Macro Exam 4

A tax imposed by a government on imports of a good into a country is called A. an import levy B. an import fine C. a tariff D. an import quota

C

An economic principle that explains why people pursue different occupations is A. absolute advantage B. International trade C. Comparative advantage D. NAFTA

C

Autarky is a situation in which a country A. only exports products B. only imports products C. does not trade with other countries D. has no absolute advantage in any production

C

The U.S. abandoned the Bretton Woods system of exchange rates in the A. 1920s B. 1940s C. 1970s D. 1990s

C

In the 1930s, the U.S. charged an average tariff rate: A. that was less than its average tariff rate in 2007 B. that cut its exports to other countries by 50% C. that was less than 2% D. that was >50%

D

Under the Bretton Woods exchange rate system, set up in 1944, which of the following was true? A. Americans could sell their dollars to the American government in exchange for gold B. Americans could sell their dollars to the American government in exchange for silver C.Americans could sell their dollars to foreign central banks in exchange for gold D. Foreign central banks could sell their dollars to the American government in exchange for gold

D

If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar, how many American dollars are required to buy a product that costs 2.5 Canadian dollars? A. $1.32 B. $2.23 C. $2.75 D. $2.81

D

Purchasing power parity is the theory that, in the long run, exchange rates should be at a level such that equivalent amounts of any country's currency A. will equalize nominal interest rates across countries B. are valued inversely related to the size of its GDP C. should earn the same real rate of return D. allow one to buy the same amount of goods and services

D

An economy that has interactions in trade or finance with other economies is referred to as: A. an open economy B. a closed economy C. a trade-balanced economy D. a net foreign investment economy

A

Assume that Finland and Latvia produce only two goods. If Finland has an absolute advantage in the production of these two good compared to Latvia, Finland can still benefit from trade with Latvia. TRUE OR FALSE?

A

Suppose China decides to sell a vast majority of their large holdings of U.S. Treasury bonds. If you are thinking of refinancing your house, how would china's action affect your decision to refinance? A. You would want to refinance as soon as possible as interest rates should rise B. You would want to wait to refinance as interest rates should rise C. You would want to wait to refinance as interest rates should fall D. China's actions should not affect your decision to refinance in any way

A

The United States has a trade __________ will all its major trading partners and a trade ____________ with every region of the world except for Latin America. A. deficit; deficit B. deficit; surplus C. surplus; deficit D. surplus; surplus E. deficit; balance

A

The balance of payments includes which three accounts? A. the current account, the financial account, and the capital account B. the capital flows account, the financial account, and the trade account C. the net investment account, the net exports account, and the net transfers account D. the balance of trade account, the net foreign investment account, and the statistical discrepancy

A

The current exchange rate system has which of the following characteristics? A. the U.S. allows the dollar to float against other major currencies B. All developing countries allow their currencies to float against the dollar and other major currencies C. The countries of the European Union have adopted the gold standard D. Several developing countries in Asia have adopted the Bretton Woods system E. The current global foreign exchange system is a fixed system

A

When the market value of the dollar rises relative to other currencies around the world, we say that A. the dollar has appreciated B. the dollar has depreciated C. the demand for dollars has increased D. the supply of dollars has increased

A

Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia. We can conclude that: A. Australia also has an absolute advantage in producing surfboards relative to New Zealand B. Australia has a lower opportunity cost of producing surfboards relative to New Zealand C. New Zealand has an absolute disadvantage in producing surfboards relative to Australia D. Labor costs are higher for surfboard producers in New Zealand than Australia

B

Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil. We can conclude that A. Honduras also has an absolute advantage in producing bananas relative to brazil B. Honduras has a lower opportunity cost of producing bananas relative to Brazil C. Brazil has an absolute disadvantage in producing bananas relative to Honduras D. Labor costs are higher for banana producers in Brazil than Honduras

B

China has developed a comparative advantage in the production of clothing. The source of this comparative advantage is A. superior process technology B. a large supply of unskilled workers and relatively little capital C. investment in capital used to produce toys D. a large supply of natural resources

B

Examples of comparative advantage show how trade between two countries can make each better off. Compared to their pre-trade positions, trades makes both countries better off because in each country: A. total employment is greater B. total consumption of goods is greater C. wages are higher D. total welfare is greater

B

From the beginning of 1973 until June 017, the value of the dollar has _________ relative to the Canadian dollar and _____________ relative to the Japanese yen. A. appreciated; appreciated B. appreciated; depreciated C. depreciated; appreciated D. depreciated; depreciated

B

If Norwegian workers are more productive than Albanian workers, then trade between Norway and Albania A. cannot take place because Norwegian goods and services will be less expensive than Albanian goods and services B. will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want C. cannot take place until Albanian workers become more productive D. can take place only if Albania has an absolute advantage in producing a good or service Norwegian buyers want

B

In 2017, President trump ______________ the Trans-Pacific Partnership (TPP), an agreement designed to reduce trade barriers between the U.S. and 11 other countries A. signed into law B. pulled the U.S. out of negotiations on joining the TPP C. declared as unconstitutional D. encouraged other nations to join the U.S. in joining the TPP

B

Over the past several decades there has been rapid growth in international trade. This growth has been due to all buy one of the following factors. Which factor has not contributed to the growth of international trade? A. the spread of reliable communications B. an increase in the tariffs charged on many goods C. a reduction in shipping costs D. favorable changes in government policies

B

The United States has developed a comparative advantage in digital computers, airliners, and many prescription drugs. The source of its comparative advantage in these products is A. a favorable climate B. technology C. abundant supplies of natural resources D. a strong central government

B

The terms of trade refers to A. the rules and regulations that countries must adhere to when trading B. the ratio art which a country can trade its exports for imports from other countries C. the role of the government in overseeing international trade D. a legal document that specifies the trade quantities agreed by two countries

B

Under the gold standard, the government must have enough gold to back up any A. increase in money demand B. increase in the money supply C. change in its currency's exchange rate D. foreign currency deposits in its central bank

B

Which of the following would increase net exports in the United States? A. The U.S. purchases 500 silver necklaces from Mexico B. The government of Mexico purchases 500 Ford F-150 pickup trucks from the U.S. C. A Mexican citizen purchases 25 shares of stock in Ford Motor Company D. The U.S. government donates $5 million to Mexico to help victims of drought in Mexico

B

You're traveling in Ireland and are thinking about buying a new digital camera. You've decided you'd be willing to pay $125 for a new camera, but cameras in Ireland are all priced in euros. If the exchange rate is 0.85 euros per dollar, what's the highest price you'd be willing to pay for a camera? A. 105 euros B. 106.25 euros C. 110.15 euros D. 147 euros

B

If the ______ cost of production for two goods is different between two countries then mutually beneficial trade is possible. A. marginal B. explicit C. opportunity D. implicit

C

If the dollar appreciates against the Mexico peso: A. Mexican imports to the U.S. become more expensive B. U.S. exports to Mexico become less expensive C. U.S. exports to Mexico become more expensive D. The value of Mexican imports to the U.S. does not change

C

In 2016, global revenue for Amazon was $550 million lower when measured in dollars than when measured in local currencies. The reason for this discrepancy is the value of the A. euro decreased relative to the British pound B. British pound increased relative to the U.S. dollar C. U.S. dollar increased relative to most other currencies D. U.S. dollar decreased relative to the Japanese yen

C

The United States usually exports _________ goods than it imports and exports ___________ services than it imports. A. more; more B. more; fewer C. fewer; more D. fewer; fewer

C

The balance of trade is defined as A. the difference between the balance of the current account and the balance of the capital account B. the difference between the value of the goods and services a country exports and the value of the good and service a country imports C. The difference between the value of the goods a country exports and the value of the goods a country imports D. the difference between the balance of the current account and the balance of the financial account

C

The gold standard is an example of A. a floating exchange rate system B. a managed float exchange rate system C. a fixed exchange rate system D. a flexible exchange rate system E. the Bretton Woods system

C

When Sophie, a French citizen, purchases a Dell computer in Paris that was produced in Texas, the purchase is A. both a U.S. and a French import B. a U.S. import and a French export C. a U.S. export and a French import D. neither an export nor an import for either country

C

When the value of a currency is determined mostly by demand and supply, but with occasional government intervention, the exchange rate system is defined as A. fixed B. floating C. managed floor D. Bretton woods

C

Which of the following countries is not one of the top three exporting countries in the world? A. China B. Germany C. South Korea D. the United States

C

Which of the following is an example of foreign direct investment in China? A. U.S. auto entrepreneur Elon Musk buys stock in Alibaba Group Holding Limited of Hangzhou, China B. Chinese Shenzen Airlines company buys a small U.S. midwest airline company, Air Chicago C. The U.S. company Walmart buys a warehouse in Shanghai D. The bank of China purchases U.S. treasury bonds E. A U.S. foreign exchange speculator buys $200,000 worth of chinese currency, the yuan

C

Which of the following is most important in explaining exchange rate fluctuations in the short run? A. relative price levels across countries B. preferences for domestic and foreign goods C. interest rates D. relative rates of productivity growth across countries

C

A Canadian oil company hires geological survey services from the U.S. If all else remains equal, this will: A. increase net exports B. increase the balance of trade C. decrease the current account balance D. increase the financial account

A

Imports are goods and services bought domestically A. and produced domestically B. but produced in other countries C. and resold at a profit D. and not subject to tariffs

B

28 countries in Europe have formed the European Union (EU). After the EU was formed, it: A. eliminated all tariffs among its member countries B. completed a trade treaty (NAFTA) that reduced tariff rates between the EU and North American countries C. greatly decreased imports and exports among its member countries D. barred imports of 747 jumbo jets by its member countries; all EU countries must now buy jets from Airbus, a European company

A

An HMO hires radiology services from India to cut costs. If all else remains equal, this will A. decrease net exports B. decrease the balance of trade C. increase the current account balance D. decrease the financial account

A

Countries gain from specializing in producing goods in which they have a(n) __________ advantage and trading for goods in which other countries have a(n) __________ advantage. A. a comparative; an absolute B. an absolute; an absolute C. a comparative; a comparative D. an absolute; a comparative

C

Textbook examples of trade between two nations are simplified in order to show how two nations both benefit from trade. These examples are misleading because A. in the real world, rich countries can take advantage of poor countries B. they do not account for the reduction in wages that occurs in both countries as a result of trade C. Some individuals in both countries may be made worse off because of trade D. trade restrictions are likely to be imposed as trade grows over time

C

The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as A. the Pacific Trade Association B. Trade without boarders C. NAFTA D. the Western Trade Union

C

The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as: A. the Pacific Trade Association B. Trade without Boarders C. NAFTA D. the Western trade union

C