Global Econ Ch 19

Ron was vacationing in​ France, when his camera was stolen. As he walked into a camera​ store, Ron noticed that camera prices were in euros. If Ron was willing to pay ​$150 for a new digital camera and the exchange rate is ​$1.50 per​ euro, how much will Ron be paying in​ euros?

100

Which of the following is not a​ non-tariff barrier to​ trade?

All of the above Health and safety requirements Embargos Quotas National security grounds

If both countries specialize completely by producing only that for which they have a comparative advantage and then​ trade, what would be the terms of trade that would benefit both​ countries?

Both countries would benefit from trade if the Philippines were to trade 20 comma 000 bananas for 16 comma 000 pineapples with Columbia.

Among the main sources of comparative advantage are the​ following:

Climate and natural resources,relative abundance of labor and capital, technology, external economies

What is the difference between absolute advantage and comparative​ advantage?

Comparative advantage is the ability of an​ individual, a​ firm, or a country to produce a good or service at a lower opportunity cost than competitors. While absolute advantage is the ability of an​ individual, a​ firm, or a country to produce more of a good or service than competitors when using the same amount of resources. A country will always be an exporter of a good where it has ___comparative___ advantage in production.

Suppose that currency traders expect that the value of ruble will fall in the future. How will this will affect the demand and supply of ruble in the foreign exchange​ market?

Demand for rubles will decrease and supply of rubles will increase.

Do you agree that reducing barriers to trade reduces the number of jobs available to workers in the United​ States?

Disagree. While some jobs are saved by trade​ restrictions, many more jobs are lost in industries that use trade restricted goods as inputs.

_______ are goods and services produced domestically but sold to other countries. _______ are goods and services bought domestically but produced in other countries. _________ are taxes imposed by a government on imports of a good into a country.

Exports Imports Tarrifs

Who gains and who loses when a country imposes a tariff or a quota on imports of a​ good? Suppose the United States imposes a tariff or quota on sugar imports. For each of the​ following, enter the letter G if it will gain from the tariff or quota or enter the letter L if it will lose from the tariff or quota. Domestic sugar producers and their workers Consumers Industries that use sugar and their workers The U.S. economy

G L L L

Briefly explain whether you agree with the following​ argument: ​"Unfortunately, Bolivia does not have a comparative advantagewith respect to the United States in the production of any good or​ service."

If the U.S. trades at all with If ​ Bolivia, then the argument above is false. There would be no trade unless both countries were made better​ off, and this would imply Bolivia has the comparative advantage in the production of at least one good or service.

What is meant by a country specializing in the production of a​ good? Is it typical for countries to be completely​ specialized?

It shifts resources toward producing only those goods where it has a comparative​ advantage; No

The following table shows the hourly output per worker measured as quarts of olive oil and pounds of pasta in Greece and​ Italy: Output per Hour of Work Olive Oil Pasta Greece 8 2 Italy 5 20

The opportunity cost of producing one more quart of olive oil in Greece is .25 pounds of pasta. The opportunity cost of producing one more quart of olive oil in Italy is 4 pounds of pasta. The opportunity cost of producing one more pound of pasta in Greece is 4 quarts of olive oil. ​ The opportunity cost of producing one more pound of pasta in Italy is . 25 quarts of olive oil.

Who is harmed when individual nations move from autarky to free​ trade?

The owners of the firms that went out of business.

An economic analysis of a proposal to impose a quota on steel imports into the United States indicated that the quota would save​ 3,700 jobs in the steel industry but cost about​ 35,000 jobs in other U.S. industries. A quota on steel imports would cause employment to fall in other industries because what happens to the costs of producing goods that use​ steel?

The quota raises the costs of producing goods that use steel.

There is little doubt who wins​ [from trade] in the long​ run: consumers

True

How is the U.S. economy affected by international​ trade?

U.S. consumers buy increasing quantities of goods and services produced in other countries. At the same​ time, U.S. businesses sell increasing quantities of goods and services to consumers in other countries.

Which of the following statements is true about the importance of trade in the U.S.​ economy?

While exports and imports have been steadily rising as a fraction of​ GDP, not all sectors of the U.S. economy have been affected equally by international trade.

Would it have been cheaper for the federal government to have raised taxes on U.S. consumers and given the money to tire workers rather than to have imposed a​ tariff?

Yes, because Hufbauer and Lowry concluded that the tariff cost U.S. consumers more than​ $900,000 per year for each job saved in the tire industry.

When a central bank intervenes into the foreign exchange market to set a​ country's exchange rate over long periods of​ time, it is called

a fixed exchange rate.

In the figure to the​ right, the exchange rate equilibrium occurs at the point where the quantity demanded equals the quantity​ supplied, yen120 ​= $1​ (point A). If the equilibrium exchange rate changed from yen120 ​= $1 to yen150 ​= $1, we would say that the dollar

appreciated against the yen

If the U.S. firms succeed in having tariffs imposed on imports of​ paper,

consumers will lose as paper prices rise but domestic paper firms will gain.co

A depreciation in the domestic currency will

increase exports and decreasein ​ imports, thereby increasing net exports.

We do not see complete specialization in the real world because

not all goods and services are traded no ​ internationally, production of most goods involves increasing opportunity​ costs, and tastes for products differ.

Another restriction with a similar outcome would be to impose a limit on the amount of a specific good that can be imported. This restriction is called a

quota

Dumping is

selling a product for a price below its cost of production.

If the government wants to protect import competing industries and its workers from foreign​ competition, it can impose a tax on imports called a

tariff

The federal government did not adopt this alternative policy because

the United Steelworkers Unions had sufficient political power to persuade Congress to pass this tariff

New Balance did not voice strong opposition to the trade agreement because

the agreement would lower the cost of shoes and shoe parts that it imports from other countries.

Real exchange rate is

the price of domestic goods in terms of foreign goods.

The term external economies refers to

the reduction of costs resulting from increases in the size of an industry in a given area.th

Which of the following is a source of comparative​ advantage?

the relative abundance of capital and labor

Protectionism is the use of _________ to shield domestic firms from foreign competition. Who benefits and who loses from protectionist​ policies? What are the main arguments people use to justify​ protectionism?

trade barriers Workers in trade protected industries. Industries that use trade protected goods as inputs.

Trade allows a country​ "to produce more with​ less."

true

Currency​ ___________ occurs when the market value of a​ country's currency rises relative to the value of another​ country's currency, while currency​ ____________ occurs when the market value of a​ country's currency declines relative to value of another​ country's currency.

​​appreciation; depreciation

When the exchange rate​ (measured as foreign currency per​ dollar) is above the equilibrium exchange​ rate, there is a​ ___________ of dollars​ and, consequently,​ ____________ pressure on the exchange rate.

​​surplus; downward