Answer Page--Unit Six

1. The capital account of the nation’s balance system is responsible for…
b) recording foreign purchases of assets within a nation
Elizabeth Lawandales

2. The Factor(s) that affect exchange rate include:
I. consumer tastes
II. Specialization
III. Relative incomes
IV. Relative inflation
d) I, III, IV
Elizabeth Lawandales

3. If the euro is worth 120 yen and the 3 euros are worth 180 rupees how many rupees equal 1 yen?
b) .67
Elizabeth Lawandales

4. France wants airplanes made in the U.S.A.
external image vnd.openxmlformats-officedocument.wordprocessingml.document.png question4.docx
This will result in…
a) The demand curve moves right and the dollar appreciates
Elizabeth Lawandales

5.external image vnd.openxmlformats-officedocument.wordprocessingml.document.png question5.docx
When the original supply curve moves to S1…
b)The dollar is losing value
Elizabeth Lawandales

6. Pounds Produced per Hour

Which of the following is correct
a)This problem uses the output method
Elizabeth Lawandales

Refer to diagram for 7-8
Hours to produce a unit

water bottles


7. What is true about this scenario
d) this problem uses input method
Elizabeth Lawandales

8. Who has the comparative and absolute advantage?
c) Jack has comparative advantage in water bottles and Mike has absolute advantage in ipods
Elizabeth Lawandales

9. Free trade...
e) all of the above
Elizabeth Lawandales

10. A tariff on a product does all of the following EXCEPT..
c) increase consumption
Elizabeth Lawandales

11. When America imports $2.9 billion worth of goods and exports $1.7 billion worth of goods for a given year, it is running a and it is likely that
a) trade deficit; tariffs and quotas do not play a controlling roll in the economy.
-Michael Remensnyder

12. A managed float, the current system for determining international exchange rates, is where
c) occasional intervention is allowed, but most of the time exchange rates are determined by supply and demand.
-Michael Remensnyder

13. Trade restrictions have advocates in many different industries in market economies for all of the following reasons except
e) they help keep domestic prices low and control inflation.
-Michael Remensnyder

14. Exchange rates can be affected by
I. purchasing power parity
II. speculators who work only in real estate markets
III. relative income levels
IV. changes to the international gold standard.
d) I. and III.
-Michael Remensnyder

Use the following for question 5.

15. The changes in the demand and/or supply curves most likely indicate which of the following is in place in America's economy:
d) An import quota on bikes
-Michael Remensnyder

16. Which of the following is not an advantage that market economies have over command economies?
b) Allows stability in long-term projects where a large amount of risk is involved
-Michael Remensnyder

17. Which of the following discourage competition and/or act as trade restrictions?
I. Liscensing requirements for the right to sell a particular pharmeceutical drug
II. Import quotas on the amount of cotton to be imported from Brazil
III. Tariffs on each shipment of Honda Accords imported to the U.S.
e) I., II., and III.
-Michael Remensnyder

Use the following for question 8.

18. As the Demand curve shifts to D*, the dollar will _, the yen will _, and its supply will _ . exchage rates rates graph
d) appreciate; depreciate; shift to S
-Michael Remensnyder

Use the following for questions 9 and 10.

Soccer Balls produced per hour
Pairs of cleats produced per hour

19. Who has the higher absolute advantage, and who has the higher comparative advantage for soccer ball production?
b) Spain has both absolute and comparative advantages in soccer ball production.
-Michael Remensnyder

20. Which country has a lower opportunity cost for 1 pair of cleats?
d) Italy; 4/5 balls
-Michael Remensnyder

21. Which country is the United States's most important trading partner?
b) Canada
Jacqueline Baron

22. A lower relative or comparative cost than that of another producer is called?
d) comparative advantage
Jacqueline Baron

23. Appreciation of a nation's currency affects imports/exports how?
c) exports decrease/ imports increase
Jacqueline Baron

24. In what way do governments not influence trade flows?
a) exchange rates
Jacqueline Baron

25. Which of these does the current account balance not include?
b) governent spending
Jacqueline Baron

26. What occurs when a sum of the current and capital accounts is negative?
e) balance-of-payments deficit
Jacqueline Baron

27. Exchange rates were pegged and the IMF helped stabilize foreign exchange rates under what?
b) Bretton Woods system
Jacqueline Baron

28. Which document marked the beginning of a trend toward lower U.S tariffs?
d) Reciprocal Trade Agreements Act
Jacqueline Baron

29. Who has the absolute advantage in maple syrup and pancakes?
d) Maple syrup- Canda/ Pancakes- U.S
Jacqueline Baron

30. Who has the comparative advantage in producing maple syrup in terms of pancakes?
e) Canada; 150/85 pancakes
Jacqueline Baron

31. When is a nation's total output the largest?
d) when each good produced by the nation has the lowest opportunity cost to produce that good.

Meredith Palaio

32. I can write a paper in an hour. It takes Liz an hour and a half. I can do a math problem in one minute, but it takes Liz an hour and a half to do that too. Which of us has the absolute advantage in paper writing?
c) Me, but I have the comparative advantage in math problems

Meredith Palaio

33. From the above scenario, if Liz and I specialize in the most efficient way, what is the total output of papers and math problems after 3 hours.
a) 180 math problems, 2 papers

Meredith Palaio

34. If the two countries below specialize on the basis of a comparative advantage analysis, which is benefited?

  1. of professionals each country can train in a 20 year period
Cross-Country Runners

Cross-Country Runners
d) Both nations
Meredith Palaio

35. In the scenario above, which nation should train golfers and which should train cross country runners?
a) US; Kenya

Meredith Palaio

36. In the scenario above, where would the ideal combination (as a result of specialization) of golfers/cross country runners lie on the nations’ productions possibilities curve?

Click Photo to See PPC
Click Photo to See PPC

Click Photo to See PPC

c) Point D

Meredith Palaio

37. Which of the following goods can be tariffed in the US?
I. Champagne
II. Ford Taurus
III. Sombrero
e) I and III

Meredith Palaio

Current Account: Balance on Goods -100
Goods Imports -200
Goods Exports A
Balance on Services 140
Imports of Services -50
Exports of Services B
Net Transfers -73
Net Investment Income C
Balance on Current Account
Capital Account: Foreign Purch. of US Assets 75
US Purch. of Assets Abroad -50
Balance on Capital Account
Official Reserves Official reserves -2
Account: $0**

38. Using the figure above, did the United States run a capital/current acount deficit or surplus for this term?
b) surplus of 2
Meredith Palaio

39. Fill in the blanks A and B from above.
c) 100; 190
Meredith Palaio

40. Fill in blanks C and D.
e) 10; -23

Meredith Palaio

Andrew Quinlan 41-50 answers
41. Which of the following events affect exchange rates?
I. Travel to one country increases
II. Prices go up in one country
III. Goods demanded changes relative to another country
When the dollar is strong (costs more) or weak (costs less) exports...
Strong Weak
E. Decrease increase

43. Current Acount
Man-land exports of goods +900
Man-land imports of goods -800
Man-land exports of services +350
Man-land imports of services -500
Balance of Trade 1.

Net investment income +20
Net transfers -26
Balance on current Account 2.

Capital Account
Man-land capital going abroad -200
Foreign capital coming into man-land +250
Balance on capital account 3.
Balance on current account
Plus balance on capital account 4.

Official Reserves Account
Official reserves transactions
Balance 5.
Total $0
C. -50, -56, 50, -6, 6

44. What does NAFTA stand for?
D. North American Free Trade Agreement

Using the graphs below answer the following question.
On which graph is the equilibrium price for motor bikes the highest relative to the quantity supplied for that price?

D. The U.S. Motorbike Market
Which of the following of Monetary Policy is used to affect exchange rates?
I. changing interest rates
II. government spending
III. Raising/ lowering taxes
A. I only
A tariff placed on an imported good would cause the price level of the good to do what?
C. Increase

48. If the dollar price of the peso rises, then:
D. the dollar depreciates relative to the peso

If Russia and China begin to engage in bilateral change, then:
E. Russia will import cars and export dolls

Using the graph below answer the following question.
If S represents domestic supply and D represents domestic demand, then which way would S move if it was changed to the total world supply instead of just the domestic supply?

A. to the right

Andrew Donoho

51. Since the 1940's, general tariffs have:
a) Declined

52. For the United States as a whole, volume of international trade has:
c) Increased both relative to GDP and absolutely.

53. If the value of a foreign currency rises, which of the following are true:
I. International value of Dollar falls.
II. Foreign currency price of the dollar falls.
III. International value of foreign currency rises.
IV. Dollar price of foreign currency rises.
e) All of the above

54. Protective tariffs are designed to:
b) Shield domestic producers from foreign competition.

55. Which created a downward trend in Tariffs:
b) Reciprocal Trade Agreement act.

56. Which of the following organizations created a free trade zone involving the US:

57. A is a trade barrier by which firms limit their amount of exports to a particular country:
e) Voluntary export restriction

58. An INDIRECT/long-term effect of tariffs would be:
c) Expand inefficient industries

59. Based on table A, Brazil has a
a. Comparative advantage in sleds.

60. Based on table B:
e. All of the above.