ECON 103
What do goods like gasoline, tobacco, and alcohol typically share in common? A progressive tax is imposed on each of them. A regressive tax is imposed on each of them. They are all subject to government excise taxes. They are all subject to government fiscal taxes.
They are all subject to government excise taxes.
Which of the following is the best example of a tariff? a tax placed on all small cars sold in the domestic market a limit imposed on the number of small cars that can be imported from a foreign country a subsidy from the American government to domestic manufacturers of small cars so they can compete more effectively with foreign producers of small cars a $1000-per-car fee imposed on all small cars imported
a $1000-per-car fee imposed on all small cars imported
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: an increase in payroll tax. an increase in excise tax. a budget surplus. a budget deficit.
a budget deficit.
What do the economies of Greece, Ireland and Germany all share? they pegged their various currencies they unpegged their various currencies a common currency floating rate currencies
a common currency
When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following: a loose monetary policy. a contractionary monetary policy. a expansionary monetary policy. a quantitative easing policy.
a contractionary monetary policy
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 contractionary monetary policy. an expansionary monetary policy. a discretionary monetary policy. a loose monetary policy.
a contractionary monetary policy.
If government policy allows a country's currency to be determined in the exchange rate market, then that currency will be subject to: a hard peg policy. purchasing power parity. depreciation. a floating exchange rate.
a floating exchange rate.
Which of the following events would cause interest rates to increase? lower tax rates a higher discount rate lower reserve requirements an open market operation to buy bonds
a higher discount rate
If American Airlines were to purchase Malaysian Airlines, it would likely have ______________________________ in mind. beliefs about how exchange rates will move in the near future a longer-term horizon beliefs about how rates of return will move in the near future a shorter-term horizon
a longer-term horizon
If the economy is in recession with high unemployment and output below potential GDP, then __________________ would cause the economy to return to its potential GDP? a tight monetary policy fewer loanable funds a loose monetary policy higher interest rates
a loose monetary policy
Short run speculation in currencies can create ________________________, at least for a time, where an expected appreciation leads to a stronger currency and vice versa. low inflation rates high inflation rates a self-fulfilling prophecy a decrease in the supply side
a self-fulfilling prophecy
When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________________ in producing that product. relative advantage absolute advantage economy of scale production efficiency
absolute advantage
Suppose the government of Taiwan subsidized its watch-making industry, enabling Taiwanese producers to undersell foreign watch producers. The law of comparative advantage indicates that watch-importing nations would best take advantage of the Taiwanese subsidization policy by: setting a tariff high enough to just offset the subsidy granted to the Taiwanese watch-making industry. setting a declining quota on the import of Taiwanese watches such that the nation's domestic watch-making industry would continue to grow at the same rate as the rest of the economy. setting a tariff such that the prices of Taiwanese and domestic watches to the consumer are equal. accepting the subsidy of the Taiwanese government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry.
accepting the subsidy of the Taiwanese government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry.
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 supply aggregate demand direct investments portfolio investments
aggregate demand
During a recession, if a government uses an expansionary fiscal policy to increase GDP, the: aggregate supply curve will shift to the right. aggregate supply curve will shift to the left. aggregate demand curve will shift to the left. aggregate demand curve will shift to the right.
aggregate demand curve will shift to the right.
Which of the following is considered to be a relatively weak tool of monetary policy? quantitative easing altering the discount rate reserve requirements reducing the money supply
altering the discount rate
Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: a comparative advantage in coffee production. both a comparative and absolute advantage in coffee production. an absolute advantage and comparative disadvantage in coffee production. an absolute advantage in coffee production
an absolute advantage in coffee production
Which of the following denotes a common misunderstanding about exchange rates? an appreciating currency must be better than a stronger currency a depreciating currency must be better than an appreciating currency a weaker currency must be better than a stronger currency an appreciating currency must be better than a depreciating currency
an appreciating currency must be better than a depreciating currency
When the interest rate in an economy decreases, it is most likely as a result of: an increase in the government budget surplus or its budget deficit. a decrease in the government budget surplus or its budget deficit. an increase in the government budget surplus or a decrease in its budget deficit. a decrease in the government budget surplus or an increase in its budget deficit.
an increase in the government budget surplus or a decrease in its budget deficit.
If Canada's economy moves into an expansion while its economy is producing more than potential GDP, then: government spending and tax revenue will increase because of automatic stabilizers. government spending and tax revenue will decrease because of automatic stabilizers. automatic stabilizers will increase government spending and decrease tax revenue. automatic stabilizers will decrease government spending and increase tax revenue.
automatic stabilizers will decrease government spending and increase tax revenue.
A ______________________ means that government spending and taxes are equal. fiscal budget balanced budget contractionary fiscal policy discretionary fiscal policy
balanced budget
What is the name given to the macroeconomic equation MV = PQ? basic velocity of money equation basic quantity equation of output basic quantity equation of money basic velocity of price equation
basic quantity equation of money
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 deficit. budget surplus. decrease in payroll tax. decrease in proportional taxes.
budget surplus.
Atlantic Bank is required to hold 10% of deposits as reserves. If the central bank increases the discount rate, how would Atlantic Bank respond? by noting a decrease in net worth by increasing its reserves its balance sheet will be unchanged it can make more loans with increased loan assets
by increasing its reserves
How are the specific interest rates for the lending and borrowing markets determined? U.S. Treasury Department Board policy by the forces of supply and demand through open market operations by altering the discount rate
by the forces of supply and demand
When governments are borrowers in financial capital markets, which of the following is least likely to be a possible source of the funds from a macroeconomic point of view? central bank prints more money increase in household savings decrease in borrowing by private firms foreign financial investors
central bank prints more money
Ricardian equivalence means that: changes in private savings offset any changes in the government deficit. changes in exports offset any changes in the government deficit. changes in imports offset any changes in the government deficit. changes in investment offset any changes in the government deficit.
changes in private savings offset any changes in the government deficit.
When nations increase production in their area of _________________ and trade with each other, both sides can benefit. relative advantage absolute advantage comparative advantage opportunity cost
comparative advantage
_____________________ identifies the area where a producer's absolute advantage is relatively greatest, or where the producer's absolute disadvantage in productivity is relatively least. relative advantage opportunity cost productivity advantage comparative advantage
comparative advantage
What matters most in determining the efficient distribution of production over the world is: absolute advantage. efficiency. the allocation of resources. comparative advantage.
comparative advantage.
It is sometimes necessary for a _________________ economy to live with a degree of uncertainty over _______________ that would be politically unacceptable in the high-income economies. developing; unemployment converging; inflation disconnected; fundamentals of growth converging; trade imbalances
converging; inflation
While governments will play a different role across countries, all the ________________ economies have found that increasing ____________________ for firms and workers has been a critical ingredient in the recipe for faster growth. technologically disconnected; focus on raising human capital converging; market-oriented incentives technologically disconnected; focus on increasing technology high-income; retained revenue and wages
converging; market-oriented incentives
If the original level of aggregate demand is AD0, then an expansionary monetary policy that shifts aggregate demand to AD1 will only: create an inflationary increase in price level. create an increase in GDP. create an increase in unemployment. create a deflationary loss in price level.
create an inflationary increase in price level.
An increase in the government's budget surplus will cause the interest rate to: either increase or decrease. remain the same. increase. decrease.
decrease
In the global economy, some nations are open to international trade, while others use tariffs and import quotas to limit the impact of trade. Which of the following is a reasonable conclusion that you can draw from this statement? differences in economic institutions exist among nations no nation intentionally aims for an unsustainable trade imbalance nations have similar priorities and similar economic situations economic growth is built on a foundation of trade improvements
differences in economic institutions exist among nations
What term is used to describe the interest rate charged by the central bank when it makes loans to commercial banks? discount rate reserve requirement Fed rate open market rate
discount rate
When the government passes a new law that explicitly changes overall tax or spending levels, it is enacting: discretionary fiscal policy. progressive fiscal policy. regressive fiscal policy. fiscal policy.
discretionary fiscal policy.
If the government initiates an expansionary monetary policy at the same time that its budget deficit increases, then the interest rate will __________________. remain unchanged either increase or decrease increase decrease
either increase or decrease
By about 2050, the ___________ populations in _____________ are expected to boom. elderly; high income countries youth; high income countries youth; low income countries elderly; low-income countries
elderly; low-income countries
The _____________ is an example of a large-scale common currency. euro dollar pound franc
euro
A central bank must be concerned about whether a large and unexpected ___________________________ will drive most of the country's existing banks into bankruptcy. exchange rate appreciation interest rate increase exchange rate depreciation increase in foreign investments
exchange rate depreciation
If a central bank focuses on preventing either high inflation or deep recession by using low and reasonably steady interest rate policy, then: foreign investment will increase significantly. exchange rates will have less reason to vary. domestic investments in foreign businesses will decrease. government will intervene to peg the nation's currency.
exchange rates will have less reason to vary.
If a government reduces taxes in order to increase the level of aggregate demand, what type of fiscal policy is being used? discretionary contractionary standardized expansionary
expansionary
A trade balance can be quickly defined as the gap between _____________, which are also included in the current account balance along with _______________________. supply and demand; investment income and unilateral transfers supply and demand; stocks and bonds exports and imports; investment income and unilateral transfers exports and imports; stocks and bonds
exports and imports; investment income and unilateral transfers
Which of the following is not a consequence of an increase in the government's budget deficit? private savings increases while holding everything else constant exports increase while imports and all other variables are held constant imports increase while exports and all other variables are held constant investment falls while holding everything else constant
exports increase while imports and all other variables are held constant
By measuring and comparing per capita GDP data, economists can determine the extent that per capita GDP differs between the nations of the World. While this is useful information, which of the following is a valid criticism of comparing per capita GDP for this purpose? national economies within the global economy are diverse most comparisons between regions are admittedly rough fails to capture diversity across the regions fails to capture the precise standard of living
fails to capture the precise standard of living
The main public policies of technological leading countries are _______________ focused on investment, including investment in human capital, in technology, and in physical plant and equipment. market-orientated policies monetary policies economic policies fiscal policies
fiscal policies
Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? financial policies monetary policies fiscal policies economic policies
fiscal policies
If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will: follow expansionary monetary policy. follow loose monetary policy. follow tight monetary policy. follow quantitative easing policy.
follow tight monetary policy.
When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is: following a contractionary monetary policy. following quantitative easing policy. following a tight monetary policy. following an expansionary monetary policy.
following an expansionary monetary policy.
The _____________________________ is the largest market in the world economy. international exchange market foreign exchange market foreign currency market international currency market
foreign exchange market
From a macroeconomic point of view, which of the following is a source of demand for financial capital? savings by households and firms foreign financial investment domestic household private savings government borrowing
government borrowing
Which of the following is not a short-run impact of imposing quotas on the American industries they seek to protect? government tax revenues increase domestic production and sales by the protected industries increase consumers' real incomes decrease prices of the goods produced by protected industries increase
government tax revenues increase
Which of the following will have the greatest influence on shifting the aggregate supply curves of high-income countries to the right? a market-driven economy investment in human capital risk of exchange rate fluctuations growth-oriented public policy
growth-oriented public policy
Factors like health, education, human rights, crime, personal safety, and cleanliness of environment all: fail to capture the standard of living in a precise manner. have a large impact on the standard of living of a country. have a slight impact on the standard of living of a country. fail to capture diversities that make up the global economy.
have a large impact on the standard of living of a country.
Unemployment rates in the nations of Europe have typically been ____________ than in the United States. higher lower the same better
higher
A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment. deficit decrease smaller trade surplus larger trade surplus higher interest rate
higher interest rate
If the government's budget deficit increases while the economy is producing substantially less then potential GDP and expansionary monetary policy is implemented, then any ________________ from government borrowing would be _____________________________ from that monetary policy. higher interest rates; largely offset by the lower interest rates lower interest rates; largely offset by the higher interest rates increase in interest rates; reduced by private sector investment inflationary increase in price level; crowding out private investment
higher interest rates; largely offset by the lower interest rates
A government will likely ____________________________ to encourage investment in technology R&D by private firms? reduce R&D grants to nonprofit organizations reduce R&D grants to universities spend more on R&D in government laboratories implement fiscal policy establishing tax incentives
implement fiscal policy establishing tax incentives
According to international trade theory, a country should: import goods in which it has an absolute advantage. import goods in which it has a comparative disadvantage. export goods in which it has an absolute advantage. import goods in which it has an absolute disadvantage.
import goods in which it has a comparative disadvantage.
Tariffs are taxes imposed on _________________. imported products exported products hazardous goods surplus goods
imported products
By June, 2010, the U.S. government owed $13.6 trillion dollars ________________ that, over time, has remained unpaid. from decreases in excise tax from decreases in income tax in accumulated government debt from decreases in corporate tax
in accumulated government debt
If individual income tax accounts for more total revenue than the payroll tax in the U.S., why would over half the households in the country pay more in payroll taxes than in income taxes? income tax is a proportional tax income tax is a progressive tax payroll tax is a regressive tax payroll tax is a progressive tax
income tax is a progressive tax
Raising an existing tariff on grapes from Argentina will: increase domestic production of grapes. increase total American consumption of grapes. increase American consumption of domestically produced grapes. increase American imports of grapes from Argentina.
increase American consumption of domestically produced grapes.
Introducing a tariff on vitamin Z would: reduce exports of vitamin Z. increase American consumption of domestically produced vitamin Z. increase total American consumption of vitamin Z. decrease domestic production of vitamin Z.
increase American consumption of domestically produced vitamin Z.
Which of the following is least likely to be the result of economic disruptive patterns caused by a prolonged period of government budget deficits? high inflation substantial inflows of foreign financial capital increasing exchange rates strains on a country's financial system
increasing exchange rates
When the central bank decides to increase the discount rate, the: money supply increases. interest rates decrease. interest rates are unaffected. interest rates increase.
interest rates increase.
When government policy moves from a budget surplus to a budget deficit and the trade deficit remains constant: savings will decrease no matter what happens to investment. savings will decrease if investment remains constant. investment will increase if savings also remains constant. investment will decrease if savings also remains constant.
investment will decrease if savings also remains constant.
When government policy moves from a budget deficit to a budget surplus and the trade deficit remains constant: savings will increase if investment remains constant. investment will increase if savings remain constant. savings will decrease, no matter what happens to investment. investment will decrease if savings remain constant.
investment will increase if savings remain constant.
"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: contains one error; the trade restraints do not increase the scarcity of foreign-produced goods. contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers. contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers. is essentially correct.
is essentially correct.
The current level of US government accumulated debt, when measured in nominal dollars: has reached higher levels in the past. is higher than it has ever been. is lower than it has ever been. has remained steady for the past decade.
is higher than it has ever been.
If the Canadian dollar is strengthening, then: it has been unpegged from other currencies. Canada has adopted a hard peg policy. Canada has purchasing power parity. it has appreciated in terms of other currencies.
it has appreciated in terms of other currencies.
Why would an expansionary monetary policy no longer be available to combat recession for a country that has pegged its exchange rate? inflation or recession must be ignored in order to focus on its soft peg it would appreciate the country's currency and break its hard peg it would depreciate the country's exchange rate and break its hard peg it will use up all its reserves of international currency to buy its own currency
it would depreciate the country's exchange rate and break its hard peg
If Australia's exchange rate is stronger than the PPP rate for several years, which of the following will likely result? its imports will increase its exports will increase aggregate demand will increase trade deficit will decrease
its imports will increase
Trade allows each country to take advantage of _________________ in the other country. economies of scale lower opportunity costs specialization worker productivity
lower opportunity costs
The idea behind comparative advantage reflects the possibility that one party: may be able to produce everything relatively more efficiently than another party. may be able to produce something at a lower opportunity cost than another party. may be able to produce something at a lower dollar cost than another party. with an absolute advantage in producing two different may export goods both of those goods to the other party.
may be able to produce something at a lower opportunity cost than another party.
A moderate increase in a budget deficit that leads to a _____________________ is not necessarily a cause for concern. combination of less foreign capital and banks that are bankrupt moderate increase in a trade deficit and a moderate appreciation of the exchange rate a series of large budget deficits shift in aggregate demand so far to the right that it causes high inflation
moderate increase in a trade deficit and a moderate appreciation of the exchange rate
In good economic times, a surge in lending exaggerates the episode of economic growth. Which of the following adaptations of monetary policy can moderate these exaggerated effects? price stability to reinforce effect of deposit insurance monitoring asset prices and leverage quantitative easing when banks are under stress inflation-targeting lender of last resort policies
monitoring asset prices and leverage
Which of the following is a traditional tool used by the Fed during recessions? quantitative easing higher interest rates open market operations coins and paper currency
open market operations
The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ________________. opportunity cost absolute cost relative cost comparative cost
opportunity cost
If a government experiences an increase in its budget surplus, which of the following possible outcomes will likely result? investment falls while everything else holds constant exports decrease while imports and all other variables are held constant imports increase while exports and all other variables are held constant private savings decrease while everything else holds constant
private savings decrease while everything else holds constant
The U.S. economy has two main sources for financial capital; _______________________ and ____________________________. private savings from U.S. households and firms; inflows of foreign financial investment. private sector investment; government borrowing private savings from U.S. households and firms; government borrowing private sector investment; inflows of foreign financial investment from abroad
private savings from U.S. households and firms; inflows of foreign financial investment.
An additional investment in human capital, especially for the low-income nations of the world, will likely directly increase which of the following? productivity and economic growth increased levels of R&D spending consumer orientated spin-offs highly qualified teachers
productivity and economic growth
A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. proportional tax regressive tax progressive tax excise tax
progressive tax
If a government decides to finance an investment in ________________ with higher taxes or ____________________ in other areas, it need not worry that it is crowding out private investment. roads and bridges; increased borrowing water supply and sewers; by raising capital spending public physical capital; lower government spending hydroelectric dams and windmills; government R&D
public physical capital; lower government spending
If the economy is at equilibrium as shown in the diagram above, then an expansionary monetary policy will: [image] have no effect on both unemployment and inflation. reduce unemployment, but increase inflation. reduce both unemployment and inflation. reduce unemployment, but have little effect on inflation.
reduce unemployment, but have little effect on inflation.
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: optional. progressive. proportional. regressive.
regressive.
The time lag for monetary policy is typically ________________ the time lag for fiscal policy. longer than shorter than about the same a the same as
shorter than
When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment budget will show a __________________ than the actual budget. smaller surplus smaller deficit larger deficit surplus
smaller deficit
Most contracts, wage levels, and interest rates are either indexed to inflation, or involve using the currency of another country to sidestep the problem of inflation in some converging economies. Following these policies caused the net flow of foreign investment in and out of the economy reached zero solid levels of economic growth for sustained periods of time with 10-30% inflation a moderate but substantial current account trade imbalance to control inflation indexed inflation policy trade-offs that led to substantial restrictions on trade
solid levels of economic growth for sustained periods of time with 10-30% inflation
In low and middle-income countries, workers who are not connected to a labor market are often unable to: collect old-age payments. receive social benefits. be "officially" employed. specialize very much.
specialize very much.
In any economy functioning at potential GDP, there are occasions when the short-term aggregate supply curve unexpectedly shifts, causing inflationary pressures. Which of the following is considered to be a common cause of this type of shift? overoptimistic lending by banks sudden rise in input prices a surge of export sales a wave of government spending
sudden rise in input prices
A ___________________________________ can lead to disruptive economic patterns and heavy strains on a country's banking and financial system. prolonged period of trade surpluses sustained pattern of large trade deficits prolonged period of budget surpluses sustained pattern of large budget deficits
sustained pattern of large budget deficits
For firms engaged in international lending and borrowing, ____________________ can have an enormous effect on profits. swings in exchange rates trade-offs and risks foreign portfolio investment foreign direct investment
swings in exchange rates
Foreign direct investment is the term used to describe purchases of firms in another country that involve ______________________. internationally traded goods across countries using another currency taking a management responsibility the exchange rate market
taking a management responsibility
Growth policies that mainly focus on both finding appropriate technology and on getting connected through communications and transport infrastructure are generally associated with: technologically disconnected nations. nations that are technology leaders. neoclassical economic theory Keynesian economic theory
technologically disconnected nations.
The quantitative easing policies adopted by the Federal Reserve are usually thought of as: short term loans to fill out reserves. temporary emergency measures. traditional monetary policies. a relatively weak tool.
temporary emergency measures.
If $1.00 U.S. bought $1.40 Canadian dollars in 2006 and in 2010 it bought $1.00 Canadian dollar, then; the U.S. dollar appreciated against the Canadian dollar. the Canadian dollar weakened against the Canadian dollar. the U.S. dollar strengthened against the Canadian dollar. the Canadian dollar appreciated against the U.S. dollar.
the Canadian dollar appreciated against the U.S. dollar.
When per capita GDP is used as a rough measure to compare the economic regions of the World, the richest region is _________________ and the poorest region is ________________. East Asia and the Pacific; South Asia the United States, Western Europe and Japan; South Asia the United States, Western Europe and Japan; Sub-Saharan Africa East Asia and the Pacific; Sub-Saharan Africa
the United States, Western Europe and Japan; Sub-Saharan Africa
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: higher interest rates will crowd out private investment. government borrowing is likely to crowd out private investment. an inflationary increase in the price level is a real danger. the central bank might react with an expansionary monetary policy.
the central bank might react with an expansionary monetary policy.
When a business firm makes an investment in physical capital, what is that investment subject to? state and local government incentives economic output and productivity political orientated incentives the discipline of the market
the discipline of the market
A government began 2013 with a budget surplus and a trade deficit. Due to the onset of recession, the government changed its policy and is now running a budget deficit. If all other factors hold constant, this change in policy will cause: the exchange rate and the trade deficit to increase. the exchange rate and the trade deficit to decrease. the exchange rate to decrease and the trade deficit to increase. the exchange rate to increase and the trade deficit to decrease.
the exchange rate and the trade deficit to increase.
When Mataeo buys Euros through _________________________, he will use his U.S. dollars to pay for them. the foreign exchange market the currency exchange market a floating exchange market foreign currency market
the foreign exchange market
When the central bank decides it will sell bonds using open market operations: interest rates decrease. the money supply increases. the money supply decreases. the money supply is unaffected.
the money supply decreases.
Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _________________________. distinctive trade-offs and risks exchange rate policy monetary policy the tools of demand and supply
the tools of demand and supply
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. If the terms of trade are established as 1 apple for 2 oranges, then: there are no incentives for Alpha to specialize and trade with Beta. it is in the interest of both countries to specialize and trade with one another. it is in the interest of Beta to grow oranges and trade for apples. there are no incentives for Beta to engage in international specialization and trade of apples and oranges.
there are no incentives for Alpha to specialize and trade with Beta.
The opportunity cost of producing a pair of pants in the USA is 5 bushels of wheat, while in China, it is 2 bushels of wheat. As a result: there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants. The USA has a comparative advantage over China in the production of pants. China has a comparative advantage over the USA in the production of wheat. there can be mutual gains from trade to the two countries if the USA exports pants to China in exchange for wheat.
there can be mutual gains from trade to the two countries if the USA exports wheat to China in exchange for pants.
With regard to the major issues involving trade imbalances, which of the following explains why smaller countries around the world should take some steps to limit flows of international capital? to counter cyclical unemployment to reduce susceptibility to economic whiplash to maintain the natural rate of unemployment to achieve real productivity gains
to reduce susceptibility to economic whiplash
A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy? trade surplus trade deficit fiscal deficit twin surplus
trade surplus
According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity, which of the following is most likely to result? unpredictable rises and falls in nominal GDP monetary policy will become inevitably imprecise quantity of credit rises above where it otherwise be innovations relating to banking and finance
unpredictable rises and falls in nominal GDP
When other factors such as health and illiteracy rates are added to global comparisons of GDP and population, which of the following is likely to be revealed? rough comparisons between regions as data are not available very wide differences in the standard of living 2% of the world's GDP comes from agriculture in low-income countries the similarity in the low degree of urbanization
very wide differences in the standard of living
A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies. strengthening; more weakening; less a problem for exporters; less beneficial to importers; more
weakening; less
There are nontariff barriers in the form of _______________ regulations, in which certain textiles are made in the United States, shipped to other countries, combined in making apparel with textiles made in those other countries—and then re-exported back to the United States at a lower tariff rate. import quota export quota "rules of origin" dumping
"rules of origin"
At the beginning 2010, the government of Norway had no debt and held $180 billion dollars in its sovereign fund. To stimulate its economy during 2011, Norway's government plans to spend $35 billion more than it will collect in tax revenue and in 2012, its spending will exceed tax revenues by $25 billion. What will the total government debt equal at the end of 2012? $60 billion $0 $120 billion $180 billion
$0
If a country's economic data shows that private savings equal $300 million, government spending equals $400 million, taxes equal $300, and the trade surplus equals $100 million, then what does investment equal? $150 million $175 million $200 million $100 million
$100 million
The diagram above refers to a private closed economy. In this instance, the equilibrium GDP is: [image] $60 billion. $180 billion. between $60 and $180 billion. $60 billion at all levels of GDP.
$180 billion.
If a country's economic data shows that private savings equal $250 million, government spending equals $400 million, taxes equal $350, and the trade surplus equals $150 million, then what does investment equal? $50 million $75 million $450 million $350 million
$50 million
If a country's economic data shows private savings of $500 million, government spending of $300 million, tax revenue of $400 million, and a trade surplus of $100 million, then what does investment equal? $600 million $500 million $700 million $900 million
$500 million
At the beginning of 2009, a government had a total debt of $540 billion dollars. It ended 2009 with a $6 billion dollar budget surplus. In 2010, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2010? $554 billion $540 billion $0 $14 billion
$540 billion
The United States national minimum wage is _____________. $6.25/hour $7.25/hour $8.25/hour $9.25/hour
$7.25/hour
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are: 0.25 apples; 0.5 apples. 9 apples; 4 apples. 0.5 apples; 0.25 apples. 2 apples; 4 apples
0.5 apples; 0.25 apples.
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following terms of trade between apples and oranges would allow both Alpha and Beta to gain by specialization and exchange? 1 orange for 0.2 apples 2 apples for 3 oranges 3 apples for 3 oranges 1 apple for 3 oranges
1 apple for 3 oranges
In 2009, the U.S. government spent $1.4 trillion more than it collected in taxes. This deficit was about: 22% of the size of the U.S. GDP in 2009. 26% of the size of the U.S. GDP in 2009. 18 % of the size of the U.S. GDP in 2009. 10% of the size of the U.S. GDP in 2009.
10% of the size of the U.S. GDP in 2009.
The high-income economies of the world contain approximately __________ of the world's population and produce and consume ___________ of the World's GDP. 14%; over 50% 12%; over 60% 14%; over 70% 12%; over 80%
12%; over 60%
A government annually collects $320 billion in tax revenue and allocates $42 billion to education spending. What percentage of this government's budget is spent on education? 24.50% 12.31% 30.13% 13.12%
13.12%
A government collects $600 billion annually in tax revenue. Each year it allocates $35 billion to healthcare and $50 billion for education. What percentage of annual tax revenue is allocated to these two categories of government spending? 21.37% 14.16% 17.51% 26.41%
14.16%
A government annually allocates $5 billion of its total tax revenue to weather related disaster relief, $21 billion to healthcare and $11 billion to education. If the government's quarterly tax revenue is $33 billion, what percentage of its budget is allocated annually to healthcare? 17.50% 63.63% 25.00% 15.90%
15.90%
The membership of the WTO includes about __________ nations. 15 150 700 1500
150
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: 1.78 dollars, 2012: 1.57 dollars 2010: 1.79 dollars, 2012: 1.59 dollars 2010: 1.87 dollars, 2012: 1.65 dollars 2010: 1.97 dollars, 2012: 1.75 dollars
2010: 1.79 dollars, 2012: 1.59 dollars
A government collects $700 billion annually in tax revenue. Each year it allocates $70 billion to the justice system and $130 billion for its own administrative costs. What percentage of annual tax revenue is allocated to these two categories of government spending? 37.15% 28.57% 17.51% 27.58%
28.57%
If GDP is 2400 and the money supply is 600, then what is the velocity? 18.3 4 4.57 12
4
A government deficit has decreased from 100 to 60. The country's trade deficit is 120 and private savings equal 80 and investment equals 100. If Ricardian neutrality holds true, after this change in the government's budget, private savings will equal: 120. 70. 40. 140.
40
Despite interlocking import quotas, tariffs, and nontariff barriers, the share of apparel sold in the United States that is imported rose from about _________ in 1999 to about ________ today. 10%; 25% 25%; 50% 50%; 75% 75%; 90%
50%; 75%
As measured in 2008, about _________ of U.S. trade and ________ of European trade is intra-industry trade. 10%; 10% 30%; 30% 60%; 60% 90%; 90%
60%; 60%
Assume that one day's labor in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labor can produce either 24 units of cloth or 12 units of wine. If Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine, the increase in combined output by those two workers will be: 16 wine; 8 cloths 16 wine; 16 cloths 12 wine; 12 cloths 8 wine; 16 cloths
8 wine; 16 cloths
A government collects $70 billion quarterly in tax revenue. Each year it allocates $15 billion to the justice system and $29 billion for the administrative costs. What percentage of its total annual tax revenue is left for allocation to the remaining categories of government spending? 84.29% 15.71% 62.85% 37.15%
84.29%
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 24 units of food per year or 12 units of clothing. Which of the following is true? Alland has an absolute advantage in producing food but will not trade with Georgeland. Alland has a comparative advantage, but not an absolute advantage, in producing food. Georgeland has both a comparative and absolute advantage in producing clothing. Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.
Alland has an absolute advantage in producing food but will not trade with Georgeland.
A stronger euro is less favorable for: German tourists traveling abroad. American tourists traveling in France. Canadian firms selling in Germany. Canadian investors with money investments in Germany.
American tourists traveling in France.
Which of the following institutions determines the quantity of money in the economy as its most important task? U.S. Department of the Treasury Federal Open Market Committee Central Bank Federal Reserve Board of Governors
Central Bank
___________________________ in high-income countries is caused by the economy being in a recession. A cyclical standard of living The natural rate of unemployment Cyclical unemployment A natural literacy rate
Cyclical unemployment
____________ means selling goods below their cost of production. Protectionism Dumping Import quotas Non-tariff barriers
Dumping
Which of the following is no longer one of the most commonly traded currencies in foreign exchange markets? U.S. dollar British pound Japanese yen French franc
French franc
The acronym GATT stands for: General Association for Trade and Tariffs. General Agreement on Tariffs and Trade. General Accounting for Tariff and Trade. General Association on Technology and Trade.
General Agreement on Tariffs and Trade.
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true? Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing. Georgeland has both a comparative and absolute advantage in producing clothing. Alland has a comparative advantage, but not an absolute advantage, in producing food. Alland has an absolute advantage, but not comparative advantage, in producing food.
Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 36 units of food per year or 18 units of clothing. Which of the following is true? Georgeland has an absolute but not a comparative advantage in producing clothing. Georgeland has both an absolute and a comparative advantage in producing clothing. Alland has an absolute but not a comparative advantage in producing food. Alland has both an absolute and a comparative advantage in producing food.
Georgeland has an absolute but not a comparative advantage in producing clothing.
_____________ are numerical limitations on the quantity of products that can be imported. Tariffs Import quotas Taxes Nontariff barriers
Import quotas
In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true? India has a comparative advantage in the production of rice. China has a comparative advantage in the production of rice. China has both an absolute and comparative advantage in the production of rice. India has an absolute advantage in the production of rice.
India has a comparative advantage in the production of rice.
____________________________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect? Altering the discount rate Reserve requirements Long and variable time lags Quantitative easing
Long and variable time lags
Despite many negative feelings, a number of governments have decided that reducing barriers to trade is at least potentially beneficial to their economy. Which of the following is an example of countries reducing barriers through free trade? NAFTA NATO G20 GTO
NAFTA
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 Import Limitation Argument Anti-Dumping Argument Buy-American Argument
National Interest Argument
__________________ are ways that a nation can draw up regulations, inspections, and paperwork to make it more costly or difficult to import products. Tariffs Nontariff barriers Quotas Import ceilings
Nontariff barriers
Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result? Northern's loan assets increase by $30 million Northern's bond assets increase by $30 million Northern's net worth changes by $30 million the money supply in the economy decreases
Northern's loan assets increase by $30 million
________________________ are the result of improvements in human capital, physical capital, and technology interacting in a _____________________. High income economies; command economy Productivity improvements; market-driven economy Global economies; remarkably similar manner Sustainable balances of trade; global economy
Productivity improvements; market-driven economy
The race to the bottom scenario of global environmental degradation is explained roughly like this: Companies seek to reduce their costs of operations on plant and equipment design and this results in higher levels of pollution. Companies seek the lowest market prices on products in order to gain market share, resulting in inferior goods and increased waste and pollution. Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits. Companies seek to influence environmental legislation standards are set to the lowest possible standards in the USA in order to maximize profits.
Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits.
________________________ equalizes the prices of internationally traded goods across countries. The foreign exchange rate A floating exchange rate Purchasing power parity An international parity rate
Purchasing power parity
When a government records a budget surplus, the national savings and investment identity is written as: S = I + (G - T) + (X - M) S + (M - X) + (T - G) = I S - (G - T) = I - (X - M) S + (T - G) = 1 + (X - M)
S + (M - X) + (T - G) = I
If the quantity of financial capital supplied is equal to the quantity of financial capital demanded then, the national savings and investment identity is written as: (M - X) - S = (G + T) - I S + (M - X) = I + (G - T) S + (G - T) = I - (X - M) S = (X - M) - (G - T)
S + (M - X) = I + (G - T)
When a government records a trade surplus, the national savings and investment identity is written as: S = (G - T) + (X - M) - I S - (G - T) = I - (X - M) S = I + (G - T) + (X - M) S + (G - T) = I - (X - M)
S = I + (G - T) + (X - M)
__________________________ address the problem of economic growth by continually striving for a more educated workforce that can create, invest in and apply new technologies. Technological leaders Technologically disconnected nations Converging economies Command economies
Technological leaders
________________________ 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. Protectionism The infant industry argument Dumping Import quotas
The infant industry argument
