ch 16,17,18,19
The following graph shows the supply of and the demand for baseballs in the United States. If the world price is $3 per baseball and a tariff of $1 per baseball is imposed, then the tariff revenue collected by the United States government is _____.
$4,000
The following graph shows the supply of and the demand for baseballs in the United States. If the world price is $3 per baseball and a tariff of $1 per baseball is imposed, then the number of baseballs purchased in the United States is _____.
10,000
The figure below reflects the relationship between the inflation rate and the unemployment rate. The figure shows that the natural rate of unemployment is:
4 percent.
Which of the following factors is most significant in determining the pattern of international trade?
Comparative advantage
Which of the following explains why many countries with relatively small populations import automobiles from Japan, the U.S., and Germany instead of producing them domestically?
Economies of scale
The largest regional trading bloc is the _____.
European Community
Which of the following is true of a country's production possibilities frontier?
International trade makes it possible for a country's consumption possibilities to exceed its production possibilities.
Which of the following is true of international trade?
It allows a country to specialize in the production of certain goods and services.
Which of the following lags reduces the effectiveness of active policy?
Recognition lag
For each watch the country of Marina produces, it gives up the opportunity to make 50 pounds of cheese. Cambria can produce one watch for every 100 pounds of cheese it produces. If specialization and trade were to occur between these two countries, which of the following is true of opportunity costs in the two countries?
The opportunity cost of producing cheese is higher in Marina than in Cambria.
Which of the following was a motive of the United States to negotiate a free trade agreement with Mexico?
To gain increased access to Mexican consumers
The reason why self-correction works to close a recessionary gap is because:
a labor surplus causes wages to fall.
The following graph shows the demand for and the supply of a good in a country. If the world price of the good is $2.00 per unit and an import quota of 50 units per month is imposed, then the decrease in consumer surplus can be represented by the area _____.
a, b, c, d, and e
If the time taken for an economy to self-correct is shorter than the active policy lags, then:
active policy is likely to destabilize the economy.
If a passive approach is followed in closing an expansionary gap, _____.
an economy would experience inflationary pressure
A legal limit on the amount of a commodity that can be imported is known as:
an import quota.
The following graph shows the demand for and the supply of a good in a country. If the world price of the good is $2.00 per unit and an import quota of 50 units per month is imposed, the welfare loss resulting from higher domestic production costs is represented by the area _____.
b
The following graph shows the supply of and the demand for baseballs in the United States. If the world price is $3 per baseball and a tariff of $1 per baseball is imposed, the net welfare loss of the tariff is shown by the area _____.
b and f
The basis of the benefits of specialization is:
comparative advantage.
Those who favor an active approach to policy believe that:
despite the lags involved, implementing discretionary policy is preferable to inaction.
Economists argue that the U.S. government can earn federal revenue:
from quotas by auctioning off quotas to foreign producers.
The _____ lag is typically longer for fiscal policy than monetary policy.
implementation
The short-run Phillips curve portrays a(n):
inverse relationship between the unemployment rate and the inflation rate.
The figure below reflects the relationship between the inflation rate and the unemployment rate. If the economy is initially at point c and aggregate demand increases, in the long run, the economy will:
move toward point a.
An economy experiencing an expansionary gap:
operates in an environment in which labor shortages drive up money wages, real wages, and prices.
For those who favor an active approach, public policy changes are necessary to cure a recessionary gap because:
real wages must fall in order to increase aggregate supply in the economy.
The short-run Phillips curve shows that as the unemployment rate goes down, _____.
the inflation rate goes up
Economist Alban William Phillips believed that:
there is an inverse relationship between inflation and unemployment.
Unless there are barriers to prevent free international trade, a country becomes an importer:
when the domestic price exceeds the world price.
The following graph shows U.S. demand for and domestic supply of a good. Suppose the world price of the good is $1.00 per unit and a specific tariff of $0.50 per unit is imposed on each unit of the imported good. In such a case, _____.
25 units will be imported
The following graph shows the demand for and domestic supply of a good in a country. If the country decides to trade, then at a world price of $1.00, _____.
50 units will be imported
The following graph shows the supply of and the demand for baseballs in the United States. If the world price is $3 per baseball, then _____ baseballs are imported.
8,000
Brandon, an economist, is a believer of the rational expectations school. According to him, which of the following is likely to affect the levels of output and employment in an economy?
A monetary policy that is unanticipated
Which of the following macroeconomic variables is most dependent on whether the government pursues an active approach to policy or a passive approach to policy?
Aggregate supply
According to the rational expectations school, if the Fed announces a policy of rapid growth in the money supply, but then puts the brakes on money expansion without any announcement, which of the following is likely to be the short-run result?
An unexpected drop in aggregate demand
Which of the following is a difference between the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO)?
GATT was involved only in merchandise trade, while the WTO covers services and trade-related aspects of intellectual property.
Which of the following is a type of trade restriction?
Health, safety, or technical standards
Which of the following is true of the terms of trade?
It is determined by supply and demand factors.
Which of the following is not correct about quotas?
Lobbying efforts by domestic producers and foreign exporters are vigorously fought by domestic consumers.
Which of the following doesnotresult in a mutually beneficial trade between two countries?
One country having an absolute advantage over the other
Which of the following is a difference between an active approach to close a recessionary gap and a passive approach to close a recessionary gap?
Only the price level would be higher in the long run with the active approach, whereas it would be lower with the passive approach.
The American Tire Company has been experiencing a steady loss of market over the past 40 years due to imports of lower-priced tires. Which of the following arguments would American Tire most likely present to Congress when it lobbies for trade restrictions?
The declining industry argument
The industry for computers has just started growing in the nation of Verdana, and there is potential for the industry to flourish in the near future. However, there is stiff competition from other foreign nations that provide computers to the domestic market. The government is considering imposing a tariff. Which of the following arguments justifies the government's decision to impose a tariff on the import of computers?
The infant industry argument
Suppose the government of an importing country is considering imposing either a tariff that would result in imports falling to 1 million units per year or an import quota of 1 million units per year. Which of the following would be true?
The tariff will increase the revenue of the government of the importing country, while the quota will increase the profits of the foreign exporting firms with quota rights.
An effective policy of governmental intervention in an economy requires all of the following .* one. Which is the exception?
The will to reject sound policy if it gets in the way of political considerations
Which of the following was one of the objectives of the North American Free Trade Agreement (NAFTA)?
To gain increased access to Mexico's huge oil reserves
The consumption possibilities frontier shows:
a nation's possible combinations of goods available as a result of specialization and exchange.
If the price level in an economy rises and its output level decreases as it gravitates toward its potential GDP, then:
a passive approach to correcting an expansionary gap is being used.
In a two-country, two-commodity framework, when one country has an absolute advantage in the production of both commodities, _____.
differences in the opportunity cost of production between the two countries ensure that specialization and trade result in mutual gains
The following graph shows the demand for and the supply of a good in a country. If the world price of the good is $2.00 per unit and an import quota of 50 units per month is imposed, then:
domestic production will increase from 100 to 125 units per month.
The law of comparative advantage states that:
each country should specialize in producing the good with the lowest opportunity cost.
International trade is most likely to occur whenever:
each of the trading nations gains from trade.
Suppose there is a policy debate over imposing trade restrictions on imported semiconductors in the United States. A congresswoman argues that it is necessary to impose trade restrictions, such as a tariff, on the semiconductor industry to protect workers in the domestic semiconductor industry. The congresswoman claims that without trade protection, there will be layoffs, causing many U.S. workers in the semiconductor industry to be unemployed. She is basing her preference for trade restrictions on the:
jobs and income argument.
The rational expectations school advocates the passive rule of a fixed-growth rate monetary policy because:
people render active policy ineffective by figuring out what it's going to be and taking actions to offset it.
The figure below shows the price level, real GDP, and the potential output for an economy. According to those who favor a passive approach to policy, once the expansionary gap is eliminated, the economy will end up at:
point B.
The following graph shows the market equilibrium for corn in the United States. If the world price of corn is $6 and there are no trade restrictions, the United States will:
produce 7,000 bushels of corn, consume 3,000 bushels of corn, and export 4,000 bushels of corn.
Suppose a recession surprises economic forecasters who did not see it coming. This is an example of a(n) _____.
recognition lag
The time it takes to identify and examine the nature and seriousness of an economic problem is the _____.
recognition lag
Tariffs and quotas:
reduce consumer surplus and increase producer surplus in the importing country.
The cost of the resources used by domestic producer groups, including lobbying fees, propaganda, and legal restrictions, is collectively referred to as the cost of:
rent seeking.
An increase in the expected inflation rate will:
shift the short-run Phillips curve upward and to the right.
A country should export only those goods:
that have a lower opportunity cost.
If a country has an absolute advantage in producing a good, _____.
the country is able to produce that good using fewer resources than other countries
The terms of trade refers to:
the opportunity cost of producing a good.
Economists of the rational expectations school believe that expansionary monetary policy is fully effective only if:
the policy is totally unexpected.
According to the rational expectations theory, monetary policy is fully anticipated and therefore only affects:
the price level.
Differences in resource endowments refer to differences in:
the quality of resources available in different nations.
When a country imposes a per-unit tariff on an imported good or service, _____.
the quantity of the good or service imported into the country declines
The Phillips curve shows:
the relationship between the inflation rate and the rate of unemployment.
The production possibilities curve of a country will be a straight line if _____.
the resources in the country are equally adaptable to the production of each commodity
The figure below shows the relationship between an economy's potential output, price level, and real GDP. According to those who favor a passive approach to policy, the economy will attain equilibrium at potential output when:
the short-run aggregate supply curve shifts to the right due to a fall in real wages.
If there are no trade restrictions, a country will import a particular good if:
there is excess quantity demanded by domestic consumers at the world price.
Some industries have argued that since their output is vital for national defense, _____.
they should be entitled to additional trade protection
According to some economists, the protection granted to infant industries should be:
to protect emerging domestic industries.
An implementation lag is the time it takes:
to put a selected policy into action.
A policy to increase aggregate demand to cure a recessionary gap may succeed; however, inflation is a likely result.
true
A tariff is a tax on either imports or exports.
true
Active macroeconomic policy would move to close an expansionary gap by decreasing aggregate demand.
true
Ad valorem tariffs on imports are based on a percentage of an import's value, while specific tariffs are based on a lump sum per physical unit imported.
true
Adaptive expectations is a school of thought that argues people form expectations based on all available information, including the likely future actions of government policy makers.
true
Advocates of the active approach believe that discretionary government policy can restore economic stability and improve economic performance.
true
Advocates of the passive approach to government economic policy believe that the government should lower tax rates when there is a recessionary gap.
true
Along the long-run Phillips curve, the economy is at an unemployment level that corresponds to an output level lower than the potential output level.
true
An import quota is a tax on imports.
true
As people come to expect higher inflation, the long-run Phillips curve shifts leftward.
true
Contrary to what the Phillips curve would have predicted, the U.S. economy in the 1970s experienced simultaneous increases in inflation and unemployment.
true
Dumping refers to selling a commodity abroad at a price that is below its cost of production or below the price charged in the domestic market.
true
If a country has an absolute advantage in the production of every good, it cannot benefit from trade with other countries.
true
If production is subject to economies of scale, countries can gain from trade if each nation specializes in the production of a good.
true
In 2012, exports amounted to about 14 percent of U.S. GDP.
true
In its original form, the Phillips curve depicted a situation in which an economy could reduce its unemployment rate by holding the inflation rate steady.
true
Inflation target refers to the commitment of central bankers to keep inflation below a certain rate for the next year or two.
true
International trade between countries typically produces a winner and a loser. Generally, it is the more economically advanced country that gains at the expense of the less developed nation.
true
It is possible for one country to have a comparative advantage in the production of all products.
true
The early Phillips curve showed a trade-off between unemployment and inflation because it was drawn for a period in which the main source of instability was aggregate demand.
true
The following table shows the per-day production data of rice and T-shirts for two countries, Cambria and Bodoni. Based on the table, it can be said that Bodoni should produce rice and trade its rice for Cambria's T-shirts.
true
The world price of a good refers to the quantity of one good exchanged for a unit of another good.
true
Those who favor an active approach to policy and those who favor a passive approach disagree not only on how quickly the government can act but also on how stable the economy basically is.
true
Those who prefer a passive approach to the conduct of macroeconomic policy tend to believe that markets are self-correcting.
true