Chapter 31 Part 1 Questions on Reading

What are exports in an open economy?

• Goods and services produced domestically and sold abroad

• Goods and services produced abroad and sold domestically

• Goods and services produced abroad and consumed abroad

• Goods and services produced domestically and consumed domestically

What does net exports measure?

• The total value of a nation's imports minus the value of its exports

• The total value of a nation's exports minus the value of its imports

• The balance between a country's exports and its imports

• The imbalance between a country's exports and its imports

What is the term for the difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreigners?

• Domestic investment

• Net capital inflow

• Foreign investment

• Net capital outflow

What influences net capital outflow in an open economy?

• The real interest rates paid on foreign assets

• The real interest rates paid on domestic assets

• The perceived economic and political risks of holding assets abroad

• All of the above

What is the relationship between net exports and net capital outflow?

• They are sometimes related

• They are directly related

• They are inversely related

• They are unrelated

What is the main reason for the increasing importance of international trade and finance in the U.S. economy?

• Improvements in transportation

• All of the above

• Advances in telecommunications

• Government policies

What is the term for an economy that interacts freely with other economies around the world?

• Global economy

• Open economy

• Closed economy

• International economy

What is the name of the agreement that has gradually lowered tariffs, import quotas, and other trade barriers? (there may be more than one)

• North American Free Trade Agreement (NAFTA)

• General Agreement on Tariffs and Trade (GATT)

• World Trade Organization (WTO)

• International Monetary Fund (IMF)

What is the term for an excess of exports over imports?

• Trade imbalance

• Balanced trade

• Trade deficit

• Trade surplus

What is the main benefit of openness to international trade?

• Promotes domestic consumption

• Allows people to produce what they produce best

• Increases government revenue

• Reduces unemployment