Question 1

During the last several decades, the size of the trade sector (exports plus imports) of the United States has been

Accepted Answer

A) increasing as a share of the economy. 
B) relatively constant as a share of the economy. 
C) declining as a share of the economy. 
D) increasing during periods of recession, but declining during periods of strong economic growth. 
A) increasing as a share of the economy. 
B) relatively constant as a share of the economy. 
C) declining as a share of the economy. 
D) increasing during periods of recession, but declining during periods of strong economic growth.

Question 2

According to public choice theory, tariffs, quotas, and other trade restrictions are primarily the result of the

Accepted Answer

A) political clout of foreigners. 
B) political clout of domestic consumers. 
C) political power of special interest groups. 
D) political desire for economic efficiency. 
A) political clout of foreigners. 
B) political clout of domestic consumers. 
C) political power of special interest groups. 
D) political desire for economic efficiency.

Question 3

Suppose that in the absence of trade, the U.S. price for bicycles was higher than the world price for bicycles. Would allowing international trade mean that the United States would import or export bicycles? Who in the United States would benefit and who would lose with a free trade policy, and would the gains be greater than the losses?

Accepted Answer

The United States would import bicycles

Question 4

Figure 17-10  
-Refer to Figure 17-10. With trade and without a tariff, the price and domestic quantity demanded are

Accepted Answer

A) P1 and Q1. 
B) P1 and Q4. 
C) P2 and Q2. 
D) P2 and Q3. 
A) P1 and Q1. 
B) P1 and Q4. 
C) P2 and Q2. 
D) P2 and Q3.

Question 5

The primary source of purchasing power used to buy imported goods is

Accepted Answer

A) the monetary sector. 
B) the balance of payments deficit. 
C) the exports of a nation. 
D) taxation and other revenue-generating activities. 
A) the monetary sector. 
B) the balance of payments deficit. 
C) the exports of a nation. 
D) taxation and other revenue-generating activities.

Question 6

A major difference between a tariff and a quota is that a tariff

Accepted Answer

A) will reduce imports, but a quota generally will not. 
B) can easily be rescinded, but a quota cannot. 
C) will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports. 
D) typically generates tax revenue, while a quota does not. 
A) will reduce imports, but a quota generally will not. 
B) can easily be rescinded, but a quota cannot. 
C) will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports. 
D) typically generates tax revenue, while a quota does not.

Question 7

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that

Accepted Answer

A) all industries will claim that they are infant industries in order to gain protection. 
B) the protected industry will become too efficient and drive out foreign competition. 
C) once in place, it is difficult to remove protection even as the industry matures. 
D) it causes the goods that are produced in the protected industry to have lower prices. 
A) all industries will claim that they are infant industries in order to gain protection. 
B) the protected industry will become too efficient and drive out foreign competition. 
C) once in place, it is difficult to remove protection even as the industry matures. 
D) it causes the goods that are produced in the protected industry to have lower prices.

Question 8

A nation benefits from international trade if it

Accepted Answer

A) exports more than it imports. 
B) imports more than it exports. 
C) imports goods for which it is a low opportunity cost producer. 
D) exports goods for which it is a low opportunity cost producer. 
A) exports more than it imports. 
B) imports more than it exports. 
C) imports goods for which it is a low opportunity cost producer. 
D) exports goods for which it is a low opportunity cost producer.

Question 9

Each trading nation can gain by specializing in producing those things for which it is a low-opportunity cost producer. This statement best describes the implications of the

Accepted Answer

A) free rider problem. 
B) law of comparative advantage. 
C) infant-industry argument. 
D) law of diminishing marginal returns. 
A) free rider problem. 
B) law of comparative advantage. 
C) infant-industry argument. 
D) law of diminishing marginal returns.

Question 10

Figure 17-10  
-Refer to Figure 17-10. With the tariff, the domestic price and domestic quantity demanded are

Accepted Answer

A) P1 and Q1. 
B) P1 and Q4. 
C) P2 and Q2. 
D) P2 and Q3. 
A) P1 and Q1. 
B) P1 and Q4. 
C) P2 and Q2. 
D) P2 and Q3.

Question 11

Public choice theory indicates that tariffs, quotas, and other trade restrictions are primarily the result of the

Accepted Answer

A) political clout of foreigners. 
B) political clout of domestic consumers. 
C) political power of the special interest groups. 
D) attractiveness of sound economic policies to elected political officials. 
A) political clout of foreigners. 
B) political clout of domestic consumers. 
C) political power of the special interest groups. 
D) attractiveness of sound economic policies to elected political officials.

Question 12

Which of the following has resulted from the North American Free Trade Agreement (NAFTA)?

Accepted Answer

A) trade between the United States and Mexico increased. 
B) trade between the United States and Canada increased. 
C) the joint output of the United States, Mexico, and Canada has increased. 
D) all of the above are correct. 
A) trade between the United States and Mexico increased. 
B) trade between the United States and Canada increased. 
C) the joint output of the United States, Mexico, and Canada has increased. 
D) all of the above are correct.

Question 13

Data on trade barriers and the growth of per capita GDP indicate that

Accepted Answer

A) there is no link between the degree of a country's trade openness and its economic growth. 
B) more open economies have grown more rapidly than those that have imposed substantial barriers restricting trade. 
C) economies that have imposed high trade barriers have, on average, grown more rapidly than economies that are more open to international trade. 
D) countries with higher trade barriers have been able to achieve higher levels of per capita GDP than those that are more open to international trade. 
E) both c and d are correct. 
A) there is no link between the degree of a country's trade openness and its economic growth. 
B) more open economies have grown more rapidly than those that have imposed substantial barriers restricting trade. 
C) economies that have imposed high trade barriers have, on average, grown more rapidly than economies that are more open to international trade. 
D) countries with higher trade barriers have been able to achieve higher levels of per capita GDP than those that are more open to international trade. 
E) both c and d are correct.

Question 14

Which of the following is a partially valid economic argument for restricting free trade?

Accepted Answer

A) Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B) Removal of restrictions that have existed for years will initially cause inflation. 
C) Infant industries need permanent protection to develop and gain productive efficiency. 
D) A nation needs to protect industries that are vital to national defense in case of future international conflict. 
A) Restrictions on foreign trade will increase employment and permanently reduce unemployment. 
B) Removal of restrictions that have existed for years will initially cause inflation. 
C) Infant industries need permanent protection to develop and gain productive efficiency. 
D) A nation needs to protect industries that are vital to national defense in case of future international conflict.

Question 15

When foreigners export goods to the United States

Accepted Answer

A) they reduce the ability of the U.S.to export products abroad. 
B) they acquire the dollars that are necessary to purchase goods, services, and assets from Americans. 
C) they reduce the living standards of Americans. 
D) they cause the dollar to depreciate. 
A) they reduce the ability of the U.S.to export products abroad. 
B) they acquire the dollars that are necessary to purchase goods, services, and assets from Americans. 
C) they reduce the living standards of Americans. 
D) they cause the dollar to depreciate.

Question 16

A basic problem with the infant-industry argument is that

Accepted Answer

A) most industries need protection when they are mature, not when they are first established. 
B) the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C) political pressure will likely prevent the withdrawal of the tariff when the industry matures. 
D) domestic consumers will continue to buy the foreign products anyway, regardless of the tariff. 
A) most industries need protection when they are mature, not when they are first established. 
B) the amount of the tariff is unlikely to have much impact on the success of an infant industry. 
C) political pressure will likely prevent the withdrawal of the tariff when the industry matures. 
D) domestic consumers will continue to buy the foreign products anyway, regardless of the tariff.

Question 17

International trade does all the following except

Accepted Answer

A) allow a country to specialize in producing certain goods and services. 
B) reduce world output. 
C) allow a country to move to higher consumption levels. 
D) increase world output. 
A) allow a country to specialize in producing certain goods and services. 
B) reduce world output. 
C) allow a country to move to higher consumption levels. 
D) increase world output.

Question 18

A U.S. trade policy that restricts the sale of foreign goods in the U.S. market will

Accepted Answer

A) reduce the demand for U.S.export goods since foreigners will be less able to buy our goods if they cannot sell to us. 
B) benefit producers in industries that export goods. 
C) increase the nation's income since it protects domestic jobs. 
D) enhance economic efficiency by allocating more resources to the areas of their greatest comparative advantage. 
A) reduce the demand for U.S.export goods since foreigners will be less able to buy our goods if they cannot sell to us. 
B) benefit producers in industries that export goods. 
C) increase the nation's income since it protects domestic jobs. 
D) enhance economic efficiency by allocating more resources to the areas of their greatest comparative advantage.

Question 19

Compared to the no-trade situation, when a country exports a good,

Accepted Answer

A) domestic consumers gain, domestic producers lose, and the gains outweigh the losses. 
B) domestic producers gain, domestic consumers lose, and the gains outweigh the losses. 
C) domestic consumers gain, domestic producers lose, and the losses outweigh the gains. 
D) domestic producers gain, but domestic consumers lose an equal amount. 
A) domestic consumers gain, domestic producers lose, and the gains outweigh the losses. 
B) domestic producers gain, domestic consumers lose, and the gains outweigh the losses. 
C) domestic consumers gain, domestic producers lose, and the losses outweigh the gains. 
D) domestic producers gain, but domestic consumers lose an equal amount.

Question 20

Trade restrictions that limit the sale of low-price foreign goods in the U.S. market

Accepted Answer

A) increase the real income of Americans. 
B) benefit domestic producers in the protected industries at the expense of consumers and domestic producers in export industries. 
C) help channel more of our resources into producing goods for which we are a low-cost producer. 
D) reduce unemployment and increase the productivity of American workers. 
A) increase the real income of Americans. 
B) benefit domestic producers in the protected industries at the expense of consumers and domestic producers in export industries. 
C) help channel more of our resources into producing goods for which we are a low-cost producer. 
D) reduce unemployment and increase the productivity of American workers.

During the last several decades, the size of the trade sector (exports plus imports) of the United States has been

According to public choice theory, tariffs, quotas, and other trade restrictions are primarily the result of the

Figure 17-10 -Refer to Figure 17-10. With trade and without a tariff, the price and domestic quantity demanded are

The primary source of purchasing power used to buy imported goods is

A major difference between a tariff and a quota is that a tariff

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that

A nation benefits from international trade if it

Each trading nation can gain by specializing in producing those things for which it is a low-opportunity cost producer. This statement best describes the implications of the

Figure 17-10 -Refer to Figure 17-10. With the tariff, the domestic price and domestic quantity demanded are

Public choice theory indicates that tariffs, quotas, and other trade restrictions are primarily the result of the

Which of the following has resulted from the North American Free Trade Agreement (NAFTA)?

Data on trade barriers and the growth of per capita GDP indicate that

Which of the following is a partially valid economic argument for restricting free trade?

When foreigners export goods to the United States

A basic problem with the infant-industry argument is that

International trade does all the following except

A U.S. trade policy that restricts the sale of foreign goods in the U.S. market will

Compared to the no-trade situation, when a country exports a good,

Trade restrictions that limit the sale of low-price foreign goods in the U.S. market

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

International Finance and the Foreign Exchange Market

Filters

Exam 18: Gaining From International Trade

During the last several decades, the size of the trade sector (exports plus imports) of the United States has been

According to public choice theory, tariffs, quotas, and other trade restrictions are primarily the result of the

Figure 17-10 -Refer to Figure 17-10. With trade and without a tariff, the price and domestic quantity demanded are

The primary source of purchasing power used to buy imported goods is

A major difference between a tariff and a quota is that a tariff

The main problem with using the infant industries argument to justify protecting an industry from foreign competition is that

A nation benefits from international trade if it

Each trading nation can gain by specializing in producing those things for which it is a low-opportunity cost producer. This statement best describes the implications of the

Figure 17-10 -Refer to Figure 17-10. With the tariff, the domestic price and domestic quantity demanded are

Public choice theory indicates that tariffs, quotas, and other trade restrictions are primarily the result of the

Which of the following has resulted from the North American Free Trade Agreement (NAFTA)?

Data on trade barriers and the growth of per capita GDP indicate that

Which of the following is a partially valid economic argument for restricting free trade?

When foreigners export goods to the United States

A basic problem with the infant-industry argument is that

International trade does all the following except

A U.S. trade policy that restricts the sale of foreign goods in the U.S. market will

Compared to the no-trade situation, when a country exports a good,

Trade restrictions that limit the sale of low-price foreign goods in the U.S. market

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

International Finance and the Foreign Exchange Market

Filters