm

Which of the following would cause the U.S. demand curve for Japanese yen to shift to the right?

All of the above.

Which of the following would be considered an export for Bulgaria?

An American student going to study at Sofia University in Bulgaria

The theory of comparative advantages suggests that a (an)

Country that specializes in producing goods or services for which it has a lower opportunity cost.

Which of the following would cause the U.S. dollar to depreciate against the Japanese yen?

Higher incomes in the United States

Which of the following statements is true?

Specialization and comparative advantage allow nations to consume more than if they were to produce just for themselves.

During the 1980s, the United States imported a lot more consumer products from Japan than Japan imported from the United States. At the same time, Japanese individuals and firms purchased a lot more real estate and bonds in the United States than U.S. individuals and firms purchased in Japan. According to this information, by the end of the 1980s:

The U.S capital account was in surplus, and the Japanese current account was in surplus.

Which of the following is not an argument sometimes used in favor of protectionism?

To reduce prices paid by domestic consumers

If the value of the U.S. dollar in foreign exchange markets rises:

U.S. exports will likely decrease.

Suppose Bulgaria is accused of "dumping" milk on the Ukrainian market. As a result, the Ukrainian government is considering an embargo against milk from Bulgaria. As a result of this proposed embargo:

Ukrainian consumers of milk, such as small children, would be made worse off, but Ukrainian milk producers would be made better off.

If a bottle of French wine priced at 100 francs can be purchased for $50, the exchange rate is:

WRONG 0.50 dollars per franc.

The balance of payments will always be equal to zero unless:

WRONG ?? None of the above?

The "law of one price" applies to all goods, except those that:

WRONG are produced only in one location.

In Zagora, a worker can produce either 5 books or 10 gadgets in an hour. In Plovdiv, a worker can produce either 3 books or 5 gadgets in an hour. Which statement about this situation is true?

Zagora has the comparative advantage in the production of gadgets.

Say that the exchange rate between the U.S. dollar and the Melnik bop is expressed in terms of bops per dollar. All of the following will cause this exchange rate to rise, ceteris paribus, except for:

an increase in Melnik residents' demand for U.S. made cigarettes

If a country puts a tariff on imported watermelons, the effects will include:

an increase in prices for domestically produced watermelons.

If U.S investments begin to offer a real rate of interest that is higher than the real rate that can be earned on German investments, we can expect:

an increase in the price of the dollar in terms of German marks

Fiscal policy affects exchange rates because:

as government debt increases, interest rates rise, and the value of the currency rises.

A nation should specialize in the production of the product for which it has a(n):

comparative advantage.

A contractionary fiscal policy will:

decrease interest rates and decrease the value of a country's currency, leading to a larger trade surplus.

Suppose Japan has a comparative advantage over Canada in the production of VCRs. This means that Japan:

has a lower opportunity cost of VCR production than does Canada.

Restrictions on imports of foreign steel into the U.S. will:

help U.S. steel producers and hurt U.S. automobile producers.

Free trade has the effect of:

increasing the purchasing options of consumers in an economy.

If a nation's central bank increases the money supply, in the nation:

interest rates will decrease, and the currency will depreciate in the international exchange market.

The term "balance of payments" refers to a nation's:

record of all international transcations.

If a nation's government continually runs a deficit, increasing the size of its federal debt, you would mostly likely expect:

the nation to experience an increasing current account deficit.

If real interest rates in a country increase, ceteris paribus:

the value of the currency will rise, and exports will decrease.

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

total output will be highest if Japan specializes in rice and the United States specializes in bicycles.

Protectionist measures are enacted because they:

typically benefit a small number of people greatly and impose small costs on a large number of people.