Econ Chapter 17 Test

A.It reduced tariffs and quotas among the United States, Canada, and Mexico.

What did passage of NAFTA do? A.It reduced tariffs and quotas among the United States, Canada, and Mexico. B.It established quotas between the United States, Canada, and Mexico. C.It increased tariffs among the United States, Canada, and Mexico. D.It eliminated quotas between the United States, Canada, and Mexico.

production possibilities curve

diagram representing maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed

foreign exchange

different currencies used to facilitate international trade

B.It has decreased the value of the dollar.

How has the persistent U.S. trade deficit since 2003 affected the value of the dollar? A.It has kept the value of the dollar steady. B.It has decreased the value of the dollar. C.It has increased the value of the dollar. D.It has prevented the value of the dollar from fall

A.The strength of the dollar is compared to a group of major foreign currencies.

How is the trade-weighted value of the dollar calculated? A.The strength of the dollar is compared to a group of major foreign currencies. B.The GNP of the U.S. is compared to the average GNP of several other nations. C.The trade deficit of the U.S. is compared to the average trade deficit of several other nations. D.The average trade surplus of the U.S. is compared to the trade surplus of several other nations.

B.By the supply and demand for that currency in foreign currency markets

How is the value of any currency determined in the market? A.By the U.S. Department of Commerce B.By the supply and demand for that currency in foreign currency markets C.By the World Bank D.By the World Trade Organization (WTO)

D.All of the above

6.What are other gains from trade that benefit all nations? Need a Hint? A.Faster economic growth B.Increased political stability C.Greater world output D.All of the above

C. Alpha's opportunity cost of producing 1 unit of cashew nuts is 5 units of coffee.

Alpha can produce 40 units of coffee or 8 units of cashew nuts. Beta can produce 6 units of coffee or 6 units of nuts. Which statement is accurate with regard to the opportunity cost of production? A.Alpha's opportunity cost of producing 1 unit of coffee is 8 units of nuts. B.Beta's opportunity cost of producing 1 unit of nuts is 8 units of coffee. C.Alpha's opportunity cost of producing 1 unit of cashew nuts is 5 units of coffee. D.Beta's opportunity cost of producing 8 units of nuts is 6 units of coffee.

D.a third country can have the same tariff reductions that the U.S. negotiates with another country

The "most favored nation clause" in U.S. trade agreements means that A.the U.S. has wide discretion to use on tariffs and quotas whenever it is demonstrated to be "in the national interest." B.the U.S. is allowed to give preferential treatment to some countries over others when tariff reductions are negotiated. C.the U.S. is allowed to use other barriers to trade, not just quotas and tariffs. D.a third country can have the same tariff reductions that the U.S. negotiates with another country.

B.China; Canada

The United States has the largest merchandise trade imbalance with ________, while the U.S.'s largest trading partner is _________. A.Mexico; China B.China; Canada C.China; Mexico D.OPEC members; Mexico

D.All of the above

What does the WTO do? A.It administers trade agreements signed under GATT. B.It settles trade disputes between governments. C.It provides technical assistance and training for developing countries. D.All of the above

C.Floating exchange rates

What is another term for flexible exchange rates? A.Fixed exchange rates B.Gold exchange rates C.Floating exchange rates D.Static exchange rates

C.Different currencies used to make international trade payments

What is foreign exchange? A.International trade of products and services B.Business conducted in multinational corporations C.Different currencies used to make international trade payments D.International banks that change currencies

embargo

a government order prohibiting the movement of goods to a country

quota

a limit placed on the quantities of a product that can be imported

most favored nation clause

a provision allowing a country to receive the same tariff reduction that the US gives to any third country

fixed exchange rates

a system under which the price of one currency is fixed in terms of another currency so that the exchange rate does not change

revenue tariff

a tariff high enough to generate revenue for the government without actually prohibiting imports

North American Free Trade Agreement (NAFTA)

an agreement signed in 1993 to reduce tariffs among the US, Canada, and Mexico

trade-weighted value of the dollar

an index displaying the strength of the dollar against a group of major foreign currencies

opportunity cost

cost of the next best alternative use of money, time, or resources when one choice is made rather than another

absolute advantage

country's ability to produce a given product more efficiently than can another country

comparative advantage

country's ability to produce a given product relatively more efficiently than another country; production at a lower opportunity cost

floating exchange rates

floating exchange rates, the forces of supply and demand establish the value of one country's currency in terms of another country's currency

General Agreement on Tariffs and Trade (GATT)

international agreement to extend tariff concession and reduce import quotas

infant industries

new or emerging industries should be protected from foreign competition

protectionists

people who favor trade barriers to protect domestic industries

free traders

prefer fewer or even no trade restrictions

balance of payments

the difference between the money a country pays out to, and receives from, other nations when it engages in international trade

exports

the goods and services that a country produces and sells to other nations

imports

the goods and services that the country buys from other countries

foreign exchange rate

the price of one country's currency in terms of another country's currency

trade *surplus*

whenever the value of a country's *exports* exceeds the value of its *imports*

trade *deficit*

whenever the value of the products a country's *imports* exceeds the value of the product it *exports*

D.The value of the products a country imports exceeds the value of the products it exports.

How does a trade deficit occur? A.The value of the products a country exports exceeds the value of the products it imports. B.The value of the products a country imports matches the value of the products it exports. C.The value of the products a country imports falls below the value of the products it exports. D.The value of the products a country imports exceeds the value of the products it exports.

B.work only if other countries do not retaliate with their own trade barriers.

Protectionist measures designed to limit free trade and protect domestic jobs A.never cause the loss of efficient production that all countries receive. B.work only if other countries do not retaliate with their own trade barriers. C.never result in the loss of access to less costly products and raw materials from other nations. D.work even when other countries retaliate with their own trade barriers.

C.It allows nations to export the products they produce best and import the products that other nations produce best.

Why is specialization a good idea in trade? A.It increases the maximum combinations of products an economy can import when all productive resources are fully employed. B.It allows nations to import the products they produce best and export the products that other nations produce best. C.It allows nations to export the products they produce best and import the products that other nations produce best. D.It increases the opportunity cost of exports and lowers the opportunity cost of imports.

protective tariff

a tariff high enough to protect less efficient domestic industries

tariff

a tax placed on imports to increase their price in the domestic market

World Trade Organization (WTO)

an international agency that administers trade agreements, settles trade disputes between governments, organizes trade negotiations, and provides technical assistance and training for developing countries

B.Exports are the goods and services a nation produces and sells to other nations; imports are the goods and services a nation buys from other nations.

Explain the difference between imports and exports. A.There is no difference between imports and exports. B.Exports are the goods and services a nation produces and sells to other nations; imports are the goods and services a nation buys from other nations. C.Imports are the goods and services a nation produces and sells to other nations; exports are the goods and services a nation buys from other nations. D.Imports are the goods and services a nation produces and sells to other nations; exports are the country's ability to produce more of a given product than can another country.

A. Yes. Absolute advantage is a country's ability to produce a given product more efficiently than can another country; comparative advantage is a country's ability to produce a given product relatively more efficiently than can another country.

Is it possible for one country to have both an absolute advantage and a comparative advantage over another country? A.Yes. Absolute advantage is a country's ability to produce a given product more efficiently than can another country; comparative advantage is a country's ability to produce a given product relatively more efficiently than can another country. B.No. Comparative advantage is a country's ability to import more of a given product than can another country; absolute advantage is a country's ability to export a given product relatively more efficiently than another country. C.No. Comparative advantage is a country's ability to export more of a given product than can another country; absolute advantage is a country's ability to import a given product relatively more efficiently than another country. D.Yes. Comparative advantage is a country's ability to produce more of a given product than can another country of comparative size; absolute advantage is a country's ability to produce a given product relatively more efficiently than a larger country.

A.It shows the maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed.

What does a production possibilities curve show? A.It shows the maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed. B.It shows the minimum number of goods and/or services a country can import when all productive resources are fully employed. C.It shows the maximum combinations of goods and/or services an economy can import when all productive resources are fully employed. D.It shows the minimum number of goods and/or services a country can export when all productive resources are fully employed.

A.It means that the country can produce the product at an opportunity cost that is lower than any other country's opportunity cost.

What does it mean when we say that a country has a comparative advantage in producing a product? A.It means that the country can produce the product at an opportunity cost that is lower than any other country's opportunity cost. B.It means that the country has a higher opportunity cost of producing the product than any other country has. C.It means that any other country has a lower opportunity cost of producing the product. D.It means that the country's absolute cost of producing the product is higher than its opportunity cost.

A.The cost of foreign goods is lower.

What happens to the cost of foreign goods when the dollar is strong? A.The cost of foreign goods is lower. B.The cost of foreign goods rises. C.The cost of foreign goods stays the same. D.The cost of foreign goods rises briefly, then falls.

A.A quota is a limit on how much of a good can be imported.

What is a quota? A.A quota is a limit on how much of a good can be imported. B.A quota is a tax on imported goods. C.A quota is a limit on how much an imported good can cost. D.A quota is a tax on exported goods.

C.A situation occurring when the value of a nation's exports exceeds the value of its imports

What is a trade surplus? A.A situation occurring when the value of a nation's exports falls below the value of its imports B.A situation occurring when the value of a nation's imports exceeds the value of its exports C.A situation occurring when the value of a nation's exports exceeds the value of its imports D.A situation occurring when the value of a nation's exports matches the value of its imports.

A.Excessive imports by the U.S. can cause the value of the dollar to decline, making imports cost more.

What is one effect of excessive imports by the U.S.? A.Excessive imports by the U.S. can cause the value of the dollar to decline, making imports cost more. B.Excessive imports by the U.S. can cause the value of the dollar to increase, making imports cost more. C.Excessive imports by the U.S. can cause the value of the dollar to increase, making imports cost less. D.Excessive imports by the U.S. can cause the value of the dollar to decline, making imports cost less.

A.The cost of the next best alternative use of money, time, or resources when one choice is made rather than another

What is opportunity cost? A.The cost of the next best alternative use of money, time, or resources when one choice is made rather than another B.The market value of the next best alternative use of money, time, or resources when one choice is made rather than another C.The comparative advantage of a product when it is produced at the lowest possible market value D.The absolute advantage of a product when it is produced at the lowest possible market value

C.Difference between money paid to and money received from other nations in trade

What is the balance of payments? A.Difference between money paid to other nations in trade and money given as aid B.Sum of money paid to and money received from other nations in trade C.Difference between money paid to and money received from other nations in trade D.Sum of money paid to other nations in trade and money given as aid

B.A protective tariff is designed to assist less efficient domestic producers, whereas a revenue tariff is designed to raise money for the government.

What is the difference between a protective tariff and a revenue tariff? A.A revenue tariff is designed to assist less efficient domestic producers, whereas a protective tariff is designed to raise money for the government. B.A protective tariff is designed to assist less efficient domestic producers, whereas a revenue tariff is designed to raise money for the government. C.A revenue tariff is designed to assist more efficient domestic producers, whereas a protective tariff is designed to limit imports. D.A protective tariff is designed to assist more efficient domestic producers, whereas a revenue tariff is designed to limit imports.

D. It was the first writing that said a country should import products if they could be made more cheaply abroad than at home.

What is the significance of Adam Smith's Wealth of Nations? A.It was identical to prevailing economic thought at the time. B.It was a departure from comparative advantage. C.It was a departure from absolute advantage. D.It was the first writing that said a country should import products if they could be made more cheaply abroad than at home.

C.Smoot-Hawley Tariff Act

Which act(s) caused international trade to come to a halt because of overly high prices for imported goods? A.Reciprocal Trade Agreements Act B.Trade Expansion Act of 1962 C.Smoot-Hawley Tariff Act D.All of the above

A.Money that goes abroad will come back again when other nations buy our exports.

Which argument about keeping the money at home is a counterargument free traders give? A.Money that goes abroad will come back again when other nations buy our exports. B.Limiting imports keeps money from going abroad so that it can be spent domestically. C.Money that goes abroad is money lost at home. D.Limiting imports keeps jobs at home.

D.The infant industries argument

Which argument is used to justify protecting new and emerging industries? A.The keep money at home argument B.The national pride argument C.The protecting domestic jobs argument D.The infant industries argument

A.The fixed exchange rate system

Which exchange rate system was mostly in effect until 1971? A.The fixed exchange rate system B.The flexible exchange rate system C.The foreign exchange rate system D.The Big Mac exchange rate system