Global Trade
What is a quota?
A quota is a limit on how much of a good can be imported.
What is the balance of payments?
Difference between money paid to and money received from other nations in trade
A ______ requires financial institutions to set aside a fraction of their deposits in the form of reserves.
fractional reserve system
Only ______ can borrow from the Fed.
financial institutions
What is the difference between a protective tariff and a revenue tariff?
A protective tariff is designed to assist less efficient domestic producers, whereas a revenue tariff is designed to raise money for the government.
Which argument is used to justify protecting new and emerging industries?
The infant industries argument
Fractional reserve banking allows the sum of everyone’s DDAs to _____ the total amount of reserves held by the banking system.
be larger than
If the Fed buys Treasury securities or U.S. government bonds from investors,
the money supply expands and interest rates go down.
The "most favored nation clause" in U.S. trade agreements means that
a third country can have the same tariff reductions that the U.S. negotiates with another country.
Which act(s) caused international trade to come to a halt because of overly high prices for imported goods?
Smoot-Hawley Tariff Act
When the Fed conducts its monetary policy, it changes _____ by changing the size of the ________.
interest rates; money supply
What is an example of the quantity theory of money?
The money supply expands for a prolonged period of time, resulting in demand-pull inflation.
Protectionist measures designed to limit free trade and protect domestic jobs
work only if other countries do not retaliate with their own trade barriers.
What did passage of NAFTA do?
It reduced tariffs and quotas among the United States, Canada, and Mexico.
What part of a tight money policy encourages people to borrow and spend less?
Higher interest rates
Why did President Richard Nixon impose wage-price controls in the early 1970s?
In an attempt to stop inflation
Which argument about keeping the money at home is a counterargument free traders give?
Money that goes abroad will come back again when other nations buy our exports.
What does the WTO do?
It administers trade agreements signed under GATT.
It settles trade disputes between governments.
It provides technical assistance and training for developing countries.
What tool of monetary policy is being used when the Fed buys and sells government securities in financial markets?
Open market operations