International Economics Practice Quiz. Politicians have a strong incentive to support projects even when their costs outweigh their benefits if: the costs of the project are spread widely across taxpayers and the benefits are concentrated on a small group. But Policy A also benefits 1,000 people at $30,000 per person. Econ exam 1 quizlet. In the example in the above section, in countries A and B, production with equal units of labour and capital would be: A—20 tooth-brushes and 20 … Spending can lower inflation and keep prices and wages steady. If there is inflation in the country, then PPP predicts: no significant long run change in the real exchange rate. And we could institute measures to stop countries from managing their exchange rates for competitive gain – a practice that has ballooned the U.S. trade deficit in recent decades. After five months of unemployment she spent $6,000 on a class that taught her the skills she would need to sell medical devices. According to the purchasing power parity theorem, the value of the dollar in the future will: In general, when there is more investment going into a country than out of the country, the country will have a: A country with a negative current account (trade deficit) has: Economic conditions are a ______ predictor of United States presidential election outcomes. One of the advantages of international trade is that you may have an outlet to dispose of surplus goods that you're unable to sell in your home market. (Figure: U.S. The quota is imposed to protect both sugar consumers and producers. 3-816-17a international trade theory and policy winter 2019 problems from international economics : theory & policy /paul r. krugman, maurice obstfeld, marc j. Over time, companies gain a competitive advantage in global trade. If a country has $55 billion of net capital outflow and a $5 billion increase in its cash reserves and ownership of assets, then the country must be running a trade: a decrease in the price of a currency in terms of another currency. Which of the following is NOT included in a country's current account? producer surplus. ADVERTISEMENTS: An important application of indifference curves is to explain the mutual exchange between two individuals of two goods possessed by each. Suppose the exchange rate between the euro and the U.S. dollar is €0.5 to $1. An analysis of the main issues in international finance. The time it takes Congress to propose and pass a plan for fiscal policy is called the: (Figure: Aggregate Demand and Fiscal Policy) Refer to the figure. 2. ... Another benefit of open trade is an overall improved quality of life. The biggest retail contributor to the 1990s productivity boom was: Those who say the growing current account deficit in the United States is a significant problem make the argument that: the United States is financing current expenditures by borrowing from foreigners and these debts will ultimately have to be paid off. Today Amy makes 25%more than she did in pharmaceutical sales and enjoys her new job much more than her old job. Suppose a high-income individual, subject to a 15% capital gains tax rate, sells 100 shares of Company X and makes a loss of $500. Gains from trade should be greatest between coun-tries with the greatest di⁄erences. Over the past 100 years the American voter has voted for the party of the ________ when the economy is doing ________. Why did the tax rebate of $78 billion in 2008 have few net stimulus benefits? Which of the following explains why the sugar quota is a winning policy for politicians? Which provides an automatic stabilizer when the economy is declining? The ban was encouraged, in part, by the makers of the more expensive CFLs. (Figure: Kidney Trade Ban Policy Spectrum) Refer to figure. (Figure: Foreign Trade 2) Refer to the figure. With respect to the sugar quota, the people who are harmed are _____ and the people who benefit are _____. For which of the following goods or services does purchasing power parity most closely hold? When benefits are highly concentrated, but costs are diffused across a large number of people: the government tends to overproduce these goods. A system in which the exchange rate is determined primarily by market forces is called: Which of the following is a yearly summary of all the economic transactions between residents of one country and residents of the rest of the world? A common market requires a common external trade policy in addition to free trade within the group. If the goal of a government policy change is to increase the incentive for taxpayers to work and/or invest, which policy is MOST likely to be successful? David Rosnick is an economist at the Center for Economic and Policy Research, in Washington D.C. Gains from Trade? If taxpayers use the tax rebate to pay off their debts, total spending will: As the recession continued in early 2009, consumer confidence most likely: In 2008, taxpayers used approximately _____ of their tax rebate checks to reduce their current debt instead of increasing their spending. A country's balance of trade is the difference between its: An exchange rate is the cost, or price, of: (Table: Exchange Rates) Using the hypothetical exchange rate information in the table, which of the following statements is correct? 1 Theory of International Trade Traditional trade theory was well settled and accepted. If there are only two candidates, A and B, and a smoking ban is the only issue being debated in this election, which one of the voters is the median voter? Which of the following would NOT prevent purchasing power parity from holding? Why might domestic producers also gain from free trade policies over those that impose tariffs on all goods? Basic Concepts of Macroeconomics and Gains from Trade Principles of Macroeconomics ECON 202 Chapter 20 1 Quick Review of If Ricardian equivalence holds, then a $100 million tax cut financed by issuing government bonds means that: private saving will increase by $100 million. Adam Smith noted long ago that specialization of labor allows each worker to become efficient at his particular job. In the absence of trade, domestically in country A, IX = 0.5У. Suppose a country's official reserves do not change. changes in government spending, tax rebates, and tax rate cuts. What quantity would be traded in a free-trade environment? The U.S. corporate tax rate is _____ and U.S. corporations on average pay _____ on their corporate income. As such, it's important to understand why economists believe trade is good. increase aggregate demand in bad times and pay off the debt in good times. Of course, you traded only if the perceived benefits (grapes gained) outweighed the perceived costs (crackers lost). When a country's inflow of foreign capital is less than its outflow of domestic capital to other countries, then the country runs a: All else held constant, an increase in U.S. exports will cause the U.S. current account to: Suppose an increase in the demand for dollars has caused an appreciation of the dollar. Economists Besley and Burgess found that a government is more responsive to food crises when there is: both more political competition and more newspapers. FALSE 2. And your friend agreed only if the perceived benefits (crackers gained) outweighed the perceived costs (grapes lost). 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