mr. weiss ape/honors economics – test study questions – macro – unit 6 2. according to the...
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Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
2. According to the principle of comparative advantage, worldwide 2. According to the principle of comparative advantage, worldwide output and consumption levels will be highest when goods are output and consumption levels will be highest when goods are produced in nations where which of the following are true?produced in nations where which of the following are true?
A.A.Opportunity costs are lowestOpportunity costs are lowest
B.B.Absolute advantages are highestAbsolute advantages are highest
C.C.The balance of trade is in a surplusThe balance of trade is in a surplus
D.D.The exchange rate is fallingThe exchange rate is falling
E.E.The exchange rate is risingThe exchange rate is rising
Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
3. What does a balance of trade deficit imply?3. What does a balance of trade deficit imply?
A.A.Exports of goods and services exceed imports of goods and Exports of goods and services exceed imports of goods and servicesservicesB.B.Imports of goods and services exceed exports of goods and Imports of goods and services exceed exports of goods and servicesservicesC.C.Investment income received from abroad exceeds investment Investment income received from abroad exceeds investment income paid to foreignersincome paid to foreignersD.D.Investment income paid to foreigners exceeds investment Investment income paid to foreigners exceeds investment income received from abroadincome received from abroadE.E.Investment by foreigners exceeds domestic investment in other Investment by foreigners exceeds domestic investment in other countriescountries
Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
17. Suppose that the price level in Country A increases relative to 17. Suppose that the price level in Country A increases relative to the price level in other countries. In which of the following ways are the price level in other countries. In which of the following ways are Country A’s imports and exports most likely to change?Country A’s imports and exports most likely to change?
Country A's Country A's ImportsImports
Country A's Country A's ExportsExports
AA IncreaseIncrease No ChangeNo Change
BB IncreaseIncrease DecreaseDecrease
CC No ChangeNo Change DecreaseDecrease
DD No ChangeNo Change IncreaseIncrease
EE DecreaseDecrease IncreaseIncrease
Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
18. In the short run, in which of the following ways is an 18. In the short run, in which of the following ways is an expansionary monetary policy most likely to cause the interest rate expansionary monetary policy most likely to cause the interest rate and the value of the domestic currency to change?and the value of the domestic currency to change?
Interest RateInterest RateValue of Value of CurrencyCurrency
AA IncreaseIncrease IncreaseIncrease
BB IncreaseIncrease DecreaseDecrease
CC No ChangeNo Change DecreaseDecrease
DD DecreaseDecrease IncreaseIncrease
EE DecreaseDecrease DecreaseDecrease
Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
7. If the rate of inflation is higher in the United States than in other 7. If the rate of inflation is higher in the United States than in other countries, analyze what will happen tocountries, analyze what will happen to
A.A.ExportsExports
B.B.ImportsImports
C.C.The international value of the dollarThe international value of the dollar
Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
8. Consider a simple model of the world economy in which there 8. Consider a simple model of the world economy in which there are two countries: the United States and Korea. Both produce are two countries: the United States and Korea. Both produce cars and computers. The labor requirement for producing each cars and computers. The labor requirement for producing each good are given in the following table.good are given in the following table.
Labor Hours RequiredLabor Hours Required
CarsCars ComputersComputers
United United StatesStates 8080 2020
KoreaKorea 6060 1010
Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
8. Consider a simple model of the world economy in which there are two countries: the United States and Korea. Both produce cars 8. Consider a simple model of the world economy in which there are two countries: the United States and Korea. Both produce cars and computers. The labor requirement for producing each good are given in the following table.and computers. The labor requirement for producing each good are given in the following table.
Labor Hours RequiredLabor Hours Required
CarsCars ComputersComputers
United United StatesStates 8080 2020
KoreaKorea 6060 1010
A.A. Which nation has an absolute Which nation has an absolute advantage in producing cars? advantage in producing cars? Explain why.Explain why.
B.B. Which nation has a comparative Which nation has a comparative advantage in producing cars? advantage in producing cars? Explain why.Explain why.
C.C. Show that the nation with the Show that the nation with the comparative advantage in producing comparative advantage in producing cars can gain from specialization and cars can gain from specialization and trade with the other.trade with the other.
Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
4. Suppose the European (EU) has decided to impose trade restrictions 4. Suppose the European (EU) has decided to impose trade restrictions on agriculture and some specific manufacturing industries. In fact, the on agriculture and some specific manufacturing industries. In fact, the EU has decided to subsidize some agricultural products from small EU has decided to subsidize some agricultural products from small farmers and to increase tariffs and quotas on the following key industries: farmers and to increase tariffs and quotas on the following key industries: steel, telecommunications, electronics, machine tools, computers and steel, telecommunications, electronics, machine tools, computers and aerospace. The EU hopes these actions will make Europe less dependent aerospace. The EU hopes these actions will make Europe less dependent on foreign producers for these essential goods.on foreign producers for these essential goods.A.A.Which groups will gain and which will lose from these proposed Which groups will gain and which will lose from these proposed restrictions?restrictions?B.B.What goals do governments intend to accomplish by imposing trade What goals do governments intend to accomplish by imposing trade restrictions?restrictions?C.C.What are some of the costs that result from trade restrictions?What are some of the costs that result from trade restrictions?D.D.What would be the likely impact of restrictive trade policies on the total What would be the likely impact of restrictive trade policies on the total amount of trade between EU and the rest of the world?amount of trade between EU and the rest of the world?E.E.Show graphically how quotas, tariffs and subsidies affect trade.Show graphically how quotas, tariffs and subsidies affect trade.
Mr. Weiss
APE/Honors Economics – Test Study Questions – Macro – Unit 6APE/Honors Economics – Test Study Questions – Macro – Unit 6
5. Consider a simple model of the world economy in which there are 5. Consider a simple model of the world economy in which there are two nations. The United States produces computers and Mexico two nations. The United States produces computers and Mexico produces oil.produces oil.
A.A.Suppose now that the Mexican demand for computers increases Suppose now that the Mexican demand for computers increases while the United States’ demand for oil remains unchanged. Use a while the United States’ demand for oil remains unchanged. Use a graph to show that would happen to the value of the Mexican peso.graph to show that would happen to the value of the Mexican peso.
B.B.Explain how the exchange rate changes in a flexible exchange Explain how the exchange rate changes in a flexible exchange rate system.rate system.
C.C.Explain how this change in the value of the peso affects Mexico’s Explain how this change in the value of the peso affects Mexico’s imports and exports.imports and exports.