Savings and Investment
In a closed economy, which of the following components of GDP is not included?
A) net exports B) investment
C) consumption D) government spending
A) net exports
You're traveling in Ireland and are thinking about buying a new digital camera. You've decided you'd be willing to pay $125 for a new camera, but cameras in Ireland are all priced in euros. If the exchange rate is 0.85 euros per dollar, what's the highest price in euros you'd be willing to pay for a camera?
A) 105 euros B) 106.25 euros
C) 110.15 euros D) 147 euros
B) 106.25 euros
A tax imposed by a government on imports of a good into a country is called
a tariff
In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. All of the following are reasons for this except
A) not all goods and services are traded internationally.
B) tastes for many traded goods are different in many countries because of globalization.
C) some countries have more resources than other countries.
D) production of most goods involves increasing opportunity costs.
C) some countries have more resources than other countries.
Imports are goods and services bought domestically but produced in other countries.
True
when the government spends more that it collects in taxes.
budget deficit
The currency adopted by most countries in Western Europe is referred to as the
euro
When Tesla, a U.S. company, purchases Italian-made Pirelli tires for its automobiles, the purchase is
a U.S. import and an Italian export.
Pakistan has developed a comparative advantage in the production of clothing. The source of its comparative advantage in this product is 2
A) technology.
B) abundant supplies of natural resources.
C) a favorable climate.
D) a large supply of unskilled workers.
D) a large supply of unskilled workers.
The United States would not gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.
False
In a closed economy, private saving is equal to which of the following? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)
A) Y - C - T B) Y + TR - C - T
C) Y - G - T D) Y - G - T + TR
B) Y + TR - C - T
When the market value of the dollar rises relative to other currencies around the world, we say that
the dollar has appreciated.
Members of Congress promising to support each other's legislation is known as
logrolling
Madison and Austin own Cafe Ole'. Table 7-2 lists the number of empanadas and tacos Madison and Austin can each make in one hour.
Refer to Table 7-2. Select the statement that accurately interprets the data in the table.
A) Madison has an absolute advantage in making tacos and Austin has an absolute advantage in making empanadas.
B) Madison has an absolute advantage in making empanadas and Austin has an absolute advantage in making tacos.
C) Austin has an absolute advantage in making empanadas and tacos.
D) Madison has an absolute advantage in making empanadas and tacos.
D) Madison has an absolute advantage in making empanadas and tacos.
If two countries adhere to a gold standard, the exchange rate for their currencies is fixed.
True
If Ebenezer Scrooge spends rather than saves his vast wealth, he will
slow economic growth because he is reducing the amount of funds available for investment.
The current exchange rate system in the United States is best described as a
managed float exchange rate system.
A tariff
A) makes everyone worse off.
B) makes both domestic producers and consumers better off.
C) makes domestic producers better off.
D) makes domestic consumers better off.
C) makes domestic producers better off.
Refer to Table 7-2. Select the statement that accurately interprets the data in the table.
A) Madison has a comparative advantage in making empanadas and making tacos.
B) Austin has a comparative advantage in making tacos.
C) Madison has a comparative advantage in making tacos.
D) Madison has a comparative ad
C) Madison has a comparative advantage in making tacos.
Both countries involved in a pegging of currency must agree to the terms of the pegging.
False
Which of the following would you expect to increase the equilibrium interest rate?
A) an increase in the percentage of income after net taxes that households save
B) a decrease in the profitability of investment projects firms are considering
C) the government begins running a budget surplus
D) an increase in the budget deficit
D) an increase in the budget deficit
If the price level in the United States is 110, the price level is 120 in Mexico, and the nominal exchange rate is 140 pesos per dollar, what is the real exchange rate from the U.S. perspective?
128
Which of the following is the best example of a voluntary export restraint?
A) a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States
B) a tax placed on all sports utility vehicles sold in the domestic market
C) a limit set by the Japanese government on the number of sports utility vehicles that the United States can import from Japan
D) a subsidy granted by the U.S. government to domestic sports utility vehicle manufacturers so they can compete more effectively with foreign sports utility vehicle manufacturers
C) a limit set by the Japanese government on the number of sports utility vehicles that the United States can import from Japan
The United States has developed a comparative advantage in digital computers, airliners, and many prescription drugs. The source of its comparative advantage in these products is
technology
The fact that the prices for McDonald's Big Mac sandwich are not the same around the world illustrates one reason why purchasing power does not hold: Many goods are not traded internationally.
True