Macro Unit 4

In 2009, 1 U.S. dollar purchased 1400 Korean won and in 2013 it purchased 900 Korean won. How much did 1000 Korean won cost in U.S. dollars in 2009 and 2013?

2009: .71 dollars, 2013: 1.11 dollars

In 2010, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012?

2010: .12 U.S. dollars; 2012: .15 U.S. dollars

In 2010, 1 Canadian dollar cost .56 British pounds and in 2012 it cost .63 British pounds. How much would 1 British pound purchase in Canadian dollars in 2010 and 2012?

2010: 1.79 dollars, 2012: 1.59 dollars

In 2010, 100 Japanese yen purchased 0.88 U.S. dollars and in 2013, it purchased 0.93 U.S. dollars. How much was 1 U.S. dollar worth in Japanese yen, in 2010 and 2013?

2010: 113.6 yen, 2013: 107.5 yen

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

Automatic Stabilizers

____________ means selling goods below their cost of production

Dumping

________________________ equalizes the prices of internationally traded goods across countries.

Purchasing Power parity

If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then;

The Canadian dollar appreciated against the U.S. dollar

________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry.

The infant industry argument

The most commonly traded currency in foreign exchange markets is the:

U.S. dollar

If the government for the state of Washington collects $65.8 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be:

a budget deficit

If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to:

a floating exchange rate

Which of the following is the best example of a quota?

a limit imposed on the number of men's suits that can be imported from a foreign country

During a recession, if a government uses an expansionary fiscal policy to increase GDP, the:

aggregate demand curve will shift to the right

A ______________________ means that government spending and taxes are equal.

balanced budget

As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a(n) __________ advantage and toward industries where it has a(n) ___________ advantage.

comparative; comparative

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes

contractionary

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.

contractionary

When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting:

discretionary fiscal policy

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that:

domestic producers can attain the economies of scale to allow them to compete in world markets

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used?

expansionary

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policies

People or firms use one currency to purchase another currency at the _______________________.

foreign exchange market

The _____________________________ is the largest market in the world economy.

foreign exchange market

An import quota or tariff on French wine that raises the prices for wine will probably:

hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices

Tariffs are taxes imposed on _________________.

imported products

If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase

If the Canadian dollar is strengthening, then:

it has appreciated in terms of other currencies

If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

progressive

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

progressive tax

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.

proportional tax

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to pay $10,000 in tax on annual income of $100,000, then the tax policy is:

regressive

When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________.

regressive

When a government uses a ______________ exchange rate policy, it usually allows the exchange rate to be set by the market.

soft peg

Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________.

taking a management responsibility

If 20 Mexican pesos could buy $2.00 U.S. dollars in 2006 and $1 U.S. dollar in 2010, then:

the dollar strengthened against the Peso

Tariffs result in a decrease in consumer surplus because:

the price of the protected good increases and quantity consumed decreases

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include:

the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _________________________.

the tools of demand and supply

What do goods like gasoline, tobacco, and alcohol typically share in common?

They are all subject to excise taxes

A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________________.

a non-tariff barrier

A tariff differs from a quota in that a tariff is:

a tax imposed on imports, whereas quota is an absolute limit to the number of units of a good that can be imported

Low-wage U.S. workers suffer from protectionism in all the industries that they don't work in, because:

protectionism forces them to pay higher prices for basic necessities like clothing and food

Which of the following would be expected if the tariff on foreign-produced automobiles were increased?

the supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise

International trade is fundamentally a ________________________.

win-win situation