Econ 327 Test 3
Given the following Balance of Payment data for a given country: Current Account Balance: $1,250 Capital Account Balance: $-50 What must be the Financial Account Balance: _______
$-1,200
The nation of Pecunia had a current account deficit of $1.0 billion and a nonreserve financial account surplus of $600 million in 2014 What is the balance of payments of Pecunia in that year? The balance of payments of Pecunica was ________ million. l What happened to Pecunia's net foreign assets in 2014? Pecunia's net foreign assets _____ by ______million
$-400 fell $1000
We have the following data for a hypothetical open economy: GNP = $12,000 Consumption (C) = $7,500 Investment (I) - $1,400 Government Purchases (G) = $1,400 What is the value of the current account balance?
$1,700
We have the following data for a hypothetical open economy: GNP = $14,000 Consumption (C) = $7,800 Investment (I) = $1,000 Government Purchases (G) = $1,400 Tax Collections (T) = $1,400 What is the value of the current account balance (CA)?
$3,800
We have the following data for a hypothetical open economy: GNP = $14,000 Consumption (C) = $7,800 Investment (I) = $1,000 Government Purchases (G) = $1,400 Tax Collections (T) = $1,400 What is the value of total savings (S)?
$4,800
When the dollar is worth less in relation to currencies of other countries are you more likely to buy American-made or foreign-made electronics?
American (domestic) products
Cost per bushel of corn in US dollars US $5 Brazil $7 Mexico $9 Now let Mexico and Brazil form a customers union, with the tariff on outside corn maintained at $5 per bushel. In this case Mexico will import _____________ and, as a consequence, will experience a welfare change that is a ________
Brazilian gain
What about an American company that is in the business of importing electronic consumer goods into the United States?
When the dollar is stronger
Are US companies that manufacture semi-conductors happier when the dollar is strong or when it is weak?
When the dollar is weaker
A pollution haven is said to exist when a. an economic activity becomes concentrated in countries or regions having less strict environmental controls than elsewhere b. a poorer region or country agrees to store pollutants in exchange for aid c. the industrial countries choose an area, usually in the less developed world, to dispose of industrial wastes d. a country fails to prosecute violators of its environmental regulations.
a. an economic activity becomes concentrated in countries or regions having less strict environmental controls than elsewhere
It would let consumers and producers make their choices based on the real costs of goods, not artificial prices determined by government policy a. free trade and efficiency b. additional gains from free trade
a. free trade and efficiency
Semiconductors are the crude oil of technology; if we don't produce our own chips, the flow of information that is crucial to every industry that uses microelectronics will be impaired. a. potentially valid. If one assumes there are external economies in this industry, the benefit of a tariff may outweigh the costs. b. not valid. Semiconductors are used in so many electronic products that a tariff would devastate any industry that uses semiconductors
a. potentially valid. If one assumes there are external economies in this industry, the benefit of a tariff may outweigh the costs.
The more oil the United States imports, the higher the price of oil will go in the next world shortage a. potentially valid. In addition to a terms of trade benefit, it would encourage the accumulation of inventories to minimize the potential for future adverse shocks b. not valid. Since oil is valued in dollars on world markets, there would be no terms of trade benefit of a tariff
a. potentially valid. In addition to a terms of trade benefit, it would encourage the accumulation of inventories to minimize the potential for future adverse shocks
Why are international negotiations important in order to reduce tariff rates worldwide? a. they help avoid trade wars b. special-interest groups cannot affect international negotiations c. large countries can impose policy restrictions on smaller countries d. the world as a whole gains from free trade.
a. they help avoid trade wars
Some economists argue that conventional analysis of international trade policy underestimates the disruption to communities in the U.S. caused by rapid shifts in international trade. The reasons put forth to justify why impacts sometimes fall more heavily on certain communities include: a. uneven growth across industries in exports by foreign countries, the high geographic concentration of certain U.S. manufacturing industries, and the unwillingness of U.S. workers to relocate away from depressed regions b. uneven growth across industries in exports by foreign countries, the even distribution of U.S. manufacturing industries across regions of the country, and the unwillingness of U.S. workers to relocate away from depressed regions c. uneven growth across industries in exports by foreign countries, the high geographic concentration of certain U.S. manufacturing industries, and the willingness of U.S. workers to relocate away from depressed regions d. even growth across industries in exports by foreign countries, the high geographic concentration of certain U.S. manufacturing industries, and the unwillingness of U.S. workers to relocate away from depressed regions
a. uneven growth across industries in exports by foreign countries, the high geographic concentration of certain U.S. manufacturing industries, and the unwillingness of U.S. workers to relocate away from depressed regions
When are preferential trade agreements welfare-improving? a. when they lead to trade creation b. when they lead to trade diversion c. when they take a form of free trade zone d. when they take a form of customs union
a. when they lead to trade creation
What is the relation between the current equilibrium dollar/pound exchange rate and its expected future level? a. expected dollar/pound exchange rate is equal to the current one b. expected dollar/pound exchange rate is higher than the current one c. expected dollar/pound exchange rate is lower than the current one d. one cannot tell given the information above
a.. expected dollar/pound exchange rate is equal to the current one
What is the relationship between GATT and WTO? a. GATT is a more formal organization with larger scope b. WTO is a more formal organization with a larger scope c. GATT is a new name for WTO d. WTO is a new name for GATT
b. WTO is a more formal organization with a larger scope
Which of the following is not a key assumption that allows strategic trade policy to work effectively in the Brander-Spencer example of Airbus and Boeing? a. Firms can earn excess returns b. a subsidy enables both firms to operate profitably c. only one firm can profitably produce aircraft d. the economies of scale are large for each firm
b. a subsidy enables both firms to operate profitably
It would open new horizons for entrepreneurship a. free trade and efficiency b. additional gains from free trade c. political argument for free trade
b. additional gains from free trade
It would allow escape from the confines of a narrow domestic market a. free trade and efficiency b. additional gains from free trade c. political argument for free trade
b. additional gains from trade
How may the liquidity of euro and yen deposits be changing over time as capital markets become increasingly integrated? a. yen deposits are likely to become more liquid, but not euro deposits b. both yen and euro deposits are likely to become more liquid c. both yen and euro deposits are likely to become less liquid d. euro deposits are likely to become more liquid, but not yen deposits e. the liquidity of euro and yen deposits is not likely to change
b. both yen and euro deposits are likely to become more liquid
Does any of the discussion in this chapter lead you to believe that dollar deposits may have liquidity characteristics different from those of other currency deposits? a. dollar deposits are less liquid than deposits in most other currencies b. dollar deposits are more liquid than deposits in most other currencies c. there is no reason to believe that the liquidity of dollar deposits is any different from deposits in other currencies
b. dollar deposits are more liquid than deposits in most other currencies
The efficiency case made for free trade is that trade distortions are eliminated a. tariff revenue will decrease, and therefore national economic welfare will decrease b. efficiency losses for producers and consumers will decrease, hence increasing national economic welfare c. efficiency losses for producers and consumers will decrease, hence decreasing national economic welfare d. tariff revenue will decrease and therefore national economic welfare will increase
b. efficiency losses for producers and consumers will decrease, hence increasing national economic welfare
If governments make trade policies based on national economic welfare, is the problem trade warfare still represented by a "Prisoner's dilemma" game? What is the equilibrium, solution to the game if governments formulate policy in this way? Would they ever choose the strategy of protectionism? a. it is still a Prisoner's dilemma game; however, now each country's dominant strategy would be to engage in free trade. This equilibrium is unstable as there would be incentive for large countries to switch to protectionism to reap additional gains b. in this case, it would no longer be a Prisoner's dilemma game; each country's dominant strategy would be to engage in free trade and there would be no incentive to switch to protectionism c. in this case, it would no longer be a Prisoner's dilemma game; each country's dominant strategy would be to engage in free trade. However, this equilibrium is unstable as there would be an incentive for large countries to switch to protectionism to reap additional gains. d. it is still a Prisoner's dilemma game; however, now each country's dominant strategy would be to engage in free trade and there would be no incentive to switch to protectionism
b. in this case, it would no longer be a Prisoner's dilemma game; each country's dominant strategy would be to engage in free trade and there would be no incentive to switch to protectionism
Customs unions differ from free trade areas by the manner in which a. members share the gains from trade with each other b. member countries apply tariffs to nonmembers c. the WTO adjudicates disputes between the members d. countries attain membership
b. member countries apply tariffs to nonmembers
Brander-Spencer analysis states that a. competition can be enhanced by international trade b. monopoly profits can be moved from one country to another by a government subsidy c. monopoly profits can be eliminated by trade polices d. monopoly profits can be eliminated by international trade
b. monopoly profits can be moved from one country to another by a government subsidy
GNP accounts avoid double counting by including only the value of final goods and services sold on the market. Should the measure of imports and exports used in the GNP accounts therefore be defined to include only imports and exports of final goods and services received from and sold to other countries? a. total value of exports should be included, but only the value of imports of final goods b. no, total values of imports and exports should be included in the calculation of the GP c. total value of imports should be included, but only the value of exports of final goods d. yes, only the value of final goods that are exported or imported should be included
b. no, total values of imports and exports should be included in the calculation of the GP
U.S. farm exports don't just mean higher incomes for farmers - they mean higher income for everyone who sells goods and services to the U.S, farm sector a. potentially valid. Export subsidies encourage domestic production at a minimal cost to society b. not valid. Unless there is some domestic market failure, an export subsidy always produces more costs than benefits
b. not valid. Unless there is some domestic market failure, an export subsidy always produces more costs than benefits
The real price of timber has fallen 40%, and thousands of timber workers have been forced to look for other jobs. a. potentially valid. the economic costs of the workers who lose their jobs far outweigh the benefits of cheaper lumber b. not valid. cheaper lumber has benefited consumers and builders. it would be more efficient for the winners from trade to compensate the losers
b. not valid. cheaper lumber has benefited consumers and builders. it would be more efficient for the winners from trade to compensate the losers
The growing exports of off-season fruit from Chile, which now accounts for 80% of the U.S. supply of such produce as winter grapes, are contributing to sharply falling price of these former luxury goods. a. potentially valid. protecting agriculture is valid as an argument for national security b. not valid. since these are off-season fruits, domestic producers are not harmed by the imports
b. not valid. since these are off-season fruits, domestic producers are not harmed by the imports
France, in addition to its occasional stabs at strategic trade policy, pursues an active nationalist cultural policy, promoting French art, music, fashion, cuisine, and so on. This may be primarily a matter of attempting to preserve a national identity in an increasingly homogeneous world, but some French officials also defend this policy on economic grounds. In what sense could some features of such a policy be defended as a kind of strategic trade policy? a. nationalist pride can encourage French workers and firms to produce high quality goods for export b. promoting French culture is a strategic trade policy in that is promotes tourism and industries related to French culture such as the textile and wine industries c. There are no economic grounds for pursuing a nationalist cultural policy
b. promoting French culture is a strategic trade policy in that is promotes tourism and industries related to French culture such as the textile and wine industries
Given the model of competition among political parties used by political scientists, the most likely tariff policy would be a. a zero (free-trade) tariff b. the tariff rate favored by the median voter c. the optimal tariff d. a prohibitive tariff
b. the tariff rate favored by the median voter
Multinationals generally have production plants in a number of countries. Consequently, they can move production from expensive locations to cheaper ones in response to various economic developments - a phenomenon called outsourcing when a domestically based firm moves part of its production abroad. If the dollar depreciates, what would you expect to happen to outsourcing by American companies? a. we would expect outsourcing by American companies to increase b. we would expect outsourcing by American companies to diminish c. we would expect outsourcing by American companies not to be affected
b. we would expect outsourcing by American companies to diminish
Which of the following is not the definition for Gross National Product? a. the market value... b. ...of all final goods and services... c. ...produced within a country's borders... d. ...within a given period of time
c. ...produced within a country's borders...
Capital gains and losses on a country's net foreign assets are not included in the national income measure of the current account. How would economic statisticians have to modify the national income identity Y = C + I + G + X - M if they did wish to include such gains and losses as part of the definition of the current account? a. Y = C + I + G + X - M - gross capital gain b. Y = C + I + G + X - M + gross capital gain c. Y = C + I + G + X - M + net capital gain e. Y = C + I + G + X - M - net capital gain
c. Y = C + I + G + X - M + net capital gain
What is the "arbitrage" opportunity in the foreign exchange market? a. a cross-rate b. a fee that brokers charge for trading currency of their clients c. a difference between the exchange rates in different trading centers d. a difference between the exchange rate for buying and selling the currency from the same bank
c. a difference between the exchange rates in different trading centers
Many countries have value-added taxes-taxes that are paid by producers, but are intended to fall on consumers. (They're basically just an indirect way of imposing sales taxes.) Such value-added taxes are always accompanied by an equal tax on imports; such import taxes are considered legal because, like the value-added tax, they're really an indirect way of taxing all consumer purchases at the same rate. Compare this situation to the argument over carbon tariffs. Which of the following statements regarding carbon tariffs is true? a. by imposing a carbon tariff on imports, the overall level of pollution will be increased b. a carbon tariff would give an artificial advantage to domestic firms if it would be more costly for a domestic firm to reduce its carbon emissions than a foreign firm c. an objection over carbon tariffs is that they may be discriminating between domestic and foreign goods d. a carbon tariff is put into place to encourage domestic firms to move their production to a pollution haven with lax enviornmental regulations.
c. an objection over carbon tariffs is that they may be discriminating between domestic and foreign goods
Some retailers in advanced countries sell products from developing countries with low wages but assure customers that these goods are produced under tolerable working conditions. Is demanding that kind of guarantee the same thing as putting a tariff on low-wage exports? Is there any way demanding a working conditions guarantee can benefit workers overseas? Demanding tolerable working conditions a. could hurt overseas workers if their employers earn higher profits b. will not affect overseas workers if retailers receive more revenue c. could benefit overseas workers if they are paid higher wages d. could benefit overseas workers if the demand for their labor decreases
c. could benefit overseas workers if they are paid higher wages
Our usual models of trade assume that jobs lost in one industry will be offset by jobs gained in other industries. The Autor et al. paper argued, however, that communities that lose manufacturing jobs to imports end up losing other jobs as well. Is this a contradiction? the Autor et al paper a. contradicts our usual models because workers are predicted to move geographically to benefit from trade b. contradicts our usual models because consumer demand is predicted to increase with lower prices c. does not contradict our usual models because the gains and losses from trade may not occur in the same place d. contradicts our usual models because workers are predicted to acquire different skills to benefit from trade e. does not contradict out usual models because a country's industries are rarely so geographically concentrated.
c. does not contradict our usual models because the gains and losses from trade may not occur in the same place
How would the differences affect the interest differential between, say, dollar and Mexican peso deposits? a. this difference will have no effect on the differential between dollar deposits and peso deposits b. dollar deposits will tend to offer higher interest rate than peso deposits c. dollar deposits will tend to offer lower interest rate than peso deposits d. dollar deposits will offer the same interest rate as peso deposits
c. dollar deposits will tend to offer lower interest rate than peso deposits
Which of the following is not an argument to support free trade? a. free trade leads toe efficient allocation of resources b. free trade allows firms to exploit economies of scale c. free trade is always welfare-improving because those who gain can compensate those who lose d. free trade limits the influence of special-interest groups
c. free trade is always welfare-improving because those who gain can compensate those who lose
Give an intuitive explanation for the optimal tariff argument. a. in a small country a tariff can favorable shift the terms of trade such that the tariff revenue exceeds the welfare loss b. in a large country, a tariff can unfavorably shift the terms of trade such that the tariff revenue exceeds the welfare loss c. in a large country a tariff can favorably shift the terms of trade such that the tariff revenue exceeds the welfare loss d. in a small country, a tariff can unfavorable shift the terms of trade such that the welfare loss exceeds the tariff revenue
c. in a large country a tariff can favorably shift the terms of trade such that the tariff revenue exceeds the welfare loss
The "theory of the second best" states that a. free trade is only the "second best" policy after the optimal tariff b. trade intervention is the best policy for dealing with domestic market imperfections c. in the presence of a market failure, government intervention may improve welfare d. there is always an alternative solution if the first best is not feasible
c. in the presence of a market failure, government intervention may improve welfare
Some retailers in advanced countries sell products from developing countries with low wages but assure customers that these goods are produced under tolerable working conditions. Is demanding that kind of guarantee the same thing as putting a tariff on low-wage exports? Demanding the working conditions guarantee a. is different than a tariff because it decreases market prices b. is the same thing as a tariff because both increase production costs c. is different than a tariff because it increases consumer demand d. is the same thing as a tariff because both decrease import consumption e. is the different than a tariff because it raises government revenue
c. is different than a tariff because it increases consumer demand
What is the main problem with imposing labor standards to prevent child labor and poor working conditions in the exporting sector of a less-developed country? a. it is too costly to monitor b. countries cannot settle on a particular standard c. less-developed countries are opposed to them d. consumers in developed countries are not willing to pay more for goods produced in better conditions.
c. less-developed countries are opposed to them
Brander-Spencer analysis states that a. monopoly profits can be eliminated by international trade b. competition can be enhanced by international trade c. monopoly profits can be moved one country to another by a government subsidy d. monopoly profits can be eliminated by trade policies
c. monopoly profits can be moved one country to another by a government subsidy
GNP equals GDP plus a. the capital consumption b. indirect business taxes c. net receipts of factor income from the rest of the world d. a statistical discrepancy
c. net receipts of factor income from the rest of the world
It's widely believed that self-driving vehicles will become commonplace in the fairly near future and that their growth will be fast for years to come. Doesn't this mean that the US should have policies designed to ensure that we are a leader in the self-driving car industry? Should the US subsidize the domestic self-driving car industry? The US should a. not offer subsidies would lead to the technological spillovers b. offer subsidies if the US naturally has a comparative advantage in producing self-driving vehicles c. not offer subsidies if the subsidies would not generate returns from market power in excess of subsidy costs d. offer subsidies if the subsides would promote perfect competition e. not offer subsidies if the subsidies if the subsidies would lead to excess returns above normal market values
c. not offer subsidies if the subsidies would not generate returns from market power in excess of subsidy costs
It would help to clean up domestic politics a. free trade and efficiency b. additional gains from free trade c. political argument for free trade
c. political argument for free trade
What is the main reason explaining why agriculture enjoys protective tariffs in the U.S.? a. environmental and health concerns force the government to restrict non-compliant imports. b. low wages in the agriculture sector would fall even further in the absence of protection c. producers (who gain) are well organized, while consumers (who lose) are not d. unfair competition from European agriculture
c. producers (who gain) are well organized, while consumers (who lose) are not
If the United States had its way, it would demand that Japan spend more money on basic research in science and less on applied research into industrial applications. Explain why in terms of the analysis of appropriability a. research targeting specific problems in an industry does not produce an externality that can be appropriated by other firms. Only basic research generates a technology externality b. research targeting problems in specific industries will lead to a competitive advantages for Japan that the US cannot appropriate c. the benefits of the United States of Japanese basic research would exceed the benefits from Japanese research targeted to specific problems in Japanese industries
c. the benefits of the United States of Japanese basic research would exceed the benefits from Japanese research targeted to specific problems in Japanese industries
Which of the following is not a valid argument against a strategic trade policy in an externality-generating sector? a. the externalities are hard to measure b. such policies can lead to trade wars c. the externalites can spill over across the border if free trade is allowed d. it might be better to address the appropriability problem directly
c. the externalites can spill over across the border if free trade is allowed
Which of the following is NOT a valid argument against a strategic trade policy in an externality-generating sector? a. the externalities are hard to measure b. such policies can lead to trade wars c. the externalities can spill over across the border if free trade is allowed d. it might be better to address the appropriability problem directly
c. the externalities can spill over across the border if free trade is allowed
What is the main problem with imposing environmental standards? a. countries cannot settle on a particular standard b. it is too costly to monitor c. they can cause potential export industries to shout down in poor countries d. consumers in developed countries are not willing to pay more for "clean" goods.
c. they can cause potential export industries to shout down in poor countries
the main critique against the WTO with respect to environmental protection? a. the WTO's stance on environmental protection supports protectionist trade policy b. the WTO interferes with environmental policy of sovereign nations c.it doesn't do enough to impose tougher environmental standards on developing countries d. it imposes environmental standards on developing countries that they cannot afford.
c.it doesn't do enough to impose tougher environmental standards on developing countries
Identify the following as debit or credit in the balance of payments: Export Expenditure
credit current account
Identify the following as debit or credit in the balance of payments: Official Reserve Assets
credit financial account
Identify the following as debit or credit in the balance of payments: US assets held abroad
credit financial account
The relationship showing that damage to the environment increases as a country's per capita income rises from an initially low level but then falls with further increases in its per capita income is known as the environmental a. income cycle b. Engle curve c. Gore curve d. Kuznets curve
d. Kuznets curve
Why do people argue that WTO undermines national sovereignty? a. WTO dictates to the countries what to produce b. WTO imposes restrictions on trade policy that are too stringent c. WTO increases trade that leads to cultural homogenization d. WTO monitors some domestic policies that affect trade
d. WTO monitors some domestic policies that affect trade
In an open economy holding GNP and consumption spending constant and where private savings equals domestic investment, a government budget deficit must be matched by a. a positive difference between domestic exports and imports b. a current account balance c. a current account surplus d. a current account deficit
d. a current account deficit
Cost per bushel of corn in US dollars US $5 Brazil $7 Mexico $9 The customs union has proven beneficial to Mexico because it led to a. tread creation b. cheaper corn c. more efficient resource use d. all of the above e. a and b but not c
d. all of the above
What particular market failure does the "market failure argument" against free trade refer to? a. unemployment b. knowledge and technology spill overs c. environmental externalities d. any market failure that occurs in the tradable sector
d. any market failure that occurs in the tradable sector
How does the WTO justify its position on trade disputes that they cannot afford. a. it requires developed countries to meet the same standards b. the WTO argues that it is not its place to impose environmental regulations on sovereign nations c. imposing uniform environmental standards on all countries prevents any one country from gaining an unfair advantage d. if forces member countries to apply the same standards to imported goods that it applies to domestically produced goods.
d. if forces member countries to apply the same standards to imported goods that it applies to domestically produced goods.
Private saving can be given by the following equation: Sp = I + CA + (G - T) This equation can be written as: CA = (Sp - I) + (T - G) Nowadays, some people recommend restrictions on imports from China (and other countries) to reduce the American current account deficit. How would higher US barriers to imports affect private savings, domestic investment and government deficit? a. it will reduce government budget deficit b. it will certainly reduce private savings c. it will increase investment d. it is impossible to tell without a general equilibrium model
d. it is impossible to tell without a general equilibrium model
What is the main problem with imposing labor standards to prevent child labor and poor working conditions in the exporting sector of a less-developed country? a. consumers in developed countries are not willing to pay more for goods produced in better conditions b. it is too costly to monitor c. countries cannot settle in a particular standard d. less-developed countries are opposed to them
d. less-developed countries are opposed to them
Do data on the US official settlements balance give an accurate picture of the extent to which foreign central banks buy and sell dollars in currency markets? a. yes, this account balance is equal to the total net sales of dollars by foreign central banks b. no, this account does not include sales or purchases of dollars by foreign central banks c. yes, this account balance is equal to the total net purchases of dollars by foreign central banks d. no, this account provides only a partial picture because it shows a net value of all transactions.
d. no, this account provides only a partial picture because it shows a net value of all transactions.
When are preferential trade agreements welfare-improving? a. when they lead to trade diversion b. when they take a form of free trade zone c. when they take a form of customs union d. when they lead to trade creation
d. when they lead to trade creation
Identify the following as debit or credit in the balance of payments: Income Payments
debit current account
Identify the following as debit or credit in the balance of payments: Foreign Assets held in the US
debit financial account
The nation of Pecunia had a current account deficit of $1.0 billion and a nonreserve financial account surplus of $600 million in 2014 If foreign central banks bought $100 million of Pecunia's assets in 2014, how would these official purchases enter Pecunia's balance of payments accounts? In this case Pecunia Central Banks foreign reserves will ____ by ____ million Continue assuming foreign central bank's purchases of Pecunia's assets. Given the above information, Foreign central bank's purchases of Pecunia's assets represent an increase in foreign official reserces held in Pecunia in the amount of ____ million, which represents a financial account ____ Pecunia's Central Bank foreign reserves will _____ by _____ million, a financial account _______ Total net financial inflows will be _____ million
fall, $300 $100, credit fall, $300, credit $1000
The nation of Pecunia had a current account deficit of $1.0 billion and a nonreserve financial account surplus of $600 million in 2014 Assume that foreign central banks neither buy nor sell Pecunian assets. How did the Pecunian central bank's foreign reserves change in 2014? Pecunian central bank reserves ____ by ________ million How would this official intervention show up in the balance of payments accounts of Pecunia? It will appear as ____million financial ______ in Pecunia's balance of payments accounts.
fell, $400 $400, inflow
In theory, the equality: current account + capital account + financial account = 0 must hold. In reality a statistical discrepancy is often included to achieve this balance. Which account is the likely culprit of this discrepancy? The __________ ___________
financial account
Suppose the U.S. foreign assets are 69 percent of the U.S. GDP, and the U.S. foreign liabilities are 98 percent of the U.S. GDP. Moreover, suppose that 57 percent of U.S. foreign assets are denominated in foreign currencies, while all liabilities to foreigners are denominated in U.S. dollars. How will a 7 percent depreciation of the dollar affect foreigners' net foreign claims on the U.S. measured in U.S. dollars (as a percent of U.S. GDP)? Foreigners will experience a net capital ____ equal to ____% of US GDP
loss, 3
Cost per bushel of corn in US dollars US $5 Brazil $7 Mexico $9 Suppose Mexico initially imposes a $5 per bushel tariff on foreign corn. In this case Mexico will import __________ ___________ corn.
no foreign
Customs unions and free trade areas are examples of ________________ trading agreements
preferential