ECON Module 5

The above figure shows the U.S. market for 1 carat diamonds. Suppose the United States imposes the import quota shown in the figure. With the import quota, how many diamonds can be imported?

400,000

The above figure shows the U.S. market for flip-flops. When there is no international trade, the U.S. price is ________ per flip-flop and the U.S. quantity is ________ flip-flops.

$14; 500,000

In the foreign exchange market, the demand for dollars decreases and the demand curve shifts leftward if the

U.S. interest rate differential decreases.

Refer to the information provided in Table 18.4 below to answer the questions that follow. Refer to Table 18.4. Chile has

a comparative advantage in wine production.

Purchasing power parity can be used as

a long-run gauge, but in the short run large deviations in currency values can exist

One of the major reasons why the United States exports jet airplanes is because Boeing faces ________ opportunity cost than firms in other nations in the production of such aircraft.

a lower

A statement that "All children should receive free health care" is an example of what kind of statement?

a normative statement

The U.S. interest rate has ________ on the supply of dollars and has ________ on the demand for dollars.

an effect; an effect

A specified maximum amount of the good that may be imported in a given period of time is a

quota

Legalizing all forms of illegal activities would

reduce the size of the underground economy and increase measured GDP

The table above has the domestic demand and domestic supply schedules for a good. According to the table, the no-trade price of the good is

$6

The above figure shows the U.S. market for flip-flops. With international trade, the equilibrium price in the United States is ________ and the United States ________ flip-flops.

$12; imports

The above figure shows the U.S. market for replacement cell phone batteries. When there is no international trade, the equilibrium price is ________ per battery and when there is international trade the equilibrium price is ________ per battery.

$14; $10

The fundamental force that generates international trade is

comparative advantage

The above figure shows the U.S. market for wheat. With no international trade, the price of wheat in the United States is ________ per ton. With international trade, the price of wheat in the United States is ________ per ton.

$14; $16

The above figure shows the U.S. market for wheat. With international trade, the price of wheat in the United States is ________ per ton and the United States ________ wheat.

$16; exports

The table above gives the domestic demand and supply schedules for a good. Suppose the world price of the good is $40 and the government imposes a $20 per unit tariff. How much will the government collect as tariff revenue?

$80

Refer to Table 18.4. Before specialization, Germany produces 45 cases of beer and 30 cases of wine, and Chile produces 18 cases of beer and 24 cases of wine. After specialization, the increase in beer production is

12 cases of beer.

Refer to Table 18.4. In Chile, the opportunity cost of 1 case of beer is

2 cases of wine.

Refer to Table 6.6. The value of government spending in billions of dollars is

2,000

If purchasing power parity exists and the exchange rate is 1.50 U.S. dollars per British pound, than a latte that has a price of $4.00 in San Jose, California, has a price of ________ in London, England.

2.67 pounds

Refer to Figure 18.2. The opportunity cost of a truck is ________ car(s) in the United States and ________ car(s) in England.

4; 1.5

The above figure shows the U.S. market for replacement cell phone batteries. With free trade, the United States imports ________ batteries and once the tariff illustrated in the figure is imposed, the United States imports ________ batteries.

800,000;400,000

Refer to Figure 11.8. Suppose the economy is currently at Point A producing potential output Y0. If the government increases spending, the economy moves to Point ________ in the short-run and to Point ________ in the long-run.

B; C

Which of the following chain of events occurs when a tariff is imposed on a good?

Domestic prices rise, decreasing the quantity demanded and increasing the domestic quantity supplied.

Your economics professor offers 10 points extra credit if you attend a review session before your next exam. This extra credit is an example of

an incentive to attend the review session

For many years, U.S. investment has exceeded savings and government expenditure has exceeded taxes. These imbalances (deficits) have been financed through international ________ by the United States as shown by the surplus on the balance of payments ________ account.

borrowing; capital and financial

International trade benefits

both the exporter and the importer

Who gains from international trade?

both the importing and the exporting nations

To appreciate the U.S. dollar against the Mexican peso, in the foreign exchange market the Fed could ________ dollars and ________ pesos.

buy;sell

Janae was fired from her job with Microsoft in the 2008-09 recession because Microsoft's sales dipped. Janae's unemployment would be best classified as

cyclical unemployment.

If the United States imports purses, then the quantity of purses produced in the United States will ________ and the quantity of purses purchased by consumers in the United States will ________.

decrease; increase

If the exchange rate rises, then the quantity of dollars demanded ________ because with the higher U.S. exchange rate, U.S. exports ________.

decreases; decrease

When the United States exports goods and services to France, there is an increase in the

demand for dollars

Today, one U.S. dollar exchanges for 1.10 euros. The next morning the same dollar exchanges for 1.07 euros. We can conclude that the dollar has ________ and the euro has ________.

depreciated; appreciated

When the exchange rate between the U.S. dollar and the euro changes from 1.30 euros per dollar to 1.00 euro per dollar the dollar has ________ and European goods have become ________ to people in the United States so that quantity of U.S. dollars supplied ________.

depreciated; more expensive; decreases

Comparative advantage is based on

differences in opportunity costs between two countries.

When Maria deposits $100 in currency in her checkable deposit at Bank of America, the immediate effect is that the quantity of M1 ________ because ________.

does not change; both currency and checkable deposits are included in M1

________ occurs when a foreign firm sells its exports at a lower price than its cost of production.

dumping

As the U.S. exchange rate (value of dollar) ________, the price of U.S. imports increases and the quantity supplied of dollars ________.

falls; decreases

The exchange rate between the United States and Japan

fluctuates, sometimes rising and sometimes falling.

The United States imports t-shirts because

foreign nations have a lower opportunity cost of production

When a country imports a good, the ________ to consumers is ________ the ________ to producers.

gain;larger than;loss

Which of the following groups gain from international trade? i.producers of exported goods ii.domestic consumers of imported goods iii.workers in exporting firm

i, ii, and iii

Which of the following is a factor in determining the demand for the dollar on the foreign exchange market? i.the exchange rate ii.interest rates in the United States and other countries iii.the expected future exchange rate

i,ii, and iii

Which of the following are reasons why U.S. residents supply dollars to the foreign exchange market? i.to buy U.S. exports ii.to buy foreign real estate iii.to buy foreign bonds

ii and iii

Which of the following is true? i.When the world price of a good is lower than the price that balances domestic supply and demand, a country gains from exporting the good. ii.Compared to a no-trade situation, imports make consumers better off. iii.Quotas raise the domestic price of imported goods.

ii and iii

In the wake of worsening relations with China, some Americans called for an increase in tariffs on Chinese products coming into America. If higher tariffs are imposed on clothing produced in China, the price of clothing in America would

increase

The price that U.S. consumers pay for goods imported from Mexico has fallen and the quantity of U.S. imports from Mexico has ________. Because of these changes, the winners are U.S. ________ of goods imported from Mexico and the losers are U.S. ________ of goods imported from Mexico.

increased; consumers; producers

When a nation exports a good or service in which it has a comparative advantage, employment in that industry

increases

If the exchange rate rises (dollar appreciates), the quantity of dollars supplied

increases, and there is movement up along the supply curve of dollars.

If the current exchange rate is 1.00 euro per dollar and the expected exchange rate at the end of the month rises to 1.20 euros per dollar, then the demand for dollars ________ because people expect holding of dollars to become ________ profitable.

increases;more

In 2015, a dollar could be traded for 100 yen and in 2016 a dollar could be traded for 90 yen. Between these two years, the dollar has become ________ valuable and so the dollar has ________.

less; depreciated against the yen

When a country exports something to the rest of the world, domestic consumers ________ because the greater the ________ in price and ________ in quantity bought, the greater is the consumers' loss.

lose, rise; decrease

If a quota is imposed on imports of shrimp into the United States, U.S. consumers ________ and U.S. producers ________.

lose;gain

The difference between nominal and real is

nominal is measured in current dollars and real is measured in dollars of a given year.

The two main reasons why international trade is restricted is because restricting trade means that governments can ________ and because domestic businesses ________.

obtain revenue; rent seek

The foreign exchange rate is defined as the

price at which one currency exchanges for another.

In the 1980s, the U.S. government forced Japanese automakers to limit their exports to the United States. The union representing the autoworkers (UAW), argued that otherwise the U.S. auto industry would have contracted. The UAW's argument is the ________ argument for protection.

save domestic jobs

When politicians debated the North American Free Trade Agreement (NAFTA), some told stories of U.S. workers whose jobs would be moved to Mexico. Which of the following arguments in favor of protection was being used?

save domestic jobs argument

If the Fed wants to maintain a dollar exchange rate of 1.20 euros per dollar but the exchange rate rises, then in the short run the Fed can

sell dollars and buy euros.

An increase in consumer confidence will

shift the consumption function upwards.

Which type of policy raises the most revenue for the government?

tariff

If the U.S. government imposes a tariff on imported steel, who else besides U.S. steel producers gains from the tariff?

the U.S. government

The table above has the domestic demand and domestic supply schedules for a good. If the world price of the good is $10, then according to the table

the country exports 6 units a day.

If the current account is in deficit, we know that

the financial account is in surplus.

Of the following, who gains from a tariff?

the government of the importing country

The labor force consists of

the number of people in the working-age population who are employed or unemployed.

Which of the following parties benefits from an import quota but not from a tariff?

the person with the right to import the good

A country exports a good if

the world price of the good is above the country's no-trade equilibrium price.

Exchange rate changes are

very volatile because supply and demand changes reinforce each other.