Macro Final Exam

The infant industry argument can be justified because

A new industry may be difficult to start in the face of existing foreign competition

Over a given period of time, if exports are greater than imports, the result is

A trade surplus

Which of the following is NOT likely to occur because of exchange rate fluctuations?

An end to flexible exchange rates worldwide

Ceteris paribus, if incomes increase faster in the United States than in less developed countries, then the currencies of less developed countries should

Appreciate, and the dollar should depreciate

Import-competing industries in the United States are likely to resist

Appreciation of the dollar

To ensure mutually beneficial trade, the terms of trade between two countries should always

Be between their respective opportunity costs in production

A World View titled "Export Ratios" examines the openness of trade for several countries based on the trade to GDP ratio. According to the excerpt, which country is the most open to trade?

Belgium

When a country has a lower opportunity cost in producing a good than any other country,

Consumption possibilities will increase with specialization and trade

When foreigners come to the United States as tourists, they are generating a

Demand for U.S. dollars and a supply of a foreign currency

Ceteris paribus, if African countries experience a drought and purchase food from the United States, the currencies of the African countries should

Depreciate, and the dollar should appreciate

When tariffs are imposed, the losers include

Domestic consumers and foreign producers

The purpose of the World Trade Organization (WTO) is to

Enforce the rules of free trade

The supply of U.S. dollars is determined by all of the following EXCEPT

Foreign demand for American exports

Places where foreign currencies are bought and sold are

Foreign exchange markets

Dumping is said to occur when

Foreign producers sell their goods abroad at prices lower than those prevailing in their own countries

A mechanism for fixing exchange rates is the

Gold standard

Goods and services purchased from international sources are

Imports

When the exchange rate between the U.S. dollar and the Japanese yen is $1 = 100 yen, this is an indication that

It would take 100 yen to purchase $1

If trade is mutually beneficial, then increasing trade

Leads to increased output in export industries

The amount by which the quantity demanded exceeds the quantity supplied at a given price is a

Market shortage

Suppose the production of 12 tons of copper in the United States requires the same amount of resources as the production of 3 tons of aluminum. In Mexico, 12 tons of copper requires the same amount of resources as 2 tons of aluminum. Implicitly

Mexico has a comparative advantage in producing copper

Except for a statistical error under flexible exchange rates, any current account deficit

Must be completely offset by a capital account surplus

Based on export ratios, which of the following countries is closest to being a closed economy?

Myanmar

Which of the following countries has the lowest export ratio?

Myanmar

It's not likely that a country will specialize completely in one good even if it has a lower opportunity cost because

Opportunity costs increase as more of a good is produced

A depreciation of the Korean won against the U.S. dollar will

Raise the won price of U.S. goods

A balance-of-payments surplus for the United States can be corrected by

Reducing tariffs on foreign goods

If exports are being excluded unfairly from a market, the World Trade Organization (WTO) may authorize

Retaliatory tariffs

All of the following are true regarding flexible exchange rates except

Speculators typically push exchange rates away from the long-term equilibrium

When American companies buy office buildings in Australia, they are generating a

Supply of U.S. dollars and a demand for a foreign currency

The amount of good A given up for good B in trade is the

Terms of trade

With flexible exchange rates

The equilibrium exchange rate is determined in a foreign exchange market

A beggar-thy-neighbor policy is

The imposition of trade barriers to increase domestic employment

In a floating exchange rate system, the capital account balance equals

The negative of the current account balance

Two countries will have zero incentive to trade if their production possibilities curves are parallel straight lines because

The opportunity costs for both countries are the same

If the United States has a trade deficit, this means that

The trade balance is negative

Because of the United States' long-standing trade deficit with Japan, the supply of U.S. dollars in Japan has increased. Which of the following is true about this situation?

The value of the U.S. dollar will decrease in terms of the yen, ceteris paribus, thereby reducing the trade deficit

Exports minus imports define a country's

Trade balance

Under floating exchange rates, the capital account balance is equal to the negative of

Trade balance + unilateral transfers

Refer to Figure 35.5. If S1 represents the U.S. domestic supply of a good and S2 represents supply in the United States under conditions of free trade, what does S3 most likely represent?

U.S. supply under tariff-restricted trade