Econ Final

If the national debt increases in any given year, it follows that the government

sold bonds in that year to finance a budget deficit.

Countries can expect to gain from international trade as long as they

specialize according to their comparative advantage

Threats to put tariffs on a nation in an attempt to get that nation to reduce its restrictions on trade are called:

strategic trade policies.

Debt is measured relative to GDP because

the ability of a country to pay off its debt depends on its productive capacity.

Debt service refers to

the interest payments a country makes on its debt each year

Retirement of the baby boomers

threatens the Social Security system because the number of retirees will be relatively large compared to the number of workers remaining by 2020

Economists

do not generally include the distributional effects of trade in their models

A country that fixes a price for its currency that is above the market price will:

lose official reserves.

Which of the following exchange rates between the dollar and the peso would a Mexican buyer ofAmerican goods most prefer?

$0.25 = 1 peso

Suppose a European stock costs 200 euros and the exchange rate is 0.95 dollars per euro. The cost of this stock to American investor would be:

$190

The text mentions 10 sources of U.S. comparative advantage. Which of the following is not one of them?

A high ratio of lawyers to the population

Which of the following groups would be most likely to benefit from a tariff on Japanese-manufactured light trucks (i.e., pickup trucks)?

U.S. domestic pickup truck manufacturers

An import quota does which of the following?

Increases the price of the domestic good for the consumer

If the U.S. dollar appreciates against the Japanese yen

Japanese goods will be cheaper in the United States.

The WTO authorized several countries to impose about $150 million in trade sanctions against the United States in retaliation for a U.S. import law that the WTO ruled to be illegal. The organization that issued this ruling against the United States is known as the:

World Trade Organization

The balance of payment account is made up of:

a current account and a financial and capital account.

The United States has limits on Chinese textile imports. Such limits are an example of:

a quota.

Germany restricts the use of nonrefillable bottles and cans. The European Union argues that the rules aren't just protecting the environment; they also are protecting German beverage makers from competition. The EU sees Germany's environmentalism as

a regulatory trade restriction.

A budget deficit is defined as

a shortfall of revenues compared to expenditures.

Government debt is defined as

accumulated deficits minus accumulated surpluses

If the government runs a budget deficit and uses it to finance the purchase of productive assets, the economy will

be better off if the return on the assets is sufficiently high

All of the following fiscal policies contributed to the large and increasing budget deficits experienced in 2003 and 2004 except:

cuts in aid to farmers

For the foreign exchange market, exports from the U.S. generate a

demand for dollars and imports to the U.S. generate a supply of dollars.

The balance of trade measures the

difference between the value of imports and that of exports

If American interest rates fall relative to Japanese interest rates and Japanese inflation falls relative to American inflation, then the:

dollar will lose value in terms of yen

Most economists

favor free trade.

External government debt is

government debt owed to individuals in foreign countries

One of the reasons government debt is different from individual debt is

government never really needs to pay back its debt

Economists generally agree that:

infant industry protection, although justified in theory, often becomes permanent because infant industries fail to grow up.

Becoming better at a task the more often you perform is referred to as:

learning by doing

Partially flexible exchange rates:

mix market forces with government intervention in a way that permits the exchange rate to respond to long-term balance of payments problems

The loss of jobs due to international trade is often

more visible than the decline in consumer prices due to international trade

The purchase of a meal by an American tourist at La Tour d'Argen (a restaurant in Paris) would find its way into the American balance of payments as a:

negative entry in the current account

The foreign exchange rate is the rate at which

one country's currency can be traded for another country's currency.

The exchange rate is the:

price of one currency in terms of another

Expansionary monetary policy:

reduces the demand for the domestic currency in the foreign exchange market and increases the supply.

One reason trade restrictions exist is that:

workers cannot be shifted easily from one industry to another.

The appreciation of a currency will

worsen a country's comparative advantages