Exam #4 Macroeconomics

Based on this table, the opportunity cost of one kilogram of coffee in Kenya is:

A) 0.33 kilograms of cocoa

When the Federal Reserve pursues expansionary monetary policy, which of these happens?

A) AD shifts right

If Costa Rica is able to produce 50,000 pounds of bananas a day, while Nicaragua can produce 30,000 pounds of bananas a day, which statement must be true?

A) Costa Rica has an absolute advantage over Nicaragua in banana production

What was the chain of events that occured 2008-2009 when the U.S. "housing bubble collapsed"?

A) Home prices rose out of reach of households; home sales fell; and banks were left with no borrower for their excess reserves, creating a crisis for banks

Which type of economist would advocate little to no role for the central bank?

A) Keynesians

The meaning behind "the balance of payments must balance" is that ____

A) a deficit in either the current or capital account must be offset by an equal surplus in the other account

Suppose Canada forms a free-trade agreement with the Netherlands and increases the quantity of tulips it imports. Canadian tulip consumers will be ____ and Canadian tulip producers will be ____

A) better off; worse off

For much of the past few decades, the United States has had a current account ____ and a capital account ____

A) deficit; surplus

The exchange rate system that results in the greatest amount of fluctuation in currency values is _____

A) floating exchange rates

Which statement is true? a. Free trade harms domestic producers of goods that face important competition b. everyone benefits from free trade c. Consumers benefit from trade and producers do not d. exporters benefit from trade and importers do not

A) free trade harms domestic producers of goods that face import competition

Countries can gain from trade as long as the difference in the prices of a trage good between two countries is ____

A) greater than the cost of transporting it between the countries

The existence of a liquidity trap implies that a(n) ____

A) increase in the money supply will not lower interest rates

The argument that industries should be temporarily protected by tariffs or quotas to allow firms to develop a competitive product is called the ____

A) infant industry argument

If the dollar depreciates in terms of the euro, what will happen to the prices of European goods in the United States?

A) they will increase

In the market for surfboards seen in the graph, in autarky this country imports ____ units, while with free trade the country imports ____ units.

B) 0; 60

The twin goals of monetary policy are ____

B) Economic growth and stable prices

Based on this table, which statement is true? a. Cambodia has a comparative advantage in maize production b. Laos has a comparative advantage in rice production c. Both countries have comparative advantages d. Neither country has a comparative advantage

B) Laos has a comparative advantage in rice production

If the Federal Reserve wishes to raise the interest rate, what does it need to do?

B) buy bonds from banks while reducing the money supply

Today, the United States' exchange rate system is ____

B) flexible

If the economy is facing inflationary pressures, the Federal Reserve will ____

B) raise interest rates

A policy of transparency in the Federal Reserve:

B) requires the Fed to act in specific ways in specific situations

Payments for imports and exports of goods and services are shown in ____

B) the current account

Suppose U.S. monetary authorities increase the money supply in order to lower interest rates and stimulate the economy. Which scenario is plausible?

B) the resulting inflation will cause the dollar to appreciate, encouraging Americans to buy more domestic goods

In the figure, the opportunity cost of one ton of steel in terms of aluminium is: a. 4.0 tons b. 2.0 tons c. 0.5 tons d. 0.25 tons

C) 0.5 tons

In international trade, when we say that Brazil is "dumping" in the United States, this is indicating that ____

C) Brazil's firms are selling goods at prices below what they change in Brazil or below their production costs

A tariff of 15% on imported artwork is an example of a(n) ____

C) ad valorem tariff

Quantitative easing refers to the process whereby the Federal Reserve ____

C) buys securities to stimulate the economy

If yesterday one U.S. dollar could be exchanged for 120 Japanese yen, while today a U.S. dollar can be exchanged for 118 yen, this means that the U.S. dollar has ____ against the yen and imports from Japan became ____

C) depreciated; more expensive

To slow down a high inflation rate, the Federal Reserve should use a(n) ____ monetary policy by using open market ____

C) expansionary; sales

When the interest rate falls, the value of the U.S. dollar in foreign exchange markets tends to ____ and net exports tend to ____

C) fall; increase

Which of these is NOT a benefit of pegging one's currency to the U.S. dollar or euro?

C) more independent control of the country's monetary policy

If the inflation rate in the United States were to double ____

C) the value of the dollar would decrease in foreign exchange markets

Which of these typically occurs when a new tariff is imposed on the import of foreign-made steel as a result of national defense argument?

D) Consumers will pay higher prices while deadweight loss is created

Which statement is generally NOT true with regard to the effect of trade on wages in developing countries?

D) Foreign companies tend to reduce the overall number of jobs available in developing countries

Which policy would cause a reduction in both bank reserves and aggregate demand?

D) an increase in the reserve requirement

If the economy is in a recession, the Federal Reserve would most likely pursue ____, which causes interest rates to ____

D) expansionary monetary policy; fall

If the dollar gets weaker against most major foreign currencies ____

D) foreign products become more expensive in the United States

Under a gold standard, if a country's exports exceed its imports, its gold stock ____, money supply ____, and output ____

D) increases; increases; increases

A country in autarky would consume at a point ____ its PPF, while a country that engages in trade would consume at a point ____ its PPF

D) on; to the right of

A depreciation of the U.S. dollar against the Chinese yuan will likely shift the U.S. aggregate demand curve to the ____, leading to ____ output in the short run.

D) right; higher