Question

(1)
If the world price is above the domestic equilibrium price, the domestic country is likely to ____________________ the good.
(2)
The difference between what an economy sells to and buys from foreigners is _________________.
(3)
The idea that exchange rates and prices adjust to equalize the cost of living across international boundaries is called __________________________.
(4)
In the graph below, when the world price is $3, how many units are purchased from domestic producers? 0 units 2 units 4 units 5 units
(5)
In the graph below, what is the volume of imports? 0 units 2 units 3 units 5 units
(6)
At a world price of Pw, the quantity of exports in the graph below is given by __________. QSD − QDD QDD − QSD Pw  − P* SD  − DD
(7)
Suppose France is an open economy and cannot influence the world price. If the world price is below the domestic equilibrium price, how would an increase in domestic supply affect the price and quantity demanded? It would increase the price and the quantity demanded. It would decrease the price and the quantity demanded. It would decrease the volume of exports. It would decrease the volume of imports.
(8)
What is the relationship between exports and income? The level of exports rises with income. The level of exports falls with income. The level of exports is unrelated to income. The level of exports rises with income as long as the marginal propensity to consume is positive.
(9)
In the domestic economy, imports ___________ the multiplier effect. increase decrease have no effect on first increase then decrease
(10)
Which of the following items is not included in the current account? Services Payments of interest Transfer payments Foreign aid
(11)
How is it possible for a country to import more goods than it exports? The government can subsidize imports. The government can subsidize exports. Foreigners can lend the country money. Private domestic banks can lend the country money.
(12)
The nominal foreign exchange rate is the value of foreign goods in the domestic currency. the value of domestic goods in the foreign currency. the rate at which one currency is traded for another. the difference between what a good costs in the domestic currency and the foreign currency.
(13)
If the value of the dollar depreciates, we would expect that more dollars would be needed to purchase a unit of foreign currency. that fewer dollars would be needed to purchase a unit of foreign currency. banks to be less willing to sell dollars than they were before the depreciation. banks to be more willing to sell dollars than they were before the depreciation.
(14)
Suppose a bottle of French wine costs 70 francs. If the exchange rate moves from 6 francs / dollar to 7 francs / dollar, how much does the price of the wine change measured in dollars? The price rises from $10 to $11.66. The price falls from $11.66 to $10. The price remains unchanged, because the price in French francs is constant. The change in price depends on how strong the dollar is.
(15)
The real exchange rate shows the amount of foreign currency needed to purchase domestic goods. the amount of domestic currency needed to purchase foreign goods. the rate at which foreign exchange can be purchased. the rate at which goods and services in one country can be converted into goods and services in another country.
(16)
When interest rates in the U.S. increase, the supply of dollars ________ and the demand for dollars ________. decreases; increases increases; decreases increases; increases decreases; decreases
(17)
The World Trade Organization was established as part of the Bretton Woods agreement. requires members to charge the same prices on goods traded internationally. requires members to reduce tariffs and eliminate non-tariff barriers. is made up of business leaders from all over the world.
(18)
If the country imposes a tariff on the product depicted in the graph, then imports increase from QDD′  to QDD. increase from QDD′  − QDD to QSD′  − QSD. decrease from QDD − QSD to QDD′  − QSD′. decrease from QDD′  to QDD.
(19)
If political instability increases abroad, the supply of dollars increases and the dollar appreciates. the supply of dollars decreases and the dollar depreciates. the demand for dollars decreases and the dollar depreciates. the demand for dollars increases and the dollar appreciates.
(20)
What is the effect of a tariff on the exchange rate? It causes the domestic currency to appreciate. It causes the domestic currency to depreciate. It affects only the quantity of goods imported, not the exchange rate. It affects only the quantity of goods imported and exported, not the exchange rate.
(21)
To move from a system of central planning to a market system, an economy generally implements which of the following steps? Nationalization of industry Privatization of capital Regulation of prices Transition from agriculture to industry
(22)
Which of the following factors contributed to the difficulty of the transition in the former Soviet Union? Capital was not privatized. Households preferred the communist system. Free market institutions were not in place. Tax rates were excessively high.
(23)
How are resources allocated in market and centrally planned economies? Prices allocate resources in a market economy; central planners allocate resources in a centrally planned economy. The supply of and demand for money determine the allocation of resources in a market economy; the people allocate resources themselves in a centrally planned economy. Corporations determine the allocation of resources in a market economy; central planners allocate resources in a centrally planned economy. Voters determine the allocation of resources in a market economy; central planners allocate resources in a centrally planned economy.
(24)
Which of the following policy measures would help prevent rapid inflation following the deregulation of prices? Setting interest rates at a fixed and constant rate Maintaining price controls on some basic goods, such as bread and fuel Maintaining tight control over the money supply Creating an inflation board to monitor price increases
(25)
The role of the price of labor in a market economy is to guarantee that resources are always allocated to their most efficient use. provide information about where resources are best employed and to give workers an incentive to work hard. ensure that workers are fairly paid for the work they do. motivate people to change jobs frequently, increasing the level of income in the economy.