Q&A Hero

Q: Assume that r* = 2.0%; the maturity risk premium is found as MRP = 0.1%(t u2212 1) where t = years to maturity; the default risk premium for corporate bonds is found as DRP = 0.05%(t u2212 1); the liquidity premium is 1.0% for corporate bonds only; and inflation is expected to be 3%, 4%, and 5% during the next three years and then 6% thereafter. What is the difference in interest rates between 10-year corporate and Treasury bonds? a. 0.45% b. 1.45% c. 2.20% d. 2.75% e. 3.25%

Q: The Federal Reserve has decided it wants to increase interest rates by decreasing the money supply through deposits held at financial intermediaries. All else equal, if the reserve requirement is 10% for all deposits, and the Fed wants to decrease deposits by $100 million, which of the following actions should be taken? Assume no excess reserves exist in the banking system. a. Buy government securities from dealers totaling $1 billion. b. Sell government securities to dealers totaling $111 million. c. Buy government securities from dealers totaling $11.1 million. d. Sell government securities to dealers totaling $11.1 million. e. None of the above.

Q: A small state bank currently has reserves equal to $300,000. If the state reserve requirement is 20%, but the bank currently maintains a 30% reserve, how much are the excess reserves the bank currently has? a. $200,000 b. $100,000 c. $300,000 d. $500,000 e. None of the above.

Q: A small state bank currently has reserves equal to $300,000. If the state reserve requirement is 20%, but the bank currently maintains a 30% reserve, what amount of reserves would the bank need if it met the reserve requirements exactly? a. $200,000 b. $100,000 c. $300,000 d. $1,000,000 e. None of the above.

Q: A small state bank currently has reserves equal to $300,000. If the state reserve requirement is 20%, but the bank feels more comfortable with maintaining a 30% reserve, what amount of deposits does the bank currently have? a. $1,500,000 b. $600,000 c. $1,000,000 d. $300,000 e. None of the above.

Q: Use the following scenario to answer thefollowing questions:An economy has two workers, Smith and Ricardo. Each day they work, Smith can produce 4 computers or 16 smartphones, and Ricardo can produce 6 computers or 12 smartphones.The opportunity cost for Ricardo to produce one smartphone is ________ computer(s).a. one-quarter of a b. one-half of a c. oned. twoe. four

Q: Use the following scenario to answer the following questions:Karl and Jager produce cars and trucks. Karl can produce 10 cars per hour or 5 trucks per hour. Jager can produce 12 cars per hour or 4 trucks per hour.Based on the scenario, which of the following is true?a. Jager has an absolute advantage in producing cars, but not trucks.b. Jager has an absolute advantage in producing trucks, but not cars.c. Jager has an absolute advantage in producing both goods.d. Jager has an absolute advantage in producing neither good.e. Karl has a comparative advantage in producing both goods.

Q: Use the following scenario to answer the following questions:Rosa and Dirk produce basketballs and footballs. Rosa can produce six basketballs per hour or two footballs per hour. Dirk can produce three basketballs per hour or four footballs per hour.Based on the scenario, which of the following is true?a. Dirk has an absolute advantage in producing basketballs, but not footballs.b. Dirk has an absolute advantage in producing footballs, but not basketballs.c. Dirk has an absolute advantage in producing both goods.d. Dirk has an absolute advantage in producing neither good.e. Rosa has a comparative advantage in producing both goods.

Q: Based on the scenario, Rosa has a. an absolute advantage in producing basketballs, but not footballs. b. an absolute advantage in producing footballs, but not basketballs. c. an absolute advantage in producing both goods. d. an absolute advantage in producing neither good. e. no comparative advantage.

Q: If this economy produces more than 20 houses per year, the opportunity cost of a house will ________ because ________. a. decrease; production will be specialized b. increase; an input with a higher opportunity cost must be used c. decrease; inputs will be obtained at lower cost d. increase; all gains from trade have already been exploited e. remain the same; Natasha and Jameson produce in constant ratios regardless of level of output

Q: If both Natasha and Jameson produce the good for which each has a comparative advantage, total output of this economy will be a. 10,000 pounds of cheese. b. 30 houses. c. 10,000 pounds of cheese and 30 houses. d. 5,000 pounds of cheese. e. 5,000 pounds of cheese and 20 houses.

Q: By the principle of comparative advantage, Jameson should specialize in producinga. both cheese and houses. b. cheese. c. houses.d. neither cheese nor houses.e. a little of both goods.

Q: Use the following scenario to answer the following questions:Natasha can produce either 5,000 pounds of cheese or 20 houses per year. Jameson can produce either 5,000 pounds of cheese or 10 houses per year.By the principle of comparative advantage, Natasha should specialize in producinga. both cheese and houses. b. cheese. c. houses.d. neither cheese nor houses.e. a little of both goods.

Q: Use the following scenario to answer the following questions:Esther and Ebenezer produce hamburgers and hot dogs. Esther can produce six hamburgers per hour or four hot dogs per hour. Ebenezer can produce three hamburgers per hour or one hot dog per hour.Based on the scenario, Esthers opportunity cost of one hamburger is ________ hot dog(s).a. two-thirds of a b. one c. sixd. foure. eight

Q: In general, a nation can enjoy a higher standard of living by ________ than by being self-sufficient.a. increasing its versatility b. avoiding trade with other nations c. specializing and tradingd. taxing imported goodse. producing on the PPF curve

Q: A society could achieve a higher level of productivity if a. each person in the society is a jack-of-all-trades. b. it takes advantage of each individuals comparative advantage. c. it does not trade with other nations. d. it does not tax imported goods. e. it does not limit exports.

Q: According to the principle of comparative advantage, trade between two countries will benefit a. neither country. b. the country with lower production costs. c. the country with higher production costs. d. both countries. e. all workers.

Q: A rich nation will trade with a poor nation (and vice versa) because the a. rich nation has a comparative advantage in all products. b. poor nation has an absolute advantage in all products. c. rich nation has an absolute advantage in all products. d. poor nation has a comparative advantage in a product. e. poor nation does not have any comparative advantage.

Q: X has a comparative advantage over Y in producing a good if a. X can produce more of the good than Y can in a given time period. b. X has to trade off more than Y does to produce the good. c. X has a lower opportunity cost of producing the good than does Y. d. X has a higher opportunity cost of producing the good than does Y. e. Y can produce more of the good than X can in a given time period.

Q: An individual or country that has a comparative advantage in the production of one good a. may or may not have an absolute advantage in the goods production. b. must not have an absolute advantage in the production of the other good. c. must not have an absolute advantage in the goods production. d. must have an absolute advantage in the goods production. e. must not have a specific advantage in the goods production.

Q: Use the following scenario to answer the following questions:Suppose that Canada, an industrialized nation, and Mexico, a developing nation, both produce clothes and cars. The real wage in Mexico is lower than in Canada. The countries have a free trade agreement. Each nation will find a comparative advantage.Floridas nice beaches and subtropical climate give the state ________ in tourism.a. a comparative advantage b. specialization c. a trade benefitd. higher income than all other statese. self-sufficiency

Q: The combination of goods and services that Mexicos citizens might feasibly consume is called Mexicosa. total consumption. b. total production. c. consumption possibilities.d. production possibilities.e. national output.

Q: The ability of one person or nation to produce a good at a lower opportunity cost than another is called a(n) ________ advantage.a. market b. absolute c. specializationd. comparativee. specific

Q: The ability of one person or nation to produce more of a good while using the same quantity of resources as another is called a(n) ________ advantage.a. market b. absolute c. specializationd. comparativee. specific

Q: Citizens can consume the largest quantities of goods and services in which of the following situations? a. autarky b. closed economy c. open economy d. economy with few citizens e. developed country

Q: If a societys consumption possibilities are identical to its production possibilities, that society has a(n) a. closed economy. b. open economy. c. one-person economy. d. absolute advantage in both goods and services. e. free trade policy.

Q: Which of the following trade agreements caused trade between the United States, Canada, and Mexico to double? a. World Trade Organization b. Asia Pacific Economic Cooperation c. North American Free Trade Agreement d. European Union e. Central America Free Trade Agreement

Q: What does NAFTA stand for? a. National Authorized Free Trade Agreement b. North American Free Trade Agreement c. North American Fair Trade Agreement d. National Assembly for Free Trading Americas e. National Authorized Free Trade Assembly

Q: Which of the following international organizations, founded in 1995, facilitates trade disputes between nations? a. United Nations (UN) b. North American Free Trade Agreement (NAFTA) c. World Trade Organization (WTO) d. European Union (EU) e. Asia Pacific Economic Cooperation (APEC)

Q: Which two countries buy the most U.S. exports?a. China and Japan b. China and Mexico c. Canada and Mexicod. Canada and Japane. Mexico and Japan

Q: In 2011, 60 percent of goods imported by the United States came from just seven nations. Which of the following nations was one of those seven?a. Australia b. United Kingdom c. Argentinad. Indiae. France

Q: Which of the following trade agreements is a binding agreement to reduce trade barriers between the United States and Mexico? a. World Trade Organization b. Asia Pacific Economic Cooperation c. North American Free Trade Agreement d. European Union e. Central America Free Trade Agreement

Q: In recent years, the United States has a. exported more services abroad than it has imported. b. imported more services from abroad than it has exported. c. had a small goods trade surplus with Japan. d. had a large goods trade surplus with the rest of the world. e. fallen to third behind Japan and Germany in the list of leading export nations (absolute volume basis).

Q: The following table identifies the real value of exports, imports, and gross domestic product (GDP) for a country for three different years, measured in billions of dollars. Use the table to answer the following questions:YearExportsImportsGDP1990434.00400.002,170.002000499.10480.002,712.502010459.01560.003,255.00Based on the table, the value of exports as a percentage of GDP ________, and the value of imports as a percentage of GDP ________.a. stayed the same; stayed the sameb. increased; decreasedc. decreased; increasedd. decreased; decreasede. increased; increased

Q: Which country has the worlds biggest economy?a. Japan b. Germany c. United Statesd. Chinae. India

Q: For nearly four decades, the United States has had aa. trade balance. b. trade surplus. c. trade deficit.d. ban on imports.e. ban on exports.

Q: Trade deficit is a. the sum of a nations total exports and total imports. b. the difference between a nations total exports and total imports. c. when a nation exports more than it imports. d. when a nation imports more than it exports. e. when a nation no longer feels it has the need for trade partners.

Q: Trade surplus is a. the sum of a nations total exports and total imports. b. the difference between a nations total exports and total imports. c. when a nation exports more than it imports. d. when a nation imports more than it exports. e. when a nation no longer feels it has the need for trade partners.

Q: Trade balance is a. the sum of a nations total exports and total imports. b. the difference between a nations total exports and total imports. c. when a nation exports more than it imports. d. when a nation imports more than it exports. e. when a nation no longer feels it has the need for trade partners.

Q: In the past decade, companies like Nike and Under Armour have set up manufacturing centers in Nicaragua in part due to the countrys establishment of ________, allowing these companies to avoid standard corporate tax rates.a. trade zones b. international zones c. production zonesd. free zonese. tax zones

Q: Since 2000, world goods trade hasa. doubled. b. tripled. c. remained the same.d. decreased by 10 percent.e. decreased by 25 percent.

Q: Free trade is ________, because it ________ the size of the pie available to the economy. a. inefficient; decreases b. inefficient; increases c. good for developed countries only; unfairly changes d. efficient; decreases e. efficient; increases

Q: If Hong Kong has an open economy, it ________ with other countries. a. trades all of its goods b. does not trade its goods c. only trades a few of its goods d. trades both services and goods e. trades only services and no goods

Q: If St. John has a closed economy, it ________ with other countries. a. trades all of its goods b. does not trade goods c. prevents its citizens from traveling to other countries, but trades goods d. trades both services and goods e. trades only services and no goods

Q: Use the following graph to answer the following questions:In a trading (open) economy, how many TVs (in thousands) will this country import?a. 30 b. 60 c. 90d. 120e. 150

Q: Use the following graph to answer the following questions:If this is a nontrading (closed) economy, the number of TVs exchanged (in thousands) will bea. 30. b. 60. .c. 90.d. 120.e. 150

Q: Use the following graph to answer the following questions: How many cars (in thousands) will this country import in a trading (open) economy situation?a. 20 b. 40 c. 60d. 80e. 100

Q: Use the following graph to answer the following questions: If this is a trading (open) economy, quantity supplied of cars (in thousands) by the domestic producers will bea. 20. b. 40. c. 60.d. 80.e. 100.

Q: Use the following graph to answer the following questions: What is the price of a car if this is a nontrading (closed) economy?a. $6,000 b. $8,000 c. $10,000d. $14,000e. $24,000

Q: The following table presents data on imports and exports as a percentage of gross domestic product (GDP) for select countries in 2015, based on data from the World Bank. Use the table to answer the following questions: CountryExports as a Percentage of GDPImports as a Percentage of GDPAustralia19.821.2Belgium84.482.7Chile30.130.3China22.418.8South Korea45.938.9United States12.615.5Suppose all countries in the world suddenly stop trading with each other. Which country in the table is likely to be the most negatively affected?a. Belgium b. Chile c. United Statesd. South Koreae. Australia

Q: An economy that trades with the rest of the world is a(n) ________ economy.a. open b. command c. traded. closede. autarky

Q: An economy that does not trade with the rest of the world is a(n) ________ economy.a. open b. command c. traded. closede. one-person

Q: Total world exports of goods and services are now about ________ the size of world GDP.a. one-tenth b. one-eighth c. one-fourthd. one-thirde. one-half

Q: For country A, an import is a good produced in a. country B and purchased by residents of country A. b. country A and purchased by residents of country A. c. country A and purchased by residents of country B. d. country B and purchased by residents of country B. e. the domestic economy.

Q: CHAPTER 19: International TradeFor country A, an export is a good produced ina. country B and purchased by residents of country A.b. country A and purchased by residents of country A.c. country A and purchased by residents of country B.d. country B and purchased by residents of country B.e. any other country.

Q: The trade-restriction view assumes that free trade is ________ and should be ________. a. helpful for an economy; encouraged b. helpful to the producers only; controlled c. helpful to the poor only; controlled d. harmful to domestic workers and producers; restricted e. harmful to domestic consumers; restricted

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Q: Why do politicians sometimes resist free trade and globalization? a. Free trade does not benefit the economy as a whole. b. Special interest groups may not benefit from free trade. c. Free trade does not benefit the global economy. d. Free trade usually hurts the consumers. e. Only the rich benefit from free trade.

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Q: One of the reasons given for the imposition of a protectionist policy such as a tariff is to a. aid other nations in developing their own industries. b. increase the welfare of foreign consumers. c. increase the welfare of domestic consumers. d. protect domestic workers from foreign competition. e. slow domestic production.

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Q: When a foreign supplier tries to dump goods into another country in order to gain a foothold in a foreign market, this is often a result of ________ within the foreign country.a. tariffs b. restrictions c. subsidiesd. unemploymente. changed preferences

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Q: When a foreign supplier sells a good below the price it charges in its home country, this is calleda. undercutting. b. releasing. c. expelling.d. dumping.e. wholesaling.

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Q: One argument for trade restriction that focuses on new industries is that a. trade barriers must be used to protect all domestic workers. b. tariffs imposed to aid new industries should never be removed. c. new industries are usually capable of competing with established rivals. d. new industries need to be shielded in their early stages. e. trade barriers can be used to enhance national security.

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Q: A possible explanation that a nation might offer for the imposition of a protectionist policy such as a tariff is to a. protect an infant industry from foreign competitors. b. encourage specialization in the good in which the nation has a comparative advantage. c. slow domestic production. d. increase the level of imports. e. give consumers more foreign-made options.

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Q: The argument that calls for the trade protection of only newly developing industries is known as the ________ argument.a. autarky b. infant industry c. developing nationd. predatory dumpinge. learning by doing

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Q: Many people argue that certain industries, such as weapons, energy, and transportation, should be protected by trade barriers in the interest of a. national infrastructure. b. national security. c. the unemployment rate in those industries. d. technological advancement. e. economic independence.

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Q: Which of the following is NOT one of the four main reasons given for the persistence of trade barriers?a. national security b. protection of infant industries c. retaliation for dumpingd. favors to special interestse. scarcity of natural resources

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Q: In the domestic market following the removal of an import quota, imports ________, domestic production ________, and prices ________.a. increase; decreases; decrease. b. decrease; increases; decrease. c. decrease; decreases; increase.d. increase; increases; increase.e. decrease; increases; increase.

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Q: In the domestic market following the imposition of a voluntary quota, imports ________, domestic production ________, and prices ________.a. decrease; increases, increase b. increase; decreases, decrease c. decrease; decreases, increased. increase; increases, increasee. decrease; increases, decrease

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Q: In the domestic market following the imposition of an import quota, imports ________, domestic production ________, and prices ________. a. decrease; increases; decrease b. increase; increases; increase c. decrease; increases; increase d. increase; decreases; decrease e. decrease; decreases; increase