ECON 4040e Test #2 Review

What are the three basic types of imperfect market​ structure?

1. Monopoly 2. Oligopoly 3. Monopolistic Competition

4 Major Groups of Arguments for Protection for Industries:

1. Retaliation Argument 2. Infant Industry Argument 3. Labor Argument 4. National Security Argument

What are the two necessary conditions for dumping to​ occur?

1. imperfect competition exists 2. markets are segmented

A country has a comparative advantage in the production of a good because: A. its endowments of production inputs determine the relative costs of products. B. products made in industries with strong unions are bettter made. C. its political leaders give incentives to its industrial leaders toward the most profitable​ industries, such as green energy. D. its people believe in free​ enterprise, which ensures productive​ industries, such as technology products.

A

A product is produced in a monopolistically competitive industry with economies of scale. If this industry exists in two​ countries, and these two countries engage in trade one with the​ other, then we would​ expect: A. that this trade will lead to greater product differentiation. B. neither country will export this product since there is no comparative advantage. C. the country with lower production costs will export the product. D. the country with a relative abundance of factor inputs consistent with the factor intensity of the product will export this product.

A

A​ counter-example to the​ Stolper-Samuelson theorem has firms using more skilled labor as it becomes more​ expensive, and less unskilled labor as it become less​ expensive, even if the firms have time to adjust their labor mix. How can this possibly​ be? A. Broader technology applications require more skilled labor and less unskilled labor. B. Skilled labor is an inferior​ good, as defined in​ microeconomics, hence higher price means higher demand. C. Unskilled labor is an inferior​ good, as defined in​ microeconomics, hence lower price means lower demand. D. Both B and C.

A

China has pegged its currency against the U.S. dollar. If demand for dollars decreases A. there is pressure for the U.S. dollar to depreciate. In this​ setting, China has to purchase dollars to maintain its peg. B. there is pressure for the U.S. dollar to appreciate. In this​ setting, China has to purchase dollars to maintain its peg. C. there is pressure for the U.S. dollar to appreciate. In this​ setting, China has to sell dollars to maintain its peg. D. there is pressure for the U.S. dollar to depreciate. In this​ setting, China has to sell dollars to maintain its peg.

A

External economies of scale occur when average costs of a​ firm: A. fall as the industry grows​ larger, but may or may not rise as the representative firm grows larger. B. fall as the representative firm and industry grows larger. C. remain constant. D. rise as the industry grows larger.

A

In the debate on fixed versus floating exchange​ rates, the strongest argument for a floating rate is that it frees macroeconomic policy from taking care of the exchange rate. Why is this also the weakest​ argument? A. The freeing of monetary policy from the task of maintaining an exchange rate creates a lack of external discipline on monetary policy and leads to an over reliance on inflationary policies to satisfy domestic economic needs. B. The domestic money supply is a captive of the need to maintain sufficient reserves to be able to supply any excess demand for foreign exchange. C. The needs of a fixed exchange rate system can be in conflict with the needs of the domestic economy. D. Fixed exchange rate systems require the monetary authority to closely monitor the exchange rate.

A

In​ general, a country whose economy is dependent on an imported resource and whose goal is to minimize the shock that the resource can cause to their economy should adopt an exchange rate system: A. that allows their currency to float in the market. B. that fixes or pegs their exchange rate to the currency of the country whose resource they import. C. ​Don't adopt a​ system; adopt the currency of the of the country whose resource they import​ (dollarize). D. None of the​ above; the country should develop substitutes for the imported resource.

A

Suppose the​ "Effective Rate of​ Protection" for Brazilian automobile producers is calculated to be minus−​60%. This result indicates that: A. Brazilian automobile producers would be better off if Brazil adopted free trade for all parts and final goods. B. Brazilian automobile producers would be better off if Brazil increased its tariffs on both imported automobile parts and imported cars by​ 60% each. C. Brazilian automobile producers would be better off if Brazil increased its tariffs on imported automobile parts. D. there is a flaw in the calculation. The effective rate of protection is always positive.

A

The Ricardian model of international trade makes predictions about actual international trade flows​ that: A. are supported with qualification by the empirical evidence. B. are supported without qualification by the empirical evidence. C. are contradicted by the empirical evidence. D. cannot be evaluated with empirical evidence.

A

The biggest disadvantage of a fixed exchange rate is the A. tradeoff between supporting the exchange rate and maintaining economic growth B. increased probability of high inflation. C. tradeoff between supporting the exchange rate and adjusting the trade balance. D. increased probability of a trade deficit. E. tradeoff between supporting the exchange rate and maintaining a balanced budget.

A

The simultaneous export and import of textiles by India is an example​ of: A. intraindustry trade. B. interindustry trade. C. increasing returns to scale. D. imperfect competition.

A

The two industries most commonly receiving protection​ are: A. agriculture and clothing. B. agriculture and steel. C. automobiles and pharmaceuticals. D. pharmaceuticals and steel.

A

Under a fixed exchange​ standard, if the domestic demand for foreign exchange increases: A. the central monetary authority must meet the demand out of its reserves. B. inflation will increase. C. the fixed exchange standard will breakdown. D. the domestic currency must be depreciated. E. the central monetary authority must increase the supply of domestic money.

A

What is the effect of a currency devaluation under fixed exchange rates in the short​ run? A. An increase in exports. B. A decline in foreign reserves. C. An increase in imports. D. A decline in output.

A

Which of the following are true statements about​ intra-industry trade? A. The majority of U.S. and European trade is​ intra-industry trade. B. Low values on the​ Grubel-Lloyd index are associated with high levels of​ intra-industry trade. C. ​Intra-industry trade is especially common in agricultural sectors. D. All of the above.

A

When the dollar is worth less in relation to currencies of other countries ​(for example relative to the Japanese Yen in the diagram to the right​), are you more likely to buy​ American-made or​ foreign-made electronics?

American (domestic) products

A contract that contains a promise that a specified amount of foreign currency will be delivered on the specified date in the future is traded in which of the​ following? A. The commodities market. B. The forward market. C. The spot market D. None of the above. E. All of the above.

B

A managed floating exchange rate refers​ to: A. A fixed exchange rate that changes once a year. B. An exchange rate that is not​ pegged, but does not float freely. C. Countries participating in the euro. D. Any hybrid exchange rate system.

B

After the breakdown of the Bretton Woods​ system, the dominant exchange rate regime in the U.S.​ was: A. a fixed rate. B. a managed float. C. a crawling peg. D. a clean float.

B

Compared with free​ trade, large countries may increase national welfare when they place a tariff on imports. What unique aspect of large​ countries, explains this​ conclusion? Large countries: A. have large numbers of domestic producers who can expand substantially when they are protected by tariffs. B. reduce the world price of the import when they levy a tariff. C. are less likely to face tariff retaliation by trade partners. D. All of the above.

B

If the U.S. dollar depreciates in terms of the​ Euro: A. European goods would be cheaper for Americans. B. American goods would be cheaper for Europeans. C. Americans would have to pay fewer dollars for one Euro. D. The relative price of U.S. exports would rise.

B

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 current account surplus B. a current account deficit C. a current account balance D. a positive difference between domestic exports and imports

B

In the current​ Post-Industrial economy, international trade in services​ (including banking and financial​ services): A. is relatively stagnant B. is relatively small C. does not exist D. dominates world trade

B

In the specific factors​ model, a​ country's comparative advantage is determined by: A. industry research and development activity which helps differentiate firms into specific industries. B. the​ country's factor endowments relative to its trading partners. C. relative industry size and capacity in each specific industry. D. relative opportunity costs across​ countries, as in the Ricardian trade model.

B

Internal economies of​ scale: A. are more likely to be associated only with​ high-tech or complex products such as robotics. B. are more likely to be associated with an imperfectly competitive industry. C. are more likely to be associated with a perfectly competitive industry. D. can never form the basis for international trade.

B

Suppose Canada exports cars and imports furniture. This is an example of: A. unbalanced​ trade, since cars are more valuable than furniture. B. ​inter-industry trade. C. ​intra-industry trade. D. monopolistically competitive trade.

B

Suppose a bond issued by the European Central Bank and denominated in euros pays 3​% per year. Today the exchange rate is 1.19 dollars per euro. It is expected that the exchange rate in one year will be 1.31 dollars per euro. What is the annual dollar return on this​ bond? A. -6% B. 13% C. 3% D. 15%

B

Suppose land is the specific factor for​ rice, while capital is the specific factor for appliances. If New Zealand exports appliances and imports​ rice, the specific factors setting implies that trade causes: A. the income of New Zealand capital owners to fall. B. the income of New Zealand capital owners to rise. C. the purchasing power of New Zealand capital and land owners will both rise due to the reduction in the cost of consuming rice. D. the income of New Zealand land owners to rise.

B

Under a Gold​ Standard: A. Prices are fixed. B. The exchange rate is fixed. C. Interest rates are fixed. D. All of the above.

B

Which of the following are true statements about​ intra-industry trade? A. ​Intra-industry trade is especially common in agricultural sectors. B. The majority of U.S. and European trade is​ intra-industry trade. C. Low values on the​ Grubel-Lloyd index are associated with high levels of​ intra-industry trade. D. All of the above.

B

Which of the following is not a positive of having a large trade​ deficit? A. A large trade deficit allows for a higher level of investment than possible solely from domestic savings. B. A large trade deficit accumulates foreign debt that must be serviced in the future. C. A large trade deficit can signal that foreigners have confidence in the current set of economic policies. D. A large trade deficit can signal the positive expectations of the future prospects of the economy. E. All of the above are positives. F. None of the above are positives.

B

Which of the following represents direct foreign​ investment? A. A deposit that an American tourist makes at a Swiss bank to open an account. B. Intel moves part of its production to a plant in Malaysia. C. A purchase by an Italian company of Microsoft stock on the New York Stock Exchange. D. An American hedge fund buys Russian government bonds.

B

Which of the following statements about​ off-shoring and outsourcing is​ true? A. ​off-shoring and outsourcing have the same definition B. off-shoring is the movement of some or all of a​ firm's activities to a location outside the home​ country; outsourcing is the reassignment of activities to another​ firm, either inside or outside the home country C. the effects and extent of​ off-shoring of services are very well understood since most countries collect the necessary types of​ data; the effects and extent of outsourcing of services is not very well understood D. off-shoring is the reassignment of activities to another​ firm, either inside or outside the home​ country; outsourcing is the movement of some or all of a​ firm's activities to a location outside the home country

B

How do economies of scale give rise to international​ trade? A. Economies of scale enhance resource differences between countries. B. International trade occurs because economies of scale make a comparative advantage. C. International trade occurs because economies of scale transfer knowledge across countries. D. International trade occurs because​ multi-national corporations have economies of scale. These economies of scale are _____________________ economies of scale.

B Internal

How does a fall in the value of the pound sterling as shown in the diagram to the right affect British​ consumers? A. Domestic interest rates increase. British consumers find it more expensive to borrow. B. Foreign goods are now relatively more expensive. British consumers are hurt. C. Foreign goods are now relatively cheaper. British consumers will benefit. D. Domestic goods are now relatively more expensive. British consumers are hurt. How does this fall in the value of the pound affect American​ exporters?

B Makes them worse off

(see question #14 of homework 4 for graph) The persistence of established patterns of specialization​ (in this case Canada's control of the world puck ​industry), even those started by historical​ accident, illustrates the​ (potential) significance of A. declining economies. B. internal economies. C. external economies. D. emerging economies.

C

A​ country, such as the​ U.S., is allowed to use​ anti-dumping duties if the price a foreign exporter: A. charges for the products it sells in the U.S. is more than the price charged in the exporters market. B. falls over​ time, and U.S. firms are harmed by import of the product. C. charges for the products it sells in the U.S. is less than the price charged in the exporters​ market, and U.S. firms are harmed by import of the product. D. charges for the products it sells in the U.S. is less than the price charged in the​ exporter's market.

C

Countries official reserve assets are mostly composed of: A. physical goods which can be bartered in emergency situations. B. the​ country's own​ currency, stocks, and bonds. C. other​ countries' currencies. D. the​ country's own currency.

C

If a U.S. firm moves some of its assembly operations to the​ firm's foreign affiliate located in​ Mexico, this is an example of A. outsourcing. B. both outsourcing and off shoring. C. off-shoring. D. neither outsourcing nor off shoring.

C

If a U.S. firm moves some of its assembly operations to the​ firm's foreign affiliate located in​ Mexico, this is an example of A. outsourcing. B. neither outsourcing nor off shoring. C. ​off-shoring. D. both outsourcing and off shoring.

C

If an industry is characterized by external economies of scale: A. the market is likely to be served by an oligopoly of firms. B. firm costs decline as firms increase in size. C. firm costs decline as the industry grows in size. D. monopolistic competition will follow.

C

If the interest rate on a deposit in Euros is​ 6% per​ year, and the Euro is expected to depreciate against the U.S. dollar by​ 1%, what does the interest parity condition imply about the interest rate on the deposit in U.S.​ dollars? A. ​6% B. ​7% C. ​5% D. ​4%

C

Internal economies of scale occur when the average costs of the​ firm: A. fall for a given firm as the industry grows larger. B. rise for a given firm as the industry grows larger. C. fall as the representative firm grows larger. D. rise as the representative firm grows larger.

C

The labor argument for​ tariffs, argues that it is unfair for a country to face imports from countries that have lower wages. The​ problem(s) with this argument: A. it ignores the fact that tariffs or quotas are an expensive method of saving jobs. B. is that it ignores the fact that cross country wage differences reflect productivity differences. C. Both A and B. D. None of the above. The labor argument is solid.

C

The​ Stolper-Samuelson theorem predicts that trade will cause countries with relatively scarce supplies of unskilled labor: A. to see wage decreases for unskilled​ labor, since unskilled labor will be used less in making exports. B. to see wage increases for unskilled​ labor, since the supply curve has moved left. C. to see wage decreases for unskilled​ labor, since unskilled labor will be used less in making imports. D. to see wage increases for unskilled​ labor, since the demand curve​ (relative to skilled​ labor) has moved right.

C

Under free​ trade, a digital SLR camera sells for​ $1000. If the U.S. imported the parts to produce a digital​ SLR, the free trade price of the parts would be​ $550. U.S. digital SLR producers will receive the highest​ "Effective Rate of​ Protection" if: A. the U.S. introduces a​ 25% tariff on imported parts that are used to produce digital SLR cameras. B. the U.S. introduces a quota limit on imported parts that are used to produce digital SLR cameras. C. the U.S. introduces a​ 25% tariff on imported digital SLR cameras. D. the U.S. introduces a​ 25% tariff on both digital SLRs and on the imported parts that are used to produce digital SLR cameras.

C

Which is​ true? A. All industrialized countries that peg today peg to the US dollar. B. All developing countries that peg today peg to the US dollar. C. Some countries peg to a basket of currencies. D. No countries peg to the dollar because the dollar floats.

C

Which of the following is NOT a valid explanation for the failure of the data to support PPP​ theory? A. Differences in price level measurements across countries B. Trade barriers C. Differences in monetary policies across countries D. Transportation costs

C

Which of the following is not part of 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

Which of the following is not the reason for external economies of​ scale? A. Knowledge spillovers. B. Specialized suppliers of intermediate goods. C. Large fixed costs. D. Labor market pooling.

C

Why do internal economies of scale lead to imperfectly competitive​ industries? A. There are barriers to entry due to large fixed costs. B. This is an observation based on measurable data. C. Large firms have cost advantages over small firms. D. Patent laws prevent firms from entering the market.

C

___________________ advantage is the foundation of our understanding of the gains from trade and the potential income distribution effects of trade.

Comparative

Identify the following as debit or credit entries in the Balance of Payments: An increase in export​ Expenditure is a _________________ to the _________________.

Credit Current Account

Identify the following as debit or credit entries in the Balance of Payments from the point of view of the United States: The U.S. government sells gold for dollars. The transaction is recorded as a __________________ in the __________________ account.

Credit Financial

Identify the following as debit or credit entries in the Balance of Payments: An increase in foreign Assets held in the​ U.S is a ______________ to the _________________.

Credit Financial Account

An import​ quota: A. Is always more costly to a country than an import tariff. B. Is always less costly to a country than an import tariff. C. Has the same effects on welfare as an import tariff. D. Generates rents that might go to foreigners.

D

Examples of demand pull factors that influence international migration include: A. the cost of moving to the destination country. B. the probability of finding a job in the destination country. C. the wage a worker may earn in the destination country. D. All of the above.

D

External economies of​ scale: A. tend to result in large profits for each firm and an industry with relatively few firms. B. lead to the creation of a single large monopoly. C. cannot be associated with a perfectly competitive industry. D. are more likely to be associated with a perfectly competitive industry.

D

GNP​ (Gross National​ Product) equals GDP plus: A. indirect business taxes. B. a statistical discrepancy. C. the capital consumption allowance. D. net receipts of factor income from the rest of the world and net unilateral transfers.

D

Gross National Product represents the sum of the following expenditure​ categories: A. ​savings, investment, tax​ collections, and government purchases. B. ​consumption, investment, government​ purchases, and the capital account balance. C. ​consumption, investment, tax​ collections, and the current account balance. D. ​consumption, investment, government​ purchases, and the current account balance.

D

If​ Heckscher-Ohlin is taught in all the​ textbooks, why​ don't more countries utilize its concepts and​ conclusions? A. Ricardian theory is more important and thus more widely used. B. With few​ exceptions, it pretty much is utilized. C. Politicians dismiss it as too theoretical and​ esoteric, making it difficult to implement. D. Measurement errors make it difficult to test.

D

Suppose again that furniture production is more​ capital-intensive relative to clothing​ production, which is more​ labor-intensive. If the relative price of furniture to clothing​ rises, this will: A. raise the income of labor owners. B. lower the incomes of both labor and capital owners. C. raise the income of both labor and capital owners. D. raise the income of capital owners.

D

The French capital stock is 15​ machines, while the Italian capital stock is 10 machines. This information allows you to conclude that: A. France is capital abundant. B. Italy is capital scarce. C. Italy is labor abundant. D. None of the above.

D

The creation of an integrated market as a result of international trade results in A. more​ firms, each operating at a larger scale. B. lower prices. C. a wider range of choices for consumers. D. all of the above

D

The opposition to expanded trade comes from people who fear that it will: A. increase the demand for their labor and capital and cause an inflationary gap. B. reduce the demand for their labor and increase the demand for their capital and lead to market failure. C. reduce the demand for their labor or capital and lead to an increase in income. D. reduce the demand for their labor or capital and lead to a decline in income.

D

When the United States signed a​ free-trade agreement with Canada​ (1989), no one thought twice about it. When the agreement with Mexico was signed​ (1994), there was significant opposition. The concepts of interindustry and intraindustry trade can explain the differences in opposition to the two trade agreements in the following​ manner: A. Given the​ productivity, technology, and factor endowment similarities between the U.S. and​ Canada, trade between the two is​ intraindustry, and such trade generally yields greater benefits than interindustry trade. B. Substantial​ productivity, technology, and factor endowment differences between the U.S. and Mexico make trade between them​ interindustry, and this type of trade is seen as more threatening to jobs and firms. C. Trade between the U.S. and Mexico is interindustry​ trade, and such trade is comparative​ advantage-based. While consumers get the benefit of lower import prices with such​ trade, they also face the hardship of paying higher prices for export goods. D. All of the above. E. A and B only.

D

Where there are economies of​ scale, the scale of production possible in a country is constrained​ by: A. the size of that country. B. the size of the domestic market. C. the aggregate size of all trading partner countries. D. the combined size of the domestic and foreign market.

D

Which of the following is​ true? A. If an exchange rate is allowed to vary across a fixed basket of​ currencies, it is called a hard peg. B. If an exchange rate is not allowed to vary against the target​ currency, it is called a soft peg. C. Any exchange rate policy other than completely flexible exchange rate systems is extremely uncommon today for currencies. D. A soft peg is when a​ currency's exchange rate is only allowed to fluctuate within a set band. E. If an exchange is only allowed to fluctuate within a set​ band, it is considered to be a flexible exchange rate system.

D

Identify the following as debit or credit entries in the Balance of Payments from the point of view of the United States: A Japanese firm in Tennessee buys car parts from a subsidiary in Malaysia. The transaction is recorded as a __________________ in the __________________ account.

Debit Current

Identify the following as debit or credit entries in the Balance of Payments from the point of view of the United States: A migrant worker in California sends​ $500 home to his village in Mexico. The transaction is recorded as a __________________ in the __________________ account.

Debit Current

Identify the following as debit or credit entries in the Balance of Payments from the point of view of the United States: An American church donates five tons of rice to the Sudan to help with famine relief. The transaction is recorded as a __________________ in the __________________ account.

Debit Current

Identify the following as debit or credit entries in the Balance of Payments from the point of view of the United States: An American retired couple flies from Seattle to Tokyo on Japan Airlines. The transaction is recorded as a __________________ in the __________________ account.

Debit Current

Identify the following as debit or credit entries in the Balance of Payments: An increase in income​ Payments is a ___________________ to the ___________________.

Debit Current Account

Identify the following as debit or credit entries in the Balance of Payments from the point of view of the United States: An American mutual fund manager uses the deposits of his fund investors to buy Brazilian telecommunication stocks. The transaction is recorded as a __________________ in the __________________ account.

Debit Financial

Identify the following as debit or credit entries in the Balance of Payments from the point of view of the United States: The Mexican government sells pesos to the United States Treasury and buys dollars. The transaction is recorded as a __________________ in the __________________ account.

Debit Financial

Identify the following as debit or credit entries in the Balance of Payments: An increase in U.S. Assets held​ abroad is a ____________________ to the ____________________.

Debit Financial Account

Identify the following as debit or credit entries in the Balance of Payments: An increase in official Reserve​ Assets is a ___________________ to the ___________________.

Debit Financial Account

Does a firm with price setting power face a​ downward-sloping demand curve or a horizontal demand​ curve?

Downward-sloping demand curve

Given that tariffs and quotas cost consumers and that they are a grossly inefficient means for creating or preserving​ jobs, citizens nevertheless allow these policies to exist because: A. the costs of tariffs and quotas are diffused throughout an entire​ nation, while the benefits are concentrated. B. they know that petitioning the government to do the right thing is futile. C. incentives to organize around the issue of trade policy are asymmetric. D. all of the above. E. A and C only.

E

In a fixed exchange rate​ system, how do countries address the problem of currency market pressures that threaten to lower or raise the value of their​ currency? A. If demand​ rises, countries must fill the excess demand for foreign currency by selling their reserves. B. If demand​ falls, then countries must increase demand by buying up the excess supply with domestic currency. C. If demand​ rises, then countries can adjust the value of the exchange rate to the desired level. D. A and B only.

E

In order to improve economic​ growth, a country should adopt which of the following exchange rate​ systems? A. Fix their currency to the country that is growing the most. B. Allow their currency to float on the market. C. Adopt a soft peg to the country that is growing the most. D. Adopt the​ country's currency that is growing the​ most; e.g.,​ dollarize, or adopt the Chinese renminbi. E. There is no superior​ system; each country has to decide what is best.

E

What​ factor(s) can cause private returns from production to be smaller than social returns of​ production? A. Knowledge​ spillovers, where firms learn from each other. B. Capital market​ imperfections, where firms with new and sound ideas are unable to attract financing. C. The inability to coordinate activities between​ firms, when the success of an industry requires multiple players to enter simultaneously. D. A and B only. E. All of the above.

E

When the social returns from production are larger than the private returns from production: A. Market output is below the social optimum. B. Market output is above the social optimum. C. Prices are too high. D. Prices are too low. E. A and C only. F. B and D only.

E

Which of the following is NOT a problem in the implementation of industrial​ policies? A. Choosing the industry to target B. The encouragement of rent seeking by firms in other industries C. Knowing the optimum amount of resources to provide the targeted industry D. The benefits are partly captured by foreign firms. E. All of the above are problems.

E

Which of the following is a theoretical justification for targeting the development of specific​ industries? A. Implement a strategic trade policy. B. Counteract a market failure. C. Punish a foreign competitor. D. All of the above are justifications. E. A and B are justifications only.

E

Nations use four main groups of arguments to justify protection for particular industries. These arguments can be characterized as either economic or noneconomic.

Economic Arguments: The retaliation argument, The infant industry argument, The labor argument, etc. Non-Economic Arguments: The national security argument Not one of 4 major groups of arguments: The mercantilism argument, The revenue argument, etc.

In order for a firm to be able to​ "dump" a good on a foreign​ market, it must have market price setting power in which​ market, home or​ abroad?

Home

The current account will fall if:

the real exchange rate appreciates or disposable income goes up

We have the following data for a hypothetical open​ economy: GNP = $14,000 Consumption​ (C) = ​$8,200 Investment​ (I) = ​$800 Government Purchases​ (G) = ​$1,400 What is the value of the current account​ balance?

$3,600

Given the following Balance of Payment data for a given​ country: Current Account​ Balance = ​$-3,600 Capital Account​ Balance = ​$-50 What must be the Financial Account​ Balance?

$3650

Suppose that you​ buy, and one year later​ sell, a foreign​ (British) bond under the following​ circumstances: When you buy the bond the exchange rate is ​$2.00 = £1. You pay £45​ ($90) for the British bond. You sell the bond for £50. No interest payment was expected or received. When you sell the​ bond, the exchange rate is ​$1.50 = £1. What is your gain or loss in​ dollars?

-$15

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 U.S. companies that manufacture​ semi-conductors happier when the dollar is strong or when it is​ weak?

When the dollar is weaker

Trade models built exclusively on the idea of comparative advantage have a __________________ record when it comes to predicting a​ country's trade patterns.

Mixed

Trade models built exclusively on the idea of comparative advantage have a ____________________ record when it comes to predicting a​ country's trade patterns.

Mixed

We have the following data for a hypothetical closed​ economy: GNP = $10,000 Consumption​ (C) = ​$8,000 Government Purchases​ (G) = ​$1,400 Tax Collections​ (T) = ​$1,600 What is the value of private savings? What is the value of gov't savings? In this closed economy, what must be the value of investment expenditure?

Private savings = $400 Gov't savings = $200 Investment expenditure = $600

We have the following data for a hypothetical open​ economy: GNP = $14,000 Consumption (C) = $8,000 Investment (I) = $1,200 Gov't Purchases (G) = $1,600 Tax Collections (T) = $1,600 What is the value of private savings plus public​ savings? What is the value of the current account balance​ CA?

Private savings plus public savings = $4,400 Current account balance CA = $3,200