Question 1

If a country's exchange rate depreciates,

Accepted Answer

A) the world price level rises. 
B) the world price level falls. 
C) the world price level remains unchanged. 
D) exchange rates have no impact on world prices. 
A) the world price level rises. 
B) the world price level falls. 
C) the world price level remains unchanged. 
D) exchange rates have no impact on world prices.

Question 2

In the United States globalization has played:

Accepted Answer

A) a significant role in growing income disparity because some sectors have benefited and others have not. 
B) little role in growing income disparity because all Americans are consumers who have enjoyed lower prices. 
C) a significant role in growing income disparity because foreign workers' incomes have risen. 
D) little role in growing income disparity because while some jobs were lost, the gain in jobs balanced out those that were lost. 
A) a significant role in growing income disparity because some sectors have benefited and others have not. 
B) little role in growing income disparity because all Americans are consumers who have enjoyed lower prices. 
C) a significant role in growing income disparity because foreign workers' incomes have risen. 
D) little role in growing income disparity because while some jobs were lost, the gain in jobs balanced out those that were lost.

Question 3

Is a small or large country likely to gain more by trading? Why?

Accepted Answer

A small country is likely to get more of

Question 4

Refer to the graph shown.   We would expect that if the two countries trade with each other (and neither trades with the rest of the world):

Accepted Answer

A) Norstrilia will export manufactured goods and Graustark will export agricultural goods. 
B) Norstrilia will export agricultural goods and Graustark will export manufactured goods. 
C) Norstrilia will export both goods to Graustark, which will have a permanent trade deficit. 
D) Graustark will export both goods to Norstrilia, which will have a permanent trade deficit. 
A) Norstrilia will export manufactured goods and Graustark will export agricultural goods. 
B) Norstrilia will export agricultural goods and Graustark will export manufactured goods. 
C) Norstrilia will export both goods to Graustark, which will have a permanent trade deficit. 
D) Graustark will export both goods to Norstrilia, which will have a permanent trade deficit.

Question 5

When comparative advantage is based on transferable factors, the law of one price tends to:

Accepted Answer

A) erode the advantage away. 
B) amplify the advantage. 
C) stabilize the advantage. 
D) make the advantage into an inherent comparative advantage. 
A) erode the advantage away. 
B) amplify the advantage. 
C) stabilize the advantage. 
D) make the advantage into an inherent comparative advantage.

Question 6

The United States dominates world markets for computer software,producing about a majority of the total world computer software,whereas Europe and Japan lag significantly behind.
(a)What possible reasons would account for this?
(b)Would you expect this to continue?

Accepted Answer

(a)The United States must enjoy a compar

Question 7

If the United States were to stop trading with other nations, economists would predict that in the long run the United States would end up with:

Accepted Answer

A) more jobs. 
B) lower prices. 
C) a higher standard of living. 
D) a lower standard of living. 
A) more jobs. 
B) lower prices. 
C) a higher standard of living. 
D) a lower standard of living.

Question 8

The United States imports:

Accepted Answer

A) only manufactured goods. 
B) only services. 
C) neither manufactured goods nor services. 
D) both manufactured goods and services. 
A) only manufactured goods. 
B) only services. 
C) neither manufactured goods nor services. 
D) both manufactured goods and services.

Question 9

Refer to the table shown. From this table we can conclude that if the two countries trade with each other, it is most likely that: $$\begin{array}{l}
\text { Cost (in euras) of praducing wine and on electric gener ator }\
\begin{array} { | c | c | c | } 
\hline \quad\quad\quad& \text { France }\quad\quad\quad & \text { Germany }\quad\quad\quad \
\hline \text { Wine } & 10 & 20 \
\hline \text { Electric Generator } & 10,000 & 30,000 \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) France exports both goods to Germany. 
B) Germany exports both goods to France. 
C) France exports wine to Germany and imports electric generators from Germany. 
D) France exports electric generators to Germany and imports wine from Germany. 
A) France exports both goods to Germany. 
B) Germany exports both goods to France. 
C) France exports wine to Germany and imports electric generators from Germany. 
D) France exports electric generators to Germany and imports wine from Germany.

Question 10

Which of the following puts downward pressure on U.S. manufacturing wages?

Accepted Answer

A) A declining value of the dollar 
B) Rising foreign wages 
C) Technological innovation 
D) Immigration 
A) A declining value of the dollar 
B) Rising foreign wages 
C) Technological innovation 
D) Immigration

Question 11

Refer to the graph shown.   If the price of Israeli shekels is $0.90, the quantity of shekels supplied is:

Accepted Answer

A) greater than the quantity demanded. This causes the shekel to gain value. 
B) less than the quantity demanded. This causes the shekel to gain value. 
C) greater than the quantity demanded. This causes the shekel to lose value. 
D) less than the quantity demanded. This causes the shekel to lose value. 
A) greater than the quantity demanded. This causes the shekel to gain value. 
B) less than the quantity demanded. This causes the shekel to gain value. 
C) greater than the quantity demanded. This causes the shekel to lose value. 
D) less than the quantity demanded. This causes the shekel to lose value.

Question 12

Immediately after World War II, the United States ran trade:

Accepted Answer

A) deficits and was an international lender. 
B) deficits and was an international borrower. 
C) surpluses and was an international lender. 
D) surpluses and was an international borrower. 
A) deficits and was an international lender. 
B) deficits and was an international borrower. 
C) surpluses and was an international lender. 
D) surpluses and was an international borrower.

Question 13

Assume that in Canada the opportunity cost of producing one television set is two bushels of wheat. Assume that in the United States the opportunity cost of producing one bushel of wheat is two television sets. If these two countries specialize according to comparative advantage and then trade with each other:

Accepted Answer

A) Canada will import both televisions and wheat. 
B) Canada will import wheat and export televisions. 
C) the United States will import wheat and export televisions. 
D) the United States will import both televisions and wheat. 
A) Canada will import both televisions and wheat. 
B) Canada will import wheat and export televisions. 
C) the United States will import wheat and export televisions. 
D) the United States will import both televisions and wheat.

Question 14

Transferable comparative advantages are:

Accepted Answer

A) based on factors that are relatively unchangeable. 
B) based on factors that can change relatively easily. 
C) becoming more like inherent comparative advantages with technological innovations. 
D) rarely eroded over time. 
A) based on factors that are relatively unchangeable. 
B) based on factors that can change relatively easily. 
C) becoming more like inherent comparative advantages with technological innovations. 
D) rarely eroded over time.

Question 15

The price of an acre of land in rural Nevada is a few hundred dollars. The price of an acre of land in downtown New York is many millions of dollars. How does the law of one price explain this difference?

Accepted Answer

A) It cannot; there are unexplainable exceptions to the law of one price. 
B) It suggests that in the long run price of land will be equalized regardless of location. 
C) The law of one price depends on the ability of resources to move; location by its very nature cannot be mobile. 
D) The law of one price applies only to resources involved in international trade. 
A) It cannot; there are unexplainable exceptions to the law of one price. 
B) It suggests that in the long run price of land will be equalized regardless of location. 
C) The law of one price depends on the ability of resources to move; location by its very nature cannot be mobile. 
D) The law of one price applies only to resources involved in international trade.

Question 16

Countries that exported a lot of gas or oil would see their exchange rates go up as a result. This in turn could make their manufacturing exports uncompetitive and possibly slow economic growth. This situation can be described as the:

Accepted Answer

A) renewable curse. 
B) depreciation curse. 
C) resource curse. 
D) common curse. 
A) renewable curse. 
B) depreciation curse. 
C) resource curse. 
D) common curse.

Question 17

If the euro rises in price, it becomes:

Accepted Answer

A) cheaper for Americans to buy European products and cheaper for Europeans to buy American products. 
B) cheaper for Americans to buy European products but more expensive for Europeans to buy American products. 
C) more expensive for Americans to buy European products but cheaper for Europeans to buy American products. 
D) more expensive for Americans to buy European products and more expensive for Europeans to buy American products. 
A) cheaper for Americans to buy European products and cheaper for Europeans to buy American products. 
B) cheaper for Americans to buy European products but more expensive for Europeans to buy American products. 
C) more expensive for Americans to buy European products but cheaper for Europeans to buy American products. 
D) more expensive for Americans to buy European products and more expensive for Europeans to buy American products.

Question 18

What are sources of U.S.comparative advantage?

Accepted Answer

The United States has a comparative adva

Question 19

Americans buying Japanese cars:

Accepted Answer

A) demand U.S. dollars and supply Japanese yen. 
B) demand U.S. dollars and demand Japanese yen. 
C) supply U.S. dollars and demand Japanese yen. 
D) supply both U.S. dollars and Japanese yen. 
A) demand U.S. dollars and supply Japanese yen. 
B) demand U.S. dollars and demand Japanese yen. 
C) supply U.S. dollars and demand Japanese yen. 
D) supply both U.S. dollars and Japanese yen.

Question 20

Economic models take into account the effect of trade on the distribution of income.

Accepted Answer

A) True 
 B)False

Exam 9: Comparative Advantage, Exchange Rates, and Globalization

If a country's exchange rate depreciates,

In the United States globalization has played:

Is a small or large country likely to gain more by trading? Why?

Refer to the graph shown. We would expect that if the two countries trade with each other (and neither trades with the rest of the world):

When comparative advantage is based on transferable factors, the law of one price tends to:

The United States dominates world markets for computer software,producing about a majority of the total world computer software,whereas Europe and Japan lag significantly behind. (a)What possible reasons would account for this? (b)Would you expect this to continue?

If the United States were to stop trading with other nations, economists would predict that in the long run the United States would end up with:

The United States imports:

Refer to the table shown. From this table we can conclude that if the two countries trade with each other, it is most likely that: Cost (in euras) of praducing wine and on electric gener ator France Germany Wine 10 20 Electric Generator 10,000 30,000

Which of the following puts downward pressure on U.S. manufacturing wages?

Refer to the graph shown. If the price of Israeli shekels is $0.90, the quantity of shekels supplied is:

Immediately after World War II, the United States ran trade:

Transferable comparative advantages are:

The price of an acre of land in rural Nevada is a few hundred dollars. The price of an acre of land in downtown New York is many millions of dollars. How does the law of one price explain this difference?

Countries that exported a lot of gas or oil would see their exchange rates go up as a result. This in turn could make their manufacturing exports uncompetitive and possibly slow economic growth. This situation can be described as the:

If the euro rises in price, it becomes:

What are sources of U.S.comparative advantage?

Americans buying Japanese cars:

Economic models take into account the effect of trade on the distribution of income.

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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