Eco Unit 4 Test Prep

Which of the following accounts for why countries specialize in particular trade products?

• Government regulations

• Variation in the size of markets

• Unequal distribution of resources

• Variety in the types of economic systems

With a given amount of resources, a country with a comparative advantage will produce a product with —

• decreased demand

• lower opportunity costs

• cheaper natural resources

• higher quality specifications

One way the United States could increase exports of sports cars would be to —

• negotiate to lower tariffs on sports cars

• reduce gasoline taxes in the United States

• increase the exchange rate of the American dollar

• raise the prices of sports cars in the United States

According to the authors of the excerpt, free trade has benefited the United States because it—

• allowed both countries to experience increased economic growth

• resulted in a surplus of exports from the United States to Australia

• improved the relationship between the United States and Australia

• created an increase in cultural diffusion between the two countries

Supporters of protectionism would argue that free trade adversely affects which group of people?

• Workers

• Consumers

• Shareholders

• Multi-national corporations

How do fluctuations to the international exchange rate of a nation's currency affect its balance of trade?

• If a country's exchange rate increases, the country's balance of trade stays the same.

• If a country's exchange rate increases, the country can import goods less expensively.

• If a country's exchange rate decreases, a negative trade balance occurs for that country.

• If a country's exchange rate decreases, the country's balance of trade stays the same.

The excerpt provides an example of how the U.S. economy has changed because of —

• growing economic interdependence

• increasing government involvement

• transforming attitudes towards unions

• decreasing demand for skilled workers

How does international trade impact economic growth within a trading nation?

• International trade allows industries within a trading nation to increase market power without losing customers.

• International trade allows a trading nation to limit opportunity costs, making the market more efficient.

• International trade shifts the demand curve of a trading nation outward, increasing the purchasing power of industries.

• International trade shifts the production possibility curve of a trading nation outward by using resources more efficiently.

The late twentieth century has been characterized by an increase in free trade agreements. Advocates of free trade argue that it results in —

• higher unemployment

• increased immigration

• lower corporate tax rates

• increased economic growth

Japan has a 100% tariff on sports car imports from the United States. If a sports car costs $80,000.00 in the United States: a) How much would it cost in Japan? and b) Would this increase or decrease U.S. exports to Japan?

• $80,000.00 ... decrease

• $80,000.00 ... increase

• $160,000.00 ... decrease

• $160,000.00 ... increase