ECON 201 ECON201 Macro Module Globalization, Trade and Finance Answers

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ECON 201 ECON201 Macro Module Globalization, Trade and Finance  Answers

Econ 201 Macro Module: Globalization, Trade and Finance

Pretest:

1. Choose ALL that apply. It is possible that one party may:

have an absolute disadvantage, but a comparative advantage.

have an absolute advantage, but a comparative disadvantage.

be able to produce everything relatively more efficiently than another party.

2. Choose ALL that apply. What are the likely consequences of protecting domestic jobs in industries that are at a comparative disadvantage to our trading partners, like textiles?

Lower prices for textiles.

More jobs for domestic textile workers.

Higher prices for textiles.

Fewer jobs for domestic textile workers.

3. Choose the BEST answer. Assuming that government decision-makers are well aware of the consequences, what is the real reason why government may seek to protect an industry?

The government wants to snub a foreign power.

The government wants to protect overall jobs.

The government is acting to preserve jobs in an industry that is threatened by competition from abroad.

4. Choose ALL that apply. Trade agreements and free trade negotiations have:

stimulated protests based on issues other than protecting certain industries from competition

reduced tariffs but have increased the use of non-tariff barriers.

allowed for a more efficient use of the world’s productive resources.

5. Choose the BEST answer. If the value of the Euro appreciates compared to the Dollar, what is logical outcome for US exports to the EU?

The amount of exports to the EU falls.

Nothing.

The amount of exports to the EU rises.

6. Choose ALL that apply. As the result of exchange rate volatility:

even large banks are significantly exposed.

demand on a trading economy can fluctuate.

contracts for currency exchanges are less risky.

7. Choose ALL that apply. Some success stories in global trade include(s):

a regional trade block that includes the U.S. and a few Central American nations.

cultural blending and variety never seen before.

the Doha Round of trade talks sponsored by the World Trade Organization.

Self–Checks

Choose the BEST answer. Brazil can produce 100 pounds of beef or 10 autos; in contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in producing beef?

Neither

United States

Brazil

Choose ALL that apply. What are the likely consequences of protecting domestic jobs in industries that are at a comparative disadvantage to our trading partners, like textiles?

Lower prices for textiles.

More jobs for domestic textile workers.

Fewer jobs for domestic textile workers.

Higher prices for textiles.

Choose ALL that apply. As the result of exchange rate volatility:

contracts for currency exchanges are less risky.

even large banks are significantly exposed.

demand on a trading economy can fluctuate.

Choose ALL that apply.Some success stories in global trade include(s):

a regional trade block that includes the U.S. and a few Central American nations.

the Doha Round of trade talks sponsored by the World Trade Organization.

cultural blending and variety never seen before.

Quiz

1. Choose the BEST answer. Here are alternate outputs from one day’s labor input: USA: 12 bushels of wheat OR 3 yards of textiles. India: 3 bushels of wheat OR 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:

3 yards of textiles.

4 yards of textiles.

12 yards of textiles.

1 yard of textiles.

2. Choose the BEST answer. Here are alternate outputs from one day’s labor input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. From the data, the USA:

has an absolute advantage over India in the production of textiles.

has a comparative advantage in the production of textiles.

should export textiles to India.

has an absolute advantage over India in the production of wheat

3. Choose the BEST answer. When the world price of some good is above the domestic price (before trade), then after trade, that nation will likely be:

exporting that item and importing whatever it produces at an absolute disadvantage.

importing that item and exporting whatever it produces at a comparative advantage.

importing that item and exporting whatever it produces at an absolute advantage.

exporting that item and importing whatever it produces at a comparative disadvantage.

4. Choose ALL that apply. Which of the following phenomena can a nation expect when it opens (more widely) to international trade?

Prices will fall.

Some industries will suffer and shrink.

Prices will rise.

Some industries will prosper and expand.

5. Choose the BEST answer.

What area in the graph below illustrates the gain to domestic producers as a result of a government placing a tariff to protect the shoe industry. 

C

B+C

C+F

6. Choose the BEST answer. Use the graph below to identify the government revenue from the tariff.

D

F+D+E+G

D+E

7. Choose ALL that apply. The slow pace of international trade negotiations is understandable given that:

there were many nations involved.

separate rules were set up for different nations.

GATT and WTO have governmental authority.

negotiations are easy but politicians make it hard.

8. Choose ALL that apply. Refer to the video on the US-South Korea free trade agreement. When Free Trade Agreements are negotiated,:

Some firms that sell domestically produced products may be harmed.

consumers necessarily gain as firms lower the price of tariffed products.

Some firms have greater access to export markets.

9. Choose the BEST answer. If the value of the Euro appreciates compared to the Dollar, what is logical outcome for US exports to the EU?

Nothing.

The amount of exports to the EU falls.

The amount of exports to the EU rises.

10. Choose ALL that apply.A weaker U.S. dollar has its advantages:

makes American exports cheaper.

makes American exporters happy.

makes imported goods and services cheaper.

increases demand on the U.S. economy.

11.Choose ALL that apply. A nation suffering from inflation would have a reason to welcome:

currency depreciation.

currency appreciation.

the inflation-fighting effects of less expensive imports.

a wave of foreign investment.

12. Choose ALL that apply. A nation suffering from high unemployment would welcome:

currency appreciation

currency depreciation

effects of less expensive exports

A wave of foreign investment

13. Choose ALL that apply. Some of the forces working against freer global trade are:

the support of environmental and labor groups.

strategic trade policy by national governments.

industries that are at a comparative advantage.

bi-lateral trade agreements.

14. Choose ALL that apply. The global movement toward generally freer trade:

threatens established livelihoods and ways of life.

offers gains from trade to all trading nations.

is supported by all sectors of each trading nation.

allows for sustained trade deficits by some nations.