Econ, Final
In high-income countries, how much of the GDP comes from agriculture?
about 2%
An individual can purchase a popular consumer electronic device in a domestic market for $1,000 and then sell this product in a foreign market for $1,250 which is below the foreign market price of $\$1,300$_. This is an example of __________.
abritrage
The purpose of tariffs is
all of the above
Which of the following is considered a source of investment income for a nation?
all of the above (buying real estate, companies, and financial investments like stocks and bonds)
Which of the following factors have a large impact on the standard of living in various places around the world, in addition to GDP?
all of the above (health, education, human rights)
What can happen to individuals who provide for themselves through farming, fishing, or hunting, and who barter and trade in low-income and middle-income countries?
because they are not officially "employed," they are often ineligible for social benefits
Which of the following can be considered an unintended consequence of a high-income country's government providing unemployment and welfare payments?
businesses may place limits on hiring
In high-income countries, many central banks run highly expansionary policies that are successful in the short run. What is the interest rate associated with these policies?
0%
What percent of the total world income do low-income countries earn?
1%
Although expansionary fiscal policies seem to work in the short-run in Japan, some experts argue that it's public debt is expected to approach what percentage of GDP?
240%
Which of the following is a reason that low-income countries are at a disadvantage?
Any income earned are spent immediately on necessities such as food.
Which of the following terms means using the U.S. dollar as the currency of a country outside the United States?
Dollarizing
Which of the following best describes what comprises a country's national savings?
Private + Public savings
How do many countries sustain solid levels of economic growth for sustained periods of time despite having seemingly high inflation?
The government indexes contracts, wage levels, and interest rates to inflation.
All of the following statements are true, except:
The share of U.S. exports in proportion to the U.S. economy is well above the global average.
Supply for the U.S. dollar comes from __________.
U.S. investors who want to make portfolio investments in other countries
What type of unemployment is caused by the economy in a recession?
cyclical
The _______________ found in intra-industry trade leads to learning, innovation, and unique skills
division of labor
If domestic investment is less than domestic savings, then ____________________________.
exports are greater than imports
Which of the following is an example of differences in how geography across countries can influence commerce, health, and the environment?
extensive coastlines versus landlocked countries
All of the following are sources of supply for the U.S. dollar except __________.
foreign investors who wish to make portfolio investments in the U.S. economy
Which of the following best describes public savings?
government savings
Which of the following scenarios could lead to higher inflation in some parts of the world?
if the central bank of a country makes loans to politically favored firms
A trade deficit occurs when:
imports exceed exports
If an investor expects exchange rates to increase from 1British Pound=$1.50 to 1British Pound=$1.60, then the investor can earn a profit by ____________.
increasing their portfolio investment of British denominated assets
The United States is both a substantial exporter and a substantial importer of capital goods, autos, and industrial supplies. This is an example of
intra-industry trade
Trade of goods within the same industry from one country to another, is called
intra-industry trade
Which of the following best defines the merchandise trade balance?
the balance of trade of commodities, food, fuel, and manufactured goods
What is expected to happen by 2050 in low-income countries?
the elderly population will boom
Which of the following best describes the results when a nation's current account balance is negative?
the nation is a net borrower
What can happen if wage levels do not rise as inflation rises?
the real wage rate and standard of living decreases
What does the rule of 72 approximate?
the time it takes to double income
In a period of trade deficit, if domestic investment rises by $1 billion, private savings increases by $220 million, and public savings decreases by $220 million, ____________________.
the trade deficit will increase
If a currency appreciates or "strengthens", then ___________.
there is an increase in the quantity of other currencies received for a given amount of currency sold
If private and public savings are higher than domestic investment, then _____________________________.
there will be extra financial capital to invest abroad
What happened to countries like Ireland, Iceland, and Greece when foreign lenders decided to stop extending funds?
they experienced serious economic shocks
What did economic success stories like Japan, the East Asian Tiger economies, China, and India do to become economically successful?
they took advantage of opportunities to sell in global markets
Knowing that economic growth works best in a stable and market-oriented economic climate, why might high-income countries utilize monetary policy?
to minimize the risk of exchange rate fluctuations, to keep inflation low
Why did many middle-income governments send students and government commissions abroad to look at the most efficient industrial operations elsewhere?
to seek out applicable technology
savings investment formula
(X - M) = S + (T - G) - I Trade Surplus = (X−M) Private Domestic Savings = (S) Private Domestic Investment = (I) Government Budget Surplus (or Balance) = (T−G)
Which of the following exist when a country runs a trade deficit?
A nation's imports exceed its exports.
Which of the following statements is true?
A nation's level of trade is measured by its exports of goods and services as a share of its GDP.
In the North American Free Trade Agreement (NAFTA), which of the following countries was not one of three to pledge to reduce trade barriers?
Cuba
What are the two functions of purchasing power parity?
Economists often use PPP exchange rates for international comparison of GDP and other economic statistics, knowing the purchasing power parity helps track and predict exchange rate relationships
The balance of trade is considered to be mainly a microeconomics phenomenon by economists.
False
Today, the United States and other countries measure the balance of trade by tracking only the goods and not the services traded between countries.
False
Of the following, which count as a source of demand for the U.S. dollar?
Foreign investors who make direct investments in the U.S. economy.
All of the following statements are true, except:
If two countries import and export almost the same dollar value of goods and services to each, they will have the same export ratio.
What is not true about arbitrage?
It involves central banks building up large reserves of their country's currency to stabilize its value.
Which of the following statements is true?
It is possible for a country to record a large trade deficit despite having a relatively low level of trade, expressed as a percentage of GDP.
Assume a simple model with only two countries: Japan and Canada, and two goods: cars and bacon. Suppose that the opportunity cost for Japan to produce 1 car is 2 units of bacon and the opportunity cost for Canada to produce 1 car is 4.5 units of bacon. Which of the following statements is true?
Japan would be economically better off if it produced cars and traded with Canada for bacon.
All of the following statements are true, except:
Recessions and economic booms often have little impact on trade surpluses or trade deficits.
Suppose the Japanese yen is expected to appreciate in the foreign exchange market. Illustrate the impact of this event by shifting the supply and demand curves in the appropriate direction.
Supply down, Demand up
When comparing the strength of two economies, which exchange rate, the market exchange rate or purchasing power parity exchange rate, is better to use and why?
The PPP exchange rate because it remains relatively constant.
Which of the following best describes a converging economy?
The economy of a country that demonstrates the ability to catch up to the technology leaders.
Why has it been politically challenging for governments to refocus efforts on new technology, education, and physical capital investment since the 2008-2009 recession?
They have focused on short-term recovery, but not enough on the long-term.
A nation's levels of domestic saving and investment influence its balance of trade.
True
A trade deficit is a large component of the current account deficit.
True
A trade surplus implies that the economy is probably a net lender to the rest of the world.
True
An increase in the trade surplus is considered a good thing for domestic producers.
True
An undeveloped labor market is a labor market in which many individuals provide for themselves via trading and bartering.
True
Business people often link portfolio investment to exchange rate expectations.
True
For about two decades prior to 1980s, the U.S. economy experienced modest trade surpluses.
True
Historical trade relationships are a good indicator of future trade relationships.
True
If during an economic boom, private domestic investment increases more than public and private saving, a nation with a trade deficit will experience a decrease in that trade deficit.
True
It is possible for a country to record a large trade deficit despite having a relatively low level of trade, expressed as a percentage of GDP.
True
Let's assume there is a trade surplus from Germany to Saudi Arabia. That trade surplus would increase if Germany purchases less Saudi petroleum products.
True
Low-income countries are those with at most $1,025 GDP per capita per year.
True
Relative rates of return between countries influence the supply and demand for foreign currency.
True
The current account balance includes merchandise trade, unilateral transfers, and income payments.
True
The equilibrium exchange rate occurs at the intersection of the demand for currency and its supply curve in the foreign exchange market.
True
When looking at the regional averages of GDP per person, the United States and European Union produce and consume close to 70% of the world's GDP.
True
Which group does not benefit from a weaker U.S dollar?
U.S. tourists abroad
An economy running a trade surplus means that that economy is _______________ international community.
a net lender to the
What could cause the demand for Chinese yuan to increase?
a relatively low rate of inflation in China
What is the term used for when a nation's exports exceed its imports?
a trade surplus
Division of labor could increase output on individual, national, and international levels. Which of the following is a reason for that?
all of the above
All of the following are sources of demand for the U.S. dollar except __________.
foreign firms that have sold imported goods in the U.S., earned U.S. dollars, and are trying to pay expenses incurred in their home countries
Dollarizing __________
is using the U.S. dollar as the currency of a country outside the United States
Which of the following is a common feature of low-income countries that inhibits raising overall income levels?
political instability
When supporting the infant industry argument, one would argue that most industry support in the world, as a whole, is directed at _________________________________.
politically powerful, long-estbalished industries that are suffering losses
Some nations are open to international trade, while other nations use _______________ to limit the impact of trade.
tariffs and import quotas
