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, 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

________________________ 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

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.

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

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

expansionary

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

foreign exchange market

If the Canadian dollar is strengthening, then:

it has appreciated in terms of other currencies.

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

If government tax policy requires Bill to pay $20,000 in taxes 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:

proportional.

For firms engaged in international trade, ____________________ can have an enormous effect on profits.

swings in exchange rates

A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.

weakening; less

International trade is fundamentally a ________________________.

win-win situation

_____________________ 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

_____________ are numerical limitations on the quantity of products that can be imported.

Import quotas

It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________.

National Interest Argument

________________________ equalizes the prices of internationally traded goods across countries.

Purchasing power parity

Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole.

aggregate demand

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

aggregate demand curve will shift to the right.

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.

budget deficit

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:

budget surplus

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.

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

fiscal policies

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

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.

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

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 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 $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.

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.

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.