Extensions and Issues; International Economics
1. Which one of the following statements about national infrastructure is correct?
A. A nation’s infrastructure refers to its stock of technological knowledge.
B. A nation’s infrastructure refers to its ability to realize economies of scale.
C. A nation’s infrastructure refers to the productivity of its labor force.
D. A nation’s infrastructure refers to public capital goods such as highways and utilities.
2. Which one of the following does not correlate positively with economic growth?
A. The percentage of the population engaged in agriculture
B. Output per capita
C. The literacy rate
D. Life expectancy
3. As it relates to international trade, dumping
A. is a form of price discrimination illegal under U.S. antitrust laws.
B. is defined as selling more goods than allowed by an import quota.
C. is the practice of selling goods in a foreign market at less than cost.
D. constitutes a general case for permanent tariffs.
4. If government uses fiscal policy to restrain cost-push inflation, we can expect
A. tax-rate declines and increases in government spending.
B. the unemployment rate to fall.
C. the aggregate demand curve to shift rightward.
D. the unemployment rate to rise.
5. In the U.S. balance of payments, U.S. purchases of assets abroad are a(n)
A. current account item.
B. U.S. dollar outflow.
D. U.S. dollar inflow.
6. The basis for the Bretton Woods international monetary system was
A. a freely flexible system of exchange rates.
B. a completely fixed system of exchange rates.
C. the gold standard.
D. an adjustable peg system of exchange rates.
7. Inflation accompanied by falling real output and employment is known as
A. Okun’s law.
B. Laffer’s law.
C. the Phillips Curve.
8. Which one of the following statements about capital flight is correct?
A. Capital flight refers to the tendency of large corporations of industrially advanced countries to build new plants in the developing countries because labor is cheaper.
B. Capital flight refers to the tendency of developing countries to overinvest in commercial aircraft.
C. Capital flight refers to the high international mobility of speculative funds caused by variations in exchange rates.
D. Capital flight refers to developing countries’ citizens accumulating or investing their savings in the industrially advanced countries.
9. If a U.S. importer can purchase 10,000 pounds for $20,000, the rate of exchange is
A. $1 = 2 pounds in the United States.
B. $2 = 1 pound in the United States.
C. $0.5 = 1 pound in Great Britain.
D. $1 = 2 pounds in Great Britain.
10. When most consumers and firms reduce spending only because they expect other consumers and firms to reduce spending, and a recession results,
A. a self-correction has occurred.
B. a coordination failure has occurred.
C. a real-business-downturn has occurred.
D. an adverse aggregate supply shock has occurred.
11. Which one of the following statements about efficiency wages is correct?
A. An efficiency wage is a wage that automatically rises with the national index of labor productivity.
B. An efficiency wage is an above-market wage that minimizes a firm’s labor cost per unit of output.
C. An efficiency wage is a “wage” that contains a profit-sharing component as well as traditional hourly pay.
D. An efficiency wage is a wage payment necessary to compensate workers for risk of injury on the job.
12. Suppose the United States sets a limit on the number of tons of sugar that can be imported each year. This is an example of a(n)
A. protective tariff.
B. revenue tariff.
C. voluntary export restriction.
D. import quota.
13. When the actual rate of inflation is less than the expected rate,
A. firms will increase their output to recoup their falling profits.
B. the unemployment rate will temporarily fall.
C. the unemployment rate will temporarily rise.
D. firms will experience rising profits and thus increase their employment.
14. Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United
States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will
A. neither export nor import wheat.
B. import wheat.
C. export wheat.
D. have a domestic shortage of wheat.
15. The “brain drain” problem in the developing countries refers to the fact the best-educated workers
A. are reluctant to work in the public sector.
B. are concentrated in rural areas where their skills are underutilized.
C. often emigrate to industrialized countries.
D. are reluctant to become entrepreneurs.
16. Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United
States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will
A. import copper.
B. have a domestic surplus of copper.
C. neither export nor import copper.
D. export copper.
17. In terms of aggregate supply, a period in which nominal wages and other resource prices are unresponsive to price-level changes is called the
A. immediate market period.
B. very long run.
C. short run.
D. long run.
18. Which one of the following is not included in the current account of a nation’s balance of payments?
A. Its goods imports
B. Its purchases of real assets abroad
C. Its net investment income
D. Its goods exports
19. If a nation’s goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with certainty that this nation has a
A. positive balance on current account.
B. balance of payments surplus.
C. positive balance on goods and services.
D. balance of trade (goods) surplus.
20. In international financial transactions, what are the only two things that individuals and firms can exchange?
A. Currency and currently produced goods and services
B. Preexisting assets and currently produced goods and services
C. Currency and real assets
D. Services and manufactured goods