ECON 1BB3 Study Guide - Moroccan Dirham, Eurozone, Price Ceiling

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orchidmouse779

6 Apr 2014

School

McMaster University

Department

Economics

Course

ECON 1BB3

Professor

Bridget O' Shaughnessy

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ECON 1BB3 Full Course Notes

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Identify the letter of the choice that best completes the statement or answers the question. Supposing this is the only trade that these countries do. What are the net exports of oceania and escudia in that order? a. b. c: none of the above is correct. and -: a firm in china sells jackets to a u. s. department store chain. . 7 billion of imports and . 4 billion of imports. . 7 billion of exports and . 4 of imports. . 4 billion of imports and . 1 billion of exports. ___: suppose that more chinese decide to vacation in the u. s. and that the chinese purchase more u. s. Sue, a u. s. citizen, buys stock in an italian automobile corporation. An italian citizen opens and operates a spaghetti factory in the united states. A mexican flour mill buys wheat from the united states and pays for it with pesos.

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4. (Part A) Suppose the USA and China are considering whether to engage in trade. Here are the production possibilities of the two countries before trade occurs:

Table 1. Production of Apparel or Chemicals in the USA and China.

The Opportunity Costs of producing one product or the other are displayed.

1000âs of Tons of

Apparel Units Chemicals

Nation Produced or Produced

USA 50 or 150

China 30 or 60

Which nation has the comparative advantage in producing Apparel? Which nation has the comparative advantage in producing chemicals? Explain how you arrived at these conclusions.

Explain the Law of Comparative Advantage, and its application to trading relationships between nations. In the example above, if the two nations decide to engage in mutually beneficial trade, which nation should specialize in producing Apparel and which nation should specialize in producing Chemicals, and Why?

Suppose a trade proposal is made to exchange 1 thousand units of apparel for 2.5 tons of chemicals. Would these terms of trade (1 Apparel : 2.5 Chemicals ) be acceptable to, and mutually beneficial for, both the USA and China as trading partners? Why or why not?

What are the âpayoffsâ from open trade? What are some of the limitations associated with open trade?

4. (Part B) Suppose the USA and EU are trading, and currencies must be exchanged as goods/services are imported and exported between the two regions. The $USD is the currency of the USA, and the â¬Euro is the currency of the EU.

a. Are the following statements correct or incorrect? Why or why not?

âIf the USA is exporting its goods to the EU, these exports from the USA to the EU create a demand for â¬Euros in the Currency Exchange Market for â¬Euros.â

âIf the USA is importing goods from the EU, these imports to the USA from the EU create a supply of $USD in the Currency Exchange Market for $USDâs.â

âIf the EU is importing goods from the USA, these imports to the EU from the USA create a demand for $USD in the Currency Exchange Market for $USDâs.â

Throughout your answer to any of these other questions, use graphs as needed (all axes and functions completely labeled) to accompany your written analyses.

Please answer all of the following multiple choice questions... Thank you!

Hours to Produce One Unit
	Worker hours to produce yarn	Worker hours to produce fabric	Additional worker hours to produce fabric instead of yarn
Country A	8	12	?
Country B	4	13	?

Based on the data in the chart, which of the following scenarios presents the most efficient use of resources? (5 points)

	Country A produces yarn and fabric, and Country B imports both
	Country A produces yarn, and Country B produces fabric
	Country B produces yarn, and Country A produces fabric
	Country B produces yarn and fabric, and Country A imports both

	Worker hours to produce one unit of oil	Worker hours to produce one unit of natural gas
Brazil	8	4
Argentina	10	2
Mexico	7	3
United States	6	1

According to the chart, which country has an absolute advantage over the other countries in oil production? (5 points)

	Brazil
	Mexico
	Argentina
	United States

10.

U.S. companies have made fewer manufacturing contracts with China in the last few years, preferring other countries in the region. Which of the following is a potential reason? (5 points)

	China has most-favored-nation trade status with the United States.
	China has large reserves of cheap labor and can produce inexpensive goods.
	China's standard of living has increased, and workers are requesting more pay.
	Shipping costs from China over the Pacific Ocean have decreased.

11.

The U.S. government wants to restrict Nation A's access to weapons-making materials. Which of the following actions will it most likely take? (5 points)

	Establish a free-trade zone with Nation A
	Impose tariffs on certain goods imported from Nation A
	Institute an embargo on trade in certain items with Nation A
	Place a quota on certain types of goods Nation A can export

12.

Because the United States has an embargo on Cuba, (5 points)

	the United States regularly increases the taxes on Cuban imports
	Cuba exports the majority of Cuban products to American companies
	virtually no Cuban products are legally available in the United States
	Cuba must sell products directly to state governments in the United States

13.

Globalization increases the interdependency of the world's countries. Inflation in one country would most likely (5 points)

	not impact inflation in other countries
	cause deflation in other countries
	result in stagflation in other countries
	relate to inflation in other countries

Which of the following is TRUE regarding international trade?

Select one:

a. Typically, it is belived that when countries trade with one another, ther eare gains in production efficiency.

b. All of these are correct

c. Freedom to trade internationally adds to the consumers' choices available for purhcase

d. Countries often hope that international trade will help raise the standard of living for their citizens

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Which of the following is TRUE regarding why countries trade with one another?

Select one:

a. Countries trade so that they can get products and services that they are not as efficient in making as other countries.

b. Countries often hope that international trade will help their economy grow

c. All of these are correct

d. Countries trade because not all nations have the same resources.

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Revenue tariffs are levied to

Select one:

a. lower exports.

b. protect domestic producers.

c. increase imports.

d. raise money.

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Tariffs and quotas can have all of the following effects EXCEPT

Select one:

a. protecting domestic industry.

b. reducing trade deficits.

c. increasing prices consumers pay for goods.

d. promoting third-world development.

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The United States trade deficit causes

Select one:

a. the value of the dollar to fall in foreign exchange markets.

b. immediate worldwide recessions.

c. increased employment opportunities for all Americans.

d. the value of the dollar to strengthen in foreign exchange markets.

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Which of the following is true regarding the relationship of international trade and competition?

Select one:

a. International competition, like competition in general, can have effects on the price levels of goods.

b. When countries trade with one another, there is often increased competition among firms offering the same good or service.

c. All of these are correct.

d. When tariffs increase, domestic producers usually have fewer international competitors.

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ECON 1BB3 Study Guide - Moroccan Dirham, Eurozone, Price Ceiling

ECON 1BB3 Full Course Notes

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