Unit 4 Test

In 2010, 1 Canadian dollar cost .56 British pounds and 2012 it cost .63 British pounds. How much would 1 British pound purchase in Canadian dollars in 2010 and 2012? A.) 2010: 1.78 dollars, 2012: 1.57 dollars B.) 2010: 1.79 dollars, 2012: 1.59 dollars C.) 2010: 1.87 dollars, 2012: 1.65 dollars D.) 2010: 1.97 dollars, 2012: 1.75 dollars

B.) 2010: 1.79 dollars, 2012: 1.59 dollars

________________________ means selling goods below their cost of production. A.) Protectionism B.) Dumping C.) Import quotas D.) Non-tariff barriers

B.) Dumping

____________________________ are numerical limitations on the quantity of products that can be imported. A.) Tariffs B.) Import quotas C.) Taxes D.) Nontariff barriers

B.) Import quotas

People or firms use one currency to purchase another currency at the ______________________. A.) internation currency exchange B.) foreign exchange market C.) foreign currency exchange D.) internation parity market

B.) foreign exchange market

An increase in the national debt will cause the interest rate to: A.) either increase or decrease. B.) remain the same. C.) increase D.) decrease

C.) increase

If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to: A.) a hard peg policy. B.) purchasing power parity. C.) depreciation. D.) a floating exchange rate.

D.) a floating exchange rate.

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? A.) 2010: .12 U.S. dollars; 2012: .15 U.S. dollars B.) 2010: 1.2 U.S. dollars; 2012: 1.5 U.S. dollars C.) 2010: .82 U.S. dollars; 2012: .66 U.S. dollars D.) 2010: .15 U.S. dollars; 2012: .11 U.S. dollars

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

If a government's budget deficits are increasing aggregate demand when the economy is already producing near potential GDP, causing a threat of an inflationary increase in price levels, then the central bank may react with: A.) a contractionary monetary policy. B.) an expansionary monetary policy. C.) a discretionary monetary policy. D.) a loose monetary policy

A.) a contractionary monetary policy.

When the government passes a new law that explicitly changes overall tax or spend levels, it is enacting: A.) discretionary fiscal policy. B.) progressive fiscal policy. C.) regressive fiscal policy. D.) fiscal policy

A.) discretionary fiscal policy.

If the government's budget deficit increases while the economy is producing substantially less then potential GDP and expansionary monetary policy is implemented, than any ________________________ from government borrowing would be __________________________ from that monetary policy. A.) higher interest rates; largely offset by the lower interest rates B.) lower interest rates; largely offset by the higher interest rates C.) increase in interest rates; reduced by private sector investment D.) inflationary increase in price level; crowding out private investment

A.) higher interest rates; largely offset by the lower interest rates

For firms engaged in international trade, ______________________ can have an enormous effect on profits. A.) swings in exchange rates B.) trade-offs and risks C.) foreign portfolio investment D.) foreign direct investment

A.) swings in exchange rates

_____________________________ 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. A.) Opportunity cost B.) The infant industry argument C.) Dumping D.) Import quotas

B.) The infant industry argument

If a country's GDP decrease, but its debt increase during that year, then the country's debt to GDP ration for the year will ___________________ in proportion to the magnitude of the changes. A.) decrease B.) increase or decrease C.) increase D.) decrease because GDP decreased

C.) increase

A _____________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. A.) proportional tax B.) regressive tax C.) progressive tax D.) excise tax

C.) progressive tax

From a macroeconomic point of view, which of the following is a source of demand for financial capital? A.) savings by households and firms B.) foreign financial investment C.) domestic household private savings D.) government borrowing

D.) government borrowing

If government tax policy requires Peter to pay $15,000 in tax on annual income of $200,000 and Paul to $10,000 in tax on annual income of $100,00, then the tax policy is: A.) optional. B.) progressive. C.) proportional. D.) regressive.

D.) regressive

Tariffs are taxes imposed on ____________________. A.) imported products B.) exported products C.) hazardous goods D.) surplus goods

A.) imported products

Low-wage U.S. workers suffer from protectionism in all industries that they don't work in, because: A.) protectionism provides a barrier to entry to the job markets that the low-wage earners want entry to. B.) protectionism forces them to pay higher prices for basic necessities like clothing and food. C.) protectionism will encourage foreign workers to apply for American jobs. D.) protectionism will prevent them from applying or those jobs in other industries.

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

A __________________________ often results in an outflow of financial capital leaving the domestic economy and being invested the global economy? A.) trade surplus B.) trade deficit C.) fiscal deficit D.) twin surplus

A.) trade surplus

A decrease in the government's budget surplus will cause the interest rate to: A.) decrease. B.) increase. C.) either increase or decrease D.) remain the same

B.) increase.

_________________________ are a form of tax spending rules that can affect aggregate demand in the economy without any additional change in legislation. A.) Standardized employment budgets B.) Discretionary fiscal policies C.) Automatic stabilizers D.) Budget expenditures

C.) Automatic stabilizers

_____________________ equalized the prices of internationally traded goods across countries. A.) The foreign exchange rate B.) A floating exchange rate C.) Purchasing power parity D.) An internation parity rate

C.) Purchasing power parity

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? A.) financial policies B.) monetary policies C.) fiscal policies D.) economic policies

C.) fiscal policies

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? A.) 2009: .84 dollars, 2013: 1.09 dollars B.) 2009: .72 dollars, 2013: 1 dollar C.) 2009: .83 dollars, 2013: 1.12 dollars D.) 2009: .71 dollars, 2013: 1.11 dollars

D.) 2009: .71 dollars, 2013: 1.11 dollars

If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used? A.) discretionary B.) contractionary C.) standardized D.) expansionary

D.) expansionary

If the state of Washington's government collect $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a: A.) budget deficit. B.) budget surplus. C.) decrease in payroll tax. D.) decrease in proportional taxes.

B.) budget surplus.

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. A.) absolute; absolute B.) comparative; comparative C.) comparative; competitive D.) comparative; absolute

B.) comparative; comparative

The infant industry argument for protectionism suggest that an industry must be protected in the early stages of its development so that: A.) firms will be protected from subsidized foreign competition. B.) domestic producers can attain the economies of scale to allow them to compete in world markets. C.) there will be adequate supplies of crucial resources in case they are needed for national defense. D.) it will not be subjected to a takeover from a foreign competitor.

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

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that: A.) firms will be protected from subsidized foreign competition. B.) domestic producers can attain the economies of scale to allow them to compete in world markets. C.) there will be adequate supplies of crucial resources in case they are needed for national defense. D.) it will not be subjected to a takeover from a foreign competitor.

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

The ______________________ is the largest market in the world economy. A.) international exchange market B.) foreign exchange market C.) foreign currency market D.) internation currency market

B.) foreign exchange market

In most developed countries, the government plays a large roles in society's investment in human capital through ________________________. A.) direct spending B.) the education system C.) tax incentives D.) private sector R&D

B.) the education system

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: A.) Japan will be able to consume a combination of rice and other goods beyond their domestic production possibilities curve. B.) the real income of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall. C.) the real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall. D.) the price of rice in Japan will fall.

B.) the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumer would fall.

One of the following groups is not participating in the foreign exchange markets. Which one? A.)Boston business firms trading goods and services with firms in France B.) international investors buying bonds issued by a German car manufacturing firm C.)an Iowa travel firm that arranges vacation tours for local seniors to Hawaii D.) international investors buying part-ownership of a mining operation in Afghanistan

C.) an Iowa travel firm that arranges vacation tours for local seniors to Hawaii

Which of the following is least likely to be the result of economic disruptive patterns caused by a prolonged period of government budget deficits? A.) high inflation B.) substantial inflows of foreign financial capital C.) increasing exchange rates D.) strains on a country's financial system

C.) increasing exchange rates

A ______________________ is calculated as a flat percentage of income earned, regardless of level of income. A.) progressive tax B.) regressive tax C.) proportional tax D.) estate and gift tax

C.) proportional tax

In the national savings and investment identity framework, an inflow of savings from abroad is, by definition, equal to: A.) private sector investment. B.) the trade surplus. C.) the trade deficit. D.) domestic household savings.

C.) the trade deficit.

If a country's GDP increases, but its debt also increase during that year, then the country's debt to GDP ratio for the year will _____________________ in proportion to the magnitude of the changes. A.) decrease because GDP increased B.) increase because its debt increased C.) increase D.) increase or decrease

D.) increase or decrease

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement: A.) contains one error; the trade restraints do not increase the scarcity of foreign-produced goods. B.) contain one error; domestic producers gain at the expense of foreign producers rather than domestic consumers. C.) contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers. D.) is essentially correct.

D.) is essentially correct.

If the U.S. government's budget deficits are increasing aggregate demand, and the economy is producing at a level that is substantially less than potential GDP, then: A.) higher interest rates will crowd out private investment. B.) government borrowing is likely to crowd out private investment. C.) an inflationary increase in the price level is a real danger. D.) the central bank might react with an expansionary monetary policy.

D.) the central bank might react with an expansionary monetary policy.

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _____________________. A.) distinctive trade-offs and risks B.) exchange rate policy C.) monetary policy D.) the tools of demand and supply

D.) the tools of demand and supply